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Buy Gold Now: Why should you buy gold? How do you buy gold? Investment expert Shayne McGuire explains how to profit from this precious metal and how buying gold can protect you from financial risk. Read more about Buy Gold Now >

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Part 2 - Government, Spending & Inflation

In order to survive, an individual must create value. In contrast, a government does not create value. It has no products to sell or exchange and must therefore expropriate the assets of individuals in some way in order to exist. Such seizure is called taxation.

New or increased taxes are difficult to apply due to the unfavourable response of the public. Instead the government must find a way of taxing the public without its knowledge - it does so through “Inflation”.

It is far easier for the government to print more paper money to pay for its needs than to raise taxes or balance its fiscal responsibilities. During election campaigns a politician will usually promise the world. So often, following the election into office, is the supply of paper money substitutes increased to pay for the earlier promises.

Recent government stimulus packages have been unprecedented in their magnitude. Governments believe that the cure for our economic woes is to further increase our debt and to print even more paper money - they are trying to “buy another boom”. Such flawed thinking by governments serves only to broaden and deepen the pain when the inflationary bubble inevitably bursts.

Everyone loves an early inflation. The effects at the beginning of an inflation are all good. There is steepened money expansion, rising government spending, increased government budget deficits, booming stock markets, and spectacular general prosperity, all in the midst of temporarily stable prices. Everyone benefits, and no one pays. That is the early part of the cycle. In the later inflation, on the other hand, the effects are all bad. The government may steadily increase the money inflation in order to stave off the later effects, but the later effects patiently wait. In the terminal inflation, there is faltering prosperity, tightness of money, falling stock markets, rising taxes, still larger government deficits, and still roaring money expansion, now accompanied by soaring prices and ineffectiveness of all traditional remedies. Everyone pays and no one benefits. That is the full cycle of every inflation.” Jens O Parsson, Dying of Money.

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