currency debasement decays all economic value

 What are all the damaging effects of currency debasement?  It depends exactly how it's being done, but the damage is broad and deep.

The most obvious hit is to savers.  The bank balance of anyone who saved in that unit, goes down in value.  The value of cash saved goes down in value.  But any asset denominated in the debased currency is equally affected.  By value, bonds are the biggy.  But also mortgages, loans, corporate "bonds", informal IOUs etc.

That much is all obvious.  I want to highlight some less-obvious costs of currency debasement.

Fake gains are when the nominal value of something goes up due to currency debasement.  A 1M GBP house "going up in value to" 1.05M GBP in a year, when there is 5% debasement ("inflation") is a fake gain of 50k GBP.  This is taxable.  Typically the entire "increase" on which people are paying tax is a fake gain.  As time goes on, the fake gain converges on the entire value of the house.  Taking the UK's 28% rate of capital gains tax on real estate, the total value of the tax paid at sale on fake gains amounts to 28% of the value of the property.  The longer the house is held, and the quicker the currency debasement, the quicker this tax converges on 28%.  Sticking with the UK example, it used to be possible to apply "indexation" to the house's value.  This allowed the value to be adjusted by a government "inflation" (actually debasement) measure.  The official measure was probably low, but it was something.  People are about to start noticing that this went away.

Likewise, companies have to pay corporation tax on fake gains on their capital.  Suppose a company has 1B EUR worth of robots, used to make their stuff.  Four years later, supposing EUR is worth 20% less (roughly).  Don't worry about depreciation, maintenance, replacement, whatever, it all comes out in the wash.  One way or another, owning the same value of robots as capital is now 1.2B EUR worth, and that 200M came onto the balance sheet as a "profit", and corporation tax at around 20% is paid on this fake gain.

Even if a company just holds its cash in a currency less prone to debasement, currently, only CHF, it has to book the fake gain vs its native currency as a "profit" and pay corporation tax on it, even tho the value in real terms did not increase. 

In general, tax on fake gains is a problem for individuals via capital gains or income tax, and companies via corporation tax, and applies on any valuable asset.

Some jurisdictions allow individuals to avoid fake gains tax on foreign currency held, including Switzerland, Germany, Austria, Slovenia, and now even the UK, since around 2012.

Likewise for precious metals: Switzerland doesn't generally have a capital gains (but it does have a wealth tax), and Germany, Austria, and Slovenia exempt precious metals or just don't have capital gains tax on movable property (as distinct from securities, say, or real estate, in this ontology).  I think the UK has exemption for a particular 1 oz coin from the Royal Mint.  I would love to see someone try to use this at scale.

Fake gains is one of the worst and most insidious effects of debasement.  It amounts to arbitrary confiscation.  Most people don't notice it's happening, while at the same time complaining about "rising prices".  It turbo-decays all value.

Compared to direct unit debasement and tax on fake gains, the remaining costs of currency debasement may seem like just annoyances, but these can also become serious problems.

Threshold levels have real economic effects, and if the real value of thresholds is exponentially decreasing, all sorts of things start going wrong.

Take cash at borders.  When I went to the US in the 90s, there was a form to complete during the flight, and it asked whether you had more than 10k USD in cash, or the equivalent in monetary instruments.  It would be interesting to know when this threshold was set.  But it has not changed for decades.  Its value now is a tenth what it was a few decades ago.  It is now impossible for a tourist to arrive with enough spending money in cash for a longer visit (without declaring the cash), whereas before it was easily possible.  As time goes on, the real value continues to decline, until even having enough cash to stay a single night in a hotel will put someone over the limit.

Likewise, the EU has their limit of 10k EUR, and show no signs of keeping the value constant.  They are going to allow it to exponentially reduce in the same way.

How about banks' AML-etc policies?  Suppose your bank currently asks for an interminable paper trail and stool samples when you transfer in a couple of months' spending money.  If that was triggered by a simple nominal threshold in their idiotic cookie-cutter "compliance" process, then as time goes on, the amount triggering this won't be 2 months' spending money, it will be enough for a single trip to the supermarket.  I hope you like unlimited admin and having banks threaten to confiscate your shit.

A person's income level before they are liable for income tax or social security, and income levels at which people's income is counted in higher brackets.  I think they call this one "fiscal drag".

Tax-free allowances for capital gains.  Limits on pension contributions, limits on pension value, tax-free savings limits in schemes like ISAs, total value limits in same.

Just having to keep applying for credit limit "increases" to keep a payment card usable for the same value.

These thresholds are everywhere, and they're going to start sticking out more as the debasement accelerates.

Workers' pay goes down by default by the debasement rate, and they have to negotiate "increases" to keep the same real level of pay.  I remember reading an article in the failed Economist mag about how this was actually a good thing.

There is unlimited futile but necessary activity around the price changes accompanying currency debasement.  New menus have to be printed.  Postage stamps have to be not only issued at the new price, but "topup stamps" have to be made to fill the gap between the previous stamp(s) and the new one.  Price lists.  Employee pay.  The only constant around here is change!  Futile change.  Think how busy everyone can be doing all this.

Cash continues to lose utility.  More bank-of-toyland bumwad is required for any significant cash-payment capability.  Governments are reluctant to admit debasement is happening, so may be tardy introducing new denominations and withdrawing worthless denominations.  Shoppers and retailers spend effort in a change ritual, during which worthless coins are exchanged, taking up real time, at the end of a transaction.  This is made worse by marketing dipshits who want prices to end in 99.  Shops allocate a drawer in every till to the worthless tokens, have machines that must count them, and so on.

The half penny coin was withdrawn in 1984, when my savings included such items (I was 5).  To keep track of the loss in sterling's value over time, they would now be withdrawing the 10p coin.  

Vending machines have to be updated.  Money-counting machines.  

Journalists become more annoying than ever, proclaiming things like "more billionaires than ever!" (of course there are, the value of a billion is exponentially decreasing: any distribution of wealth will have more people over a decreasing threshold, even if everyone's real wealth stays exactly the same), "first trillion dollar company" (that says more about the value of a trillion dollars than about the company), "biggest price for such and such EVAR" (happens all the time, and has to).  They may not even be this innumerate, they just don't care.

It gets impossible to relate to monetary amounts in any literature, or even simple proverbs.  "Look after the pennies and the pounds will look after themselves" should now be "look after the tens of pounds, and the thousands of pounds will look after themselves.  I'm not shitting you.

It gets so much harder to reason about economic value, that everyone gets worse at resource allocation.  Any perceived escapes from the collapsing value create distortions of their own.

And this article has just talked about secondary effects.  The entities sucking on the print-spigot drive up prices in certain asset classes and end up transferring all wealth to themselves via newly-minted currency, or would, except, eventually, people kind of cotton on, and there is some reform, until the next time around.