The most insidious form of government theft from the people is inflation. Inflation is a regressive tax that transfers wealth from the poor and middle classes to the wealthy and connected. It’s regressive because it hurts the poorest the most, and benefits the government and the rich, connected cronies.
Inflation rates are grossly underreported
Unlike income and sales tax rates, which are clearly defined, inflation is a tax that varies with every year, and the government, naturally in its own interest, systematically lies about what the real rate of inflation is. While current inflation rates in the US are claimed to be around 2%, they’re actually more like 10%. Here’s one source. Here’s another.
If you ever wondered whether it was possible to quantify a lie, well, in this case it is. The government is lying by 500%. That’s the difference between the official 2% inflation rate and the actual 10%.
Inflation is a yearly inheritance tax
Think about what inflation is. It’s not just a tax on your earnings for that year (income tax), nor is it a tax on a specific item purchased (sales tax). It’s a tax on everything. Inflation affects everything you own. If you have $100 in cash in your wallet and you can buy 10 pizzas at $10 a pop, and in a year, due to inflation, pizza is now $11 a pop so you can only buy 9 of them, then the real value of your cash has gone down by 10%.
The same is true of your debit cards and savings accounts. All of your investments (if you have any) are also affected. Even property is affected. Let’s say you have a house that you bought for $200,000 and then sold it for $220,000 in 10 years. You think you made a profit?
Given an annual 2% inflation rate, you would have had to sell your $200k house for 200,000 x (1.02^10) = $244,000 just to break even.
With a 10% inflation rate? 200,000 x (1.1^10) = $519,000…
Good luck with that.
That means everything you own. Every asset, the chair you’re probably sitting on right now, the car in the driveway, the house you’re in. Everything is affected by inflation. It’s therefore indistinguishable from an inheritance tax. Except you get hit by it EVERY YEAR.
The future you of next year is inheriting assets owned by today you. And paying an inflation tax of 10% on it. Every, single, year.
Let that sink in for a minute.
Are you getting a pay increase of 10% per year to offset the real rate of inflation? I’m not. I don’t think most people are. But even if you were, you’re not just losing 10% of the purchasing power of your income every year. You’re also losing 10% of the value of every asset you have. That means if you wanted to save for retirement and actually have more than what you put in, you’d need to find an investment fund that yields an average of more than 10% in annual returns.
Again, good luck with that…
The erosion of the middle class
If you’re wondering how the middle class is barely making ends meet with two incomes and an average of two kids when two generations ago the dad could go out and earn enough to comfortably feed 3 kids and a wife who stayed at home. Well, there’s your answer. People are getting poorer. They just don’t realize it because they’re distracted by trinkets like smartphones. They think because a few areas of technology have experienced advances that they’re wealthier. But they’re not.
How the inflation scam works
Inflation is a scam, and like all scams, it was designed to benefit the people who created it. That money that we calculated you were losing every year? That’s not just disappearing into thin air. Someone is stealing that from you.
The key is to understand that inflation, technically, is an increase in the money supply. Price increases that are usually termed “inflation” are actually just the consequence of this increase.
Let’s use Monopoly as a metaphor. Imagine you’re playing a game with three players: Adam, Beth, and Charlie. Let’s also assume they’re not quite using regular Monopoly rules, but that instead, Adam is a “regulator”. He’s the government, so he gets to set the rules.
Normally, nobody can “create” money in Monopoly. You start out with the same amount of cash as all the other players and then you gain or lose money as you play the game. But Adam, being the government, has given himself a special power: he’s made himself into a central bank. As a central bank, Adam can print money for himself whenever he wants.
When he lands on a property that he can’t afford to buy, he just writes the amount he wants on a piece of paper and “creates” the money. When someone else puts up a property for auction, he can always outbid the other players because he can just give himself as much money as he wants.
But while Adam creates more Monopoly money, he’s not creating more wealth or value. The number of properties and buildings available in the game don’t increase. Instead, their price goes up. Imagine these two contrasting scenarios:
Adam doesn’t cheat
Bob lands on a property that he can’t afford to buy, so he has to auction it. Bidding starts at $10. Charlie really wants the property, so he bids it up to $200. Adam only has $180 and he’s already mortgaged everything he has, so Charlie wins. The property was therefore valued/priced at $200.
Once again, Bob lands on a property that he can’t afford to buy, so he has to auction it. Bidding starts at $10. Charlie really wants the property, so he bids it up to $200. Although Adam only has $180 and he’s already mortgaged everything he has, he’s a central bank, so he can just create money. He writes $120 on a piece of paper and declares it “money”, and raises the bid to $300. Charlie can’t afford so much, so Adam wins. The property was therefore valued/priced at $300.
