Inflation: An Invisible Tax?
What is inflation? Inflation is the rise in prices of goods in services to the effect that more dollars buy fewer goods and services. Over the last 12 months, we have seen an overall inflation rate of around 9%. I have seen gasoline rise by 2 dollars per gallon. A year ago, I remember spending about $75 - $120 for a week's worth of groceries. Now I spend $100 - $165. This is definitely higher than we have seen for over 40 years. Average inflation is normally 4.7%.
What causes inflation? Scarcity of commodities(especially energy) and increase of money supply. The version that seems most concerning to me is the money supply. Before August 15, 1971 the U.S dollar was based on the value of gold. So back then, an ounce of gold was $35. Now an ounce of gold is about $1700 dollars. This is because when the government prints more money and there is not enough gold in Fort Knox to back up those notes. Over time there are more notes printed and circulating in the money supply and therefore a higher demand for an ounce of gold to the tune of $1700 presently.
Why does the government do this? Because they love to spend and they love to spend because it gives them power and it gives them power because they can say that they give things to the voters who in turn keep voting them into office. In order to spend, they need money from taxes but also they can print the money. Printing money is a tax. An invisible tax, because they don’t call it a tax but it essentially works the same because they give out that printed money and then in turn it makes prices go up because there are too many dollars chasing too few goods and services. The government benefits from it and many people are blind to the detrimental effect it has on everyone’s ability to afford the things they need.
Will it stop? That is hard to say but if we look at history there have been many times that it stopped only when there was an economic collapse. The Romans would make more coins with other metals because they ran out of silver which is pretty much like printing money because they could make more coins than they had silver which takes away the purpose of using silver as real money. In order to keep the integrity of the money supply, there needs to be a scarcity factor. That is what keeps prices under control. The Germans after WWI printed money until they needed a wheelbarrow to carry their paper money to the store just to buy groceries. How did those societies recover? They went back to only using real money, silver and gold.