So today we're going to talk about why the government wants more inflation.
And I've got three reasons as to why.
So why on earth would the government want more inflation?
Three reasons.
The first one,
it's a current policy, which I'm going to talk about more in a little bit.
Second, the US is in debt over $30 trillion.
We're going to talk about that as well.
You can't dispute that.
And third, it redistributes the wealth.
And for those of you
who are a little concerned or a little confused around this one,
we're going to talk about that, too.
Number one of why the government wants inflation
there is a 2% target inflation.
That is the Fed's policy.
And for those of you nonbelievers,
I actually pulled up the Federal Reserve dot gov.
And as you can see here, it's actually on their website.
Why does the Federal Reserve aim for inflation?
Of 2% over the longer run?
There are lots of reasons, but the point here is it's policy.
What this means is that inflation is targeted at 2% and sometimes
it's a little bit less and sometimes it's a little bit more like today.
It's trending at close to seven or eight.
The point is, it's not a zero, which a lot of you might think
it's supposed to be.
The Fed itself wants slow growth over time.
So let's talk about why the Fed would want a 2%
inflation rate, which, of course, today is seven or eight.
No. One businesses profit.
The economy needs to move slowly forward and upward.
And this also prevents consumers to wait
because they don't want prices to go up.
So it forces consumption.
It forces consumer demand and consumption.
And of course, what the government wants is economic growth up.
The way to do that is moderate inflation over time.
One of the biggest fears the government has is when consumers save.
And John Maynard Keynes called that the paradox of thrift
or the paradox of saving.
In other words, the theory is as when money saved, it's not moving.
What they're trying to do is slowly increase prices
over time so that you are sitting on cash.
What you need to know is the Fed's policy has been 2%.
And in a ten year period, that potentially is a 20%
loss of purchasing power on your hard earned money.
So why the government wants more inflation?
Well, right now the US government is $30 trillion in debt, as you can see.
Just go to the US debt clock dot org.
This is a great website.
It's going to have all kind
of confusing things on here, but there's some really cool stuff.
Like you can see what's the revenue
per person, per citizen, what's the debt per person.
And there's a lot of
really cool things on here, both at the state and federal level.
I encourage you to go to this website and check it out.
The point is, is that the US is in debt and inflation helps debt.
It actually helps debtors and hurts creditors.
So why does inflation benefit debtors?
Because this is why I talk about getting into fixed rate debt,
because what you're doing is as our money gets deflated,
then you're paying off that debt in cheaper dollars later.
Just like the government's doing.
This is why I believe the government is okay with having more inflation
because they're reducing the cost of their debt.
So for those of you who are a little confused of why
the government wants more inflation,
I did this video a little while ago and I put this chart up.
You could see the losers and the winners of inflation.
And this chart is the same as I put up a couple of weeks ago, about the same topic.
But one of the things that you need to know
is that debtors pay in currency that is worth less and are worth less.
The currency continues to get devalued.
The people that will win will be debtors on fixed repayment plans.
Governments with high public sector debt like I just showed you in the last slide.
Orders of land and physical assets, which we preach about on this channel.
And firms who can cut real wages Does this all sound kind of familiar?
The people that are going to get most hurt, which is horrible, are the savers.
Number one, retirees living on fixed incomes,
workers on fixed incomes.
Borrowers are variable rates
because those rates are going to go up to compensate the whole economy.
From general economic uncertainty, which is happening right now
and at borders are less competitive.
We're seeing that right now with our supply chain issues.
So why the government wants more inflation?
Inflation is rising prices.
Inflation is a tax on savings as we already talked about,
because your savings are going to buy less.
Inflation is a tax on creditors.
So if you're loaning somebody some money and they are paying you interest,
only then your principal is going to be paid off and cheaper dollars later.
Inflation is a benefit to all debtors.
That's the US and to you.
Now, number three, why the government wants more inflation.
Inflation transfers wealth from creditors to debtors.
That's how it works.
All you got to do is Google this, which I did.
Brace yourself.
Inflation could create a giant wealth transfer from lenders to borrowers.
This is all over the Internet.
Just pay attention and go look for it.
So more ways that inflation transfer as well.
One way is printing more money.
Now all governments are responsible for this.
They all print because they're overspending.
All you have to do is take a look at the United States.
We spend way more than we collect Same with a lot of other countries.
But we also spend it on things like the pandemic.
We also spend it on things like social programs that are really,
really needed because no politician wants to raise higher taxes.
It's easier to print more money for these programs.
Higher taxes are definitely unpopular,
especially as we get closer to these elections.
When money is printed and you add more money to the money supply
It actually deflates the money supply by having more money
in the economy and inflation then becomes a hidden tax.
So what can we do about why the government wants more inflation?
Well, number one, be the Fed.
Do what the Fed is doing.
Think like the Fed because I can tell you that savers,
fixed income and creditors will all lose.
As inflation continues, you need to be
on the right side of this because this is not going away.
As always, I love putting these videos together, so
please hit like subscribe and hit the notification bell.
As always, thank you for watching.