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To: Dinesh who wrote (74575)	11/12/2007 9:24:10 AM
From: Elroy	Respond to of 77400

Many countries allow adjustment of cost basis for inflation. Seriously? Which countries? Calculating capital gains is complicated enough, adjusting cost basis for inflation sounds like a major POB! US is the most regressive in this regard. Even interest income is not allowed to be adjusted, even though everyone knows that expected inflation is a key component of interest rates. I don't really understand the concept. Are you saying that in some countries if you were to earn $1,000 interest in a given year on a 5% time deposit, if inflation that year was ~5% you, would owe tax on $0 of interest income, something like that? If inflation was 2% that year you would owe tax on interest income of $600? Most countries have trouble just collecting ANY tax, I'm surprised if this inflation adjustment actually exists outside of countries experiencing major hyper-inflation problems. Which countries are you talking about? Under such circumstances, how can one teach children the value of opening a savings account. By the third grade they are capable of doing all kinds of divisions and subtractions, and figure out that when that interest earned is reduced by first taxes and then inflation, the net effect of saving is a loss in purchasing power. I think you're creating a problem that doens't exist. When I was a kid inflation was really bad (early 1970s) and I understood the value of a savings account. Comic books cost more every 18 months, which sucked, but I still liked having a little money in my savings account. I wouldn't have minded some inflation adjusted increases in my allowance, however. Somehow those never showed up.....