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One Twisted Child

Can inflation be considered just another form of taxation?

While we know that inflation is not directly controlled by the government whereas taxation is, the government does have a hand in shaping the determining factors which bring about it's rapid increases.Are the two interlinked?Do you believe an increase/decrease in taxation influences the rate of inflation in any tangible way?Is there any one entity that should bear the brunt of the blame for any increases in inflation?
Muttin':

When spending grows too fast, this can lead to high inflation, which can damage the economy just as taxation does– goods and services can become too expensive, and the dollar becomes worthless. When interest payments accumulate, credit is worth less and money is more expensive, so people are more likely to save and less likely to borrow, keeping inflation low. As the government feels the need to borrow more, and more money, the cost of doing so increases and inflation goes up. Inflation therefore is just an interest payment on wasteful borrowing and spending. It is a tax on borrowing which pays down the cost of the spending. Will the country ever pay its debt off? Probably not. They are still on a shopping spree and inflation is paying for it. The dollar is worth what now? 50 cents? Inflation is a borrowing tax.

One Twisted Child:

Excellent answer :)
So what's the solution? Other than overthrowing the current government in it's entirety that is?

Muttin':

Stop creating more government. Stop creating all the programs we cant afford. stop spending over seas. (besides the military which protects us and the rest of the world.)

Ze'_Enigma of Dissidence..!!!:

I realize that taxes are onerous, but what puzzles me in your analysis is that on the one hand you say "they are still on a shopping spree" and in your comments you say that you support military spending that is protecting the rest of the world. It's the cost of the war and "protecting the world" that has become the "shopping spree" and it's not being paid by taxes, but rather by borrowing. The war itself has resulted in more than $1 trillion in additional debt and borrowing. I assume that the "they" in your reference to spenders are members of Congress. So if the problem lies with the party that has controlled Congress for the most past of the past decade, why is it that prior to the current administration they were able to produce not only a balanced budget but also a surplus to reduce borrowing? If inflation is a "tax" on borrowing, it would deem to me that a reduction of taxes by the current administration has actually increased the "tax on borrowing" or inflation.

One Twisted Child:

FJA, obviously you did not understand the intent of the question, which I can accept. However I take issue with you trying to make the question one of a partisan nature. Why is that?

Ze'_Enigma of Dissidence..!!!:

Lest you forget, one twisted child, you did ask: 'Is there any one entity that should bear the brunt of the blame for any increases in inflation?" My comment implied that there was -- the Republican congressional majority. Now that's the truth, and stating the truth sounds partisan, so be it.

Ed:

Yes, it has an identical effect on taxpayers, as well as on the government. Governments can pay off debt by raising taxes, or they can do so by raising inflation, and paying off debt with money that's worth less. The effect is exactly the same. Taxpayers have less buying power, whether the government takes their money through taxes or through inflation.
There are many, many hidden ways the government takes from taxpayers....they don't always call it a tax, but it's the same thing.

One Twisted Child:

Excellent answer. Do you feel either one has a distinct advantage to the individual? To the government?

Ed:

Inflation obviously benefits the government. They can pretend that they are not raising taxes, when for all practical purposes, they are. Most people don't have a basic understanding of economics, so they blame inflation on the "greedy corporations", rather than the greedy politicians.

One Twisted Child:

I think you nailed it with that last sentence. Too bad many are still of the mindset "ignorance is bliss" when it comes to basic economics.

Ze'_Enigma of Dissidence..!!!:

Inflation represents the decreasing value of currency --- that is, your dollar doesn't buy as much as it used to.

Since our economy is considered to be a "consumer economy". economist attribute inflation with supply and demand -- that too many dollars are chasing too few goods and as a result prices rise. In some ways, then, increasing taxes would reduce available funds for consumer spending and as result with less money to spend, demand for goods is reduced and in a competitive market place it results in lower prices.

The way our government handles inflation is through credit, not taxes. Since low interest rates makes credit more easily available, there is more money available for spending, By increasing credit rates two things happen; it slows down credit and thus the flow of money; the available money is put into savings because the returns in interest are attractive and produce more capital for future spending.

Our current economy, however, is faced with a dilemma. Apparently our current inflations is not necessarily due to consumer spending, but rather the flow of money in the financial markets.
Consumers are feeling the impact, partly because of the effects of deregulation and lower taxes.
Since most tax relief has been directed to the wealthiest segments of our economy, it has enabled greater investment or spending in the financial markets. Financial markets however are actually "paper trades" --- IOUs or promises to pay. The "paper" or securities are used just like real money in many financial market transactions. As result the "risk" of the financial markets is the money behind supporting the "paper." Typically mortgages are the type of "paper" that represent an IOU. Homes were being purchased because low interest rates made owning a home affordable. Capital was available for trading. Mortgages were purchased and traded because th

One Twisted Child:

If you choose not to answer the actual question, that is your decision. However might I suggest citing your sources. Your text is eerily similar to that of a first year economics book.

Ze'_Enigma of Dissidence..!!!:

Sorry that my answer doesn't satisfy you, but I did try to simplify it to the status of "Economic for Dummies" It is an original essay that analyzes the several questions you asked. It comes from years of education and long careers in journalism and business.

Taxation can be something that is onerus and so is inflation. So in that sense they are alike.
Is government taxation interlinked with inflation? My answers was: "Consumers are feeling the impact, partly because of the effects of deregulation and lower taxes. Since most tax relief has been directed to the wealthiest segments of our economy, it has enabled greater investment or spending in the financial markets. Financial markets however are actually "paper trades" --- IOUs or promises to pay. The "paper" or securities are used just like real money in many financial market transactions' Apparentlly that doesn't satisfy YOUR answer but it does mine.

One Twisted Child:

I've studied economics, and my question was not designed for an econ major. I only took exception with the fact sources were not cited

.......:

Absolutely. Look at how much more income in taxes the government is now getting off the price of gasoline. And ponder the direct impact of raising the minimum wage has on driving all costs of labor upward, then include programs that are based on the wage. It's an upward spiral.

One Twisted Child:

Do you see it getting better anytime soon? Or do you believe that is in part dependent on who takes office come November?

Slap Daddy:

Maybe

One Twisted Child:

Nice committed answer, Thanks :P LOL

Russ:

Yes, and government benefits from "creeping brackets", people making more to get even, and then the tax bite puts them in a higher bracket.

One Twisted Child:

Thank you for your answer. You seem to have understood the actual intent of the question.

Grunty:

yes it can be the gov gets a bigger cut now that prices are higher on a wider range of things

One Twisted Child:

Thank you.

Jodi:

Greed.....

One Twisted Child:

Doesn't it always boil down to that? :)

Koko:

It IS a tax, a hidden tax that hurts poor people the most. Inflation is a great way to make money if you can afford to invest but if you have none to begin with, you're screwed. Only one thing causes it. The Federal Reserve printing too much money too fast. The more there is, the less it's worth, and it's always followed by a recession.

One Twisted Child:

Well said, thank you for your opinion.

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