Taxation has a lot of names. It can be called a Tariff, Licensing Expense, Fee, Government Surcharge and more. Whether you are buying a fishing license or licensing a business, you are paying taxes for the privilege (things that used to be free). When I discussed the current tax situation, broken tax promises and coming new taxes in my previous reviews (like the Tax Day Examination of Taxation)...I overlooked an important hidden tax that affects rich and poor alike...inflation.
Inflation is the most insidious of taxes. And it is not accidental. Inflation traces its roots to Europe between the 15th and 17th Century, when countries mixed coins made of precious metal with base metals to extend the amount of money that could be minted. This was a slick move, because it allowed Kings to finance their wars or various lifestyles without a popular tax revolt creating domestic problems. Although prices and inflation do occur simultaneously, they are tied to one another. Ultimately, it takes more money to buy the same thing when inflation kicks in.
In the United States, inflation normally start appearing within six to eighteen months. Because we increased our money supply by over fifteen percent last year, we should start experiencing the fallout of those poor decisions at any time. Additionally, the Federal Reserve has been buying up debt (Fannie and Freddie) using printed money possibly to the tune of one trillion dollars. This strain our money system will start appearing in the coming months adding insult to injury to our current double-digit unemployment.
We may not see double-digit inflation this year, but we have been holding on to moderate inflation for several years. I don't recall double-digit inflation since early in the Reagan Administration...so brace yourself. In addition to having to spend more money for the same standard of living, those of you who are carrying heavy credit card debt need to get out now. Interest rates are necessarily tied to the rate of inflation to encourage investment. So double-digit interest rates are on their way back, too!
How does this affect you? If you are at the lower end of the economic spectrum you get hit twice. First, you may already find yourself taxed in trying to make ends meet. As prices rise ten percent or more every year you will find that your income can't keep pace with rising prices. This will create an incredible strain on family budgets and increase the need for debt. But debt is the second problem. Most Americans enjoy sizable credit card debts that they have allowed to mount. Those rates are heading up and the ability to simply keep up with the interest on that debt will add another strain to the family income. So for those of you who view Obama as the "Savior," think again. His irresponsible spending and printing of money for feel-good policies is going to make everyone feel the pain.
Actually, people at the lower end of the spectrum...all the way up to Obama's target of 250K threshold are going to get hit in their retirement investments. Many people on lower incomes manage to invest through company 401K programs. That money is wealth that you have managed to accumulate through responsible investing and sacrificing in other areas of your budget. If you have a 401K, you are to be commended. I have one as well. And it angers me that my taxes are going up, inflation is going to make everything more expensive, and the value of my accumulated wealth is going to decrease because the government thinks printing more money will solve our problems. They are stealing from us whenever they increase the amount of money they print. They have already hit us with a fifteen percent "inflation tax" by keeping the Bureau of Engraving and Printing running day and night.
Inflation sucks. And it is avoidable. It destroys accumulated wealth in the ultimate redistribution. But it is wrong. It is reprehensible. And it impacts everyone. For those reading this article who thinks giving people free cell phones, internet service or any other of the plethora of give-aways that we simply cannot afford is the right thing to do I simply ask "is it worth the price?" I agree in benevolence. I believe in helping people out. I believe that we should have social programs. But there are limits and those limits have been passed. We are paying the bills for feel-good policies that are bankrupting the wealth of hard-working Americans. It is simply wrong. We need to stop out-of-control spending and non-stop printing of more money to try and solve long-term problems with short-term solutions.
Inflation, a dirty word for politicians and economists. Yet, it's on almost everyone's mind these days, including some distant villagers in China. There have been many talks about this topic in the business world, be it from the academics, business leaders, employers, employees, real estate agents, or even children. Everyone knows inflation is an evil in one's life. It exists whether you like it or not. The point is you can't eradicate it, you can only … more
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer goods and services; consequently, annual inflation is also an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy. A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the Consumer Price Index) over time.
Inflation's effects on an economy are manifold and can be simultaneously positive and negative. Negative effects of inflation include a decrease in the real value of money and other monetary items over time; uncertainty about future inflation may discourage investment and saving, or may lead to reductions in investment of productive capital and increase savings in non-producing assets. e.g. selling stocks and buying gold. This can reduce overall economic productivity rates, as the capital required to retool companies becomes more elusive or expensive. High inflation may lead to shortages of goods if consumers begin hoarding out of concern that prices will increase in the future. Positive effects include a mitigation of economic recessions, and debt relief by reducing the real level of debt.
High rates of inflation and hyperinflation can be caused by an excessive growth of the money supply. Views on which factors ...