Inflation

One of the reasons that economics have been so successful is obscuring the source of inflation is that they have short-circuited the very definition of the word. Nearly everyone believes that rising prices means inflation. So if prices aren't rising, there must be no inflation.

But rising prices are merely the results of inflation! The inflation is the expansion of the money supply.

— Peter Schiff; How an Economy Grows and Why It Crashes

And then take a moment to think about how much inflation has affected your life. You may recall that not too long ago people began flipping houses because prices were going up so rapidly. During that same period, the prices of gasoline, a college education, food, clothing, and more were climbing steadily—but incomes weren't. Many people did nor save because it was smarter to spend today rather than pay more tomorrow. That was inflation in action.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

This [Inflation] is caused by the Federal Reserve and the U.S. Treasury borrowing money or printing money to pay the government's bills. That's why inflation is often called the "silent tax." Inflation makes the rich richer, but it makes the cost of living more expensive for the poor and the middle class. This is because those who print money receive the most benefit. They can purchase the goods and services they desire with the new money before it dilutes the existing money pool. They reap all of the benefits and none of the consequences. All the while, the poor and the middle class watch as their buck gets stretched thinner and thinner.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

Inflation may be defined as any increase in the economy’s supply of money not consisting of an increase in the stock of the money metal.

— Murray Rothbard; What Has Government Done to Our Money?

Inflation, then, confers no general social benefit; instead, it redistributes the wealth in favor of the first-comers and at the expense of the laggards in the race. And inflation is, in effect, a race—to see who can get the new money earliest. The latecomers—the ones stuck with the loss—are often called the “fixed income groups.” Ministers, teachers, people on salaries, lag notoriously behind other groups in acquiring the new money. Particular sufferers will be those depending on fixed money contracts—contracts made in the days before the inflationary rise in prices. Life insurance beneficiaries and annuitants, retired persons living off pensions, landlords with long term leases, bondholders and other creditors, those holding cash, all will bear the brunt of the inflation. They will be the ones who are “taxed.”

— Murray Rothbard; What Has Government Done to Our Money?

Inflation has other disastrous effects. It distorts that keystone of our economy: business calculation. Since prices do not all change uniformly and at the same speed, it becomes very difficult for business to separate the lasting from the transitional, and gauge truly the demands of consumers or the cost of their operations. For example, accounting practice enters the “cost” of an asset at the amount the business has paid for it. But if inflation intervenes, the cost of replacing the asset when it wears out will be far greater than that recorded on the books. As a result, business accounting will seriously overstate their profits during inflation—and may even consume capital while presumably increasing their investments.3 Similarly, stockholders and real estate holders will acquire capital gains during an inflation that are not really “gains” at all. But they may spend part of these gains without realizing that they are thereby consuming their original capital.

— Murray Rothbard; What Has Government Done to Our Money?

By creating illusory profits and distorting economic calculation, inflation will suspend the free market’s penalizing of inefficient, and rewarding of efficient, firms. Almost all firms will seemingly prosper. The general atmosphere of a “sellers’ market” will lead to a decline in the quality of goods and of service to consumers, since consumers often resist price increases less when they occur in the form of downgrading of quality.4 The quality of work will decline in an inflation for a more subtle reason: people become enamored of “get-rich-quick” schemes, seemingly within their grasp in an era of ever-rising prices, and often scorn sober effort. Inflation also penalizes thrift and encourages debt, for any sum of money loaned will be repaid in dollars of lower purchasing power than when originally received. The incentive, then, is to borrow and repay later rather than save and lend. Inflation, therefore, lowers the general standard of living in the very course of creating a tinsel atmosphere of “prosperity.”

— Murray Rothbard; What Has Government Done to Our Money?

There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

— John Maynard Keynes

One reason why people ignored the advice of Keynes, Nixon's 1971 change, and others on the destruction of money is because debauching the currency suddenly made people feel rich. Credit cards came in the mail, and shopping became the national sport. Many in the middle class became pseudo-millionaires, as their homes seemed to magically increase in value. They came to believe their retirement would be financed by profits in the stock market. People took out home equity loans to pay for family vacations. Rather than one car, families had a Mercedes, a mini-van, and an SUV. Kids went to college and were strapped with student loans that take years to pay off. The middle class celebrated their new found wealth by dining in fancy restaurants, dressing in designer clothes, driving Porches, and living in McMansions—all financed by debt.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

Inflation also means that all the talk about how higher taxes will be confined to "the rich" is nonsense. Inflation is a hidden tax that takes away the value of money held by everyone at every income level.

— Thomas Sowell; Dismantling America

In 1980, gold hit $850 an ounce and silver went to $50 an ounce as inflation blasted off.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

Because the United States is printing money, all other countries will probably have to print money. If other countries do not print, then their countries' currency will become too strong against the dollar and exports to the United States will slow down, causing a slowdown in the exporting country’s economy. This probably means inflation in every country that trades with the United States.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich

The primary cause of inflation is the government printed money, which increases the money supply. Inflation is caused by the purchasing power of your money going down as more and more dollars flood the existing pool of money, which means prices of many essential products, such as food, fuel, and services, go up as more dollars chase the same amount of goods. Inflation is often called "the invisible tax," which is hardest on the poor, elderly, savers, low-income workers, and fixed-income retirees.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich