Currency devaluation is a way for governments to tax their populations surreptitiously. All governments that have control of the money devalue it to some extent, but generally not too much for the same reason they don't directly overtax or over-regulate: too much state looting discourages production and investment.
If China is over-looting (relative to other countries), then investors should be leaving China, not queuing to get in.
Currency devaluation is a tax on savers and a tax cut for debtors. So there is one group of people that is surreptitiously taxed and another one that is surreptitiously bailed out. Since the US is a net debtor nation, the Fed and the government creating inflation amounts to a net tax relief for the US population.
To clarify: that only goes for the inflation beyond the expected inflation. The expected inflation is priced into the interest rates. The current level of inflation of the dollar does not amount to a tax on savers.
it does because many of them are holding fixed rate notes at very low interest rates. For those with resetting interest rates it is no big deal, but grandma holding CD's or bonds bought in the last few years is going to get killed.
Comments
Currency devaluation is a way for governments to tax their populations surreptitiously. All governments that have control of the money devalue it to some extent, but generally not too much for the same reason they don't directly overtax or over-regulate: too much state looting discourages production and investment.
If China is over-looting (relative to other countries), then investors should be leaving China, not queuing to get in.
Currency devaluation is a tax on savers and a tax cut for debtors. So there is one group of people that is surreptitiously taxed and another one that is surreptitiously bailed out. Since the US is a net debtor nation, the Fed and the government creating inflation amounts to a net tax relief for the US population.
To clarify: that only goes for the inflation beyond the expected inflation. The expected inflation is priced into the interest rates. The current level of inflation of the dollar does not amount to a tax on savers.
it does because many of them are holding fixed rate notes at very low interest rates. For those with resetting interest rates it is no big deal, but grandma holding CD's or bonds bought in the last few years is going to get killed.