The View From 1776
Saturday, February 20, 2010
Should Government Steal Your Money?
Levying taxes is too unpopular. Why not just inflate the currency?
Inflation is a silent tax. As with the frog gradually heated in a pot of water until it’s too late to jump out, inflation wipes out the value of a life’s work, politicians hope, so gradually that the victims don’t notice it.
The Federal Reserve, as it manages the fiat dollar supply, has hitherto set an inflation target of 2% - 3% per annum. Unofficial gossip pegs possible future inflation targets at double that: 4% - 6% per annum.
At 2% annual inflation, the dollar loses half its purchasing power in 36 years, roughly a lifetime of work. At 6%, it loses half its purchasing power in only 12 years. Like the Red Queen in Alice in Wonderland, you will have to run faster and faster to stay in the same place. A $40,000 per year college education would cost $80,000 12 years later.
For details, read Induced inflation feared as way to cut debt.