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INFLATION HURTS RETIRED PEOPLE THE MOST
Posted by: Darrell Castle
January 29, 2010
Topic: Bankruptcy
Inflation can be defined as an increase in the quantity of money and debt within an economy. Inflation is specifically not an increase in prices within an economy. Price increase within an economy is a consequence of inflation not the cause.
Governments then, in our modern central bank run economies, are responsible for inflation because of their constant increases in the money supply through the central banks. In the U.S., the central bank is the Federal Reserve. Inflation is a hidden or stealth tax imposed on the public without their knowledge or consent. Inflation serves to steal the savings and transfer the wealth of people to the government.
Retired people, usually on fixed or limited incomes, are hurt the most by inflation because their income cannot keep up with the constant rise in prices and therefore their standard of living constantly falls. Due to inflation, the real standard of living in America has been falling since about 1971. This is true because people are falling further and further behind the ever increasing rate of inflation. For example: If you had ten loaves of bread which cost two dollars each for a total cost of twenty dollars and you double the money supply then each loaf would increase in price to four dollars because there would be twice as much money available and it is therefore worth half as much. The more you make of something the less it is worth. The bread is the same bread but it costs twice as much and the retired person with the same income must pay twice as much for it.
Inflation serves the constant need of government to buy more than it can legitimately pay for because a real tax increase may not be possible. The over spending and over production of money comes at the expense of people who cannot keep up and constantly must borrow to maintain their standard of living. Inflation and the need to borrow to keep up also explain, at least in part, our current recession. Credit collapsed and with the collapse of credit came an end to borrowing and an end to people's ability to keep up with the rate of inflation by going further and further into debt. At the same time, businesses started to fail because credit was no longer available to them. This credit collapse resulted in lost jobs and declining tax revenue which resulted in even more inflation.
To reduce your own exposure to a system over which you no longer have any control, get out of debt as quickly as possible.
