Given that the Federal Reserve has obviously abandoned its 2 percent target for the rise in prices brought on by its own paper-money inflationary policy, it’s important that we keep in mind how our nation’s paper money-system and the Fed’s inflationary policy plunder and loot the American people.
There is the plunder and looting that takes place through the simple inflationary expansion of the money supply. By inflating the amount of money in circulation, the Fed reduces the value of money sitting in people’s savings accounts or that they receive in income. Their savings and income buy less than before simply because the federal government, through its inflationary policy, has debased the value of money.
This is what has been occurring ever since the U.S. government converted to a paper-money standard during the President Franklin Roosevelt administration during the 1930s. Prior to that time — in fact, for more than 125 years prior to that time — the official money of the American people had been gold coins and silver coins. That’s because the Constitution mandated gold coins and silver coins as the official money of our nation.
But gold coins and silver coins cannot be printed, like paper money can. So, FDR used the excuse of an economic “emergency” to declare a permanent end to our constitutional monetary system. Indeed, he did it without even the semblance of a constitutional amendment. And the U.S. Supreme Court upheld his extraordinary “emergency” power to effectively amend the Constitution through executive order and congressional law, even though the Constitution does not delegate“emergency” powers to either the president or the Congress.
Ever since then — year after year, decade after decade — the value of the paper dollar has gone down. That’s because the federal government found it more convenient to pay for its out-of-control welfare-warfare-regulatory programs through newly printed money than by simply raising income taxes on people.
After all, people get upset when public officials raise their income taxes. With rising prices that come with inflation, most people have no idea that it is federal officials who are causing the prices to rise through inflationary debasement of the value of people’s money. So, they get angry at people in the private sector who are raising their prices to reflect the lower value of the money rather than get angry at people in the government sector who are causing the rising prices through inflationary expansion of the money supply.
Even at an inflationary rate of 2 percent per year, the citizenry are still getting plundered and looted to the tune of at least 2 percent per year. When one compounds that amount year after year, the amount of plunder and looting increases substantially.
But there is another factor to consider — the benefit that an inflationary policy brings to state and local governments in the form of higher property taxes on people’s homes.
Over the years and decades, the Fed’s inflationary policies have caused the value of people’s homes to soar. While this phenomenon has caused people to feel like they are increasing the equity in the home, it actually doesn’t make any real difference at all. Why? Because all the home values in the surrounding area have increased too.
Thus, people quickly discover that selling their home in the hope of acquiring a better home doesn’t work out. In order to benefit from the increased inflationary-induced value of their home, they have to move to another part of the country — one where home values are relatively lower.
The people who love the inflationary increase in home values are state and local government officials. That’s because they rely on property taxes to fund their operations — and those property tax revenues are based partly on the assessed value of people’s homes.
Thus, as the value of people’s homes increase due to the Fed’s inflationary debasement policies, the real-estate taxes that state and local officials are assessing on people’s homes are constantly going up. That means that while people are receiving no real benefit from the increase in their home values, they are suffering a constantly worsening situation in terms of the real-estate taxes they are paying, which are going up year after year, decade after decade.
According to ChatGPT, with a 2 percent inflation rate, the nominal value of someone’s house, given compound interest, will increase by 22 percent over a ten-year period, meaning, as ChatGPT states, its “real purchasing power remains about the same.”
But notice something important: while the real purchasing power remains the same, the same can’t be said of the amount of property taxes that must be paid to state and local officials. The property tax burden is constantly increasing because the taxes are being assessed on the nominal value of the home, not the real purchasing-power value of the home.
Thus, it’s important to keep in mind that America’s paper-money monetary system that FDR foisted upon our nation on a permanent basis, which is reinforced by the inflationary policies of the Federal Reserve, which was established in 1913, ends up looting and plundering people not only at the federal-government level but also at the state and local government level.
Reprinted with permission from The Future of Freedom Foundation.
