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<p>[QUOTE=&quot;fatima, post: 1165023, member: 22143&quot;]Government should have no role in the creation of inflation or deflation.&nbsp; However once they convert the currency used for trade to 100% fiat and put laws on the books to prevent any competing currency from being used, then government has 100% control over inflation or deflation.&nbsp; (plus a great deal of control over its people)</p><p><br /></p><p>Inflation has to occur in a debt based system (fiat money) because the investors that own that system have to be paid off.&nbsp; Yet these people have no role in the actual creation and consumption of the real wealth covered by the currency transaction so the question is raised.&nbsp; &quot;where does the money come from to pay off the investors?&quot;&nbsp; The answer is they inflate the money supply to provide siphon off the wealth.&nbsp;&nbsp; This is a simple example:</p><p><br /></p><p>In an asset based economy, say silver, there is no 3rd party involved.&nbsp; &nbsp; I buy a dozen eggs from a farmer and pay him with a silver dollar.&nbsp;&nbsp; The value of that money is in the silver.&nbsp; This is how the USA operated until the 1930s.&nbsp; There was essentially no inflation for over 130 years.&nbsp; </p><p><br /></p><p>In a debt based economy, I buy a dozen eggs from a farmer and pay him with a Federal Reserve Note.&nbsp; This money entered the economy by the FR &quot;loaning&quot; the money.&nbsp; It expects interest to be paid on this money.&nbsp;&nbsp; So for example if the interest is 5 cents/year where does the 5 cents come from?&nbsp; Or rather, when I use the dollar to pay the farmer who is paying the interest on that dollar?&nbsp; What ends up happening is they inflate the supply of money so next year in this example, I have to pay the farmer $1.05 for the same purchase or the farmer gets less wealth.&nbsp;&nbsp; So in other words, the farmer and myself didn&#039;t change anything, but because a 3rd party is involved in the transaction who didn&#039;t provide anything beyond a piece of paper, one or both of us loses out.&nbsp;&nbsp; This is the fundamental flaw in the fiat system.</p><p><br /></p><p>This is why there is inflation and why there will always be inflation until the Federal Reserve blows up.&nbsp; They have to keep inflating the money to keep paying off the accumulated interest.&nbsp;&nbsp; The problem is that any system that is inflated at a constant linear rate, will end up with a geometric increase in size with the end coming at an extremely fast rate.[/QUOTE]</p><p><br /></p>

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