How to Become Exempt from new "Monetary Tax"

The massive bailouts of 2008 and 2009 (and continuing today) not only changed the way our nation conducted its fiscal policy, but its monetary policy also. The enormous amount of spending by our government -- at a pace that increases the deficit annually at a rate higher than our total debt a few decades ago -- has been breathtaking to observe.

As a result of such spending, government is mass producing money to pay its bills. The government loves this approach to solving its problems for several reasons. First of all, since the government prints the money and release it first, it enjoys this "funny money" at its highest value. It is only after it circulates through the economy that it loses its spending power and reduces the value of all other dollars in the market. Inflation is defined as "too much money chasing too few goods." High prices is only one of the many symptoms of such a policy. In addition, inflation plays on the ignorance of a population who has no idea that these increases in prices are caused by the mass production of devalued dollars. Most voters will blame businesses for their "greed" and price raising, not the politicians who make such a phenomenon necessary. Simply put, every new dollar pumped into the economy takes away the value of all the dollars in the market, unless there is a comparable increase in productivity.

In one day in 2009, the United States took a chapter out of Zimbabwe's playbook by pumping $1.2 trillion into the money supply in an attempt to pay off its bills. Many Americans have (rightly) been alarmed by the more than $1.5 trillion we have seen in bailouts. According to the Washington Post, these inflationary efforts have the potential of being much more far reaching, noting that "combined with the billions already deployed by the Fed, the new money dwarfs even the biggest government bailouts of financial companies."

Historically, this type of monetary policy leads to the kind of inflation that we have seen in history books, where it is cheaper to use money for wallpaper than to buy it or it requiring a barrel of money to buy a loaf of bread. Printing worthless money will not make our problems away, but make issues we never imagined.

The purpose of this inflation is to serve as a tax by taking away the value (rather than the actual dollars) of all the money we hold. This is, however, one tax we can fight against, according to Albert Lu of Woodlands Bullion, a leading authority on precious metals and a contributor to the Price of Business radio show. Lu has stated many times that Americans can reduce their "monetary tax" burden with every precious metal purchase they make. Gold, silver, and other precious metals are at an all time high because of the inflation we have suffered over the last two years. It is only expected to get worse. Precious metals are a tool for shoring up the value of money. As the money supply is inflated, those with gold or other precious metals will see their wealth enjoy a greater level of protection and their "monetary tax" burden greatly reduced. Those who do not move towards precious metals either do not fully appreciate our current economic crisis or are as apathetic as the millions of Americans who still sit on the sidelines rather than participate in the most important political battles of the day. People need to make a difference in the national economy through elections and their personal economies through precious metals.

The Road to Hyperinflation

There is a great deal of discussion about inflation and even hyperinflation, but most are not really aware of what either are and how they come about. Inflation is not, as you have often heard, "high prices." High prices are among the symptoms of inflation. The classical definition of inflation, simply put, is "too much money chasing too few goods." We have a great deal of that going on in our economy today. The result is not only high prices, but outrageously high interest rates (which are right around the corner) and a massive drop in the value of US bonds in the eyes of international buyers. Those bonds are one of the primary vehicles our country uses to avoid bankruptcy, because of the size of our debt and deficits.

Many Americans believe we have not had a problem with inflation in decades, but the reality is inflation has grown steadily at approximately 4 percent for years. For example, items that totaled $100 in 1988 would cost almost twice that today. Those higher prices did not go up because the items became more scarce or the ability to produce them had declined (in fact, the exact opposite has happened; technology and the ability to easily do business internationally should have drove pricing down), it is due to a reduction in the value of the currency itself. This is a cowardly form of taxation, with the government decreasing the value of all money by printing fiat dollars as a form of paying bills. It is much easier to do that than the government behaving in a fiscally responsible manner.

So we have had inflation for decades, yet it has largely gone unnoticed by millions of Americans who remember the double digit inflation of the 1970s and are too busy trying to make a living to notice the government chipping away at the value of all money today. Now the federal government is going much further in its efforts to devalue our nation's money. We have got into the mode of adding $1 trillion to the deficit annually. Twenty years ago, this was the amount of the entire national debt and took almost two centuries to accumulate. The Obama administration has to do something in order to make this shell game of fiscal insanity work. There is no doubt Obama wants to raise our taxes and has moved aggressively in that direction. However, the US already has the second highest corporate tax rates in the world among industrialized countries according to the G-20. Unless the US wants to shut this economic machine down entirely, they will have to look for strategies beyond tax increases. One of those clearly include more inflation and it has already begun to happen.

On one day earlier this year, the United States took a chapter out of Zimbabwe's playbook by pumping $1.2 trillion into the money supply in an attempt to pay off its bills. Many Americans have (rightly) been alarmed by the more than $1.5 trillion we have seen in bailouts. According to the Washington Post, these inflationary efforts have the potential of being much more far reaching, noting that "combined with the billions already deployed by the Fed, the new money dwarfs even the biggest government bailouts of financial companies."

Historically, this type of monetary policy leads to the kind of inflation that we have seen in history books, where it is cheaper to use money for wallpaper than to buy it or it requiring a barrel of money to buy a simple loaf of bread. One of my favorite photos is a Weimar Republic sanitation worker in the days before World War II literally sweeping money in the gutter because it was both worthless and in excess. Printing worthless money will not sweep our problems away, but make issues we never imagined.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.