Hal writes “Since the charismatic champion of the poor is not going to raise taxes on the poor, and the former members of the middle class are now poor, he or she must raise taxes on the rich or inflate. If taxes are raised on moguls and magnates, they will flee the country. Understanding this, the charismatic champion of the poor opts for inflation (see here). To do this, the money supply is increased, which occurs when the champion of the poor directs the nation’s central bank to print new money to buy new Treasury bonds. With each period’s economic losses being pyramided on top of previous periods’, the money supply expands at a geometric pace. This causes the nation’s currency to devalue at an increasing rate.
The moguls and magnates that own commercial, rental, and personal property benefit from the inflation. As the rents they collect grow geometrically in inflation, the real value of their loan principle falls. In a few periods of sufficiently high inflation, inflated rents can be used to pay off loan principle or the equity inflation creates can be leveraged to acquire more property. They can also protect their wealth by purchasing safer currencies or precisions metals, the poor cannot.
The policies that are intended to help the poor — rent control, price ceilings, and the minimum wage — harms the poor, destroys the middle class, widens wealth and income gaps, extinguishes innovation and entrepreneurship, and turns champions of the poor into tyrants.”