In Inflation 101, Puru Saxena discusses the reasons for why we get poorer each year and explains inflation in its most basic form:
In our opinion, inflation is evil and the sole reason why human beings have become modern-day slaves. Remember, money is supposed to be a store of value, however due to reckless central bank-sponsored inflation, it can no longer fulfill this critical role. This is precisely the reason why human beings are never satisfied with what they have because nobody knows what their savings will buy them in ten or twenty years time. So, rather than enjoy their lives, the vast majority of people continue with their never ending pursuit of acquiring even more money! Unfortunately, nobody questions the inexplicable loss of the purchasing power of their savings, thus, central banks get away with financial murder.
Now more than ever, if you hold cash assets (US Dollar, Long Term Treasuries, CD’s) your store of wealth is disintegrating. If you are earning 4%, and inflation sits at 9%, as suggested by John Williams at Showstats, you are losing purchasing power each and every year! President Ronald Reagan called inflation a hidden tax on the people.
The important thing to note, and Mr. Saxena does it succinctly in his article, is that inflation is not a rise in prices as the government would have us believe:
Before we delve further, we want to make it absolutely clear that inflation is defined as the increase in the quantity of money and debt within an economy. And contrary to what the governments want you to believe, inflation is certainly not an increase in the general price level within an economy. Instead, an increase in the general price level within an economy is a consequence of inflation.
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