The Invisible Tax

THE INVISIBLE TAX
by Puru Saxena

Every human being must understand that the Federal Reserve IS inflation.The Federal Reserve was established in 1913 to create inflation and itssecondary role is to manage the public's inflation FEARS. Over the past 25 years, the Federal Reserve has done a fantastic job at both - inflation(money supply growth) has gone out of control and the public's inflationfears have been well contained.Let's review the consumer price level over the past 200 years. It is interesting to note that consumer prices didn't rise at all during theentire 19th century. However, under the "guidance" and "supervision" ofthe Federal Reserve, consumer prices have risen dramatically. In fact, prices in the economy have increased the most since the early 1970's whengold was removed from the monetary system."But why is that so?" you may wonder. The truth is, prices in an economyrespond to changes in the supply of money. When we witness inflation (money supply growth), prices rise as the value of money declines due toan increase in its supply. On the other hand, during deflation (moneysupply contraction), prices fall, as the value of money increases due to a decrease in its supply. The reason why prices did not rise at all duringthe 19th century is because there was no inflation (money supply growth).In those days, money was backed by gold and the money supply was limited. Therefore, prices remained relatively stable; money held its purchasingpower, and savings didn't get destroyed due to inflation.Once the Federal Reserve came to power, things changed. Firstly, the goldstandard was eliminated and then gold was completely removed from themonetary system in the early 1970's. Once this was accomplished, theFederal Reserve along with other central banks decided to embark on aninflationary rampage. As the supply of money accelerated, consumer prices in the economy surged and savings got totally destroyed due to inflation(money supply growth). This phenomenon shows that after remainingrelatively stable for 170 years (1800-1970), prices have soared 600% over the past 35 years!Inflation is an increase in the quantity of money and it is createddeliberately by the central banks. As Nobel Prize winner, Dr. MiltonFriedman said, "Inflation is always and everywhere a monetary phenomenon. To control inflation, you need to control the money supply." Inflation isNOT a mysterious by-product, which simply emerges out of the blue in aneconomy. But why would central banks create inflation? To answer this question, you have to ask yourself who benefits from the monetization ofthe economy? Who makes money from issuing more and more debt?In order for the present monetary system to be accepted by the public,inflation must remain concealed. If the public discovered the truth, therewould be tremendous uproar. Accordingly, central banks keep up thepropaganda by claiming that inflation is tame and under control. I'm sorry to disappoint you, but what's under control in not inflation but inflationFEARS. By artificially suppressing the Consumer Price Index throughcomplicated adjustments, central banks continue to please the public. Still not convinced?Consider the following:The money supply has grown from $302 billion in 1959 to over $10 trilliontoday - an astonishing explosion of over 3,000%! If this isn't inflation,then I don't know what is! During the same period, the US dollar's purchasing power has collapsed by 85%. In other words, due to money supplygrowth, the dollar saved in 1950 is worth only 15 cents today. So, you cansee that "money" isn't an ideal store of value!It's only normal to expect that the standard of living in any civilizationshould get better with industrialization and advancements in technology.After all, in today's "modern" world of abundance, food is plentiful and modes of transportation and communication are extremely efficient due tothe progress made over the past 50 years. All these factors should'vetranslated into a much more relaxed and comfortable life for everyone. Unfortunately, if you look around today, you'll realize that despite allthese advancements, human life for the average person has never beentougher! 50 years ago, families could survive on one income and debt levels were very low. These days, the average household needs two incomes,people are working longer, and everybody is up to their eyeballs in debt!So, what's gone so horribly wrong? Basically, inflation (money supply growth) has turned people into slaves. No matter how much you save, it'snever enough because things always seem to get more expensive. I'll letyou in on a secret: as long as the current monetary system continues, life isn't going to get any easier. However, we all have to live within thesystem, so it is vital to understand the situation and invest in theappropriate assets that will benefit the most from the ongoing monetary inflation.