Inflation only steals your wealth if you are keep your dollars in a pillow. If your wealth is invested in real capital, then you wealth grows along with the price on that capital.

The government doesn't need to print more money in order for inflation to happen, in fact, inflation is naturally associated with growth. Look at China, it had years of high inflation despite the government being fiscally conservative. Inflation simply represents the speed at which people exchange money. Suppose everybody decided to double their prices. We'd have 100% inflation overnight even though the total amount of money hasn't changed.

Small amount of inflation is needed for the economy to function well, so called the "grease effect" of inflation; both US and European central banks have lower limits on how low they will allow inflation to go. Bank of England aims to have it between 2 and 3%.

HollywoodBob -- that's the same fallacy that Grayson brings up, and Bernanke addresses -- the credit swap with foreign banks did not affect credit availability for Americans

Well, monetarism has been tested by Volker in the 80s, and as a result is not very popular nowdays. Inflation between 2 and 3% is considered ideal, and central banks of US and Europe will take measures to increase inflation if it ever falls below that value. Economy that is experiencing too low of an inflation risks stagnation, or even falling into a deflationary trap, seen during the Great Depression

Interesting that he views deflation as a good thing. That goes against every macroeconomic theory out there.

MINK, it's ok, we make fun of Americans all the time

BTW, that's not an accordion, that's a "баян" http://en.wikipedia.org/wiki/Bayan_(accordion)

I couldn't login at first because my password was reset to a previous (randomly generated) password. This is why you don't delete emails from 2007 when 2009 strikes

One of the important points he misses is how legalization would affect the number of people using drugs

This is coming from a guy who thinks we should use real gold for transactions, and the way to get people to do that is to cancel the gold taxes.

Ron Paul often criticizes problems of overabundance of credit created by fractional reserve system in the times of boom, but never addresses the problems of overly tight money supply inherent in the gold standard or 100% reserve system (such as risk of entering a deflationary spiral)

http://en.wikipedia.org/wiki/Deflation_%28economics%29#Deflationary_spiral

While formally The Fed is a "private corporation" in actuality it's a public agency. It's actions are controlled by the board of the governors which are picked by president and confirmed by the Senate. The Congress audits the Fed and can amend it's activities by a statute.

When the elected representatives have direct access to the printing press, like you are suggesting, there's too much temptation to pump out extra cash before the elections to give economy a temporary boost, and let the successors deal with the long term harms of inflation.

A look at the stability of dollar in the last 80 years compared to some currencies where the government would "print money on their own" (Argentina in 2001, Russia in 1998, Zimbabwe now) would show you that a "private corporation" can do a better job managing money supply than elected officials

Rotty -- Congress has the power to regulate money supply (ie, they can force The Fed to do whatever they want), they just realize their own ineptitude in the matters of macro-economics, and choose to defer key decisions to the Fed most of the time

Giving money to the poor won't solve the underlying problem -- the fact that credit markets are frozen up. This means that there's no money for investment. You could subsidize the poor, and that would fuel spending, but it's investment that adds real value to the economy, not spending.

Fed is the "lender of last resort" and is supposed to prevent bank runs. If recipients were made public it would trigger bank runs on the recipients.

Seems cruel -- the scientist encourages them to walk the 50 feet knowing that it will burn there feet, potentially badly

There's no such thing as centrifugal force