I have a question here regarding something Mises has said in “Marxism Unmasked” (a series of lectures).
I quote: “Deflation is not as dangerous, not as bad, as inflation. Deflation is expensive for the government, while inflation is profitable for the government. But deflation, too, must be avoided.”
I understand how inflation can profit the government (stealth tax), but how would deflation be “expensive” for the government? Do they lose tax revenues or something? (I don’t mean the absense of the stealth tax.)
Deflation increases the real cost of repaying debt… so perhaps he’s implicitly assuming that the government is in debt (which is true most of the time). Maybe he’s got a more subtle argument like the government has to spend more money collecting taxes via means other than inflation. Either of these would appear to be plausible.
In any event, it’s hard to see how deflation could help the government unless they had considerable surplus money reserves.