The Fed’s Magic Trick That’s Picking Your Pocket

The Fed’s Magic Trick That’s Picking Your Pocket from Schiff Gold

Every year, the Federal Reserve robs you of a little bit of your wealth.

And it does so by design.

Writing for the Sovereign Man, Jeff Thomas called it a “magic trick.” But it’s not magic in a mystical way. It’s magic in the show business sense of the word.  It’s an illusion, facilitated by distraction that fools the audience. As a result, we all miss what’s actually happening.

How does the Fed rob you?


As Thomas put it, inflation is the ideal magic trick. The average person doesn’t see it as a tax. The magicians – the central bankers – present it to us as a normal and necessary part of the economy.

Rube Goldberg, was an American cartoonist, sculptor, author, engineer, and inventor. He was best known for building complex machines that only accomplished a very simple task, or in some cases didn’t do anything at all. When you look at the Federal Reserve justification for inflation, it brings to mind one of these Rube Goldberg machines.

The Fed has most people convinced that all of this is necessary and even beneficial. In fact, if anybody protests, the central bankers will assure them that without this scheme, the economy will cease to function correctly. But ultimately, this is a nothing but a carefully crafted magic trick designed by the political class to tax the people. As Thomas put it, “from its inception, one of the goals of the bank was to create inflation. And, here, it’s important to emphasize the term ‘goals.’ Inflation was not an accidental by-product of the Fed—it was a goal”

It’s a given that all governments tax their people. Governments are, by their very nature, parasitical entities that produce nothing but live off the production of others. And, so, it can be expected that any government will increase taxes as much and as often as it can get away with it. The problem is that, at some point, those being taxed rebel, and the government is either overthrown or the tax must be diminished. This dynamic has existed for thousands of years.”

Enter inflation.

Inflation allows the government to borrow money, devalue the currency, and then pay off its debt later in cheaper dollars. It is literally an invisible tax. The Fed’s money creation has proven extremely effective in inflating the dollar. Over the last 100 years, the greenback has lost nearly 97% of its value.

Once the above process is understood, it’s understandable if the individual feels that his government, along with the Fed, has been robbing him all his life. He’s right—it has. And it’s done so without ever needing to point a gun to his head.”

So, what can we do to avoid the effect of this voodoo? One way to mitigate the effect of inflation is to buy gold. Precious metals historically serve as a hedge against inflation. Since gold is priced in dollars, it’s dollar price will typically rise as the dollar’s value depreciates.

As Peter Schiff has explained, this is one reason rising interest rates are really bullish for gold.

The main reason that interest rates are rising around the world is because inflation is picking up around the world. Higher inflation is positive for gold. I mean, it is the most bullish thing for gold. And in fact, when inflation rates are rising, that means money is buying less, right? The purchasing power of money is going down. And that’s when you want to own gold.”

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Peter Schiff

Mr. Schiff began his investment career as a financial consultant with Shearson Lehman Brothers, after having earned a degree in finance and accounting from U.C. Berkeley in 1987. A financial professional for more than twenty years, he joined Euro Pacific in 1996 and served as its President until December 2010, when he became CEO. An expert on money, economic theory, and international investing, he is a highly sought after speaker at conferences and symposia around the world. He served as an economic advisor to the 2008 Ron Paul presidential campaign and ran unsuccessfully for the U.S. Senate in Connecticut in 2010.