We all pay federal income tax.  Some pay state income tax.  Nearly all of us pay sales tax.  Social security tax.  Medicare tax.  Property taxes if you’re a homeowner.  These are all taxes that we’re painfully aware of – we see them loud and clear.  But there’s an even worse tax than all of these, and it’s about to get worse.

Inflation – the hidden tax

Yep, inflation is a tax.  Never thought about it that way, did you?  Perhaps worse than an income tax or a consumption tax ( sales tax ), inflation is a wealth tax.  As the years pass, the money supply grows, and any cash you have to your name is worth less and less.  You don’t see it directly because your dollars don’t go away.  But they do buy less. 

Expect worse inflation in the coming years

Stimulus plans left and right, bailouts all over the place.  Ever wonder where all the billions of dollars come from?  Well, they’re borrowed into existence.  Whether borrowed from China, the Federal Reserve, Social Security, or other places… they’re all borrowed.  So not only does the money supply increase drastically from the creation of new money, it must be paid off with interest.   As these billions flood into the economy, they will dilute the value of your dollars.  And BAM – inflation, the hidden tax, eats away at your savings.  While I don’t expect anything crazy like a sustained 12% per year inflation rate, you can be it will be higher than the 3% – 4% we’re used to.