Inflation – The Simple Explanation is Theft

Inflation is theft. It is a simple concept that a single mother and a retiree understand but a PhD in Keynesian Economics probably does not. Examples:

In 1971 take $1,000 in crisp new $20 bills and place them in a safe while watching President Nixon blame speculators for the loss of Fort Knox gold. (He “temporarily” severed the last connection between gold and the U.S. dollar.) Spend those dollars in 2016 and you will feel ripped off because they would have bought most of a car in 1971, and in 2016 they might buy only four tires.

Take $400,000 and purchase an airplane in 1971. Today that $400,000 will purchase the helmet for an F-35.

A cup of coffee in 1971 probably cost about $0.25. Today it is $2.00.

WHY?

 

Dollars buy less because of inflation, but what causes the inflation? Creating dollars from nothing (fractional reserve banking), which increases the total number of dollars in circulation, causes consumer price inflation by reducing the value of each dollar that existed prior to the legalized counterfeiting. There is more to the story but this is the simple answer.

Why would commercial bankers create dollars from nothing? Because it pays so well! If you could sell washing machines and had a zero cost of production, your profits would be higher. If you could loan dollars and your cost to obtain them was zero, your interest earnings would be larger.

Why would the Federal Reserve create dollars from nothing, thereby devaluing all existing dollars, and use those dollars for QE programs to purchase dodgy assets from banks? They created dollars from nothing so they could bail out bankers. Socialize losses (spread the inflation across all dollar holders) and privatize profits (increase bank profits and banker bonuses) has worked for centuries. It also works for the European Central Bank, Bank of Japan, Swiss Central Bank, and the Bank of England.

From Steve Saville – an astute economist:

“Regardless of whether it is implemented via an emperor surreptitiously reducing the precious-metal content of the coinage or by the banking system (the central bank and the commercial banks) creating new currency deposits out of nothing, monetary inflation is a method of forcibly transferring wealth from the rest of the economy to the first users of the new or debased money. In other words, it is a form of theft.”

Repeat: Inflation “is a form of theft.”

 

Central banks want more inflation and often complain there is insufficient inflation in the financial system. Inflation is theft that benefits bankers.

Governments want more inflation because it benefits governments.

Individuals who save money currently earn perhaps 1% on their savings. The increase in U.S. consumer price inflation, as we all know, is far more than 1% per year. Hence, the low interest rates created by the Federal Reserve forcibly extract a huge sum each year from savers, insurance companies, and pension funds for the benefit of … bankers and governments. Estimates of the cost of such “financial repression” suggest that perhaps $300 billion is lost each year.

Inflation is a form of theft. Keynes understood it nearly a century ago when he said, “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”

Inflation sucks away a piece of your savings every year. Hyperinflation does the same every day, which is why it is so destructive.

Historically fiat currencies have been inflated into worthlessness as they have been devalued toward their intrinsic value of zero. This has been clear for three centuries, but the theft remains successful so “printing currencies” and inflation of the currency in circulation are still used aggressively.

From Benjamin S. Bernanke: “By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services.

 

Read: The Hyperinflationary Death Watch

Read: Inflation Has Always Been About Theft

Read: We Need More Debt

Read: Rothbard on the Glorious Effects of Falling Prices

Regardless of who is elected President, regardless of what escalation of war occurs in the Middle-East, regardless of how much corruption exists in the world, debt will increase, currencies will be devalued, and fiat currencies will decline in purchasing power – UNTIL THE SYSTEM RESETS.

As they say, forewarned is forearmed.

Gary Christenson

The Deviant Investor

28 thoughts on “Inflation – The Simple Explanation is Theft

  1. As Fellow Americans, we are beneficiaries of a truly remarkable civilization that functions through the division of labor. Money is the tool that enables this division of labor. Laws governing the irreprehensible act of counterfeiting money are just, necessary, and legitimate so long as they protect every individual engaging in free, honest, and peaceful trade.
    By definition, individuals and their organizations who engage in the act of counterfeiting money seek to gain valuable products and services provided by other individuals without providing equal value themselves. The counterfeiter creates inflation and experiences gain by increasing the number of monetary units within the monetary system without likewise increasing the number of goods and services available. Increasing the number of monetary units (inflation) is the cause and rising prices are the effect. To counterfeit money therefore is always and everywhere an act of theft against all other individuals participating within the same monetary system. It is a crime that harms everyone. It is a crime against society as a whole and it is therefore also a form of Treason that should be treated as such.
    America was founded through a revolution. Many of the reasons the first revolution occurred were monetary, and the cause of the next revolution, the coming revolution to restore America, will be monetary as well. The units that, in aggregate, created the monetary system of America from the first revolution until 1913 were comprised of gold and silver. Since 1913, thieves who call themselves “bankers” have managed to usurp the entire system. Today they steal from us all by creating new monetary units from thin air. Each new unit devalues every other existing unit. This is the act of theft that our counterfeiting laws are designed to prevent and punish; they are thieves who should be tried and convicted of counterfeiting.
    The monetary system these bankers have foisted upon America is going down like the Titanic. It has hit an iceberg, and that iceberg is debt. Berhard Von NotHaus, Ron Paul, and many other Patriots have correctly identified the root of this problem and offered solutions. They have fought against it, and regardless of individual agendas they may have had at the time, they have acted to preserve and restore honesty, respect, and individual liberty to America. Their actions have benefited society. They should be rewarded for their contributions, not convicted, and history will grant them this reward regardless of what happens in the present. Truth they have taught will eventually prevail of its own accord.
    As fellow Americans, we have inherited the gifts of individual liberty and a Constitutional Republic to preserve it, and the most precious gifts we can pass on to our children are the same. Everyone carries a part of civilization on his shoulders; no one is relieved of his share of responsibility by others. No one can find a safe way out for himself if civilization is sweeping towards destruction. Therefore everyone, in his own interests, must thrust himself vigorously into this intellectual, economic, and monetary battle.
    Exchanging Federal Reserve ‘dollars’ for real money, commodity money, such as gold and silver, and saving any excess in the same, serves to invalidate the banksters phony fiat money. It terminates their ability to easily counterfeit and thereby perpetrate their acts of theft upon us all at will. It also simultaneously validates honest commodity money. Commodity money is the only money that remains compatible with individual liberty and a Constitutional Republic.


  2. “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”

    We need to replace the word “inflation” with “inflation-theft” to convey reality.


  3. The only true money I recognize are gold silver platinum and palladium to a certain extent base metals like copper. Everything else is not money as far as I am concerned.


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