Biden-Harris Inflation: The Secret Tax, by Dr. Doug Cardell

VIA SBINSIDER INSIDER ECONOMICS GURU Doug Cardell Ph.d

People think of inflation as akin to a pandemic or a hurricane, an unpredictable disaster, a fact of nature. However, only government action can create inflation. It is a result of government policy. Inflation happens when the government inflates the money supply, causing its currency to lose value.  

It’s like a stock split in the market. Let’s say XYZ Inc. has stock selling for $1000 per share. The company’s officers may decide the price is too high to encourage investing. So, they split the stock two for one. They give every stock owner an extra share for every share they have and reduce the value of each share to $500. So, if you owned 100 shares at $1000 each, you would now have 200 at $500 each. Either way, you have $10000 worth of stock. Doubling the number of stock shares cuts each share’s value in half. It works the same with the money supply; if you double it, each dollar is worth half of what it was.  

I’d like you to try a little math experiment. First, add all the money you received in Covid relief funds. Next, calculate the effect of the resulting inflation on your earnings. In 2021 the rate was 7%, and in 2022 the rate was 8.3%. The rate so far in 2023 has been 4.6%. Since inflation compounds, the calculation is 1.07 times 1.083 times 1.046, which equals 1.219 or 22%. Prices are 22% higher than two years and a half ago. 22% inflation lowers your purchasing power to 1/1.22 = .82 = 82% of what it was before the inflation. So, inflation effectively reduced your income to 82% of what it was two and a half years ago. Therefore, you lost 18% of your income. So, if you multiply the amount of money you earn now by .18, you can find the purchasing power you lost to inflation. Now you can compare what the government gave you in Covid relief funds to the amount the resulting inflation cost you. This cost happened because the money you received in Covid funds was money the government did not have. It created more money so it could give it to you.  

Let’s use a specific example. The median individual income in the US is $44,225, and 18% of 44,225 is $8051. The Covid payments were $3200 per person. So, the government, by expanding the money supply to give everyone $3200, created price increases that cost the average earner $8051, more than two and a half as much as they handed out. Only a government bureaucrat could think this was a good deal. Worse yet, workers don’t get back that 18% yearly loss even if inflation stops now. Eventually, income may increase enough to return to even, but that could take a decade or more.

The only way anyone will ever get back to the purchasing power they would have had is if their employer gives them a 22% raise to match inflation; how likely do you think that is to happen?

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Gloria Wolf
BiggG
5 months ago

Great explanation. As usual, the secret tax hurts poor people the most.