Saturday, February 28, 2015

How We Ripped You Off With Inflation Part II

Saving up for a new car, home improvement, or college for your children? Have you noticed you’re not making much progress against rising prices? That’s because we tax those savings of yours. Heavily. No, not just the interest, but each and every individual dollar you own. Better rev up your savings plan.
When we at the government decide to print some money to spend we increase the total number of dollars that exist. Supply and demand dictate that when you increase the quantity of anything, its value goes down. Those new dollars that we print and spend get 100% of their value from demand for dollars that already exist, including your dollars. A little bit of the demand for the dollars in your savings migrates from your dollars to our new dollars, and with that demand goes value. Your dollars lose value, ours gain value. You’re none the wiser. If we print and spend enough money to increase the total number of dollars in circulation by 5%, your dollars will, in time, lose 5% of their value. You see this in the form of higher prices, or inflation, as businesses need 5% more dollars to pay their suppliers, rent, etc., and they pass on the higher costs to you. See the graph near the top of this page to see how much money our partners at the Federal Reserve have created for us to spend and add to circulation lately. Don’t worry, it can take a few years for our new dollars to work their way into circulation and erode the value of your cash. For us, the benefit is immediate!!
Now, if you have bonds, savings, certificates of deposits, money market accounts, tax lien certificates, or ANY other financial instrument with a fixed dollar value, it will lose value. Your annuity, pension, or other fixed income instrument may never fail to pay you the amount intended, but whether or not that monthly amount comfortably covers your monthly expenses or barely gets you through two weeks is another question. That is why counterfeiting (for anyone besides us) is illegal. Only we at the government are allowed to steal the value of your property. We at the government have printed quite a bit of money lately (see above link).
We sell our own treasury debt to you people, taking your money from you while you smile. Of course we’ll pay you back, but in the mean time we’ll print up some money. The dollars we pay you back with will be worth less, maybe much less than the dollars we took from you. This is usually true even after you add in the interest you collected. By the way, we may decide you owe us income tax on that interest.
We tax you heavily by printing money, or “quantitative easing,” as we have come to call it to hide what we are really doing. Jonny’s never going to college; you cannot save fast enough to keep up with the rising tuition costs we cause. You’re not going to beat our stealth taxation. We do, however, enjoy taking his tuition money, so by all means please keep trying. Can I offer you some risk free Treasury Bills??

"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."
- Thomas Jefferson


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