An inflation tax is the amount of improvement in a government's position from its own inflationary actions. Since governments are almost always net debtors, reducing the value of previous borrowing reduces their debt load as percentage of revenues, and, in effect, reduces the amount of time it will take the government to pay those debts. However, there is no such thing as a free lunch, and those holding government debt, directly or indirectly, have less buying power.

---