Wednesday, April 13, 2005

Cheats

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Cheaters exist in all levels of society. Today is a disjointed rant (you have been warned) on the biggest cheat of all.

In a poker game they can drain your wallet, in finance they can drain your retirement.

The contrast is more apparent than the parallels here. In poker you are most likely to run into a rigged game in small, home environments. In finance it's the big boys that are most likely to put a bad play on your money.

“If we want to have money, it must be something that cannot be increased with a profit by anybody, whether government or a citizen. The worst failures of money, the worst things done to money were not done by criminals but by governments, which very often ought to be considered, by and large, as ignoramuses but not as criminals.”

—Ludwig von Mises, speaking at
the Foundation for Economic
Education, November 8, 1969.

Inflation is a tax. Like most taxes it is best hidden under the table. The old world rule of thumb used to be when taxes approached 50% rebellion was inevitable. Now days the taxes are hidden in dozens of hard to discover locations. real estate, gasoline, state and local taxes, sales, payroll withdrawal, VAT, etc; and lots of high fees for licenses, records, and traffic tickets. Don't forget Government seizure, a growing source of taxes, In some California cities they can take your car if you are accused of racing, and then they sell it. If you have too much cash in your pocket, they will take it, and make you prove it was not for unlawful purchases. If somebody plants marijuana in the woods behind your house, they will take your house, even if they don't accuse you, and make you prove you did not grow that grass. The compounding effects grow as these taxes, fees, and takings pile on; The guy who sells the seeds, the trucker that transports, the farmer, the trucker again, etc. All those pay taxes that go into the final loaf of bread. No wonder so many work two jobs, one job is as an unpaid volunteer contributor. Joe and Josephine Average are dropping well over 50% of their money into supporting government, and that's before inflation.

There are nice clean releases about inflation, usually with a mental picture of bucolic cattle slowly growing in size. The references are to cost of goods inflation, or payroll inflation. The reality is inflation is not prices going up, it is the value of money going down. Do you want to know the real value of inflation? Look at money supply. Money supply has been bouncing around between a growth of 5 to 20%. The value of money is dropping as more money is created by the government. We all can look at the prices for the things we buy and know they are going up a lot faster than the 2 or 3% the government claims. This is not a recent event, although the US government has gotten better at large fibs since the early 1990s.

Inflation is bouncing around at 5 to 20%, and eating up the value of your future at the same rate.

that's the big sting.

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