Here’s what they teach you at Business school: 

So what makes inflation happen, and how do economists explain this hard to understand economic phenomenon; here are the three reasons that they put forward as follows:

The first is what they call “cost-push inflation” this is when the costs businesses rise (read the costs of producing a widget raises) and the producers of said widget pass that cost on to the consumers. There are many reasons for this happening; for example, the price of oil rises, the costs of the raw materials for the widget rises and so there is a temporary spike in the prices of the widgets. The workers through their unions may have demanded more money and management agrees and there are so few skilled workers to make the widgets that the costs of human capital become expensive. Also, the prices of land and therefore renting or buying of property increases and that too pushes up the input costs of the widgets. 

The second factor is called, “demand inflation” is when more countries or people wish to have the widgets and the company has to expand its production capacity to fulfil the demand. In other words, the company has to hire more workers, make more loans to fund the expanding operations and even look for other land or properties to accommodate the increases in consumer demand. Governments often stimulate “demand inflation” by lowering taxes, or the Central Bank drops the interest rate which encourages people to start buying more widgets in different colours, whilst this is good for the short-term, ironically, this causes inflation in the long-term because other widget producers soon push up their prices to meet with the increase in demand from the consumers.

The third reason behind the increases in inflation is “governments printing money.” This is done ostensibly to create more jobs and to stimulate the economy, this is done by the Central Bank deciding to literally print more money, but traditionally this is achieved by the government making bigger and/or more loans so in all these cases the amount of money in circulation increases and that increases inflation. The problem with this increase in the supply of money is that the number of goods and services largely remain the same, so it naturally increases the price of these goods and services because, in a sense, more money is chasing the same number of goods and services. So even though there is more money available, it doesn’t buy you more, rather it serves to increase the costs of things which one would argue is pretty counter-intuitive to what we have been taught, so “more does, in fact, get less.”

There is the argument often put forward by world-famous British economist, John Maynard Keynes that it doesn’t matter if inflation rises at say 10 % per annum, as long as the average workers’ wages increases by 15% per annum. That is seen as “beating inflation” because inflation essentially erodes the value of your money so if an apple costs $0.90, and inflation was sitting at 10 %, it means that the real cost of the apple is 1 dollar.

Here’s what they don’t teach you at business school: 

Because the U.S. dollar is the international reserve (fiat in Latin means, “let it be done”) currency, every time the U.S. Fed prints money, it automatically dilutes the value of all other global currencies because their (the other countries) reserves are backed by the U.S. dollar. In a real sense, since 1971, when Nixon dropped the gold standard, whenever America goes to war and funds those wars with sovereign/treasury bonds, the indirect inflationary effect on other currencies, (see inflation as a secondary or hidden tax), means that all the countries are paying for the costs of those wars, including the country that is at war with the United States.