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

Finance Trends 2019 Mid-Year Markets Review

Email subscribers of the Finance Trends Newsletter receive the first look at new articles and market updates, such as the following piece, sent out to our email list on Sunday (6/14).   Hello and welcome, everyone! If you received our last email notice over the July 4th holiday, you'll know that this weekend's newsletter will serve as a mid-year market update and a follow-up to issue #29, " How to Reinvest in a Rising Market ".   Ladies and gentlemen, without further ado, let's start the show...  Finance Trends Newsletter: Our Mid-Year Market Review When we last spoke, back in February, the U.S. stock market was rallying off its December-January lows. As the S&P 500 and Nasdaq reclaimed their 200 day moving averages in February and March, it became increasingly apparent that a lot of retail investors (and perhaps some institutional investors) were left under-invested while watching this recovery move from the sidelines.  The U.S. stock ...

Round trip stocks: momentum booms and busts

" No tree grows to Heaven ." - Old proverb adopted by Wall Street. What happens to hot momentum stocks when their rocket fuel runs out? How long can they continue to fly before they come crashing back down to earth? Why is the stock that you paid $100 a share for now trading at $39? These are questions that many novice traders and investors may be struggling with in the wake of the most recent market correction. Momentum stocks have been hit hard as the Nasdaq 100 and Russell 2000 indices have moved lower in recent weeks. Caught unaware by the recent slide, some traders may be wondering when their beaten-down stocks will snap back and allow them to exit with smaller losses (or even reach the mythical "break even" point).  While growth stocks still firmly within their uptrends may form constructive technical bases and move higher after this correction, others may experience sharper pullbacks or break down into full "stage 4" declines (see chart below...

How to "Pull the Trigger" on Your Trading Ideas

In our last post, I quoted hedge fund manager, Jim Leitner on the importance of following up on your investment ideas.  Today I'd like to follow up and share some thoughts on how you can learn to consistently "pull the trigger" on your best trading setups and investing ideas. In order to help you do that, we'll take from the best and offer up key insights from interviews with top traders and trading psychologists like Alan Farley, Brett Steenbarger, and Doug Hirschhorn .  Now before we get to their key insights on overcoming trading anxiety and pulling the trigger on your trading ideas, let's remember what Jim Leitner said in his interview: "Learn to love to listen to people and when you hear something interesting, follow up on it. Don't just think, "Well that's an interesting idea" only to find out a year later that the company you could've bought shares in is now up 500-fold. You never want to say woulda, coulda, shoulda...