August 1984

TAXATION BY INFLATION

As the U.S. National Debt continues to rocket its way into the stratosphere with constantly increasing velocity, it has become quite obvious that it will eventually reach escape velocity and be beyond the control of any congress or other governmental agency. It will not matter which party wins the coming national election, since each of them has stated clearly that, if elected, it intends to spend more than one hundred billions of dollars more than it can possibly take in, even with the considerable tax increases which either side intends to impose if successful in the election.

This simply means that the national debt will be increased by the amount of the overdraft, and the purchasing power of every dollar now in circulation, will be reduced by a proportionate amount. Actually, government deficit spending is one of the most insidious and confiscatory forms of taxation ever conceived, since it steals from the public without its consent or even its knowledge, the value of the money it has already earned, paid taxes upon, and thinks it is saving for the future! It is especially unfair to Senior Citizens who, for decades, saved their hard earned dollars in order to have something for retirement, only to be forced to watch helplessly while the value of those dollars rapidly disappears into the insatiable maw of inflation, caused almost entirely by government deficit spending. Many senior citizens, including your editor, have seen more than 80% of the purchasing power of their savings destroyed by the constant demand of the government for more and cheaper dollars.

During the question period following a lecture, people have often asked questions concerning the constantly rising cost of living and price of consumer goods. My reply usually causes a gasp of surprise and disbelief. “In terms of real money, the price of consumer goods in the U.S. has not gone up at all since the bottom of the great depression in 1930.” Someone in the audience is sure to protest. “How can you say such a thing when, in 1930 one could buy a gallon of gas or two one pound cans of Van Camps pork and beans for a DIME, and now they would cost around a dollar!” “You are right on both counts,” I reply, “but we are talking about two very different kinds of money. The dime that bought the gallon of gas or the two cans of beans was a silver dime. Today, that same silver dime is still worth enough to buy a gallon of gas, two cans of beans, or anything else that it would have bought in 1930. So it is true that prices, in terms of real money, have not risen at all since 1930. It is just that, as a nation, we have been conned into using counterfeit money which has no intrinsic value, and nothing whatever behind it to prevent its value from reaching zero. It is therefore worth only whatever the public can be persuaded to think it is worth.

When paper notes were first printed in the U.S., they were not considered to be money at all, but were simply ‘ownership certificates’ to certain silver or gold coins that had been minted and stored in the federal treasury. Anyone who had possession of one of these certificates could go any bank or federal mint and exchange the paper for the coin described on its face. While the price of gold and silver were relatively low, few people bothered to exchange the paper for the coins, since the paper would usually be accepted by the seller as readily as the coins. When the value of gold began to go up in other countries, during the early thirties, the government promptly defaulted on its promise to exchange gold coins for the paper certificates, by ‘Going off the Gold Standard’. It then passed a law prohibiting the public from owing gold and began to collect all of the gold coins and bullion in the country, paying only face value for the coins even though the gold they contained was worth considerably more in some countries. When the value of silver began to rise in the sixties, the government hastily changed the form of the silver certificates. The original (of which your editor has several) read – This certifies that there has been deposited in the treasury of the United States of America, One Silver Dollar payable to the bearer on demand. This was changed to read – “This certifies that there is on deposit in the treasury of the United States of America, one dollar in silver payable to the bearer on demand. (This was done so that if the value of the silver in a silver dollar rose beyond a dollar, the government would not have to give silver dollars in exchange for the certificates but could give instead, a few granules of silver which were said to be a dollar’s worth!) However, when the value of silver really began to climb, the government hastily but quietly called in all of the silver certificates it could get as they passed through the banks and replaced them with ‘Nothing Certificates’ which were and are simply pieces of paper which say, “This is Money! Get what you can from your neighbor for it but don’t expect us to give you anything for it except perhaps a new piece of paper when this one wears out.” These pieces of paper are printed and distributed by a corporation known as the Federal Reserve Bank. The name causes many persons to assume that it is a part of the Federal Government, although it is actually a privately organized corporation, set up entirely for the profit of its managers and stockholders. Except for the fact that the federal government does, by law, exercise a certain amount of control over its actions, just as it does over any bank, the corporation has no connection with the federal government.

The pieces of paper which the corporation prints are loaned to the government, and we are all taxed to pay the interest on the loan. The greatest problem however is that the more of these pieces of paper are printed, the less each one is worth, and, with the government’s constantly increasing need for more of this paper, the presses are kept running night and day!

(signed) Daniel W. Fry

Whichever politician tells you there’ll be no additional tax raise is lying. Due to this ungodly and uncontrolled giant deficit, it MUST be done, unfortunately for us all! Therefore do not let this subject affect your vote in November.

We leave Aug. 8th, to clear up Understanding affairs in Arizona, California and Oregon. Yes, it has to be done in person and yes, it’s a long and costly trip, but it won’t ever need to be done again.

Of course we’ll get a lecture or two delivered as we go. We love your letters but do ask you to ‘hold’ them since we see no way to arrive home before Sept. 1st. Until then we’ll keep you with us in our hearts, for you ARE our ‘family’.

(signed) Daniel W. Fry

Treasurer,

Understanding, Inc.

P.S. For three weeks we’ve been enjoying early autumn with low’s of 62′ and highs of 85 to 88. Just lovely – and we hope yours is equally delightful.