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The Unsustainable Lie of Inflation

I should add that I don't recommend buying any short ETFs and have my doubts about gold as a short-term or medium-term strategy that would dominate a portfolio. Having a couple of gold-mining stocks in your portfolio isn't a bad idea. But no more than 15 percent or so.

However, you'll make more money by adjusting your portfolio to buy new growth stocks and stocks that are in ascending sectors than you will just buying gold.

The Unsustainable Lie of Inflation

I sent this article to my brother, a banker in Charlotte, NC, along with the following comments:

Dear Dave,

I remember when top wages were around $4,500 a year for most people back in the '50s. Everybody wanted to lay some heavy taxes on those rich bastards who made $10,000 a year. And so they did. Who could ever spend that must money in a year?

Because of inflation, those people making $4,500 a year were, in a few short years, making $10,000 a year themselves, though they were not a penny richer than before. Yet they were paying taxes at the $10,000 a year rate.

Things got so bad that President Kennedy slashed taxes, more than Ronald Reagan did later, and the nation began to climb out of what had become a prolonged period of stagnation.

How quickly we forget history. The piece below covers most of the bases of why we, as a nation, behave so stupidly when it comes understanding taxes and inflation.

One base it fails to cover is that the entire educational system nowadays pretty much brainwashes kids into believing that the government takes care of everybody and is the source of all wealth.

No kid, no high school senior and no college graduate has been taught that what the government "gives" to one person, it must take away from another person. And the person who is on the receiving end gets far less that what was taken from the person producing wealth. Because the government also has to pay all those bureaucrats administering the giving and taking, and all those enforcement people who will put folks in jail who refuse to pay.

Another concept that is absent from the present discussion is that the person getting something from the government probably would get a lot more from the person providing the wealth, if the wealth were left in the "rich" person's hands. He might get a job. She might get cheaper diapers for her baby because the "wealthy" person could aggressively cut prices to overcome competitors.

Example: Wal-Mart has done several hundred thousand times as much good for the poor as the government has done. It has provided a higher standard of living for almost everyone because of lower prices. But it has especially benefited the poor who spend a larger percentage of their income on food, clothing and light bulbs, among other necessities.

Wall-Mart has hired hundreds of thousands of people. It could be argued that the government never creates a productive job and that most government jobs reduce real GDP. (It could also be argued that almost all government spending harms the poor, rather than helps them. But for the sake of argument, even allowing that the billions of dollars the government has taken out of the economy to "spread the wealth" has helped some recipients, Wal-Mart has done far more in pure dollar value.