Our very elevated inflation rate is a wealth tax on cash assets, and on other assets too that do not appreciate “in value”.

If you had $100 one year ago, you purchase goods and services then costing $100.

Today, your $100 would purchase what you could have bought for $91.70 cents LAST YEAR.

12 months later, inflation has taken away 8.3% of your purchasing value.

Not all assets respond to inflation the same way. Homes, for example, tend to appreciate in value – that is, their value in dollars goes up as the value of a dollar goes down. If you had $100 in real estate a year ago, that may – 12 months later – be worth $108 or even more.

The bottom line is that inflation is a wealth tax on everyone and a future tax on income.

Income you earn in the future will buy less too – many may see wage increases that offset that effect to some extent. But if you do not, then inflation is a tax on your future earnings as well.

Who benefits from inflation?

Those who took out loans in the past and then get to pay them off with future deflated value dollars.

Who is the biggest beneficiary?

The U.S. government which has borrowed trillions of dollars. The Treasury will pay off their loans with future dollars that “cost less” because of the deflated value of each dollar. In effect, inflation is a wealth tax on everyone used by the government to pay off past loans. Kind of sneaky.

By EdwardM