Replies

“The fruits of this article requires a trust in government.”

Exactly. And if you trust government, then a much better inflation hedge is TIPS, which pay interest ON TOP OF inflation-adjusting your principal. So it’s like Forever stamps that pay interest:

“The U.S. Treasury has been issuing Treasury Inflation-Protected Securities (TIPS) since 1997. TIPS provide investors with protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. (CPI-Urban, Non-Seasonally-Adjusted with a 3-month lag)

When a TIPS matures, the investor is paid the inflation-adjusted principal or original principal, whichever is greater. Since a TIPS investor won’t receive less than the original principal, the investor’s original principal amount is protected against deflation as well.

TIPS pay interest semiannually at a fixed rate. The rate is applied to the adjusted principal; so, like the principal, interest payments rise with inflation and fall with deflation.” http://www.treasurydirect.gov/instit/marketables/tips/tips.htm

“Wasn’t it in 1913 that congress said they’d never raise payroll taxes higher than 2%.”

No: it’s actually worse. Payroll taxes didn’t arrive until Social Security in the 1930’s. You’re thinking of the income tax, first made constitutional by the 16th amendment, ratified in 1913. The original tax rate was only 1% and that only applied to those with incomes above $3,000 (I don’t know the exact %, but this group constituted only a small fraction of the population: possibly 2%!).

“The presidential election of 1912 was contested between three advocates of an income tax. The winner, Woodrow Wilson, after the ratification of the Sixteenth Amendment, called a special session of Congress in April 1913, which proceeded to pass an income tax of 1% on incomes above $3,000 and applied surcharges between 2% and 7% on income from $20,000 to $500,000.”
http://www.mises.org/story/1597