We hear the term inflation regularly in our media. Why are so few people able to accurately explain what inflation is?
As I've traveled around our world, I have asked hundreds of people if they understand the concept of inflation? Only a very few people are able to answer this important question correctly.
Inflation is so intimately tied to our welfare that it is vital we understand it. Why don't we? The famous industrialist Henry Ford is quoted as saying:
"It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
What Is Inflation?
The former US politician Ron Paul gave a succinct explanation of inflation as:
"More money = less value."
My simplified explanation of Inflation is:
When you double the amount of money in circulation you reduce the real purchasing power of the existing money by 50%!
That is inflation at work!
How Is The Money Supply Increased?
Inflation is fundamentally managed by those who create the money. The central banks in the vast majority of countries are privately owned and they control the issuance of new money. This is extremely dangerous and costly to our societies and I will expound this knowledge in a future post!
To use the US as an example: when the privately owned Federal Reserve prints money they are increasing the inflation rate. In real terms they are reducing the purchasing power of anyone who holds US dollars.
Who Benefits From Inflation?
So who directly benefits from inflation? The primary beneficiaries of inflation are the central banks and those who receive the new money before it can filter into the rest of the economy and raise prices.
In the case of the US economy the Federal Reserve creates new money and some of the first recipients of that money are the government, banks, defence contractors and private suppliers with good political connections. The truth is this money will never be repaid. The true cost of the new money will saddled on the existing holders of US dollars.
This process is enacted in one form or another all around the world!
Who Loses From Inflation?
The simple answer to this is almost everyone!
We pay our income taxes, road taxes and many more. However one of the major taxes we pay is never explained to us. We hear about it all the time: "the inflation rate"!
You can study business and economics at the world's best Universities but they never teach you the true meaning and cost of inflation. Inflation is so important to our economic welfare yet it is a hidden scam to defraud us of our savings. If only 30% of our populations understood how we were being manipulated we would have a "revolution before tomorrow morning!"
Why Bank Accounts For Children Are Not A Good Idea!
When I was a child my parents took me to a bank and helped me open a savings deposit account. I know many people who had similar experiences in their childhood. I even know of schools in certain countries who encouraged students to open bank accounts as part of the curriculum. The teachers weren't corrupt they just didn't know better!
When we understand the mechanism of inflation we can see why we should not invest in children's bank accounts. The bank's interest rate is never above the inflation rate otherwise they would loose money. Banks are in the business of making money!
When the interest rate on saving deposits is less than the true rate of inflation and the child wishes to withdraw their savings, the real purchasing power of that money will be less than when it was deposited!!! =(
There is a lot of valuable information that I wish to impart on this subject in future posts. Posting here on Steemit I am aware that many of you will understand this knowledge and that makes me very happy!
Crypto-currencies like Bitcoin and Steem allow us to free ourselves from this situation by owning a share in the creation of our own currency. I am interested in providing this information to those who don't yet understand the process of money creation and how it inevitably taxes us.
I look forward to discussion of this topic and reading your comments!
Further study references can be found here: 1, 2. 3, 4, 5, 6, 7.
Images courtesy of: 1, 2, 3, 4, 5.
