INFLATION:

A HIDDEN
TAX
• According to Economist, it more or less
agreed upon that inflation is a form of
hidden taxation. Hidden because we did
not see the outflow going from our
pockets.

Milton Friedman had once said "Inflation is

the only form of taxation that can be levied
without legislation"

• Most governments spend more than they

earns, here the common steps they taken:
Increase Taxation
The government has been spending more
than it makes. Common of doing are
bringing more goods and service under
purview of taxation as well as increasing
the rates of collection for goods and
service.
Austerity
This is instead of making more money, the
government could cut down the amount of
spending that it is currently doing.
Austerity measures and it is trying to
negotiate with other government. With
reduced expenditure, governments can
save a part of their income and pay taxes
 Hidden Taxation via Inflation
The government temporarily borrows the
money required to finance the fiscal deficit
from the bond market. This diluites
increase the money supply decreasing
the value of money held by other people,
But it pays off the government debt.
 What Happen when more money
Created?
• Every money that is printed causes the
value of the peso or dollar bills to
depreciate. The government therefore in
effect has taken the money out from
public. The effect is similar to taxation, but
the procedure is hidden. There is no direct
payment of tax from the people to
government. Instead the government has
debased the value of currency held by its
citizens.
INFLATION
: A HIDDEN
TAX(Part 2)
• Welfare Schemes
-like social security and unemployment
benefits. The benefits of these welfare schemes
many government simply borrow money in long
or short term to monetize debt. The welfare
schemes it may cause massive inflationary in
the near future.

• Unproductive Jobs:
- it like a drain on the public resources.
The reason that these jobs existed because the
government promise the existence of these jobs.
Needless to say since these jobs do not add
value, but wages have to be paid, it will lead to a
massive build up of debt and also contribute to
inflation.
• Bailouts
- A bailout is the act of a business,
an individual, or a government providing
money and resources to a failing company.
These actions help to prevent the
consequences of that business's potential
downfall which may include bankruptcy and
default on its financial obligations. Bailouts
traditionally occurred in industries or
businesses which are no longer viable or that
have sustained huge losses.
• Infrastructure Project:
- excessive borrowing is other term
for infrasture project. The project could not
pay off its debt by generated from project
itself. This caused build up of debt sooner be
paid off by monetization of the debts. Some
infrastructure project may be good for the
economy . Countries should refrain from
taking on massive debt unless they are
certain about the economic viability on any
given project.
• National Events
- like World Cups, Oympics and
other games competition leads to massive
overspending in these economies. Countries
often borrow immense amount of money to
fund building of sports infrastructure which
not priority for development of the countries
and economies. But in the name of pride and
promoting tourism, large amount of money
are spent without consideration how it will be
repaid.
Thankyou for
listening! :)