First of all lets get on the same page with a definition of inflation. My informal definition of inflation is that money (or I suppose another medium of exchange) will purchase less then it would previously. I have heard people refer to inflation as stealing our wealth. For a long time I did not understand what they were talking about, maybe I am slow on the uptake. In any case I recently figured it out.
We get inflation when the supply of money increases so it is more common and thus worth less. How does that money get out there? It gets out there because our government prints it. Our government does not print huge amounts of money just to have it in circulation, that would be madness. THEY PRINT IT SO THEY CAN SPEND IT. More specifically they print money so they can spend money THEY DON'T HAVE.
This is sort of a backdoor tax. Why is it a backdoor tax you ask? Imagine that you have $100 in your pocket, $1,000 in checking and $10,000 in savings. The government prints a whole bunch of money and spends it. Now we have 15% inflation.
Your hundred dollars will now purchase $85 in goods. Your $1,000 in checking will purchase $850 in goods and that $10,000 in savings is now really worth $8,500.
This is a backdoor tax because a tax was not passed. You did not have money stolen out of your paycheck and didn't write them a check but they in effect reached into your wallet and bank accounts and via a loss purchasing power you were essentially taxed.
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