Why Interventionist Governments Love Inflation

Posted by freedomforall 7 months, 1 week ago to Philosophy
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"Inflation is taxation without legislation, as Milton Friedman said. There is no such thing as “multi-cause” inflation. It is a lot more money going to the same number of goods. And the inflation tax is increasing the size of government in the economy both ways: Through massive deficit spending and eroding the purchasing power and savings of the private sector through currency debasement."
SOURCE URL: https://www.dlacalle.com/en/why-interventionist-governments-love-inflation/

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  • Posted by Misanthropic-Shrugger 7 months, 1 week ago
    I would like to add that inflation also reduces the nominal debt and reduces the effect of compounding interest upon that debt. This, in turn, allows the Federal Government to continue to ignore the impending default of the U.S.A. and further increase the size of government. This aspect inflationary first-order and second-order effects is critical; without which we would be forced to address the debt crisises NOW.
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  • Posted by $ Ben_C 7 months, 1 week ago
    Inflation is not caused by the actions of private citizens, but by the government: by an artificial expansion of the money supply required to support deficit spending. No private embezzlers or bank robbers in history have ever plundered people’s savings on a scale comparable to the plunder perpetrated by the fiscal policies of statist governments.
    Ayn Rand
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  • Posted by VetteGuy 7 months, 1 week ago
    I don't understand how banks can charge such low interest rates. I would think that the interest would have to cover AT LEAST the cost of inflation. Otherwise the money being paid back to the bank is "cheaper money" and the bank's assets (in terms of buying power) would be on a continuing downward spiral. But (obviously) I'm not an economist.
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    • Posted by 7 months, 1 week ago
      The bank does not loan from their assets. A simplification is that they can loan up to 10 times their deposits, and they borrow that from the fed at a minuscule rate. The fed creates it from nothing. That is how the banking cartel controls and corrupts anyone, with fiat created from nothing. The fed was created by the banking cartel after they corrupted the con-gress in 1913. That is when the cartel started inflation. There was very little inflation prior to that time (except when government went to war.)
      The Creature From Jekyll island by G. Edward Griffin describes the history of that ultimate con.
      This borrowing is the way that all fiat is created in this country. The banksters get rich and the rest get robbed.
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      • Posted by Bopalla 7 months, 1 week ago
        People who receive government handouts, also get out ahead?
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        • Posted by 7 months, 1 week ago
          Ahead of what? It's a serf system.
          Under that system design human survival saw very little improvement in centuries.
          Under free markets with reward based upon merit, humans have eliminated many impediments to progress and the result is much better lives for everyone.
          Now the monarchists and dictators want to return to serfdom and 'free stuff' is one of the first steps to make people dependent on the aristocracy.
          Very few people are just lazy, but many will accept help to survive in a system designed to punish merit - like the one being foisted on potentially productive people today.
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    • Posted by CaptainKirk 7 months, 1 week ago
      VetteGuy, LEVERAGE is the answer.
      The bank can borrow against: ASSETS at the Fed Window.
      It used to be limited to 10x - 15x leveraging (that's 10-15 TIMES their assets). Assets INCLUDE performing loans!

      So, you deposit money at 1% (1 mln).
      The bank loans that to someone at 3%.
      the bank then goes to the FED Window and borrows at ZERO from the fed (typically 15 times, but Citi was at 42!)
      Lets do 10 Tmies.
      They make another 3% loan... Now, they are making 30% on your 1mln. And if inflation is STRONG.
      It means they are paying back the FED with WEAKER dollars in the future. Inflation is GOOD for DEBTORS, bad for SAVERS.

      Now take it to 20 times, and it's a 60% return.

      So, when someone like me takes 100k out of the bank to buy CRYPTO... The bank does not lose 3% on 100k.
      They FEEL 3% on 1-3 Million worth of lost revenue, and start calling me to ask where my money is.

      Once you see this is how banks make money, you realize the MORAL dilemma they face. How many times should I lever?

