I suspect most of the people if not all of the people reading this are informed enough that what I am writing about in this post is common sense. Yet I could be wrong.
I will tell you I am a little disgusted now. I wrote this post an hour ago, had images in it, and was going through it and editing it. I bumped the wrong mouse button which caused a refresh or something and the entire post was gone.
I am writing something similar to it now. I suspect it will be lacking some of that magic that happens for me in my initial stream of consciousness posts from time to time. It is important enough I thought I'd take a stab of at least hitting the main points that I wanted to talk about.
Overt Taxation
All of us are very much aware of the overt (out in the open) form of taxation that you must pay each year to the IRS (Internal Revenue Service) and is withheld from wages based upon how you filled out your W4/W2 forms. If you are reading this from other countries you likely have something similar so everything I talk about in this post is still relevant.
The government takes this tax from your paycheck and it is not voluntary. It is mandatory, compulsory, etc. If you don't pay it you are fined, if you still resist you are jailed, if you resist being jailed you will be killed in the process. It is an unavoidable fact of government taxation of this form.
Depending upon what State and what country you live in you may pay a Sales Tax, or some other form of Value Added Tax on top of purchases you make from the store. A portion of your income is taken. When you make purchases they take more of it. Unless you violate the law it is unavoidable. It is mandatory. It is not really a choice if you want to survive.
This is an unpleasant reality. People have come to know that if they are making $70,000/year that the amount they actually get to keep will be less than that. They are also used to the fact that if they make a purchase of $100 worth of food they actually will pay more than that. If sales/VAT taxes are 7% then they would actually pay $107.
We all understand that and can work with it.
Most people seem oblivious to the covert taxation. This is in clear evidence by the things people demand of the government, and how they get excited when the Government offers "free" this, or "free" that. This is clear when they demand the minimum wage be increased.
Covert Taxation
Governments only produce two things. Laws, and Bureaucracy (often in the form of waste). They have no product that actually produces wealth. If they can't produce wealth then they cannot promise you anything for free and it not be a lie, a con, fraud, etc. The work must be paid for, the products must be paid for, people that work to produce the products must be fed, they must have shelter, etc. Even if those people were enslaved their food, and shelter would still need to be paid for. If something must be paid for then it cannot be free. When the government promises you free anything someone has to pay for it. Since they don't produce wealth it will not be them. Ultimately it is the people.
To justify this they will use overt taxation above and that taxation can be quite extreme and people complain about it because they can see it. They also are often duped into thinking that taxing all of the wealthy can pay for all this "free" stuff. It cannot, not even close.
We can clearly see that taxation and we get angry about it. Some of us get angry when they then pass bills that spend that tax money in large amounts outside of our own country while we have people struggling, homeless, and having other issues in our own country. This why the concept of "America First" is a big deal. The idea is that you make sure your own house is in good shape before you go help people with their house. The United States for quite some time has been letting it's house rot while it is going around rebuilding, refurbishing, and updating the houses of other people. They do it with the taxes they take from the people. Yet that is actually where only a small amount of this comes from.
You are actually being taxed in a much more nefarious way. It is a way with a con job built into it. A scam built into it.
What if I were to tell you that the $100 bill that is in your wallet that has been there since April can only purchase $95 worth of goods from April? In one month $5 less in products can be purchased? You might say that is incorrect as $100 is $100. That is what they want you to think.
Imagine this... If you were in April and you bought $100 worth of food. You sat on that food for one month and at the end of the month you sold it to someone else for $100. They couldn't buy it all from you. They can only buy what would have cost you $95 in April for $100 then. That means in the span of one month that $100 lost $5 in purchasing power. That is what is known as inflation.
In May of this year it was 5%!!!
To put this into perspective. Say you get a "Savings Account" at a bank as you want to save for the future... you put $100,000 into that account.
The common interest I am seeing on savings accounts is 0.5% or there about. That means your account would earn $500 in a year for just sitting there. At least that is what your bank account saying $100,500 would make you think.
Yet the annual inflation is usually 3%. That means that the purchasing power of the dollar decreases by about 3% on a normal year.
