Like a Biblical plague, inflation (higher prices) destroys everything in its path. From 1918 to 1923, inflation wrecked post-World War I Germany. What cost one German mark in 1918, cost one trillion marks in 1923. A German demagogue in the 1920’s, talked about “starving billionaires.” The demagogue was Adolph Hitler. What has happened in the United States? If an American put a $100 in a piggy bank in 1960, that $100 would be worth $20 today.
In Hungary, what cost one pengo (the Hungarian money at the time) in May 1945, cost one quintillion pengos in December 1946. (A quintillion is a the number one followed by 18 zeroes.)
Inflation is simply a form of taxation. However, the federal government does not have to pass a tax increase to generate inflation. All the government has to do is print more money. (Today, the printing is done by some sort of digital process, but the effect is the same.)
The government calls the printing of money “quantitative easing.” But quantitative easing is just a euphemism for printing more money.
For the last several years in America, inflation has been low. That’s probably because Americans are hoarding their money, not spending it. Once the spending starts, then inflation could begin with a vengeance.
Just suppose Santa Claus gave each American $20 million. Americans might then start buying cars, homes, clothing, and other things. Prices would start to rise. After a while, the $20 million from Santa Claus would be worthless. Santa Claus’s giving out $20 million in gifts is no different from the government’s printing more money.
In one area, prices have in recent years, been rising rapidly. That area is taxation. On January 1, 2013, Americans got hit with two federal tax increases. One tax was to pay for Obamacare. The other tax, passed by Congress in January of 2013, was the tax increase to solve the Fiscal Cliff mess.
But there’s more. In California, Gov. Jerry Brown led an effort to raise California’s sales tax and income tax. The Golden State’s voters passed Brown’s tax proposal, called Proposition 30, in November 2012. Brown said the money would go for education. Now, it looks as if the money will, instead, go for teachers’ pensions and certain schools, not all schools.
Brown’s state income-tax increase is retroactive to January 1, 2012.
Before voters passed Proposition 30, California already had the highest statutory state sales tax in the nation. Now, that tax is even higher.
Also, before Proposition 30, Hawaii had the highest top state income tax bracket in the nation: 11%. But Proposition 30 put California in the lead. California’s top bracket is now 13.3%.
To keep ahead of inflation (and excessive taxation), Americans should consider buying things like gold, certain stocks, and real estate. While such buying might not work for everyone, at least the ravages bof inflation (and taxation) might be moderated.