The problem with central banks isn't the 2 percent inflation they typically target. The problem is that when government needs to spend inordinately on anything, such as a war, it has three revenue sources:
1. Taxation.
2. Going into debt.
3. Printing money.
(And plunder, actually, which is more of an ancient practice.)
The USA finances itself mainly with #1 and #2, with our creditors being sovereign funds, banks, and individuals. Foreign countries are dropping out lately, and individuals and banks are sure to follow. Would you loan the government money for a sweet 0.4 percent yield? It can't be maintained. The yield will rise, and the government either pays more for credit, cuts back expenses, or raises taxes. All painful. But if there's a central bank, well, that third option comes up. All the big wars of the 20th century were paid for in part this way. Inflation is not like a normal tax, but is a wealth levy, and while nobody would approve of the government taking 50 percent of their total possessions, almost everyone is fooled by the printing press...
Some other people suggest that "not holding dollars" is the solution. Doesn't work. In mass inflation, your income typically doesn't index correctly, and you have to sell assets to survive. People were selling pianos for bags of potatoes in the Weimer republic.
1. Taxation.
2. Going into debt.
3. Printing money.
(And plunder, actually, which is more of an ancient practice.)
The USA finances itself mainly with #1 and #2, with our creditors being sovereign funds, banks, and individuals. Foreign countries are dropping out lately, and individuals and banks are sure to follow. Would you loan the government money for a sweet 0.4 percent yield? It can't be maintained. The yield will rise, and the government either pays more for credit, cuts back expenses, or raises taxes. All painful. But if there's a central bank, well, that third option comes up. All the big wars of the 20th century were paid for in part this way. Inflation is not like a normal tax, but is a wealth levy, and while nobody would approve of the government taking 50 percent of their total possessions, almost everyone is fooled by the printing press...
Some other people suggest that "not holding dollars" is the solution. Doesn't work. In mass inflation, your income typically doesn't index correctly, and you have to sell assets to survive. People were selling pianos for bags of potatoes in the Weimer republic.