Some experts call it the “government’s invisible tax.” You have been paying it for years…whether you know it or not.

Technically, this invisible tax has many names. You can call it “inflation” — although that doesn’t tell the whole story. You can call it the Fed’s failed “strong dollar policy,” but even that can be misleading.

No, I’m talking about the real tradable value of your money. So the easiest way to describe the invisible tax is to call it “loss of your purchasing power.”

In other words, every single dollar you ever earn buys less and less each year. Less college tuition for your kids. Less groceries. Less weekend toys (boats, cars etc). Less for your vacations. Less savings for your retirement.

And in the last four decades, you and your family have lost a whopping 92% of your purchasing power. You’ve lost 21% of that purchasing power in just the last nine years.

Here’s where the government comes in…

By controlling money, politicians can control how much anyone spends — including themselves. Over the last few decades, the government has quietly ballooned our money supply and manipulated money’s overall value.

You see, money is a commodity like anything else. If you flood the market with a supply of any commodity, it will naturally be worth less.

But here’s the catch: Usually when you have a glut of commodities in the market, those goods drop in price. Commodities become more affordable and give you a higher standard of living.

On the other hand, money is ONLY a medium of exchange. Money has no other purpose, no value on its own. This makes it a demand tool. The more demand tools you throw in the market, the less they’re worth. In other words, if you flood the market with dollars, your dollars are simply worth less. And their real value — what they can buy you — is worth less.

By determining your money’s value, governments literally hold the puppet strings on your wealth. They decide whether your dollar will buy a cup of coffee or a half stick of gum — not directly, but indirectly, by controlling how much cash is in circulation.

In this way, it’s just as if the politicians are dipping their hands in your bank accounts and retirement savings and collecting this “invisible tax.”

The only real legal way to avoid this tax?

Look at your overall net worth, and make the conscientious decision to diversify 10% to 20% into non-dollar assets. This can include buying stronger foreign currencies, making a long-term investment in precious metals like gold and silver, or even buying key commodities that rise in value as the dollar falls.

Bottom line: You will never be able to control the U.S. government, or how they manipulate the dollar’s value. But you can take control of your portfolio so your long-term wealth doesn’t suffer.

Good Currency Investing,
Kat Von Rohr, Editor
FX University