The Financial Bailout Fiasco

Both democracies and dictatorships inflate, some more than others.
Dictators inflate because they fear revolutions. They must not raise taxes too much or they risk being overthrown or assassinated. So instead of raising taxes, they print money. They inflate.
In a democracy like the US, revolutions are not a problem, but elections are.
In a democracy, people who run for office get elected by promising what the people want, that’s fine. However, people's wants are unlimited, so politicians are constantly promising more, and more, and more.
For instance, suppose you and I are both running for the Senate. I am trying to get enough votes to beat you, and you are trying to beat me.
I might promise the voters new schools and new high-ways. You reply by promising new schools, new highways, and new hospitals.
When it looks as if you might win, I offer even more. I promise not only schools, highways, and hospitals, but parks, and playgrounds, too. Since I promise more, the voters elect me.
Keep in mind that the voters always elect the person who comes closest to offering what they want. The only way a person can get elected is to promise what the people want.
Now I am in office and I must give the people what I promised. If I don't, I'll be a liar. The people will vote against me in the next election.
Of course I can't raise taxes enough to pay for all the things I promised. I'd make a lot of enemies and they'd vote me out of office. If I raised taxes a lot, they might even have me impeached.
So I start printing money. I start inflating.
However, modern politicians don't just run the printing presses. They use a more complex system. They use the banks and Federal Reserve.

Source: Uncle Eric by Richard J. Maybury "Whatever Happened to Penny Candy?"
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