Inflation is theft
In this simple example, we can see how adding new money into a system will increase the price of things. But more importantly, we can also see that it benefits the people who add the money first, because they get to bid in an economy that hasn’t yet adjusted to the new money. As the money travels throughout the economy and is spent by people, eventually all prices will adjust and you have “inflation”. Since the people who get to spend the new money first are at an advantage and the ones who spend it last lose out, inflation is therefore a transfer of wealth.
The difference between you and the cheater is that you have to earn your dollars, while they just make them out of thin air, either by literally printing them or, more often, just creating virtual 1s and 0s in a database. Yet at the end of the day, both the hard-earned dollars in your wallet and the counterfeit created by the central bank are treated exactly the same.
In real life, the central bank in the United States is the Federal Reserve. And there are central banks in all nations, with few (if any?) exceptions. Every government, naturally, likes to print its own money. The peculiar thing about the US central bank is that it’s a privately held bank, with privately collected profits. And nobody knows who exactly owns the bank, because the information is kept secret. Neat, huh?
Where are all the bleeding hearts?
Inflation is a tax on the poor and middle class, and benefits those who create the money in government. But it also benefits connected corporations who get government contracts and therefore get to “use” the new money by bidding more for resources. So where are all the bleeding-heart liberals? Where are the socialists who claim to care for the poor and downtrodden? Why is it that rather than opposing central banks and the massive amount of power they wield, establishing a central bank is actually the 5th plank of the Communist Manifesto written by Marx?
Marx deigned this to be a crucial step towards establishing communism: “5. Centralisation of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly.”
Kinda sounds to me like communists are all about power and not about helping “the little guy”. But of course you’d already know that if you were paying attention.
Regular banks are scamming you, too
It’s important to recognize that while central banks are the original cause of this issue, they are hardly the only culprits. Regular, everyday commercial banks like Bank of America, Chase, and others are all benefiting from this and contributing too. It’s called Fractional Reserve Banking. And it’s also one of the oldest scams on the planet.
What is it? Fractional reserve banking is when a bank lends out money it shouldn’t. For instance, you deposit $100 in a debit account and you think that money really is “there”. But it isn’t. Before you left the building the bank has already allocated that money for lending. It lends out $90, keeping $10 in reserve (that’s the minimum in the U.S., some countries like the UK don’t even have minimums).
Now, while you believe you have $100 in the bank and make spending decisions accordingly, someone else is borrowing $90 and spending that money. And when they buy a new gadget or gizmo and pay for it with a credit card, that money goes to the merchant’s bank, so now we have $190 sitting in deposits, from an original $100.
Of course, the merchant’s bank is no better, and it too lends out 90% of the $90 deposited, or $81. Do the math and you’ll see that as the cycle continues, these commercial banks will have created $1000 out of the original $100 that you deposited at the bank.
To add insult to injury, this dangerous practice of fractional reserve banking opens you up to losing all of your deposits. That’s what they call a “run on the bank”, which is when everyone tries to take their money out at once, and guess what? The bank doesn’t have it, so they declare bankruptcy. During the Great Depression thousands of banks went out of business because of this, and millions of people lost a lot of money.
People aren’t angry because they don’t realize how bad inflation is
I really believe that of all the thievery and scamming that the government does, the 1-2 punch of underreporting inflation rates and miseducating people about what inflation actually is, is one of the worst. If people realized that they’re almost all going to be poorer next year than this year. That by the time they retire their pension will be a small fraction of what they have now. That all their efforts to budget, save money, and invest for a future are being eroded by a small group of narcissistic megalomaniacs…
Henry Ford said: “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
He was right.
What can I do?
Doom and gloom is all well and good, but what can I do to safeguard my wealth? And what if I want to protest the system?
If you want to save money, the only way to do it is to find investments or assets that yield returns greater than the rate of inflation. If you’re in the U.S., that’s currently about 10%. That’s hard, but not impossible. There are stock market funds that do this, although of course those are risky. You could also start a business and try to “out-earn” the rate of inflation. If your business grows by more than 10% per year, you’d probably be okay.
As far as protesting, the best thing to do is to disengage from the system. Don’t use banks or fiat currency (money created by the government) except for when you really have to. Obviously your internet provider wants to be paid in dollars, but there’s an increasing number of people accepting cryptocurrencies for goods and services. Of course, those are still quite volatile and in their early stages of maturity.
You could also try to avoid taking on debt. Debt is how this whole system works. Debt is how commercial banks create new money through fractional reserve banking.
Lastly, try to become self-sufficient. Grow your own food. Plant a garden, get some goats and chickens. The less you participate in this scam of an economy, the less the wealthy and powerful can rip you off. Get some solar panels setup and generate your own power instead of relying on paying dollars to a power company. Get off the grid as much as you can.
You’ll never be a complete island, but the less you’re plugged into the system, the less of your assets you expose to theft through inflation.