The dollar has been shrinking for over a centuray. This causes the cost of goods and services to rise. We call this inflation or, as I prefer, a debasement of our currency. Since this has been going on for quite a long time, it is fair to assume that it is government policy. Why, you might ask, would the govenment do such a thing ?
1) This seems to help reduce the national debt. It is fairly obvious that it is easier to pay off debts with cheap dollars than it would be to pay with high priced dollars.
2) As the dollar sinks, apparent incomes rise and our graduated income tax system makes more people pay more and higher taxes, thus increasing government revenue.
3) Our negative foreign balance of payments is enormouse. Cheaper dollars make our products cheaper to buy and foreign products more expensive. Ergo, we should export more and import less and improving the negative balance.
Does this sound like a win-win situation ? There are downsides to this and we will examine them shortly.
( To be continued )
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