The relationship between the money supply and inflation
The most important reason why governments allow excessive monetary growth is their attempts to stop unemployment rising. In the absence of monetary growth, a rise in money wages faster than output would lead to unemployment.
Monetary growth occurs when both the government and companies borrow from the banks, which are the residual source of finance for both. Such borrowing tends to occur when the demand for finance exceeds the supply of savings in the economy as a whole.
Hobart Paper 68