Inflation: It’s a Wealth Redistribution Scheme

by Russell Lamberti

Many central banks around the world aim to achieve some “inflation target” either as a single explicit policy goal — as in the case of the South African Reserve Bank — or part of a set of policy goals as pursued by the US Federal Reserve. But far from maintaining economic stability and fostering prosperity, consumer price inflation targeting practically guarantees a pernicious wealth transfer year in and year out, a perpetual duping of unsuspecting employees and companies, and a permanent blind spot to hidden inflation.

What Is Inflation?

Most economists define inflation as what happens when the prices of things like bread and haircuts and rent go up in money terms and consumers generally experience an overall loss of purchasing power of their money. This is known as consumer price inflation represented by the consumer price index or CPI. This definition of inflation is reasonable at describing the outcome of a larger general process, but it unhelpfully leaves more gaps than it fills.

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