HASENMILLER: Visibility important
February 21, 2010
About a week and a half ago, I had the privilege of seeing a $10 trillion bill. That’s trillion with a “t.” And it wasn’t a fake. The catch is, it was 10 trillion Zimbabwe dollars. There were 13 zeros on that bill, and yet it’s worth practically nothing. I checked eBay, and the very first listing gave me the option to purchase 580 trillion Zimbabwe dollars for 27 U.S. dollars.
How did Zimbabwe get to this point? Their government, in order to keep up with its spending, kept printing money, which caused inflation. For those of you who are unfamiliar, inflation — according to Dictionary.com — is “a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency.” The following is a basic example of how inflation works:
Imagine a country that produces only one good — hamburgers. Imagine this country has a total of 100 hamburgers in it. And imagine that all of the citizens combined have 100 dollars. Since there are 100 hamburgers and 100 dollars, each hamburger costs one dollar.
Now imagine that the government of this country prints another 100 dollars, which it can then use to purchase hamburgers — since they are the only available product. Now there are 200 dollars in circulation, but still only 100 hamburgers, so a hamburger now costs two dollars.
That means that the government will buy 50 hamburgers with its 100 dollars, and the citizens will buy a combined total of 50 hamburgers with their 100 dollars.
By doubling the amount of money in circulation, the government managed to take half of the citizens’ stuff for itself.
This is similar to how our government pays for many of its expenses. See, the nice thing about using inflation as a source of revenue is that it can be done quietly. A lot more people will notice a big vote in Congress for a new tax or a rapidly increasing national debt than will a little change in monetary policy.
But if you happen to have any money, or if you ever buy anything using money — which I’m guessing most of you do — then this affects you.
President Barack Obama and the Democrats in Congress are spending more and more of your money, and they will need sources of revenue to pay for this spending. This will likely be one of the sources that will be utilized, so make sure that you’re looking out for it.
Actually, make sure that you look out for it no matter what party is in power. The Republicans, too, are hardly innocent when it comes to this. So really, the point is, you should always remember that the government does not require a tax to steal your money.
Blake Hasenmiller is a senior in industrial engineering and economics from DeWitt.