Reflecting On the Immorality of Inflation On Christmas Eve
Inflation is immoral as it is a tax imposed on Americans by the Federal Government and the Federal Reserve. Americans do not get to vote on inflation, therefore it is immoral.
When calculating taxes, one must include the inflation tax to get a real sense for the degree to which the Federal Government bleeds Americans of their financial resources.
The Dollar is the lifeblood of the U.S. economy. Yet, a combination of excessive fiscal spending and monetary subsidization of fiscal policies causes the Dollar to lose a portion of its value (positive CPI), each and every year. CPI – which of course is understated versus real world prices increases for goods and services – was 8% in 2022. Thus, the Dollar lost 8% of its purchasing power in 2022 as measured by CPI.
2023 delivered more Dollar devaluation. 2024, 2025 and future years will do more of the same.
One may hedge against inflation by owning commodities; hard assets such as land; property; equities; TIPS and more, yet this does not justify the Fed’s position of 2% inflation as acceptable and just.
Why is it that Americans accept that the value of the currency in their pocket will be devalued by at least 2% each and every year? At 2% annual inflation, $100 in savings today (earning zero percent interest if held in the mattress), will be worth only $67 in 20 years. Why is that a good deal for Americans? Would it not be ideal for the purchasing power of the Dollar to increase over time? Of course it would be.
The reason the U.S. Dollar does not enjoy increased purchasing power over time is because the Federal Government spends more than it receives in tax revenue. Biden & Company and the lovely U.S. Congress ran a $1.7 Trillion deficit in FY 2023.
The U.S. Treasury plugs deficits by issuing new debt. Who purchases the new debt? China used to purchase much of it. Not so much any longer. Ditto for Japan. The Federal Reserve buys much of Treasury’s new debt by creating new Dollars, thereby devaluing the Dollar the moment new Dollars are printed. The Dollar is devlaued as the Federal Debt grows.
Until Americans force Congress and the White House to get fiscal spending under control, the Dollar will continue to lose value. The Dollar’s erosion will continue until the Dollar is worth zero. That day will come. When is only a question of the devaluation rate.
Only two things can save the Dollar:
Radically reducing fiscal spending;
Putting the U.S. back on the Gold Standard. The U.S. Government will eventually spend the Dollar to zero, at which point the U.S. will have no choice but to go back on the Gold Standard. At some point the last 2% of value that the Dollar retains versus Gold will expire (the Dollar has lost 98% of its value versus Gold since President Nixon took the U.S. off of the Gold Standard in 1971).
Merry Christmas.
