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SPECIAL FEATURE – English economist, journalist and financier in the early 1920s John Maynard Keynes said: “Through a persistent inflation process, the government can secretly and unnoticed seize an important part of the wealth of its citizens.”
Government issues newspaper headline for various money. Stock Image | Photo by Zimmytws / iStock / Getty Images Plus, St. George News
One can almost imagine the overwhelming joy politicians found reading Keynes’ words. Finally they had found an easy way to fund the government’s wild shopping frenzy and pig barrel projects without raising taxes – and losing votes!
Inflation gave governments a powerful but discreet tax method that did not require voter approval. The icing on the cake was that the effects of inflation were far less detrimental to a political career than unpopular budget cuts or tax increases.
This marked the beginning of the era of printing press addiction, rampant budget deficits, and an increasingly intrusive government.
Where are we today
The “easy money” inflationary spirit shot out of the bottle with the force of a cork from a champagne bottle. No pressure or sensible economy could push it back inward. Even the Great Depression, which was partially financed by the easy money economy, could not reverse the course of uncontrolled government spending and money printing.
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Inflation is a misunderstood concept that threatens your wealth.
Inflation is one of the most misunderstood economic ideas and the source of much of the evaporation of middle class wealth in the United States. Put simply, inflation is a measure that determines the rate of rising prices in an economy.
Inflation catalysts can be the following:
- Increase in raw material costs.
- Wage increases.
- Bad government housekeeping.
In order to stimulate a lackluster economy again, targeted government measures are being taken, such as the so-called “quantitative easing”, which the US Federal Reserve pursued a few years ago and which also contributes significantly to rising inflation.
Inflation is the “silent” tax
Inflation, sometimes referred to as the “clandestine tax,” is a bigger threat to your financial future than state or local income taxes. Inflation has proven to be particularly problematic for retired seniors. This is because retirees live mainly on the income from their retirement accounts, along with social security.
So when money loses its purchasing power, the price of essentials rises. Such increases mean that seniors will use up their savings faster and potentially put themselves in the position of losing money early in retirement.
Could we see “billion dollar” currency pieces?
Disastrous monetary policies such as shameless deficit printing and currency devaluations have existed for most of human history. Unfortunately, however, the United States has taken its fiscal irresponsibility to a new level and has become the most indebted country in world history. Currency turmoil is almost always the result of ruthless fiscal policy.
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For example, inflation in Zimbabwe was so high for so long that its entire economic system collapsed. This hyperinflation arose when Zimbabwe’s government responded to the runaway national debt, political corruption and a weak economy by increasing the money supply.
Zimbabwe’s government caused one of the highest inflation rates in human history. At one point it took 1.2 trillion Zimbabwean dollars to equal $ 4,000! Some scholars suggest that if the US continues on its current course, we may experience similar problems.
Bottom line: Inflation is just one of the erosive factors that can ruin your best retirement plans and create stress and worry when you stop working. Inflation can be the greatest threat of all because it is little understood and little expected.
If you have a retirement plan, now is a good time to discuss that plan with your advisor to make sure you have prepared for in the event of hyperinflation.
Copyright © Lyle Boss, all rights reserved.
Lyle Boss is a member of Syndicated Columnists, a national organization that advocates a fully transparent approach to money management. As an asset protection instructor, he has helped thousands of seniors find their financial retirement options. Its clients include government employees, teachers, doctors, farmers and business people, to name a few. Boss has been actively teaching advanced estate planning and wealth preservation for more than 20 years in locations like the University of Utah and in over 200 Senior Retirement Consumer Education Workshops throughout Utah, Idaho, and Wyoming. Boss and his wife Deanna live in South Ogden and St. George, Utah.