Scamflation (n) - 1. Erosion of our purchasing power by devaluation of the dollar 2. Printing vast amounts of money to cover deficit spending 3. Manipulating the inflation rate to avoid increases in bond interest
Inflation’s Harsh Reality
I read an interesting post over at the OnlineInvestingAI blog, where George reviews a book called How to Profit from the Falling Dollar. And, it got me all upset once again about the state of our economy.
Image by Pete Bakke
Even though corporations are profiting handsomely from the high productivity (i.e. layoffs), our economy is under attack from the reckless spending by our government. Our national debt now stands near 85% of GDP and unless this changes quickly, we could exceed 100% within a few short years. Then, we will be in the same financial trouble as most of Europe. Below are three of the ways I feel our government is scamming the American public.
Scam 1 – The Shell Game
The scam is very subtle and most Americans aren’t aware of it. Government economists quietly changed the way they calculate the rate of inflation in 2000. In my opinion, this was done to reduce the appearance of inflation. The obvious reason is the interest payable on trillions of dollars of U.S. Treasury bonds. A small percentage increase for these bonds adds up to hundreds of billions of dollars in interest costs per year. Another reason is that automatic increases for entitlements (COLAs) are tied to inflation. That’s why people on Social Security didn’t get a raise in 2009.
What this means to you is that you can expect your standard of living to quietly erode, unless your income and investments are outpacing the true rate of inflation. This is why there are so many working poor and working homeless in America right now. Wages aren’t keeping pace with the real cost of living. And, basic services, such as health care and education, are rapidly outpacing inflation. So, workers are getting squeezed from both ends.
Most Popular Posts