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How Currency Debasement Increases Taxation

That moment when you realize not only is taxation theft and debasing the currency is a tax and thus theft, but since accounting practices do not account for currency depreciation, a false accounting exists of higher than otherwise would be income and profit perpetually increasing said theft.

Ludwig von Mises writes in The Theory of Money and Credit, pages 204-205, the following:

This disregard of variations in the value of money in economic calculation falsifies accounts of profit and loss.  If the value of money falls, ordinary book-keeping, which does not take account of monetary depreciation, shows apparent profits, because it balances against the sums of money received for sales a cost of production calculated in money of a higher value, and because it writes off from book values originally estimated in money of a higher value items of money of a smaller value.  What is thus improperly regarded as profit instead of as part of capital is consumed by the entrepreneur or passed on either to the consumer in the form of price-reductions that would not otherwise have been made or to the laborer in the form of higher wages, and the government proceeds to tax it as income or profits.  In any case, consumption of capital results from the fact that monetary depreciation falsifies capital accounting.  Under certain conditions the consequent destruction of capital and increase of consumption may be partly counteracted by the fact that the depreciation also gives rise to genuine profits, those of debtors, for example, which are not consumed but put into reserves.  But this can never more than partly balance the destruction of capital induced by the depreciation.


Published in Trey Smith