Uncle Sam's Heist: Deficit Spending and Inflation

Sometimes you can see an accident waiting to happen and there’s nothing you can do but stand there, shield your eyes and cringe. That’s the maddening position American citizens are now in as they prepare for the inevitable inflation that will result from deficit spending, socialist political patronage and the centrally planned economy now taking hold in America.

One need not be an economist to understand inflation. If you started writing checks with no money in your account, they’d throw you in jail. Yet when the government does it, at least for the time being, it’s called “stimulus" and rewarded with high approval ratings, that is, until the bills come due. And they always do.

As we pointed out years back there’s no fundamental difference between a $1 and $50 bill. Both are simply pieces of paper, backed by the future production of Americans. Printing money doesn’t create wealth; it only debases the currency that already exists. Shortly put, there is no free lunch.

When Bernie Madoff stole $50 billion, he harmed thousands of private citizens. But the government’s thievery through inflation is even more brazen and destructive. Middle and lower income individuals are hurt most of all.

The law of supply and demand cannot be conned. And as the supply of money increases, prices rise, and the dollars you and other productive members of society have worked so hard to save decrease in value. This is why $100 billion Zimbabwe dollars, which used to be the equivalent of $100 billion U.S. dollars, now buys only three eggs.

Private citizens and corporations don’t cause inflation; only government has the power to destroy the purchasing power of millions of its citizens without as much as laying a finger on their checking accounts. Make no mistake: The billions lost on bailouts for GM (GM), Chrysler and AIG (AIG) will be paid for by you…whether you want to or not.

Meanwhile, as Washington systematically slits our throats, they add insult to injury by stabbing the productive class in the back, busily “clamping down” on hedge funds, speculators, any profit-seeking investor on whom they can lay the blame for their own fiscal misdeeds.

And while the government is quick to highlight how our money is being spent on feel-good social programs though web sites like Recovery.gov, what we don’t see is the production, productivity and progress not achieved because of the disastrous effects of government theft.

Since we first started writing about gold in 2001, it has risen from $290 an ounce to nearly $1000. The bar of gold itself is unchanged; of course, it’s the purchasing power of the dollar bill that’s declined. Our government outright ownership of General Motors doesn’t give me much hope that trend is poised to reverse anytime soon.