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Posted 8/6/2019

It has only been in the last 100 years inflation took over the world. Deflation was the norm before our last century. Governments are the only ones who gain from inflation. Inflation makes the national debt more manageable because it can be repaid with cheaper dollars.[1]  Inflation allows the government to spend more than it collects in taxes. Our currency has no real value and prevents our governments from making hard choices.

[1]              Crash Proof 2.0, page 95 - why inflation is the silent partner, by Peter Schiff

Inflation causes the dollar to devalue. Persistent inflation defeats the purpose of using money in the first place, which is working to earn a living wage and saving money to purchase goods you require and desire. And most importantly saving, so one can survive comfortably in retirement without being a burden on society.


The dollar’s steady erosion is not a fact of nature, it results from government intervening into the economy, through its monopolization of money and its decision to continually pump new dollars into the economy.


Price inflation tends to lighten the “real” burden of debt. By raising prices throughout the economy—including wages and salaries—through the creation of new dollars, government indirectly boosts tax revenues for the federal government. This makes it easier to afford the fixed dollar payments on debt, especially long-term debt originally issued many years earlier. The more basic connection between government debt and inflation is simple: when the government wants to spend an incredible amount of money—such as during a world war—it can only raise so much through taxes. Then it can only raise so much more through borrowing.  At that point, if the government still wants to spend more money, it turns to the printing press.[1]


Moral:  If our currency was fish, in the early 1960s you could feed a person with one fish per day. Because of inflation and dollar devaluation, it now takes 2 fish a day to feed one person. Just because it appears you are eating more than your parents, doesn’t mean you are getting fatter. Similarly, cutting more pieces out of a Saskatoon pie, does not create more Saskatoon pie.


Inflation allows governments to avoid hard choices. By printing money, governments pay back money they owe, but it dilutes our currency. Inflation is simply a means to transfer wealth from anyone who has savings to anyone who has debt. To counter this, you need to own hard assets.


Moral:  Do we continue to spend like drunken sailors from the previous night’s binge, by taking another stiff drink in the morning, or is better to awake, avoid that drink and go to work (being productive and save). 


[1]              Lessons for a Young Economist, by Robert P Murphy, page 351

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