What exactly is an inflation tax?

Question

and what does it mean to hold money

Answer 1

Lavencia, inflation tax refers to the economic loss suffered by consumers as the result of the lower purchasing power of their money.  That's the book definition.  In plain English, it means that when things cost more, you have less money in your pocket.   So when you hold money during inflationary times, it loses value, just as if it had been taxed.  Let's say you have $350 stuffed under your mattress six months ago.  At that time you could have bought 100 gallons of gas.  Today, you could only buy 87 1/2 gallons.  Inflation tax.  We'll be hearing a lot about it nowadays.

Answer 2

An inflation tax is when the government causes inflation. The US government does this by continually printing more money, which devalues their own currency and reduces the wealth of everyone that holds money.

If you don't like this idea, I suggest you vote for Ron Paul in the next election (if you are a US citizen).