puzzle

Contents

AmericanRebus
Subject Areas

 

Debt and Taxes

Inflation is a continual theft of our wealth


The Attack of the inflated dollar

In these uncertain times, most of us are very concerned about the fiscal crisis. Time will tell whether the processes being tried were the best way of solving our predicament. Regardless of the success of the current efforts, however; we are facing another, far graver, problem that will grow from our current actions. Regardless of how it is cloaked in political or economic terminology, our future will be deeply affected by the spending of money that we don’t actually have or can reasonably hope to have in the future.  Common sense tells us that this is the road to ruin, but unfortunately common sense in very uncommon in Washington D. C. Even if the money being shoveled into economy actually works as advertised (open to question) it will leave us with a debt that we cannot repay without extreme pain. If additional spending is added to our debt, we will experience a lowering of our standard of living like none of us have ever envisioned.

Most of us are aware of increases in the “cost of living,” but haven’t paid much attention to the real extent of those costs. In reality, the cost of living has not risen; the value of the dollar has simply decreased. This decrease is not a trivial matter; it is a major theft of our individual and national wealth. Let me explain. A $60,000 life insurance policy bought in 1970 still has the same face value, but will now buy only 19% of what it would buy in 1970.  A house purchased in 1983 for $100,000 would have to sell today for $213,000 just to break even. Suppose a deposit of $1000 was made to savings account in 1990. If it isn’t more than $1623 today, it has lost value. Ironically, any increase in its book value, will be further decreased by taxes on the interest earned!

Before you write to say how I erred in some particular, let me agree that the effects of inflation are widespread and complex. One thing that is not complicated though, is the disastrous impact inflation has on our ability to plan for our individual futures. Every dollar in your pocket, paycheck, or bank account is losing value every day. Granted, the daily loss is small and varies over time, but the loss is real. While your 401k plan probably lost money in the stock market decline, what is left of it is further depreciated by the loss in value due to inflation. The essence of the problem is that any funds you set aside for the future will be diminished by the unseen attack of inflation. If you are already retired on a fixed income (such as a retirement with no cost of living adjustments) you already have suffered the ravages of inflation. All indications are that those ravages will get worse in the near future.

Why do we have inflation? Inflation is the result of the government printing (actually borrowing) more dollars than there is value to back them up. If the government borrowed just to make ends meet until payday (for example April 15th) that would be OK. But in recent years, the government has been borrowing with no intent to ever repay the loans. For every additional dollar that is printed, the values of our existing dollars decrease. Now that we are borrowing trillions more dollars that we can’t pay back, our dollars become increasingly less valuable. This is what politicians don’t you to think about – why does the “cost of living” go up each year? It is mostly caused by a little thing called “inflation”. Inflation is like a minor, but chronic health problem; you always know it’s there, but it doesn’t hurt enough at any one time to cause you to see relief. Unfortunately, the chronic pain is about to get very intense and an immediate cure is required if we are to continue to enjoy our national health.

Inflation is not our friend. It is the result of devaluing our dollar. Every year the government prints and spends more dollars than there is actual value to back up the dollars. This creates a budget deficit (spending money you don’t have). These deficits add up to create a “national debt” (owing money that you can’t repay). With too many dollars available, each dollar becomes worth less. Over the last 30 years of so, the dollar’s value has decreased an average of almost four percent per year. Four percent doesn’t sound like much, but it does have a serious impact on your finances. For example, this inflation can wipe out any interest you earn on a savings acount (plus you still have to pay taxes on the supposed, but actually non-existant, earnings.

Inflation is not our friend, but it is the friend of most politicians. In fact politicians love inflation. They love it, but they don’t like to talk about it.  “Cost of living sounds” sounds like something we can’t help: “inflation” might raise the question of why do we need to have inflation? Why do politicians love inflation? Because, inflation necessitates change,and politicians live for change (change they can believe in)! Inflation requires politicians to vote additional dollars just to maintain existing programs. Politicians like to give wage increases to grateful workers. who become dependent on the politicians and dependable voters when needed. Bigger budgets enable politicians to camouflage favored projects; grants, rebates, and earmarks, in inflated budgets.  

Inflation gives an excuse for much of the hot air emanating from Washington. Politicians like inflation because it encourages higher wages, which in turn, produce (apparently) higher tax revenues. Inflation also eventually pushes taxpayers into higher tax brackets without politicians having to vote for increases. Most politicians know that inflation robs citizens of their savings, but believe the government has a better use for the peoples’ wealth. Politicians also count on inflation to reduce our national debt by cheapening the dollar and defrauding people and nations that bought our bonds in good faith.

Inflation has done us no favors in the past and is about to cause us dangerous problems for our future. Our government is spending unbelievable mountains of dollars in an effort to resurrect our banking system. Regardless of whether this is wise or even workable, one result will be that these trillions of dollars will cause a large increase in inflation. Worse yet is that the administration is planning to spend untold trillions more at hat are not related to the current crisis but are simply political preferences. The complete disregard for the real potential for inflationary and bankruptcy disaster is incredible.

Those who deny or ignore this threat are too stupid
to be allowed to drive on our public streets