I saw this piece in Fortune magazine last week and thought the image captured the dangers of government-driven inflation perfectly.
The sandwich pictured below in this month’s Fortune magazine is not getting more expensive because of supply and demand, it is getting more expensive because our government and The Federal Reserve are printing so many U.S. dollars to pay our debt, that our currency is being destroyed (devalued) and it takes more of our U.S. dollars to buy the same things over time.
What’s the difference between paying an extra $1,065 a year in income taxes or paying an extra $1,065 a year in higher gas prices?
None. There is no difference. Inflation IS taxation.
I will pay over a $1,000 more for gas in 2011 than I did in 2010. Alternatively, the government could have raised my income tax. It’s the same thing. The same inflation that is costing me more in gas, will cost me more for this sandwich.
That is why economists call inflation, the “hidden tax.” So when we expect an annual inflation rate of 2%, why is my cold cut combo sandwich costing 79% more?
Consider the following…
Politicians that raise your income or sales tax find it really hard to stay in office because we don’t like paying higher taxes and so we vote them out. At the same time, we love a politician that spends a lot of money on social programs and getting us all kinds of “free” stuff.
So how is it possible that a politician can promise so many free things to so many people, and yet not raise taxes to pay for them at the same time?
Simple.They inflate the currency. Inflation IS taxation.
So when you hear a politician like Obama promising to raise taxes only on the “rich” remember that you are already paying more in taxes, through inflation in your gas and your sandwiches and everything else, whether you are the “rich” or not.
The government knows that most Americans don’t know enough about economics to know that fact. American ignorance is absolutely required to maintain the governments control and continue taxing you to death, without you even knowing it. In this manner, our government can print trillions of dollars to pay for social programs, bank bailouts, government employee benefits and the war machine without raising your taxes. But we can see what they are doing by taking a look at the simple Subway sandwich pictured above. Their money printing is revealed by the rising costs of….everything.
This is why gold, silver, foreign currencies, cotton, sugar, soybeans, and a long list of commodities, including oil, are rising. What you have to wrap your mind around is that they are in fact not rising in price, our dollar is falling relative to them.
The video below is Peter Schiff discussing inflation and some of his economic forecast for 2011.