AMERICA'S EMPIRE TAX

The costs of empire are great. The people who pay for it, however, don't always know that they're paying for it. Here's why.

Let's start with the incredible shrinking dollar. If a dollar could purchase a loaf of bread in 1980 that same dollar can only buy you three slices of bread today. Simply put, because we are printing and sending out more U.S. dollars our currency is worth less than it was 33 years ago ...

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If you're a regular reader of this blog you might be asking yourself, What about your recent post on "Dollar Hegemony Continues (still)"? Isn't printing more dollars that the rest of the world holds a good thing? The simple answer is yes. Because everyone still wants dollars global demand from the world's commercial, national and "black market" communities has allowed the United States to print more money than our economy can actually support through commerce and trade.

This is a good thing for America because having the world's reserve currency benefits America's national security needs. We can pay to maintain global stability while others seek out our credit markets. Americas financial position also allows the United States to enjoy what French President Charles de Gaulle called the "exorbitant privilege" of printing dollars that others around the world are willing to hold.

Any other nation, as de Gaulle explained, can't "export" their currencies to other nations like the U.S. can.

On the flip side, printing so many dollars has devalued the dollar, which means that the purchasing power of the dollar has declined (inflation calculator here). So who's paying the price for the devalued currency?

That would be you and me.

Specifically anyone on a fixed income, or who works where wages haven't kept pace with the cost of living, has to do more with less.

If you or your family have found it increasingly difficult to pay the bills - and are now tapped out because of these efforts - it's not simply because your wages have stagnated or gone down over the years (though they have). The purchasing power of the dollar has also declined.

And it's been declining for years.

There are many reasons why most Americans don't recognize that the value of the U.S. dollar has declined as much as it has (see especially the Boskin Commission). But the reality is that excessive printing of the U.S. dollar means that you and I can only purchase three slices of bread today compared to the loaf of bread we could purchase 33 years ago (the richest 7 percent of Americans don't have this problem).

By printing so much to maintain the empire (and now to bailout Wall Street) the U.S. government has shifted the costs of empire - via a devalued currency - on to the little guy (there are other costs too).

The worst part? Most Americans don't even know it's happening. So we continue to pay.

Consider it America's Empire Tax.

- Mark