[ctdonath]

Inflation needs to remain on par with growth so that $1 (or whatever unit of currency) remains valued at $1 as more value is created within the economy. The total of an economy's currency represents the total value within that economy; think a pie, where the number of slices is the currency representation of the totality of the pie. If the money supply does not increase as the economy grows, then each currency unit effectively stretches to represent more value: as the pie gets bigger, but the number of slices doesn't change, then the value imputed to each slice grows. If the money supply grows but the economy doesn't, the value of each currency unit decreases: the number of slices increases, but the amount of pie per slice decreases. If the currency supply increases on par with the economic growth, the value per unit remains the same while the total value of the economy increases: as the pie grows, you want to increase the number of slices so that each slice has the same amount of pie, even though there is more pie total.

When inflation exceeds growth, people get distressed as their "slice of the pie" gets smaller. When growth exceeds supply, people get distressed as it gets harder to obtain a slice of that pie. And the problem with the Fed conjuring virtual currency out of thin air is it makes each slice of the pie smaller without the pie growing...giving the Fed, and their cronies, a bigger chunk of the pie without earning it.