Friedman: Inflation is the Most Insidious Tax Without Legislation
Milton Friedman pointed out, "Inflation is the one form of taxation that can be imposed without legislation."
This classic assertion reveals the essence of how governments dilute the purchasing power of money through printing, effectively imposing an invisible tax on holders.
In market mechanisms, investors accelerate the shift from fiat assets vulnerable to inflation to hard currencies and inflation-resistant assets, with funds flowing from cash and bonds to Bitcoin, gold, and RWA. This awareness drives capital towards inflation-resistant infrastructure, putting pressure on traditional fiat savings and fixed-income products.
Source: Public Information
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Friedman emphasized the insidious nature of monetary expansion as early as the 20th century, continuing his critique of the stagflation in 1970s America, when the Fed's loose policies led to runaway inflation, ultimately corrected by Volcker's aggressive rate hikes.
On the capital front, rational investors hedge against inflation tax by allocating to fixed-supply assets like Bitcoin, shifting wealth from fiat currency that can be "printed" by the government to hard assets that cannot be arbitrarily increased, motivated by the desire to protect long-term purchasing power and avoid being the last to bear the burden of the "inflation tax."
Similar cases include the hyperinflation of the Weimar Republic, lessons from Zimbabwe and Venezuela, and the significant performance of Bitcoin and gold following global money printing from 2021 to 2023. The current global monetary system is undergoing a transformation from unlimited quantitative easing to the repricing of inflation-resistant assets.
Essentially, this reflects a change in regulation: open legislative taxation is replaced by the central bank's implicit tax through monetary expansion. The root mechanism is the significant political resistance to direct tax increases in democratic processes, making it possible to achieve a quiet transfer of wealth through printing money, thus maintaining the appearance of sustainability in government spending and debt.
ABAB News · Law of Cognition
The most dangerous tax is never written in law, but printed on banknotes. Inflation does not require parliamentary votes, yet it automatically taxes all savers. The starting point for protecting wealth is to refuse to work for something that others can print infinitely.