"By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."Think of all the real work done by productive people in a country, and imagine you can represent the fruits of their labours as good quality wine. Also imagine this is all stored in a giant vat, a wine bank if you like.
John Maynard Keynes
The government (with the help of its Central Bank) adds large quantities of water to its own account in the the wine bank, but they pretend they’re adding wine. It all mixes together, diluting the wine bank.
They then use the watered wine in their own account, to pay for public works programmes and government employees, and also for wars.
All of this government activity - some good, some not so good - has been paid for using a share of the good wine which the productive people have made with the sweat of their brow, taken covertly from the citizens by diluting their wealth.
Everybody still has the same amount of “wine” in their account as before, and it looks pretty much the same, but somehow it tastes thinner...
