Talk:Inflation tax - Misplaced Pages

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Untitled

Just copied stuff from Hyperinflation, please feel free to expand (perhaps with direct printing of money for gov'mt use?)

Just done that. Examples would be nice. Argentina looks like a prime candidate... --Pablo D. Flores 15:37, 13 Jun 2005 (UTC)

The definition was wrong. It was a definition of 'inflation' rather than 'inflation tax'. There is a difference.

Incorrect definition of real interest rate

By definition, if the nominal value of your money increases by the real interest rate, and then by the inflation rate, it has increased by the nominal interest rate. As an equation, we get (1+N) = (1+R)(1+I), where N is the nominal interest rate, R is the real interest rate, and I is the inflation rate. Solving for R, R = (1+N)/(1+I) - 1. In contrast, the first makes the incorrect definition R = (1+I)/(1+N) and then later suggests the second incorrect definition R = 1 - (1+I)/(1+N). To see further why the definitions given in the article are wrong, note that if inflation is 0, we must have N = R. The definitions in the article do not agree with this simple fact. I don't have time to make all the necessary corrections right now, so I'll leave this comment for now. I'll try to fix things later if no one else gets to it before me. Norman314 (talk) 00:12, 7 October 2008 (UTC)

Reverted edits by 67.121.189.182

The definition I gave may have been incorrectly phrased, or restrictive, but it was not incorrect. The one you gave was not clear at all. Note also that the original article (not by me) was text copied from another article, Hyperinflation, which is quite well researched and extensive.

References:

An article about optimal inflation:
A short definition (somewhat different, but probably less inclusive):
A study guide with an overview of inflation (restrictive - defines inflation tax as the government revenue produced by creating money):

Inflation tax cannot be confused with inflation according to the original definition. It's a more-or-less intended result of inflation. I think the article is clear enough. --Pablo D. Flores 02:00, 23 Jun 2005 (UTC)

I'll merge your opinion of what it means with my opinion, even though I think you are wrong. We can have both definitions.

You need to look "inflation tax" up in an economics textbook. You are defining inflation. Nowhere in your definition do you explain why or how it is a tax on the individuals. Please move your definition to the inflation page.
Also, your definition is confusing. What does improve position mean? Position usually refers to physical location. Maybe an example is in order of how this is a tax in your definition.
Note "Humble fool" does not get it in his comments about this page.

I'm no economist and I have no economy textbooks at my disposition. I only interpreted the idea as I could. But I do understand the basics of economics, and from what I gather, the definition of "inflation tax" is not as simple. This is how I see it.

An inflation tax is not a tax. It acts like a tax, but in fact it is just an (automatic) effect of inflation. In fact, the reason why you might be seeing that "my" definition is the same as that of inflation is that "inflation tax" is really "inflation viewed as a tax". Unless your textbooks say that governments must purposefully induce inflation in order for this to be called "inflation tax", or that there are governments that actually do this. I know enough about economics and ideological biases to imagine what kind of economists consider this definition to be the only correct one. (I live in Argentina, land of failed economic experiments conducted by people of the Friedman school and their ilk.)

It's not a matter of negotiating the definition, or merging two different ones; if there are more than one, let's keep them apart. If mine is in fact incorrect, it must be deleted. What about this?:

--- BEGIN DEFINITION ---

An inflation tax is the economic disadvantage suffered by holders of cash and cash equivalents in one denomination of currency due to the effects of inflation, which acts as a hidden tax that subtracts value from currency.

For example, if the annual inflation rate in the United States is 5%, one dollar will buy $1 worth of goods and services this year, but only $0.95 the next year; this has the same effect as a 5% annual tax on cash holdings.

--- END DEFINITION ---

... followed by the rest ("Governments...").

I've taken the liberty to format your post a bit. It would also help if you registered and/or signed your posts, but that's up to you. Four tildes (~~~~) will automatically insert your name (or IP address) and the date and time. --Pablo D. Flores 11:03, 23 Jun 2005 (UTC)

seems ok now

Ok. I was the anonymous poster (by IP address) who was arguing this point. I think the definition is ok with me now.

81.64.150.248 13:18, 3 January 2006 (UTC) I just edited the article to mentione an utilisation of the term in economic litterature. Cf. for exemple the page 35 of these paper : "Crises and Crashes : Argentina 1885-2003" by Cerro and Meloni, may 2005, articledownloadable on http://econpapers.repec.org 81.64.150.248 13:18, 3 January 2006 (UTC)

If the argument in these links, both to the same article: http://www.gold-eagle.com/editorials_05/petrov011606.html http://www.informationclearinghouse.info/article11613.htm is correct then 'what is an inflation tax' becomes one of the most important questions which could be asked.

