Wednesday, April 15, 2009

Magic words in politics




By Thomas Sowell


 | China is the largest foreign holder of U.S. government bonds. But, instead of buying more of those bonds as our skyrocketing national debt leads to more bonds being issued, China has been selling some of its U.S. government bonds this year.

The Chinese are no fools.
They know that all this unbridled spending — even when it is called "investment" — means that inflation is coming. That in turn means that the dollars with which U.S. government bonds will be paid off will be worth a lot less than the dollars with which the bonds were bought.

Governments around the world have played this game for centuries, robbing those who trusted them enough to buy their bonds. Like Bernard Madoff, they call it "investment."

Inflation also means that all the talk about how higher taxes will be confined to "the rich" is nonsense. Inflation is a hidden tax that takes away the value of money held by everyone at every income level.



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