Inflation is not hidden, and it is not a tax.
INFLATION AS A HIDDEN TAX
Inflation is actually an old, secret method of taxing the people without their knowledge. This may sound strange because no one talks about inflation as a tax. However, I will explain.
When extra money is printed up and put into circulation, it costs the government very little. The only cost is that of printing. Each paper bill of any denomination from $1 To $1,000 or more costs less than fifty cents to manufacture. So it is almost free money for the government.
They just run the printing press and it suddenly exists. It seems like they can create value out of nothing. It is wonderful for the government, which is why most governments do it all the time. Most nations, by the way, do it far more than the United States. We are not used to inflation, but in other nations of Africa and Asia, it is business as usual.
The government can then lavish the money on all their favorite projects without worrying about the people complaining, because the money seems to be “free”.
However, it is not free. What it does is to slowly dilute the money that is in existence already, like diluting the milk in the analogy above. So all the money the people already have, including all their savings, salaries and all the rest, slowly start to be worth less. In this sense, inflation is a very hidden tax, or way the government confiscates the people’s real wealth.
If the government gave its new printed money to each of us to spend, it wouldn’t be so bad. Then at least we would all have more of the diluted or less valuable money. But they never do this, as a rule. They give it their favored friends and projects. Everyone else is just cheated out of some of their wealth. This is indeed a sneaky way to tax people because:
· It happens so slowly that few people see it.
· It is hidden, as there are no tax forms to fill out or taxes added to your purchases or bills.
· Unlike other taxes, no one seems to force you to pay up on April 15 or any other day
· People actually feel richer because often their salary and the price of their house goes up. In fact, many actually have more money, but of course all that cash is worth less.
· Inflation does not require any new laws that people could debate and vote down. Thus it happens silently and secretly.