Kiss Me First

So here we are. Possibly going into a 30's style depression. This week's polls show 51% of Americans think so. Unbelievable. Most Americans I think understand that this downturn is to a degree self-fulfilling. That if I spend less, then businesses I patronize take in less; and then they lay off workers; and then workers go on unemployment; and the government extends unemployment benefits with money it has to borrow; and government debt goes up; and the government spends more money that it doesn’t have digging holes and stuff to replace the money that’s not being spent by businesses and individuals; and the government debt goes up; and the world loses faith in the government to repay the loans and quits buying our debt; and then inflation goes up because the government has to print money to pay back the loans because they dare not raise taxes enough to pay them.

What I think most American’s don’t understand is that we either pay for the government's overspending with higher taxes or higher inflation. There is no other way. When uncle prints more money to pay debt then there are more dollars in circulation chasing the same amount of goods. That’s what causes inflation. Someone called inflation ‘the cruelest tax of all’. Maybe they did so because taxes on spending, in the form of higher prices, are paid disproportionately by the little guy. Little guys spend all their money on housing, goods and services; fat cats only a small percentage. Income taxes are paid disproportionately by the fat cat. So wanton government spending and borrowing hurts the little guy more than the fat cat unless the spending is paid for with higher taxes. Does anyone in the asylum believe that this government is going to raise taxes enough to cover the trillion plus annual deficits in this and coming years? If you do, you better put that pitchfork back in the shed and go back and get that G.E.D. you never completed. (And don’t forget to put your tooth under your pillow)

But the real reason inflation is called the cruelest tax is that it’s a tax on the stupid, on the unknowing, on the uneducated; those who don’t even know their paying it. It’s an invisible tax. When the cost of living goes up even 1% per year more than your after-tax wages, in 10 years you’re making only about 90% of where you started, even after all those raises. And it all happens so gradually most don’t even notice. Anyway you cut it, huge unpaid deficits ultimately lead to a lower standard of living for everyone. The future of democracy and the world’s prosperity depends on whether governments realize that there’s a limit to how much they can tax capitalists and investors before they take their ball and go home, either materially or spiritually.

So why do 51% of the American people think we’re going into a depression? Maybe it’s because they viscerally understand what they might not be able to articulate; that we individually and collectively owe and spend more than we can ever repay and whether we choose to raise taxes or print money to pay it, we’re screwed either way. We know it, but our government doesn’t know it. Scary.