Skip to main content

The Inflation Tax

Ron Paul on "The Inflation Tax":

All government spending represents a tax. The inflation tax, while largely ignored, hurts middle-class and low-income Americans the most. Simply put, printing money to pay for federal spending dilutes the value of the dollar, which causes higher prices for goods and services. Inflation may be an indirect tax, but it is very real- the individuals who suffer most from cost of living increases certainly pay a "tax."

The erosion of purchasing power and ensuing increase in the cost of living is a recurring theme in Ron Paul's speeches on inflation. And why not? These phenomena must have accompanied every inflation known to man. Representative Paul is attempting to make clear, to his constituents and the politicians who should be representing their constituents, that inflation acts as a hidden tax. Slowly but surely, even a "properly managed" fiat currency will lose its "value" (read: purchasing power) over time.

In fact, you could make the case that inflation represents a form of double taxation. You are paying higher prices for goods and services, while at the same time experiencing a decline in your standard of living. People take on more work and increasing amounts of debt just so they can maintain their lifestyles and an outward appearance of prosperity. Mothers leave their children to enter the workforce, hoping to achieve financial stability by adding a second income to the household. Still, we find ourselves deeper in debt than our parents' generation, consoled though we may be by the appearance of luxury items that surround us.

The average person is running in place on a treadmill that leads to nowhere.

As the inflation progresses, the quality of goods and services becomes watered down. Many of the goods we buy today are engineered for obselescence, and even the simplest products have a relatively short shelf life (ever heard the complaints about Wal Mart hammers?). Do you feel wealthier because you are able to afford a dozen crappy hammers?

Please do not be fooled by the BLS' assertion that substituting hamburger for steak represents a comparable trade off of purchased goods. While it might play in the broadcast studio, it won't wash here.

For more on the redefining of inflation, see "The Core Rate" by Jim Puplava.

Popular posts from this blog

Nasdaq credit rating junked.

S&P cut Nasdaq's credit rating to junk status citing debt burdens and its questionable strategy to buy a controlling interest in the London Stock Exchange. Financial Times reported that the exchange's counterparty credit & bank loan rating were lowered fromm BBB- (lowest investment grade rating) to BB+. The change will increase Nasdaq's borrowing costs should it wish to pursue aquisition targets. For an earlier look at the exchange consolidation trend that brought about Nasdaq's push for a stake in the LSE, please see "Exchange fever" .

Clean Money - John Rubino: Book review

Clean Money by John Rubino 274 pages. Hoboken, New Jersey John Wiley & Sons. 2009. 1st Edition. The bouyant stock market environment of the past several years is gone, and the financial wreckage of 2008 is still sharp in our minds as a new year starts to unfold. Given the recent across-the-board-declines in global stock markets (and most asset classes) that have left many investors shell-shocked, you might wonder if there is any good reason to consider the merits of a hot new investment theme, such as clean energy. However, we shouldn't be too hasty to write off all future stock investments. After all, the market declines of 2008 may continue into 2009, but they may also leave interesting investment opportunities in their wake. Which brings us to the subject of this review. John Rubino, author and editor of GreenStockInvesting.com , recently released a new book on renewable energy and clean-tech investing entitled, Clean Money: Picking Winners in the Green Tech Boom . In Clean ...

Jesse Livermore: How to Trade in Stocks (1940 Ed. E-book)

If you've been around markets for any length of time, you've probably heard of 20th century supertrader, Jesse Livermore . Today we're highlighting his rare 1940 work, How to Trade in Stocks (ebook, pdf). But first, a brief overview of Livermore's life and trading career (bio from Jesse Livermore's Wikipedia entry). "During his lifetime, Livermore gained and lost several multi-million dollar fortunes. Most notably, he was worth $3 million and $100 million after the 1907 and 1929 market crashes, respectively. He subsequently lost both fortunes. Apart from his success as a securities speculator, Livermore left traders a working philosophy for trading securities that emphasizes increasing the size of one's position as it goes in the right direction and cutting losses quickly. Ironically, Livermore sometimes did not follow his rules strictly. He claimed that lack of adherence to his own rules was the main reason for his losses after making his 1907 and...