Inflation is taxation without representation, and the Federal Reserve is undemocratic

Inflation is an alternative form of taxation, plain and simple. The main difference is that inflation doesn't require democracy.

inflation is taxation without representing

If you think Congress is the only body deciding how much purchasing power you have, you are missing a much bigger piece of the puzzle.

The Federal Reserve has just as much ability to influence whether you’ll need to make concessions at the grocery store or if you can afford a vacation this year.

They’re just way sneakier about it, and rely on the fact that most Americans don’t know how they fit into in the control of wealth and assets in this country.

Since the onset of the pandemic, the Federal Reserve has called the shots that have directly skyrocketed the cost of living more than Trump, Biden, Ted Cruz, A.O.C., DeSantis, and just about any other elected official, combined. Love it or hate it, neither Trump nor Biden had much to do with today’s out-of-control inflation.

The blame for that rests squarely at the feet of the Federal Reserve, a non-democratic, “quasi-government” institution that acts like a government when it’s convenient, and a private business when it’s not. In other words, the Federal Reserve makes decision that effect how much day-to-day buying power the average citizen has, but without all the “red tape” of democracy.

The Federal Reserve printed trillions of dollars over the last two years, which diluted the value of the dollar domestically.

One way to think it is: All the dollars in circulation are a slice of America’s overall wealth. In that sense, every dollar in your wallet represents a percentage of total American net worth.

This is a well-understood, never-disputed concept in finance. Conceptually, it’s similar to ownership of a company being divvied up into stock shares. When a company IPOs, they do so with a fixed amount of shares.

Imagine for a moment that you go into business with someone and decide to split the company 50-50. You do so in the form of stocks. You issue a total of 100 stocks — 50 for you, and 50 for your business partner.

Now imagine that while you were out sick, your business partner issues 50 new shares which they split between them and a third-party, bringing the total shares in circulation up to 150 as opposed to 100.

You now own 50 out of 150 shares, which means you own 33.3% of the company. Prior to your partner issuing new shares, you owned 50 out of 100 shares of stock, or 50% of the company. Your partner has in effect, reduced your ownership in that company, because 33.3%<50%.

You would have every right to be angry, especially if they did it without consulting you.

That is exactly what the Federal Reserve did. Don’t get caught up in the “too much stimulus” narrative.

Only about 30% of the freshly minted dollars went back to average taxpayers in the form of stimulus measures. The vast majority, more than 2/3rds of it, went directly into the stock market, bonds, and assets that are now on the Federal Reserve’s balance sheet. That’s why all of those assets classes exploded in value — the cash rich Federal Reserve went on a shopping spree that drove up the cost of living nationally. When there’s more dollars chasing the same number of goods as before, things get pricy.

Since 2020, the Federal Reserve increased the total number of dollars in circulation by just under 22%. Rather than push legislation through elected officials in Congress to increase taxes — never popular with voters — they opted to use an easier, backdoor method that didn’t require weigh in from taxpayers.

Instead, they diluted the taxpayers’ equity in the American economy by 22%.  Because productivity did not increase by 22%, this was textbook share dilution. Were this a publicly traded company, it would require shareholder approval. But in the case of the Federal Reserve, rather than shareholders in a private company, it is citizens’ equity in the American economy.

In effect, the Federal Reserve’s policies have indirectly taxed the American people an additional 22%, circumventing democratic processes. The subsequent and highly predictable inflation — or dilution of citizens’ equity in the economy — is fundamentally, taxation without representation.

If a company issues new shares without shareholder approval — well, it’s not even worth discussing, because Wall Street would never let that happen. Ever. Because Wall Street fully understands the concept of equity dilution. For a company to issue more shares, a shareholder election would be required.

But elections are the exact democratic process the Federal Reserve sidestepped by printing more dollars as opposed to passing legislation through congress increasing taxes, which would have had the same net effect. 

Because no politician would ever survive doubling taxes, a backdoor channel was used instead. Rather than taking dollars out of citizens’ paychecks, the Federal Reserve opted to dilute the value of the dollar within the American economy by “issuing more shares” of economic productivity: dollars.

The American people have been diluted out of 22% of their stake in the American economy — that’s the bottom line. No democratic processes required.

Inflation is an alternative form of taxation, plain and simple.


  • Jack Tazman

    Jack Tazman is a Baltimore, Maryland native. He attended Washington University where he studied political science. Since then, he worked as a writer for various national news organizations specializing in politics and policy. He now resides in New York City as a freelance writer and political consultant.

Leave a Reply