That means the purchasing power of any of your dollars are 97% what they were the previous year. That $100,500 savings account can only purchase you $97,485 worth of equivalent goods from the previous year. The number went up, but your actual purchasing power went down.
The truth of the matter is that unless your investment appreciates (increases) more than inflation savings accounts are not actual savings accounts. They are loss accounts. You'd do far better buying something that will retain its value that you could then sell later if you need dollars.
We are being robbed blind by inflation...
Do you understand how huge the ramifications of a 5% inflation in May alone are? If that happened every month that'd be 60% in a year. That would make the purchasing power of that $100,500 bank account in terms of 2020 things it could purchase equal to $40,200.
How does that savings account look now?
A CD gives a little bit better interest. When I looked today it was usually around 0.55% so barely better than a savings account. In the example I've been talking about your account would say you have $100,550. Yet in terms of purchasing power you have less than that.
How does that 401K account look? If they made profits that exceeded inflation it might look okay. Though it could also look quite bad. If the inflation is as bad as it is likely going to be getting then that 401K is going to rapidly lose value.
What Causes This?
There are a few things that lead to this.
The main cause is using a fiat currency that isn't backed by anything and that the government or some central bank (not government at all) can print money on demand. People think "We want to give free education..." they don't want to lose the election by hitting people with the huge tax increase that would be required to pay for this "free" education so they get the central bank to print more money.
What do you think happens to the value of money that already exists when you dump a lot more of the same money into circulation without backing it with anything?
The money loses value. It takes more of that money to purchase something in the future.
Imagine the market cap for your MONEY is $1,000,000 and you can buy a house for $10. They need more money to give something for "free" so they double the money supply. The market cap is still only $1,000,000 but now there are double the amount of money units in circulation. That house will now cost you $20. If your bank account was $10 before they printed money you could have bought that house. After they print the money your bank account is still $10 and you only have half the cost of the house.
This is inflation. This is happening...
How do we stop this?
Stop asking the government for free stuff. They can't give people free anything. They have to steal either through taxation, or inflation to pay for things.
Stop asking the government to increase the minimum wage.
If you make $16/hr and the minimum wage is $10/hr and they demand it be increased to $15/hr you will not get an increase because you were making $16/hr. For a very brief (few months) period those people that were in the area that did get an increase will be able to purchase more "stuff" and they will be happy and talk about how great it is. A few months later the prices will adjust because people cannot just magically sell you things for the same price if they are suddenly having to pay people more to make those things. These people that got the increase will now be right back where they were before the increase. Though this time it will be different because now the people that were making $16/hr, $17/hr etc will be purchasing less than they could before the minimum wage increase. They will now be struggling. They will join in with the crowd asking for a minimum wage increase. Maybe they will demand $25/hr.
This erodes the middle class. It gives a very short illusion of helping people. It actually in the end harms a lot of people. It does not lift people out of poverty. It just gives that very brief illusion of doing that before the market adjusts. The people that hope you will ask for this count on the short term memory behavior of people. They will remember that 3 months of nicer living. They will think it was due to the minimum wage increase actually working. It didn't work. It made it worse.
That brief moment of better was being paid for by the value stolen from everyone's money. It contributes to inflation.
The government cannot give you "free" anything. Anytime they claim to be doing so they will be stealing from all of us either in overt ways or covert ways. In most places it is both. Yet most people are oblivious to the covert ways and what causes inflation.
If they understood inflation they would never be asking the government for free anything. They would also not demand the government step in and interfere with the market and the ability of people to negotiate for wages by mandating a minimum wage. If there are people willing to work for a price that is between them and their employer. Most of the time the employer bases that upon what they think people will accept. This is not always the case. If they are wrong about that then people don't have to agree to work with them and they will have to raise the wage until they get what they need. This also usually influences the price they charge for their product and services. If the government can force them to pay more then they will have to increase their prices accordingly in many cases to offset that. The exception is the robber barons who are making huge profit margins. They could afford to pay more wages but this does not describe the majority of businesses.
The past...
In the past it hasn't been uncommon for people to get a cost of living wage increase from some employers on an annual basis. If inflation was thought to be around 3% they would give all of their employees a 3% increase in wage. They might also have to increase their prices by 3%.
