Redistribution -- Part 4 of 4

This is Part 4 of 4 and the last on this subject— a hoped-for “rescue” of people with delinquent mortgages by an additional $75,000,000,000 "bailout."

Part 3 discusses how the federal government’s printing of fiat money to fund such a program effectively confiscates one person’s equity in real estate and redistributes it to another.

Continuing, there are two additional ways in which the taxpayer pays:

Higher Taxes— On top of the involuntary loss of real estate equity (through confiscation and redistribution) for that troubled “affordable housing” program, there will now be higher taxes to pay to help fund the new “homeowner mortgage foreclosure rescue plan.” Some of the $75 Billion in promised spending to try to correct the problem will come from taxes, diminishing the net income of each earning taxpayer.

Inflation— Inflation is discussed in other posts. But in short, the $75,000,000,000 to be printed and paid out immediately under the “homeowner mortgage foreclosure rescue plan” means that there will be that much more money circulating in the economy. The $75 Billion is not backed by the production of something of value, but is created from “thin air.”

The additional $75,000,000,000 will be competing with your now existing dollars.

As an illustration (using “small” round numbers to keep it simple), assume there is now $150 Billion of spending money in circulation, some of which may be in your savings account. Soon the federal government is going to print another $75 Billion out of thin air (not backed by any new assets or other things of value— no roads have been built, no bridges erected, no crops produced for the $75 Billion). Thus, there will be $225 Billion in circulation to buy, trade or exchange for the same things or services now existing. Prices of existing products and services will rise, perhaps costing three times as much. Or, stated another way, the purchasing power of the dollar in the savings account has lost a third its value.

Inflation is a form of taxation. Instead of overtly taxing the population $75 Billion, the federal government accomplishes the same thing by diluting the value of the dollar. I.e., for this new program, the government politicians in effect take the $75 Billion from everybody’s cumulative savings accounts or 401(k) plans or IRAs by diluting their value by 33%.

So, that’s why I write here that the federal government has taken some of your property and transferred it to others . . . and continues to do so through subtle confiscation, higher taxes and inflation.

May I suggest reading . . .

Adams, Charles, For Good and Evil (The Impact of Taxes on the Course of Civilization), Madison Books (1993)

Folsom, Burton, Jr., New Deal or Raw Deal? (How FDR’s Economic Legacy Has Damaged America), Simon & Schuster (2008)

Parkinson, C. Northcote, The Law and the Profits, Houghton (1960)

Shales, Amity, The Forgotten Man (A New History of the Great Depression), Harper (2007)

Sowell, Thomas, Basic Economics (A Common Sense Guide to the Economy), Perseus Books (2007)

White, Andres Dickson, Fiat Inflation in France (1876)

Woods, Thomas E., Jr., Meltdown (A Free-Market Look at Why the Stock Market Collapsed, The Economy Tanked, and Government Bailouts Will Make Things Worse), Regnery (2009)