In June 2022, the U.S. witnessed a 40 year high in inflation—a rate of 9.1%. This manifested as a 38% increase in egg prices, 14.5% increase for milk, and 16.8% increase for cereal over the span of a year. Inflation is Americans’ top concern as the 2022 midterm elections approach.
The truth is that Americans are right to be worried. Not only does inflation have vast economic consequences but also moral implications for any society based on Judeo-Christian values or even vague notions of “fairness.”
So, what is inflation? Inflation is an increase in the overall level of prices, resulting from an increase in the supply of money. Since the early 1900s, the Federal Reserve has increased the money supply during nearly every national crisis to pass “relief” packages, bail out banks, pay off debt, or fund wars. Such reckless money supply expansion is what creates “boom-bust” cycles exemplified by the Great Depression and 2008 Recession.
This form of inflation via money stock increases is not a recent phenomenon. As early as the Roman empire, governments and kings used debasement to pay off debt and create new wealth for themselves. Debasement—or “lightening the number of ounces or grams in the same monetary unit”—devalues coins by reducing their physical weight in gold.
Increasing the money stock has consequences, however. All else held equal, those who first receive this new money will face an excess of cash holdings, so they will spend the new money on goods and services. This drives up the demand for these goods and hence their prices, as well. When overall prices increase, each dollar is not able to purchase as many goods as it could at the old price level.
This means that even though the debased coins retain the same nominal value that is stamped on the outside, they do not have the same purchasing power that they once did.
In fact, the Bible has quite a bit to say about debasement. Leviticus 19:35-36 and Proverbs 20:23 condemn those who use dishonest weights, committing fraud by giving people less than what they paid for. Likewise, Isaiah 1:22 likens spiritual decline to the debasement of silver coins. Even in Dante’s Inferno, those who falsified precious metals are found in the deepest recesses of hell.
Monetary debasement is a form of fraud. When governments do it, such fraud is simply legalized counterfeiting. Whether by reducing the weight of a gold coin or by simply printing more dollars, increasing the money supply artificially degrades the value of the currency and attempts to pass it off as pure.
Such counterfeiting is not a victimless crime. It redistributes wealth to those who first receive the new money (the king, government, minter, etc.) from those who receive the new money later. Those who receive the new money later or not at all become relatively poorer as they now face higher prices because the money has already circulated through the market. As explained by famed economist Murray Rothbard, counterfeiting “injures all the legitimate, existing dollar-holders by having their purchasing power diluted.”
Debtors are enriched at the expense of creditors because loans made in the past become relatively less expensive as prices rise. Those on fixed incomes face increased prices while their income will not rise. Rothbard explains that “early spenders, those who get the money early in this ripple process benefit at the expense of those who get it late or not at all.”
Higher prices for daily purchases are certainly a valid source of outrage for voters and consumers. However, the effects of inflation are much broader and more problematic than paying an extra dollar for every gallon of milk.
Inflation is a moral evil, defrauding citizens by reducing their purchasing power and creating disastrous boom-bust cycles. From retirees on a fixed income to college students who face higher tuition costs, the consequences of inflation are not isolated and ripple across all demographics for years to come. Those who view inflation as simply another distant political term—including many young Americans—must recognize these vast economic and moral implications rather than shrugging them off.
The views and opinions expressed in this piece are those of the author and do not necessarily reflect the values and beliefs of Cogitare Magazine, nor of Grove City College.
