[pessimizer]

The government is not borrowing foreign currencies to buy an oversupply of domestically produced goods.

I think your model depends on "workers" being the only people who are taxed, so if workers are being paid less than the cost of the goods they have to consume, the government + workers must be running at a constant deficit.

But you also tax employers and owners.

Inflation is a tool intentionally used by governments to quickly lower wage costs across the board. People at the bottom end can be subsidized, and productive people whose nominal worth just went up with inflation will negotiate for higher pay. Everybody else gets a pay cut.