If you were making $70,000 in 2019 then perhaps they'd bump you to $72,100 in 2020.
Let's consider they keep doing that. Think about the fact that this May alone inflation was 5%.
If you get a 3% wage increase you'll be at $74,263 in 2021. This is all to keep you at the same purchasing power as that $70,000 from 2019. You cannot purchase more goods. You can purchase the same amount of good in 2021 as you could in 2019 for that $70,000.
Yet we now have just one month in 2021 that is already 5% inflation. That month alone would have stolen 2% of the purchase value of your wage.
The other months haven't looked good this year either, and it is likely to get far worse...
What is happening?
Stimulus Checks... Huge amounts of money printed and handed out for "free". My family and I received them when we didn't need them at the time. We put it all into crypto, gold, and silver because it is obvious to us that doing something like this can ONLY lead to massive inflation. The sweet period before inflation tends to hit is typically only a few months. That'd make what happened in May to be right on schedule.
Paying unemployment benefits that pay more than the person was making working. Now they don't want to go to work and places have a labor shortage and cannot produce enough goods. This reduces supply in a supply and demand economy type situation and the prices increase dramatically. The people don't go back to work because they are making more not working.
Meanwhile those unemployment benefits can only lead to more inflation...
Then they are passing stupid laws to restrict energy business making in 180+ days the U.S. go from Energy independent to importing energy, and gas prices going through the roof.
There are a ton of bad laws/bills. Not to mention all of these bills that produced the stimulus checks, and unemployment coverage spent only a fraction of that money within the United States. A lot of it was spent in other countries.
What can you do?
If you have spare money it is going to lose value rapidly in any form that is in dollars. Put it into some other assets not tied to the dollar. This can be real estate, it can be gold, it can be crypto, it can be collectible items that you are certain will retain their value.
If you put $100 into gold and the dollar inflates by 50% you would then be able to sell that gold for $150 so you will not have lost anything. You will not actually have gained purchasing power, but you will not have lost any either.
Savings accounts are stealing from you... they are way less than inflation.
EDIT: It isn't the same as my original post but hopefully it still makes sense.
They have been encouraging putting money into something other than savings for a while now. It makes it better if you have a lot of debt, but not so if you have a lot of savings.
To be honest. In a country where the level of inflation is sky rocketing it is always hard to safe
And the CPI numbers aren’t even close to being an honest indicator of inflation. For that, http://www.shadowstats.com and http://www.chapwoodindex.org are much better sources.
Posted Using LeoFinance Beta
Yeah it is worse than they are reporting. I'm planning on moving out of Colorado and looking as of February. If things keep going like the are I may need to go sooner. Last year when I checked Colorado was the 10th most expensive state to live in. It has moved up 3 spots and is now 7th.
Unfortunately that second one doesn't seem to have 2020, or any of 2021 yet.
I think maybe the guy who kept it going got sidetracked; he’s being sued by Seth Rich’s family. Probably has his hands full dealing with that.
Looking at the present condition of Nigeria it is really hard to save, judging the economy is getting bad day by day and the government is making it worst for citizens here.
My only means of saving is using the little I have to make investment know it will take me time to withdraw.
Yes. This is a global problem. In some places it is worse than others. The only upside in Nigeria is you likely understand what it means to be poor better than some people in the U.S. who claim to be poor.
On the flip side I bet I can spend $1 and buy a lot more product in Nigeria than I can buy with it in the United States.
You might be able to find a bottle of water for $1 in the U.S. if you look for a bargain. Most of the time even a bottle of water will cost more than that.
Thus, when you hear $70,000/year and me talking about it that is likely a huge amount of money in Nigeria (I am guessing). In the United States it is not. It is barely livable in some of the most expensive states.
I was running 50usd at the grocery store on average a few years ago, now it's more like 75.
You are fortunate...
I'd love if I could leave the Grocery Store for only $75. I am purchasing for 8 people though so I guess that shouldn't be that surprising.
I am fortunate in many ways.
Has your average gone up a similar amount?
Oh definitely. It likely has gone up more than that. I just know we can spend $400-$500 at the store on a trip and wonder why it seems like we have so much less food.