Originally published at: https://peakprosperity.com/too-few-appreciate-the-dangers-of-our-fraudulent-money-system/
We have a money problem, because our system of money is fraudulent.
Fraud
The act of intentionally deceiving someone to obtain a benefit, such as money, property, or services.
In our elected system of government, the way it’s supposed to work is that if or when your elected officials deem it necessary and in the national interest to take some of your money so they can spend it on something, they have to tax it.
A law has to be written, debated and then passed. Over time, the US tax laws have morphed into a colossal pile of impossibly complex code, usually penned not by actual Congressmen, but by special interest lobbyists.
As distasteful and as embarrassingly bloated as the tax code has become, at least it’s technically honest.
But there’s another tax the government operating in cahoots with the Federal Reserve levies and this one is as fraudulent and dishonest as they come.
Inflation is that hidden tax, as Milton Friedman put it. And it’s fraudulent as defined above. Inflation is the process of taking your money’s ability to buy things from you but doing it deceitfully. Nobody votes for inflation, you can’t vote it out of office, and nobody outside of the Federal Reserve and the banking system actually wants it.
In his confirmation hearings when discussing tariffs Scott Bessent showed that he clearly understands the process:
That places him well above the average US Congressman and US Senator. Actually, practically in a league all his own with Thomas Massie, Ron Johnson, and Rand Paul and perhaps a few others who get it but remain silent for some reason.
On Bessent’s first point about money supply increasing, the Federal reserve in cahoots with the banking system have massively increased the money supply in recent years, using “Covid” – the enormously overhyped pandemic – as justification for this emergency increase in the money supply.
If you want to know why everything is so expensive, the above chart gets you most of the way there. The already inflationary expansion of money was super-charged and now the well-connected and Wall Street are somehow already addicted to those surplus funds sloshing about and that’s become our new normal.
The inflation that has resulted from the Covid “emergency” has already been enormously destructive to the lower economic classes and younger generations whose start in life as economic heads of households has been hobbled right out of the gate.
The second reasons given by Bessent, concerned government deficit spending. On that point the future sure looks positive for inflation.
That’s another $25 trillion of additional federal debt which will bring the entire smoking pile to $60 trillion by 2034. This too is enormously inflationary.
This young woman channels for an entire generation saying, “I’ve reached the part in this whole class consciousness part where I am filled with the most impotent rage. (…) Like what do you mean in other countries they don’t have to spend 20% of their paycheck on groceries. What do you mean in other countries everyone can own homes because they’re not paying $2000 a month in rent? Or like that their mortgages aren’t their entire paycheck?”
https://x.com/TaraBull808/status/1879868706399953275
For these reasons you’d think progressives would be all over this issue, but they are almost perfectly silent on the matter either because it’s too complicated for them to understand (unlikely) or because inflation benefits the existing political and corporate power structures and that’s where their true allegiance lies (<– this). In other words, when you hear a progressive prattle on about caring about the disadvantaged while ignoring inflation you are free to classify them as either ignorant or duplicitous.
Irritatingly, but increasingly infuriatingly, the US government Department of Labors Statistics, or the “BLS,” gaslights us each month with their supposed inflation measurement reported as the “CPI.”
For a variety of reasons ranging from wanting to minimize Social Security cost of living adjustment (COLA) hikes to helping to hide political leadership’s inability to do their job properly, the government is strongly incentivized to lie about the true rate of inflation.
Each month is a new set of inflation whoppers from the BLS who is supposed to faithfully and accurately tracks these things. These fictions are then presented to us by the media without questions and as if they were Gospel.
But anyone with any real-world experience at all can tell you immediately that the BLS lies must be approaching some sort of escape velocity.
Really?!?
Are they seriously, and with a straight face, telling us that groceries are up 1.8% over the past year? Because that’s what the “Food at Home” line says in the far-right column. Anybody who does the shopping knows this is a complete crock.
And restaurants are up 3.6%? I need to bring this table down to our local eatery and ask them why fish and chips for two with a non-alcoholic drink is $70 when last year it was $50. Or maybe the BLS would like to help us try to negotiate with Carl’s Jr to get the cost of two burgers with fries back down to something more affordable.
When did a couple of burgers and fries cost more than $35? And, oh, let’s not forget that “shrinkflation” is part of food inflation too:
Or how about ‘medical care’ being up 3.4% when everybody’s health insurance premiums went up by double digits percentages while their deductibles (medical shrinkflation) wormed their way higher too?
Obviously, these are BLS fictions.
Inflation all by itself is a very destructive thing. It ruins hopes, dreams, and lives and is most punishing on those who can afford it the least. But, hey, the Federal Reserve likes it, and your politicians by and large love it, so here we are.
But wait, it gets worse.
“There is nothing so good that politicians can’t make it bad and nothing so bad that politicians can’t make it worse.” ~ Thomas Sowell
Inflation is actually a double tax. When it comes to investments, and your portfolio, inflation acts as both a tax and a tax upon a tax.
First, inflation is the biggest tax on investments and retirements, vastly outstripping the predation of ordinary income and gains taxes.
For example, if your portfolio gained 10% but inflation was 5%, then fully half of your gains were confiscated by inflation representing a 50% tax rate. That’s a lot higher than the long-term capital gains tax rate of 20%.
If you put your money into US Treasuries yielding 4%, but inflation was 5%, then your effective tax rate was 120%. You lost money! Your wealth went backwards! Oh, and just to add insult to injury, you still have to pay federal taxes on the 4% interest income you ‘gained.’
My view is that all investment gains should be inflation-adjusted before taxes are calculated, because, if not, the government is double taxing the same money twice.
First, there’s the inflation tax which has eaten away at the purchasing power of our savings and investment. That’s straight up a tax, hidden though it might be. Again, this tax comes as a result of the government spending money it doesn’t have which the Fed and related banking cartel are only too happy to manufacture out of thin air to lend to the government, for a hefty fee (the interest cost). Hey, that’s the banking scam. It’s a profitable line of business if you can break into it.
Second, are the capital gains taxes we pay when we sell the investments. After deducting the inflation portion, the remainder represents legitimate capital gains. That’s the only part the government can legitimately lay claim to, and even there we have some questions and concerns.
This logic of deducting inflation before calculating taxes should apply to every asset class including real estate, stocks, bitcoin, and bonds. If the government doesn’t like inflation reducing its take, then it will be incentivized to stop creating so much inflation. For the government to double-tax its citizens is both immoral and unfair, especially since inflation stems from political weakness and policy failures.
Conclusion
Inflation is about to get a lot worse. That come from the simple observation that the government is set to deficit spend another $25 trillion over the next 10 years, and that’s without factoring in the likelihood of a recession and/or a war. Those are extra.
The process of printing money out of thin air, or the government spending money it doesn’t have, are both acts of fraud. Both are underhanded ways of taking money you already earned and stealing some of its ability to buy you things. Any money system predicated upon fraud is one that will encourage corruption.
We’re humans, so we respond to incentives. If we’re in a system built upon fraud, there’s literally a disincentive to act honestly. You will be punished. The problem is obvious; fraudulent systems cannot persist. They end up consuming themselves and leaving a trail of wreckage.
But that’s not even my biggest concern. For that we’ll have to turn now to the math problem lurking at the very heart of our system of money. It’s completely obvious once you see it. That so few do is a testament to the power of self-delusion or perhaps evidence of a poor educational system, or maybe a combination of both.
