1 min read

Inflation is taxation

We all know that inflation means you can't buy as much with your money. A gallon of milk has increased more than 10 times in the last century. But that phenomena is merely the effect of inflation on your pocketbook. The actual cause of inflation is creating new money.

The US dollar used to be backed by gold. The government had to bring in more gold if it wanted to create new dollars. Since gold is a global commodity, government currencies that use a gold standard can't just print money whenever they want, but that doesn't necessarily mean less inflation.

The difference is that gold requires effort to acquire. There's some measure of global accountability. Modern fiat currency gives government more control and better resource efficiency. The problem is a lack of accountability. Fiat currency should come with laws to limit the rate of inflation and checks and balances to ensure those laws are upheld.

Even if you disagree with me on this point and believe it's good for government to have full control, the system would still benefit from greater transparency.

When your buying power is affected because your money isn't worth as much, inflation is as good as taxes. It's just invisible and not a regular topic of political debate.

Blockchain can be used to provide monetary stability, transparency, and accountability. Even if cryptocurrency has inflation, the rate is readily known, follows strict rules, and can only be changed by the will of the people. That's a step up in my book.


P.S. I believe blockchain can improve government monetary policy and efficiency, but I don't support central bank digital currencies.