1. Even if you have not been moving up in the world wealth-wise, inflation has been putting you into a higher tax bracket each year. If you were let’s say poor or lower-middle class and you were paying some pretty low taxes, then after ten years or so passed your income would have risen, not because you were really earning more but because of inflation. You would have earned more dollars but each dollar would have been worth less, so basically your situation would not have changed. You would have remained poor or lower-middle class. But, the number representing your income would have gotten bigger. The difference you would have experienced is that years later you would pay taxes like a middle-class person, at a much higher tax rate. Sorry, less money to keep for you, and you were already having a hard time making ends meet. This is reflected in current government statistics that show the standard of living going down steadily in the U.S.
2. As a middle class or upper middle class person, the same thing has been happening to you, except it’s even worse. You have moved up into what used to be the upper middle class’ or wealthy class’ tax brackets regardless of whether your actual financial condition improved or not. What is worse is that more and more of you have become subject to the Alternative Minimum Tax, a tax that was originally designed to trap tax dodgers and other criminals. You will be worse off because the value of your income has not changed but you are now taxed more.
3. If you are a senior and live on a fixed income, you will see your standard of living go down year after year as you cannot earn a return on your savings that will keep up with inflation, and your Social Security increases cannot keep up with inflation either. Oh, but you say S.S. is indexed for inflation. No, it is indexed according to the Consumer Price Index (CPI), which does not accurately gauge inflation. In recent years the government has gutted the CPI, so that CPI says inflation was 2.5% for all of 2006, and it is only about 3.6% so far in 2007 (annualized). According to Shadow Government, inflation is in reality more like 7% if you were to go by CPI the way it was reported under the Clinton Administration. It is likely it was under-reported even then. Even using just 7% for inflation, the difference between the 3.6% indexing of S.S. and the actual increases in consumer prices at 7% per year would quickly erode a senior’s standard of living.
4. Whoever borrows first gets the full benefit of the new dollars. The government and big corporate borrowers get to spend the new dollars before the average Joe and before the average Joe is able to respond to the inflationary effects caused by putting the new dollars into circulation. In other words, Joe loses out because he sold his labor or his used car for last year’s prices, but he will spend the dollars that trickled down to him at this year’s prices or next. The effect is a huge gift to the government and big corporations, and a huge drag on small businesses and wage-earners.
These are just a few of the problems you should be concerned about and a few of the reasons why you should not settle for having a secretive private banking cartel in charge of our national currency.
OK, you are concerned but not convinced. You worry that the Fed might actually be doing something useful and to abolish it would be like “throwing the baby out with the bath water”. No problem. Allow full competition in the currency market and let the market decide. Give legal tender status to gold coins, 100% gold backed certificates, and let income tax table tax-brackets be defined in terms of both FRNs and ounces of gold, and give the seller the right to specify which currency they will use to report income, FRNs or ounces of gold.. Make the law also so that for tax purposes gold is valued in terms of ounces, not FRNs.
Then, if FRNs were to drop in value by half in 10 years, as they would at 7% inflation, then prices would double, wages would be higher too, and people being paid in FRNs would be in a higher tax bracket as described earlier. But, people being paid in gold would have their income calculated in ounces of gold, which would not double but remain the same. Then, let the public decide if they are getting more of a benefit from the FRN or a competing gold-backed currency.
How would that work in practice? Let a currency dealer issue a gold coin and instead of putting a face value on it in terms of FRNs, just stamp it with the weight of the coin in ounces. A gold coin weighing a little over a tenth of an ounce would be worth approximately $80 in terms of FRNs. Electronic cash registers could automatically convert the weight into FRNs at the current market exchange rate. Assuming you owned such a coin, then with ten years of 7% inflation per year, the advantages would be this:
1. An $80 load of groceries now would cost one 1/10 oz coin or $80 in FRNs. In ten years it would cost one 1/10 oz coin or $160 in FRNs.
2. Regardless of your class, your income in ounces of gold would remain constant unless you really moved up in the world to a truly better paying job. With your income in ounces of gold remaining constant you would not be forced into a higher tax bracket. Your taxes would not increase due to “bracket creep” and you could maintain your standard of living.
3. Seniors savings held in gold would hold their value. Seniors choosing to be paid in gold would not see their S.S. checks change due to FRN-inflation. Their standard of living would stabilize.
4. The whole problem of who benefits from spending dollars first would disappear, provided that you demand to be paid in the gold-currency and spend your money in the gold-currency.
If you like what you read here, if it is not too “extreme, radical, or kooky” for you, if you can diss the Fed and not fall flat, and keep your head sans tinfoil hat, then you just might be … a Ron Paul supporter.
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