Table of Contents
What is Invisible Tax?
Inflation occurs when the quantity of paper money increases in the economy. This, in turn, results in a decrease in the purchasing power of the monetary unit, leading to a rise in prices.
When inflation drives prices higher, each unit of currency can buy fewer goods and services. Consequently, the value of money held by individuals and businesses diminishes.
It’s important to note that inflation doesn’t directly and visibly deduct from income or wealth. Instead, it operates subtly by diminishing the real value of money over time. While people may not immediately notice its impact, as it unfolds gradually, over the long term, inflation can significantly affect the cost of living and financial well-being.
This is why inflation is often referred to as an invisible tax. Its effects may not be visible, but they are felt by individuals and businesses alike.
Inflation is called invisible tax since it is not directly imposed by the Government.
Effect of Inflation on Purchasing Power
Central Bankers On Inflation
“Inflation at its current level is due to high rate of increase in prices of vegetables, pulses and edible oils.”
Ayn Rand on Inflation
“Inflation is not caused by the actions of private citizens, but by the government, by an artificial expansion of the money supply required to support deficit spending.”
Henry Youngman on Inflation
“Americans are getting stronger. Twenty years ago, it took two people to carry ten dollars worth of groceries. Today, a five year old can do it.”
Sam Ewing on Inflation
“Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair.”
Milton Friedman on Inflation
“Inflation is taxation without legislation.”
Ernest Hemingway on Inflation
“The first panacea for a mismanaged nation is inflation of the currency. The second is war. Both bring a temporary prosperity. Both bring a permanent ruin.”
John Maynard Keynes on Inflation
“By continuing a process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”
Warren Buffett on Inflation
“If you forego ten hamburgers to purchase an investment; receive dividends which, after tax, buy two hamburgers; and receive, upon sale of your holdings, after-tax proceeds that will buy eight hamburgers, then you have had no real income from your investment, no matter how much it appreciated in dollars. You may feel richer, but you won’t eat richer.”
Also read:
- FTSE Yearly Returns
- Nasdaq Yearly Returns
- Nifty 50 Yearly Returns
- S&P 500 Yearly Returns
- Nikkei 225 Yearly Returns
- Dow Jones Yearly Returns
Conclusion (Warren Buffett)
“The best assets you can have during inflation are your abilities.”