The article argues that the U.S. taxes its empire cryptically using a variation on the 'classical inflation tax'. By forcing oil to be traded substantially in dollars and then inflating America taxes its empire. The implications of this would go on forever and drive most geo-politics.

So pull your fingers out boys and girls and get it sorted, non economists like me are depending on you. To be frank I don't understand your definition.

95% solution

Actually 5% compound inflation would mean that one dollar would buy 1/1.05 or slightly more than 95.2% of what it would have if spent the year before.

In 20 years that same dollar pulled out from a mattress would buy 1/(1.05)^20 or 1/2.653... or almost 38% of what it would have bought before it was tucked away for two decades.

Perhaps a mention could be made about the effects of adjusting for inflation vs adjusting for wages, GDP, size of population, etc.

Hcobb (talk) 12:41, 5 February 2008 (UTC)

Stealth tax

I made an entry on the stealth tax page a month ago. Is it any use here? Foofighter20x (talk) 03:28, 22 February 2008 (UTC)

The Keyser Soze of taxes. This must be mentioned somewhere in this article. —Preceding unsigned comment added by 87.194.21.39 (talk) 00:00, 2 November 2008 (UTC)

NPOV flag

The last section of the article does not appear to be an unbiased presentation of the effects of inflation on the business cycle. Other researchers believe that a small amount of inflation actually encourages economic activity as it gives consumers an incentive to buy goods today rather than wait until the price goes down. Fed Chairman Ben Bernanke has made comments recently about the perils of deflation. Further, banks may be among those hurt the most by inflation since the long-term fixed rate borrowers (e.g. consumers with mortgages) will be able to pay them back using "cheaper money".

The language about trickery and "biting the bullet" does not appear to be consistent with the Misplaced Pages:Manual of Style. —Preceding unsigned comment added by Thomaswagner (talk • contribs) 01:34, 19 March 2009 (UTC)

Most of the claims in this article that are presented as hardcore fact are, at best, up for debate. For instance, many economists think that inflation is an important driver of growth, yet this article simply states that it harms future growth as if there weren't any sort of question on the subject. The "inflation tax" is a derogatory word for any sort of expansionary monetary policy (sort of like "death tax" for the estate tax), so it's really NPOV to use it as is without mentioning that. Using the word "tax" to describe it is also dubious, as money that's printed doesn't go into the treasury.130.18.131.194 (talk) 12:11, 18 April 2011 (UTC)

Deletion

This article depends solely on the premise that inflation is strictly harmful to the economy. This is an opinion and not a fact. It is already discussed in the inflation article that inflation affects purchasing power. There should be no need to have an entire article dedicated to this fact. It seems that this article intentionally attempts to mislead the readers. Dotter (talk) 07:25, 23 October 2010 (UTC)

Paragraph

"If the annual inflation rate in the United States is 5%, one dollar will buy $1 worth of goods and services this year, but it would require $1.05 to buy the same goods or services the next year; this has the same effect as a 5% annual tax on cash holdings, provided there is 0% economic growth, or other price-reducing factors, such as efficiency-enhancing technology. With price reducing factors at play, a 5% inflation rate indicates a tax rate of higher than 5%."

I feel like this is saying "this will be a 5% tax on cash holdings unless other unrelated stuff happens." My position is to change it to

on the grounds that the (now removed) half of the sentence only muddles the issue of the inflation tax. Those are other straightforward economic lessons that act independently of the inflation tax. -Ich (talk) 18:04, 6 May 2011 (UTC)

Not a tax at all; rather, an economic effect

The article refers to an economic phenomenon, not a levy on persons, things, or transactions by a government. Therefore, "inflation tax" is not a tax. See any reliable dictionary. I have modified terms used appropriately. In addition, I removed some statements that improperly used the terms seignorage (which means the difference between the face value of a coin and the value of the metal it contains) . Also, I have tagged some uncited items as citation needed. Finally, I recategorized the article to Economics, since it is not about taxation. Oldtaxguy (talk) 22:28, 23 May 2011 (UTC)

The inflation tax represents a real financial charge to the taxpayer. Put another way, the inflation tax represents a transfer of financial value from the taxpayer to the tax authority (the government). For more information we've been having a detailed discussion with Oldtaxguy about whether the inflation tax, or the financial repression tax, are actual taxes in the talk section of the Taxation page. References and further reading on the inflation tax can be found there.Ghileman (talk) 20:19, 28 May 2011 (UTC)