by Christopher Crowe

An often overlooked tax is inflation. By printing money, governments gradually undermine the value of assets denominated in the domestic currency. While governments seek low inflation, this source of revenue is increasingly attractive in the absence of effective taxation structures.

The poor may be relatively unable to inflation-proof their assets, while the rich are able to move their assets into alternative currencies. Government calculations of optimal inflation will then be affected by the extent of income inequality within the country.

OCGG Economy Analysis No 5 (PDF)