Inflation exposed.

[AweBurn]

Though I act as though im exposing a big secret. From what i gather in the academic community, this fairly simple concept doesnt seem to be very well understood. Forewarning, I don’t believe any of this to be provable truth it is simply a novice’s speculation from a bit of personal research.

 

After the Great Depression FDR took the financial security of Americans into his hands and took America off the gold standard. Previously, each dollar was backed up by a specific amount of gold to be held in Fort Knox. It was a portion of his New Deal to remove this stipulation and create the Federal Reserve Board whose sole concerns were to monitor interest rates and the amount of money in circulation. I believe the government has overstepped its boundaries and simply created a hidden tax that most Americans are unaware of.

 

To demonstrate what I mean by a hidden tax, I will create a scaled sample case. Let’s say, there are $10,000 dollars in circulation in America and I personally have $100 in the bank Inflations is usually about 2% a year meaning at the end of this year there will be $10,200 in circulation and the Federal Government will have $200 to spend on whatever they see fit. Nice situation, right? Wrong.

$100/$10,000 = 0.01 or 1%

1% * 10,200 = $102

 

As shown above, after printing the money I should have $102 because of the increase in volume. However, as it stands, the money people lose due to inflation is printed and taken control of by the fed’s to support their irresponsible spending habits.

 

The countless taxes we are subjected to daily simply muddle the picture making it virtually impossible for an average citizen to ascertain their tax liability each year. Gas tax, sin tax, income tax, cigarette tax, lottery (a paper in and of itself), and now inflation, when will it end?

 

If I may draw a parallel to the automotive industry, I can’t help but thinking about the current competition between Toyota and GM. I recently read an article about the business tactics Toyota has adopted to streamline business and create profits. They are required to keep memos on one 8.5”x11” sheet of paper. Reducing complicated business plans to fundamental laws that anyone in the company can quickly understand and adapt to. General Motors, on the other hand, has become the epitome of red-tape and consequently is failing in the American market. I see the same happening to our government’s strategy for taxing the public to perform its very basic duty of providing a firm foundation for citizens to thrive in.

 

My aim was simply to dispel the common belief that inflation is due to greedy businessmen raising prices. It is, however, due to greedy government officials who want to support their poor spending habits at home and abroad.

 

-AweBurn

[JustStuit]

1.) Each year money is lost or destroyed (by government or people)

2.) Money would mean nothing without backing and would ultimatley fail.

3.) How does the government end up with this money?

[ecoli]

FDR created inflation in the 30's to get the economy out of a severe depression... and, with the help of WWII, it worked.

[AweBurn]

FDR created inflation in the 30's to get the economy out of a severe depression... and, with the help of WWII, it worked.

At what cost?

 

Why force an economic trend on a system when all you really have to do is create a firm foundation and let the system take over. Right now the gov't controls our money better than we do.

 

In resposne to the first comment. They print more money than they destroy which results in the rise of prices and more dollars in their pocket to support shitty spedning habits.

 

-AweBurn

[Pangloss]

At what cost?

 

At significant cost. But the question is not whether it cost something, but whether there was benefit to go along with that cost .

 

The flaw in the reasoning here is that just because a system has become more complex doesn't mean that it is completely intractible. Whether a system like the Federal Reserve works has mainly to do with the intelligence and dedication of the people who run it.

 

One could similarly postulate that the problem with government spending is the influence of special interests groups, but as I just demonstrated in another thread, that's too simple an answer as well. The real dynamic is actually the dedication and motivation of the people who implement that system. If they're motivated only by money and power, the system will be terrible. So the system needs safeguards to prevent that from happening.

 

Incidentally, arguing against the gold standard is nothing new. Ayn Rand's objectivism movement was greatly opposed to it and preached widely for a return. One of her most intelligent and well-published followers and preachers was none other than Alan Greenspan. How's that for an about-face?

[AweBurn]

At significant cost. But the question is not whether it cost something' date=' but whether there was benefit to go along with that cost .

 

The flaw in the reasoning here is that just because a system has become more complex doesn't mean that it is completely intractible. Whether a system like the Federal Reserve works has mainly to do with the intelligence and dedication of the people who run it.

 

One could similarly postulate that the problem with government spending is the influence of special interests groups, but as I just demonstrated in another thread, that's too simple an answer as well. The real dynamic is actually the dedication and motivation of the people who implement that system. If they're motivated only by money and power, the system will be terrible. So the system needs safeguards to prevent that from happening.

 

Incidentally, arguing against the gold standard is nothing new. Ayn Rand's objectivism movement was greatly opposed to it and preached widely for a return. One of her most intelligent and well-published followers and preachers was none other than Alan Greenspan. How's that for an about-face?[/quote']

I never knew the connection between Alan Greenspan and Ayn Rand.

Very interesting.

 

What i ask is that we take the burden off our federal government and take the power of decision making into our own hands. This country is breeding robots who accept all that is handed to them from their superiors. It would be nice to see people saving 10% of their income rather than banking on SS or unemployment but because so many do I and other equally intelligent people are forced to go along with what the fed's tell me.

 

I argue against the removal of the gold standard not only because it's taking the power away from the people but also because it is straight up UNCONSTITUTIONAL.

 

Along with the unconstitutionality of the whole premise, I am forced to purchase inflation protected securities over-sea's because my dollar could instantly be worth no more than the paper it is printed on...This is not the American way.

 

My arguement is that these safeguards you speak of are not needed if you place the decisions in a fair market and let it pan out.

[Pangloss]

Well if it's unconstitutional it certainly wouldn't be the first compromise we've made.

 

But hey, far be it from me to stomp on your motivations and dash your hopes. I simply think you'll find as you investigate further that there's generally a reason why sweeping absolutes don't carry the day, and why old ways aren't always the best ways. But in the end that's probably a journey you're going to have to make on your own, just as I did.

 

I know that Milton Friedman, the Cato Institute, and libertarians in general are basically carrying this banner today, and there's been some interesting writing on the subject that's definitely worth reading if you want to bolster your opinion. I also recommend reading some contrarian points of view.

 

I've gradually come to the conclusion over the years that when it comes to economics, humanity bounces back and forth between extremes, gradually pulling out the best parts and working them into a centrist model that incorporates the best of all the extreme models. The shift from Keynsian to "market" economics lead by von Mises, Hayek, and Friedman in the latter quarter of the 20th century is a perfect example of this. AVOIDING the gold standard that segment wants us to switch to would be a good example of what I'm talking about.

 

Let's cherry pick the good, and avoid the bad. Why not? It's called *learning*.