A Ramble Through Government Economics

"Monetary inflation is actually a tax by which government - by expanding the money supply - transfers wealth from its people to itself. Indeed, inflation is perhaps the most destructive tax that can be imposed - but unfortunately it is the easiest one for a government to impose on its people. It also results in the transfer of enormous amounts of wealth from the hands of ordinary people to the hands of those speculators shrewd enough to take advantage of the price volatility inflation causes in the markets."

http://www.futurecasts.com/Understanding%20Inflation.html

Who suffers most from inflation? Anyone with savings (note that 5% inflation would mean that the value of cash would fall by 35% or so over six years); anyone on a fixed income (pensioners and those on benefits); those with no assets and no debt; and the unskilled.

http://www.moneyweek.com/blog/inflation-is-a-tax-on-the-poor-00284 

"Fiat money:"

“inconvertible paper money made legal tender by a government decree."

http://oxforddictionaries.com/definition/fiat+money?region=us&rskey=HBmWPS&result=11#m_en_us1246821.001 

Inconvertible- can't be changed, as in, 'inconvertable paper money' is just that- plain paper money that you cannot take to the bank and exchange for real gold or silver (as we once could, which is why older bills actually say on them something like 'silver certificate.'). Without the government's command order and our willing response, it has no intrinsic value on its own or as a medium of exchange.

It's pretty colored monopoly money which we use like real money because the government tells us to, and we have all agreed to play this game and pretend it actually has value.  This works so long as we all play by the same rules. This is why counterfeiting is not a misdemeanor, and it has been used by governments as acts of warfare against other governments.   But when the government itself starts devaluing the money supply....

How does a government devalue a money supply?  

Let me tell you the story of the wentletrap seashell.
Tomorrow.