“Think of it this way. Suppose there were twelve people in a room and there were twelve chairs. Each person had one dollar in his wallet and the price of a chair was one dollar.
Each person would think that he could buy one chair—and he would be right. Now let's suppose that someone walked into the room and, without telling everybody else, gave each person one more dollar. Each person would then have two dollars. The twelve people together would have twenty-four dollars. Each person would now think that he could buy two chairs. But he obviously couldn't because only twelve chairs exist. The first person would attempt to buy two chairs and would probably succeed. Perhaps the second would also succeed. But soon, whoever was selling the chairs would see that they were running out fast and would start to raise prices. By the time only one or two chairs remained, people who had not yet been able to buy a chair would be frantically bidding the price up to buy the remaining chairs. That, briefly, is the cause of inflation.”