Is inflation really a tax?
- Anonymous1 decade agoFavorite Answer
It doesn't matter where you come from if inflation is induced by government action its a tax. It is buying power lost. Devaluation of money. Before the housing crisis of late people could normally expect their property value to increase dramatically over a long period of time. If you are paying a loan or mortgage over a long time you generally pay out twice as much money as the loan was for which is bad but if the price of housing inflates more than twice as much that is a capital gain. Now if the price goes down(deflates) as in right now you are losing. What happens when deflation hits the guy who paid out twice the price of his house. In 1966 I could build a nice ranch style house for $15,000.00. Pay a mortgage totaling $30,000.00 and after the mortgage is paid sell it for $150,000.00. That is how bad inflation is but how it helped people. It doesn't work like that with buying power over a short haul though. If a dollar is worth a dollar now and progressively drops to being worth $.30 over 5 years nearly every time it change hands its value goes down. When it leave the treasury it has full value but looses value everyday.
- 1 decade ago
Well, that was Ron Paul.
Saying that something is a 'tax' implies a certain 'intent' to raise money or something that way. However, often it is simply the byproduct of a monetary policy that errs on the side of employment rather than stable money.
In any event, the 'cost' of inflating the currency is precisely it's devaluation. So if the government were to profit by it, it would be by any debt the government had. But, if it really profited to much, the currency itself would start to loose value, and it would have pay more to borrow in the future. So, I don't think the government inflates the currency just to avoid it's debts or collect a 'tax'.
Although inflation works against people who cannot contract it away, there is a social benefit from taxing the holding or hoarding of money, which reduces the amount needed for investment and reduces consumption spending, reducing output.
- good guyLv 71 decade ago
good question, but i think if inflation really were a tax, the right would be against it. That snarky comment aside, we have a choice (so to speak) of either raising taxes to pay for the ten TRILLION in related war costs OR, the fed can/will simply print more money. Either way, the population will suffer (and obama will get the blame). My guess is the fed will increase the money supply and we will have soaring inflation and rush limplaw will ignore the REASON for the need to print money (the money spent on the war instead of on our infrastructure is the major cause) and concentrate on blaming everything on obama. History, of course, will place the blame exactly where it belongs--at the feet of boy george.
- Jacob WLv 71 decade ago
It is indeed. I remember life under Carter. Imagine almost overnight the price of things like bread and milk more than doubling. That is what was happening. It was directly because of the high inflation that the "Misery Index" was invented. It really amazes me that so many people believe the same Democrat nonsense that caused that back then.
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- halt-fear-kissLv 61 decade ago
or tax an inflation
- Anonymous1 decade ago
Yes - just as paying back all this damned money Bush borrowed!Source(s): And having a stock market that doubles and housing prices that double during the time that your currency loses HALF of its value gains you absolutely nothing! (And they have now CRASHED TOO so Bush's plan has lost us countless trillions of dollars!)
- SugarLv 71 decade ago
NO! not where I come from.