Here’s an eye opening quote from political commentator G. Edward Griffin on America’s inflation tax that I found today:
“Inflation has now been institutionalized at a fairly constant 5% per year. This has been determined to be the optimum level for generating the most revenue without causing public alarm. A 5% devaluation applies, not only to the money earned this year, but to all that is left over from previous years. At the end of the first year, a dollar is worth 95 cents. At the end of the second year, the 95 cents is reduced again by 5%, leaving its worth at 90 cents, and so on. By the time a person has worked 20 years, the government will have confiscated 64% of every dollar he saved over those years. By the time he has worked 45 years, the hidden tax will be 90%. The government will take virtually everything a person saves over a lifetime.”
– G. Edward Griffin
If you would like to do something about this please click here to send a letter to Congress
Eric Schleien
zachary
teenmoney
josh4580
Carlton
[...] Every Step To The Grave Perhaps, inflation stalks us more relentlessly than even death. This quote caught my eye today (link), and got me to thinking. I’ll provide some numbers of my own. If a person earns one dollar [...]
Hmm.. Well, based on Mr. Griffin’s comments, every retiree, no matter how wealthy or poor, should have only 10% purchasing power left on all retained assets at the end of their life. Simple life experience should tell you otherwise. Do you think that Carnival Cruises would be in business if this was true? Most retirees I know have more purchasing power, not less, provided that they earned decent wages, saved, and invested prudently.
Second, where does Griffin get this ‘institutionalized 5%’ nonsense? A cursory glance at a few financial publications once in awhile should show you that inflation rates fluctuate. Indeed, Mr. Schleien, has, on these pages, taken Ben Bernanke to task for cutting rates to prevent recession— at the risk of fueling inflation! Why would this be a danger if inflation was an ‘institutionalized 5%’?
Finally, Griffin states that this 5% rate has been ‘determined’ for optimum revenue without causing public alarm and then, later, that ‘the government’ will take 90% of a person’s lifetime earnings. So, the idea is that the government sets inflation rates and collects the differential in purchasing power as a ‘hidden tax.’
HAAAAAAAAAAAAAAAAAAAAAAAAAAAA!
G. Edward Griffin is a fool indulging in paranoid delusional fantasies. Anyone who gives the matter even a brain cell worth of thought would be hard pressed to figure out how the government profits from inflation. Mr. Schleien describes the quote as eye-opening. My eyes opened alright— from shock at Griffin’s utter stupidity!
Inflation is a real concern, and savvy investors account for it. A reading of Warren Buffett’s annual Berkshire letters will reveal how inflation is a critical determinant of which businesses Buffett selects for investment and why.
It is not, however, as Mr. Griffin suggests, a government conspiracy to secretly rob individuals of 90% of their lifetime earnings. Simply putting one’s money in a decent rate CD should protect against inflation— the money wouldn’t grow much, but it wouldn’t erode either.
Perhaps the most frightening question, though, is why Mr. Schleien, who claims to have taken a macroeconomics class, would give enough credence to this insanity to publish it on his blog and, indeed, to urge his readers to write their congressmen about it?
Joel,
It is an eye-opening statement for most people which is why I posted it on my blog. Inflation suggests the devaluation of money and all US Currencies have seen massive devaluations the last several decades. The best indicator to compare money valuation is the Gold/Currency ratio.
Even Allan Greenspan acknowledges first in 1966 and then as recently as the past year that a gold standard would not be such a bad idea.
I think you may enjoy reading the book Gold: The Once and Future money. It goes into all of this in several hundred pages of more detail. Anything in the book you don’t agree with I’ll be happy discuss it more in depth with you.
Thanks for the comment,
Eric
Is this what your talking about
Eric,
I’m showing my age here, but I remember an episode of “Taxi” in the 1970’s in which a crazy person claimed to be from the future and that zinc was the new monetary base. The irony of that show is that today, the United States actually still has some sound money – specifically the penny and the nickel. The metal content of those two coins is actually close to the face value and the cost to produce each is higher than their nominal value. While the nickel is made from a copper-nickel alloy, the penny is 97% zinc. Who knew that the “crazy” character on Taxi was such a prophet!