Inflation is a Regressive Tax on the Poor

Well meaning liberals that promote the false philanthropy of government spending on programs for the poor by way of deficit spending are actually hurting the poor and middle class most of all. Hawkish neocons that fund endless wars by deficit spending are killing the poor and the middle class. The poor, the disenfranchised, and the middle class in America are getting killed by the hidden "inflation tax."

The sooner that the American public wakes up to the concept of inflation as a tax, the sooner it will demand discontinuation of deficit spending. Ultimately, as people begin to realize that the real culprits are the unelected international bankers in control of the Federal Reserve, the sooner they will demand that the Fed be ended as soon as possible.

Inflation correlates to the supply of money in the system. The chart below shows the money supply increase since 2006. There has been a dramatic increase.

The next chart reflects the actual inflation (not the faked government statistics) since 1981. Notice that our current rate of inflation is approximately twelve percent.

Wonder why your family budget is becoming more and more stressed. It is the growing inflation tax.

Shadow Statistics

The deficit spending by Congress is a primary reason why the Fed is printing so much money. If the Fed does not print the money, then the deficit must be financed by borrowing from other countries. However, other countries are looking at the same data.

Our currency has no standard. It is technically, like most other of the world's currencies, a "fiat currency." That means it is linked to nothing of value and the only restraint upon the volume is the government that is backing the currency.

As our deficits grow larger and larger, other countries are going to demand that we pay higher interest on their loans. Based upon current trends, our entire tax revenue will soon be used to pay interest. If things do not change, we will buy no guns nor butter with our taxes, but it will all be spent on interest payments to other governments. As other countries demand greater and greater interest on loans (as the risk of default rises), the U.S. government will pay larger and larger portions of the budget for interest. Very soon, the government's interest payments to foreign countries become the largest part of our country's budget.

That cannot happen. Therefore, the government turns to the only viable alternative . . . printing money. This phenomena is also called "monetizing the debt." So what? Printing money seems like a painless way to satisfy our huge deficit and national debt.

Except it is not free. It comes with the cost of the inflation. Deficits are ultimately paid by the subjects through an inflation tax, the debasement of the currency.

Inflation hits the poor and the middle class where it really hurts because we must buy food, water, rent, and fuel. The inflation tax is also obscure. People do not realize (unless they are reading this blog or others like it) where the hidden inflation tax comes from. People do not know who to hold accountable--the President, Congress?

The political class is of course accountable for the damage done by an inflation tax. However, they do not admit responsibility. They can blame the Federal Reserve. They are right.

The Fed operates based upon the Federal Reserve Act, a statute Congress enacted in 1913. The Fed is not part of the American Constitution. Congress and the President could revoke all federal reserve powers by merely enacting legislation to repeal the enabling statute.

The sooner people realize that Congress' deficit spending will cause an inflation tax, the quicker we will demand changes in the law, including repealing the Federal Reserve Act.