The Usual Suspects

November 18, 2021

It’s the most despicable kind of tax there is.

It’s regressive. 

It’s punitive.

It has the greatest impact on those who can afford it the least. 

I’m sure you’ve guessed, I’m talking about inflation.

We all understand how it works. (It seems like the only people who don’t are those in Washington DC.) Inflation shows up as higher prices. At the grocery store. At the gas pump. When you buy home necessities. What you pay in rent.  Medical care. Clothes. Travel.

Everywhere you turn, it eats up more of what you earn, more of what you save.

It’s a flat tax…

It hits everybody the same, regardless of how much money you make. (Which means a heavier burden on the middle and lower classes.)

A millionaire software entrepreneur pays the same $12 per pound for steak as a janitor does. (Except the janitor probably doesn’t eat steak.)

We’re Now Headed for the Biggest Tax Levy Ever

As I’ve outlined in my past few letters, we are likely headed toward a bout of “secular” inflation. 

Secular inflation isn’t the modest and typical inflation that comes with GDP growth in the business cycle. 

Secular inflation occurs when something gets broken in the economy. And it goes without saying, the usual suspects who are always breaking the economy are those in government. 

The problem is, unwittingly or not, they have been breaking the economy for years.

Uncontrolled deficit spending. Zero interest rate policy. Quantitative easing 

The moral hazard that the Federal Reserve offers combined with Wall Street’s insatiable lust for profit has forced them to beg, borrow and (worst of all) steal money to keep the economy and financial system intact.

They begged… in 2008 then Treasury Secretary Hank Paulson purportedly got down on one knee and begged Nancy Pelosi not to deep six the three-quarters of a trillion dollar TARP bailout for banks who had behaved so recklessly.

They borrowed… In the intervening years from that debacle, the Treasury has borrowed roughly $5 trillion more… mostly from the Fed via quantitative easing.

And they’ve stolen (and this might be the most despicable act of all)…

They’ve Bankrupted Our Future

Since the beginning of time, “money” has been a representation of value. Today, since it’s no longer backed by anything real — like gold, it’s basically become a yardstick of economic growth. As value is created in a growing economy (and GDP rises) the monetary base will naturally grow along with it. That’s normal inflation.

Their theft has been accomplished by creating money from thin air – effectively stealing from (I’d say borrowing against, but there’s no plan to pay it back) future growth and value creation. 

You hear debt numbers all the time… The $29 trillion in public debt. The $160-plus trillion when you add in unfunded liabilities. I’d call those numbers staggering, but we’ve heard them so often, we’ve all become kind of numb to them.

It’s hard to guess how much has been stolen from our economy in terms of future growth.  But if the bill came due and we had to stand for an actual accounting of our economy, well… the two former numbers might pale in comparison.

(And just to be clear, the begging, borrowing and stealing has, in some form or another, been going on for over 40 years.)

In any case, the end result of this bad financial behavior has been to break the economy. Today our economy is effectively held together with the financial equivalent of duct tape and string. And if it started to come apart…

It’d bankrupt a whole lot of little people. But it might also bankrupt some of the elite too. 

And we can’t have that. 

So the Fed will need to figure out a way to beg, borrow or steal even more. To protect their friends on Wall Street. 

And those actions are going to put YOU in the cross hairs of the next BIG tax.

I’ll show you what it looks like in your next letter.

Make the trend your friend,

Bob Byrne
Editor, Streetlight Daily