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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 210405  
Subject: Re: A Buffett Classic: On Inflation Date: 1/25/2013 8:33 AM
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"The arithmetic makes it plain that inflation is a far more devastating tax than anything that has been enacted by our legislatures. The inflation tax has a fantastic ability to simply consume capital. It makes no difference to a widow with her savings in a 5% passbook account whether she pays 100% income tax on her interest income during a period of zero inflation, or pays no income taxes during years of 5% inflation. Either way, she is "taxed" in a manner that leaves her no real income whatsoever. Any money she spends comes right out of capital. She would find outrageous a 120% income tax, but doesn't seem to notice that 6% inflation is the economic equivalent."

Inflation is the tax which everyone pays. No messy legislation, no lobbyists, no loopholes, no phalanxes of accountants and lawyers figuring out arcane tax strategies, no secret payoffs, no special favors returned.

It's no secret that it hits those on fixed and low incomes, but at least it also hits everyone else fairly equally, something that can't be said for most tax regulation.

A little inflation is not a terrible thing, it's when it gets out of control that it becomes destructive. Of course so is deflation, or even an expectation of deflation, as Japan has wrestled with for the past decade.

All things in moderation.
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