How fiat money inflation makes us poorer
Fiat money is money created by Power (yes, in the Tolkienesque sense). It's not mined as a metal or salt, selected as a spice or grain, domesticated like animals or made from jewels, etc. It's money that either governments (politicians) create or that governments (politicians) allow bankers to create out of thin air.
Enter the Cantillon Effect
Inflating the money supply is not positive or neutral yet necessary, as some economic schools say. It is a redistribution mechanism, from the poor and the middle classes to the rich and well-connected among society. It would be recognized as the driving force behind real wage stagnation in the U.S. (in financial terms, not ordinary goods terms) and global unnecessary (artificial) poverty.
Let's picture society as three groups: A, B and C.
Group A -government financial allies, contractors, subsidized groups- receives the newly printed (or electronically issued nowadays) money and goes out and demands goods from group B -their food, luxury housing, land, etc providers- whom receive part of the newly inflated money too, via their business activity, bidding away goods from the rest of society with it. Group C, the middle classes and the poorest in society, merely receive the effects the new, higher prices.
Inflation is not neutral but a regressive (it makes the poor, poorer) mechanism of wealth redistribution.
Technocratic elites (some economics schools even consider inflation a "stimulating" tool), banking cartels and their allies push for inflation to prop up the stock market, rescue huge banks or industrial companies in trouble, to "make exports more competitive", etc etc. The effect is neither stimulating nor competitive: it stagnates or slowly -or in cases like Venezuela or Zimbabwe, very fast- erodes the value of wages and savings (including retirement funds, both private and forceful/"social security").
Wages were disconnected from productivity when Richard Nixon severed any connection between the U.S. dollar and gold. (Graph)