alt Hacker NewsSo, in this desert there would be no inflation or deflation, you say. Let’s say we use gold coins there. Wouldn’t we have an inflation if we find a gold mine there and everybody start digging up gold? You are missing the fact that the money printing is not driven only by government spending. It is driven primarily by the monetary policy (in the hands of the FED) and to some extent by the government debt. You have knowledge gaps on a very basic level. The idea that taxation stops inflation is absolutely ridiculous. It would mean that countries with low taxes have very high inflation and this is not the case. It would also means that the inflation should be constant and in struct correlation with the taxes. Both statements are completely false and very easily provable by quick fact check. The only things taxes do are: misplacing capital and stopping economic growth, which may be the same thing arguably
> It is driven primarily by the monetary policy
Yeah, that's why I mentioned the fed.
> It would mean that countries with low taxes have very high inflation and this is not the case.
It's about the total balance of government spending and taxes. The point being made is that tax breaks have the same effect as government spending. Recall that I was replying to
> Tax breaks, i.e. my money not being in your pocket means that they are stolen?
The government writing someone a million dollar check and the government giving someone a million dollar tax break (assuming they pay at least a million in taxes), contribute to inflation by increasing the money supply by a million dollars than it would be otherwise. Yes, this federal reserve is by far a larger driver of inflation, but the government giving this tax break still degrades the value of your money, same as if they wrote a check.
Of course, it is easy to view a tax break as a non-action, but that's exactly why the government gives so many tax breaks. Once you're taxing everyone, you can hand out tax breaks that's the same as handing out money only you can pretend that it's doing nothing.
Think of it as 3 Scenarios:
1) The island government writes a check to everyone except you, increasing their wealth by 50%.
2) The island government taxes just you for 50% of your wealth.
3) The island government taxes everyone 75% of their wealth, grants everyone but you a total tax-break, and you 25 percentage point tax break.
Basically the same result, only in one they say "It was fair, and we handed out a few tax-breaks, what's wrong with letting people keep their money?"