I alluded to it yesterday, and then in my blog-feed there's this gem:
The first thing to recognize is that a policy of enforced “price stability”, whether implemented in terms of levels or rates, is a form of goverment-provided social insurance, just like unemployment or disability benefits. For all of these programs, there are states of the world in which some individuals might suffer misfortune. The government acts to counteract that misfortune, imposing costs on other individuals in order to fund a transfer of resources. With unemployment insurance, business owners and employed workers pay unemployment premiums, which fund benefits for workers who lose their jobs. A similar dynamic holds for stabilizing prices.Government policy can't help but pick winners and losers: there is no "natural" cdistribution of wealth, only the distribution that policy creates. Our government has clearly chosen to screw you and me to help the creditors and other rich folks.
It is fairly obvious, then, that restraining prices in the face of a supply shock effects a transfer from debtors, taxpayers, and marginal workers to creditors and secure workers. A policy of price restraint is a form of insurance for creditors and secure workers, who are absolved of the risk that the purchasing power of their nominal assets will suffer an unforeseen decay. It is financed with a guarantee written by debtors, taxpayers, and marginal workers, who are put at risk by the policy.