      Now, the WONDERFUL piece is the FDIC only insures the initial deposits. Not all the borrowing against it.
      BUT WAIT, the 2008 crash led to rule changes where banks who owe the FED have to pay THEM BEFORE you get paid. So you could be "restored" by FDIC only to have to GIVE BACK enough to BAIL IN the bank. The BANK owns your deposits...

      So, why do I use celsius? (Because they pay me 5% to hold BTC, and 8.8% to hold USDC (stable dollar coin))

      use that link, and get $50 in free BTC when you deposit $400. (I get $50 in BTC as well).
      But the REAL thing is getting 8.8% On DOLLAR STABLE Coins. Treat it like a CD. test it out with a few hundred dollars.

      Banks hate crypto because you CAN'T Lever it.
      Celsius is one of the fastest growing platforms.
      They encourage you to buy and HOLD. They pay you interest on your Crypto while you are holding.
      AND the interest is paid IN KIND (BTC on BTC, and ETH on ETH), like a DRIP program.

      Well worth it. UNBANK Yourself!
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      • Posted by VetteGuy 7 months, 1 week ago
        Thanks Captain!

        I actually do no business with banks. I am currently with a Credit Union, but I need to do some research to check if they are using the same type of leveraging. Based on their rates, I suspect so.

        I've been looking at Bitcoin, but still a bit skeptical.
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        • Posted by CaptainKirk 7 months, 1 week ago
          Yeah, I am surprised that the Gulchers are not much deeper into Crypto. It's a monetary system they can understand. BTC has a fixed number of coins. No more can be created. It costs money to "mine" them digitally. Later miners will simply be paid to manage the transactions via fees.

          But it's worth going to https://www.hope.com/ and learning a it.

          My point was once I realized how much the banks were screwing us by NOT paying interest. I was done. Celsius has a business model that EVEN the Hedge Funds can't tolerate.

          They make money LIKE a bank does (without the leveraging). But instead of keeping ALL the profits and cheating the depositors. They pay 80% of their money to the clients, and charge no fees. They OPERATE the company on 20% and if people want a "RETURN", they recommend they UNBANK themselves, and deposit their coins with Celsius, and get paid like every body else. No special treatment for investors vs. clients in that regard. Which is really cool.

          And they pay out, every monday, like clockwork.

          Dip your toe in the water. Go through the process, if you can. And a whole new Gulch will open up for you. Not financial Advice.

          If you can watch Michael Saylor he helps people wrap their brains around it...
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          • Posted by $ blarman 7 months ago
            I have the following concerns with Cryptocurrencies:
            1) There is no real/physical asset involved. Now people say "there's a limited number of coins, etc." but the problem remains: you can't touch it, bite it, or hand it to someone else.
            2) A third-party has to be involved. As with any digital technology, you have to go through gatekeepers to use it. Whether that is the blockchain servers or the credit services which exchange/manage the cryptocurrency, you are dependent on them to use your own money. And they typically want fees to do so.
            3) Despite what has been said, government manipulation is still a major threat to crypto. China's recent forays into control of crypto demonstrate this. And why? See #2 above. It's pretty easy to shut down access to a server (if you're China). It's almost impossible to prevent someone from using a silver coin to trade for goods.
            4) Instability - uncertain value. The prices of the various cryptocurrencies have fluctuated so wildly that there is no way to accurately gauge the value of any of them. Very few merchants accept cryptocurrency for the same reason: the uncertain value of what they are getting in exchange for offered goods and services. If there is anything my MBA taught me, it was that businesses depend on stability.
            5) They are investment instruments, not a currency base. Right now, there is no distinguishable difference between buying penny stocks and buying cryptocurrencies: people are primarily using them as short-term investment instruments. See Dogecoin.

            The real key to all this is #5. Stability will come as the trade of crypto for real goods will set and stabilize prices. But until that happens and the volatility drops, I see no reason to exchange even my inflation-damaged funds for a cryptocurrency.
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