February, 1988

TAXATION OR INFLATION ?

It has been said, by some of our tax authorities, that instead of a tax increase this year, we will just be treated to a bit of inflation, say 4% or 5%, which it is said, "Will be good for us economically, although the manner in which it will be beneficial is not stated. It is also said that it will be, "Just like a tax raise insofar as the government is concerned." That statement is true, in the worst possible sense of the word. Inflation is caused primarily by government deficit spending, and is one of the most insidious forms of taxation that has ever been invented, since it steals from the people, the purchasing power of their money without their consent or even their knowledge. It steals the value of money they have earned, paid taxes upon, and think they have saved for a rainy day. It is especially unfair to the senior citizen who, for decades, saved his or her money in order to have something to retire on, only to be forced to watch helplessly as inflation, caused almost entirely by the Federal Government spending much faster than it can get it from the people, robbed their dollars of almost all of their purchasing power. Our National Debt Ceiling was intended to prevent this but as fast as it was reached it was raised and the spending went on. The Gramm-Rudman bill was intended to stop the spending but a number of ways to get around that have been invented by the very persons who should be applying it, so the spending goes on and on!

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. It happens automatically,.. but    just as certainly as though it were intentional. As long as our government needs more and cheaper dollars they will get cheaper in spite of anything that can de done otherwise.

During the question period following most of my lectures, people have often asked questions concerning the constantly rising cost of living and of consumer goods. My reply usually causes a gasp of surprise and disbelief. "In terms of real money, the price of consumer goods 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? Why in 1930 you could buy a gallon of gasoline or two one pound cans of Campbell’s pork & beans for a dime. Today either would cost you almost a dollar!" "You are right on both counts" I would 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 pork & beans was a silver dime. Today that same silver dime, if you can find one, is still worth a gallon of gas, two cans of beans or any thing else that a dime would buy in that time. So it is true that prices have not gone up since 1930, it is just that we have all been conned into using counterfeit money which has no intrinsic value whatever and nothing behind it to prevent it from reaching zero value. It is therefore worth only whatever the people can be persuaded to think it is worth. That is not very much, and is growing less every day, since the dollar will not do anything more for you than you are willing to do for it:

Sooner or later, the other countries think it will be sooner, judging by the constantly lower price they are willing to pay in their money for it, the dollar will reach its true value and will have to be replaced with something that has intrinsic value such as a kilowatt of energy or a gallon of water, or some other useful item. So that it may retain some standard of value.

Daniel W. Fry