to inflate the Króna

Tonight (May 26th) there was something on the news about the inflation. It seems we have had some. Strange as it may seem we inflate a ballon and it gets bigger. We inflate the Króna and it gets smaller. In value at least.
In Iceland we have an index to measure the inflation. Actually we have several indexes. One is a currency index that measures fluctuations in the króna versus the foreign currency. You can see it here.  The other ones are here.
These guide our lives to an extent. We watch the index and if it goes the wrong way so go the Central bank intrest rates, thus banking rates and thus our loans go south as the index inflates them, the rates expand them and so on.
The funny thing is that all of this is mental.
Honest it is.
The value of a currency is based on the idea the "market" has about its strength. If the market believes in a currency it will be strong and if not - well sorry it, falls.
In the 1920´s the Icelandic króna and the Danish króna had a similar value. Now the Danish costs 22 Icelandic ones. So the Icelandic has really fallen in price and what is more - when we consider that two 0 (Zeros) were removed from our precious in the 1980's it actually 1 Danish equals 2200 Icelandic ones.
I said this is all mental. How does one value a Króna? Basically from what you can buy with it. How does the index work? Well, some people (officials) put together a database where they evaluate how the index for consumption works. Or whatever.
So they sort of weigh in how high a proportion of an average family's consumption any given item is. How much on telefones, tv licences and subscripions. Petrol, fruit, booze and so on. And there will be some justice in all of this and its to some extent based on market reseach.
Obviously they could get court orders and go through any family's spending. God knows its inside the banking system.
Then by working out how prices go up or down on petrol, clothes and so on, and putting this into their database they find out how much inflation there is.
Having done so banks can update loans and the savings so that the lenders pay back in equal worth (plus intrest) and the savers get back equal worth (plus savings). But they can increase and decrease inflation by fiddling the database. They took out Tv licences as it now is a tax. Down went inflation. They added to the share the state has in tobaccoprices (great) and booze. Prices went up and so did the loans. So basically its jut a question of balance and imagination.
Its really fiddling the numbers, - according to a plan.
One problem is that inflation drives the index, the index drives the inflation and no one drives either.
So my suggestion is that every time the Central banks target for low inflation is met the government and bankboard/managers should get a raise. Everytime it does not they get a cut. When anyone of them has raised say 25 million he/she retires.
We would have a lot of retired people in a few years and no inflation.
Wanna bet?