Commentary
There is a growing desire among citizens for increased government control over the economy to combat rising prices. However, this approach is highly ineffective. Interventionist governments do not succeed in lowering consumer prices because they actually benefit from inflation. They use inflation as a hidden tax, allowing them to reduce their debt in real terms, collect more taxes, and present subsidies as a solution to rising prices, all while the currency becomes increasingly devalued. This symbiotic relationship between socialism and hyperinflation illustrates the dangers of giving more economic power to the government.
Socialist governments reject fundamental economic principles and promote the idea that they can create wealth simply by printing more fiat currency. When inflation inevitably occurs, these governments rely on propaganda and repression to maintain control. Propaganda blames businesses for price hikes, while repression is used to quell social unrest caused by scarcity and high prices.
To achieve lower prices, it is crucial to limit government intervention in the economy. Free markets, competition, and open economies are the key drivers of price reduction. Unfortunately, many nations today are increasingly overregulated and intervened in by central banks and governments, leading to unsustainable deficits and debt. As a result, families struggle to make ends meet, businesses face challenges, and the currency loses its value over time.
The concept of “social use of money” allows governments to prioritize their spending commitments by devaluing the currency. This leads to a cycle of dependency on the state, as citizens demand subsidies paid in a currency that continues to lose value. The government’s manipulation of the currency through debt and depreciation is a form of control over the populace.
In reality, governments and central banks do not aim for true price stability. Their definition of stability includes a two percent annual depreciation of the currency, which fails to account for the erosion of purchasing power. The consumer price index (CPI) used to measure inflation is manipulated and does not fully reflect the true rise in prices of essential goods and services.
Inflation is essentially a hidden tax that benefits governments by increasing their power and control. By destroying the currency’s value, governments can justify higher debt levels and taxes. Inflation serves as a tool for governments to increase revenue without directly raising taxes, shifting the blame to private businesses for price increases.
It is crucial to recognize inflation as a warning sign of declining confidence in the currency and loss of purchasing power. Governments cannot sustain unlimited borrowing and must acknowledge the economic and fiscal limits imposed by inflation.
The economic limit is apparent through indicators such as decreased growth, reduced employment, lower real wages, secular stagnation, and a decline in foreign demand for public debt.
The fiscal limit is demonstrated by escalating interest expenses despite low rates, diminishing receipts with each tax increase, as well as citizens and businesses relocating to countries with more favorable tax systems, all contributing to the weak or negative multiplier effect of government spending.
To achieve lower prices, it is essential to limit the economic influence of governments rather than expanding it.
A government proposing to borrow $2 trillion annually in a growing economy with high receipts, and continuously increasing debt and borrowing until 2033 under the most optimistic GDP and receipt projections, is essentially signaling a path towards impoverishment.
Politicians who pledge to reduce prices are often misleading. Currency devaluation serves as a means to enhance government control over the economy, with the consequences only becoming evident later on.
Money represents credit, and government debt translates into fiat currency. Currency devaluation results in inflation, which is akin to an implicit form of default. Interventionist governments and central banks typically do not advocate for lower prices, as inflation enables them to augment their authority while gradually deviating from their monetary obligations.
Please note that the opinions expressed in this article are solely those of the author and may not align with the perspectives of The Epoch Times.
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