An excerpt from a larger piece of writing from 4chan on banks and how inflation is created, as well as how it impacts most normal people:
Without government, banks are simple. Person A gives a bank $100. The bank loans $50 of person A’s money to person B. A year later, person B pays back the $50 with 10% interest, so the bank now has $105. The bank then gives person A $102 (2% interest) as a thank you for letting them borrow the money, and the bank keeps $3 as profit.
Things get weird when government gets involved.
The government can give the bank a “loan” of $100 at 5% interest. The bank can then turn around and re-loan that money to person B at 10% interest. So long as the government interest rate is lower than the rate they charge to person B, the bank can do this infinitely. In this way, the government replaces person A.
Also, the bank can choose to buy government bonds that pay 10% interest. So long as the bank is making 10% interest on their loans, they don’t care who they loan the money to. In fact, a government is bigger and has more money than person B, so they’re more likely to pay it back! This means that they’re more likely to lend to the government. In this way, the government replaces person B.
If person A and person B are unnecessary, then banks can keep making money by borrowing money without ever involving citizens and without ever actually creating economic value. By borrowing money from the federal reserve and lending it back to the government in the form of bonds, banks keep siphoning off tax dollars without actually DOING anything.
So if the government keeps lending money to banks in order to borrow that money back, the government will keep owing more. The only solution to this is to print more money to pay back the money they borrowed. This isn’t a an exaggeration or a warning. This is a thing that has been happening for the last 100 years. This, and this alone, is the cause of inflation. Inflation occurs when more money is printed. It’s as simple as that.
Think this is weird? Well, it gets bad now. Because if there’s inflation, a dollar today will be worth less tomorrow. This means if you borrow a dollar from someone today, you’ll have to pay them back more than a dollar tomorrow. It also means if you work hard to earn TWO dollars today, and spend 1 dollar each day, then tomorrow’s dollar won’t be worth as much as today’s dollar was.
Now let’s return to what I said about “inflation not mattering” 2 posts ago. One hour of work equals 3 loaves of bread. But if you do one hour of work then wait a year, that money only gets you two loaves of bread. Wait two years and it only gets you one loaf. The only way to keep getting fed is to keep working.
Did you catch that? The only way to keep getting fed is to keep working.
One more time: The only way to keep getting fed is to keep working.
This is the goal. You can’t save enough money. You can’t pay off your loans. You can’t pay back your debts. You can’t earn enough to retire. You will ALWAYS have to work. It’s an infinite labor cycle to keep people working.
Inflation can be a somewhat more complex issue than what is summarized above. For example, a lot of the current so-called inflation experienced in the US on the cost of everyday goods and fuel are due to supply chain issues (i.e, Covid measures, Ukraine war, etc all wreaking havoc on the supply of everyday goods and fuel).
The above summary, however, does a great job illustrating one of the most important and egregious source of inflation – namely, the process through which government involvement contributes to the issue.