Every Day Is Tax Day When You Have Inflation

The Inflation Tax Is Eating Your Lunch & Good News for Silver Bulls


Mike Maharrey Mike Maharrey
Midweek Memo
April 17th, 2024 Comments

Also listen and subscribe on:

Tax day was Monday. It was a painful day for some people, but for most, it was no big deal. After all, they got a nice refund. But as Money Metals' Midweek Memo host Mike Maharrey explains, whether they realize it or not, they're getting taxed to death too. In fact, everybody is thanks to the inflation tax. 

In this episode, Mike also explains why last Friday's big selloff in silver may be good news for silver bulls. 

Mike kicked off the show with some of his thoughts on Tax Day. He pointed out that a lot of people don't seem to mind tax day. For instance, Mark Cuban claimed paying taxes is one of the most patriotic things you can do. 

"You know, he could give more. Did you know there is a link to donate money to the US government? The funny thing is, I never hear of anybody who extols the virtue of taxation going and donating more than they owe. I wonder why that is?"

Mike also laments the fact that tax withholding shields most people from the true pain of taxes. 

"Most people have no idea how much money the government takes from them. Their employer just siphons it out of their pay and sends it to the IRS. And then they get a refund. I think a lot of people view this as a gift from government. They certainly don’t feel the pain. But let me tell you; writing a check is painful. For all of you people who got a big refund, I’m going to let you in on a little secret. You’re getting ripped off too. They just hide it from you."

Before explaining how everybody is getting taxed at a far higher rate than they realize, Mike talked about the big selloff in gold and silver last Friday and explained that there may have been a silver lining. (Pun intended.)

In the first place, gold quickly recovered its losses, despite Federal Reserve Chairman Jerome Powell running open-mouth operations. 

The Fed chair said the hotter-than-expected inflation data over the last quarter has introduced new uncertainty over when and whether the Fed will be able to lower rates later this year.

"The reality is that the markets are going to get the rate cuts. I’ve said this over and over. And the cuts will be a far deeper cut than anybody anticipates. I mean all the way to zero. We may get some kind of cut later this summer, but the real action will happen when something breaks in this debt-riddled bubble economy. And make no mistake - something will break. This economy is built on easy money. It needs easy money. It can’t function in this higher interest rate environment."

As far as the silver market goes, Mike said the timing was more significant than the extent of the selloff. 

"It indicates that the shorts and price manipulators in the paper market drove the selling action."

Why is that potentially good news?

Expanding on James Turk's analysis, Mike explains that this may have been the paper market's last hurrah. 

Turk thinks the shorts and price manipulators have run out of runway. Although anything is possible, he said he doesn’t think they will try another overt manipulation by slamming the paper markets.

"So, to sum it up – it’s going to be increasingly more difficult for the paper market to overwhelm the physical market, especially considering silver is underpriced given the supply and demand dynamics. We had record demand last year even as supply dropped. And the Silver Institute expects close to record demand again this year with another supply deficit. So, if Turk is right – and his argument makes sense – this could be good news for silver bulls."

Mike then pivots back to a discussion on taxes. 

"I mentioned that a lot of people think Tax Day is great because they get a refund. Here’s an interesting factoid. Did you know about have the workers in America don’t pay any income tax at all? True story. Their deductions cover their income. But here’s the dirty little secret. They’re getting hosed too. There is one tax everybody pays every single day. It's the inflation tax."

As Mike explains, there are basically three ways to fund government -- direct taxation, borrowing, and the inflation tax.

Mike argues that the inflation tax is the most insidious and pervasive way government pays for itself. 

After giving a quick overview of the March CPI data showing that announcing the death of price inflation was premature, Mike explains exactly how the inflation tax works. 

"In effect, instead of the government taking your money, the government takes the purchasing power of your money. That’s a tax. You pay it in the form of higher prices every single day – at the grocery store, at the gas station, at your doctor’s office. Everywhere."

There is only one way to mitigate the inflation tax. Have real money - gold and silver!

References

Article Mentioned in the Show

  1. CPI Comes in Hotter Than Expected - Again
  2. Deja Vu All Over Again: Biden Administration Charts Another Massive Budget Deficit in March
Mike Maharrey

About the Author:

Mike Maharrey is a journalist and market analyst for MoneyMetals.com with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.