Why the Fed hurts the elderly most of all
February 3rd, 2012
Anti Fed activists often call inflation a tax, and rightly so. When the Federal Reserve creates new money it dilutes the buying power of the money already in circulation. The value of the new money is “taxed” from the value of the money in your pocket. Congress gets to fund their projects, and you pay for it through the steady increase in prices. It’s invisible, but the effect is the same. But I’ve been thinking this slogan is insufficient. There are still plenty of Americans who want taxes. They want to fund the projects of Congress, as long as it’s the projects they want. But there are still plenty of reasons for these people to be against the Fed.
The Fed doesn’t give Congress the money for free. It’s a loan, and like any loan there’s interest to be paid. When Congress borrows money from the Fed the collateral on that loan is the future earnings of their subjects, which they tax directly. Those interest payments aren’t funding any projects. It just goes to the Fed. In other words, Congress is selling you to the bank, and the dollar is the receipt. So, inflation isn’t just a tax, it’s creeping slavery. Even worse, the debt isn’t paid in the lifetime of the borrower. It’s paid by taxes collected on the income of future generations. So, if inflation is a tax it is taxation without representation, and if it is debt slavery is it selling unborn children to the bank. This is much more precise than that old slogan.
Last week the Fed announced their inflation forecast and interest rate intentions through 2014. In other words, they published how much the Federal Government sold you to them. The Fed is projecting a 2% inflation rate, which is low, but being sold into slavery 2% at a time is still bad news. What’s worse is that the scam requires them to set interest rates below the inflation rate (or to misreport the inflation rate), if they hope see any kind of economic recovery. So, even as the dollar amount grows in your interest bearing savings account, the purchasing power of those dollars actually erodes faster. Basically, if you keep your money in a savings account you’re being stolen from.
But it’s worse news for the elderly. When people first start to save for their retirement they tend to make riskier investments. High risk, high return over a long enough timeline means higher profit. But as they age, approaching retirement, they typically choose more and more conservative investments, preferring a sure thing with lower returns, because the timeline is shorter. As a result, most retirees live on fixed incomes from interest bearing investments. What this report means for them is that prices are going to rise faster than their income. So, when we hear stories about elderly women being forced to eat cat food because of food prices, understand that the Fed is culprit.
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