Inflation is awful for what it is in theory. For what it does to people in practice. And for what it reflects. So forgive me if I say a few things everyone knows. As sometimes we forget what we know (I’m the first culprit myself), the following is just to jog your memory.
Inflation is too much money chasing too few goods. In the West, the amount of available goods mostly depends on private economic activity. The amount of money chasing them mostly depends on how much currency rolls off the printing presses controlled by the government or, more typically these days, by the quasi-independent central banks to which governments like to delegate this function. As the government can control production only indirectly, inflation is caused by governments printing (or borrowing, which amounts to the same thing) too much money. Why would any government want to print too much money? Because it wants to spend too much. And why would it want to do a silly thing like that? Because this enables it to reshape society in its own image, that of corrupt, selfish, ignorant materialists.
In his book The Time of Turbulence, the self-admittedly infallible Alan Greenspan, who operated the American printing press from 1987 to 2006, confirms the first half of this homespun wisdom: ‘Excess government spending causes inflation.’ The second half is proved by numbers.
Western governments began to pursue aggressive economic activism in the 20th century. Whether the subsequent violent death of the best part of half a billion people was a direct result of this development or its unfortunate side effect is outside my immediate subject. I just want to compare the inflation figures in the last sane century, the 19th, with the 20th, the first ‘American century’ (it was described as such by the publisher Henry Luce).
Behold: £100 pounds in 1850 became £110 pounds in 1900 — a negligible inflation of 10% over 50 years. That meant that a baby born at the time with a silver spoon in his mouth, which utensil equalled, say, a solid middle-class income of £500 a year, could live his whole life in reasonable comfort even if he never made a penny of his own. Conversely, £100 in 1950 became £2000 in 2000 — a wealth-busting, soul-destroying inflation of 2,000%. This brought the economy to the forefront of human endeavour: with money losing value at that rate, people had to devote every waking moment to chasing pennies wherever they could find them. They also realised that saving and conservative long-term investment would lead them straight into the gutter. Saving became ruinous; borrowing, logical. Why not borrow £100,000 if you know that in a few years its real value would drop by an order of magnitude? And, for the same reason, why save £100,000? Thus the hysterical, feverish, soulless materialism of modernity isn’t just a consequence of original sin. It’s a result of systematic government policy.
The knock-on effect pushed the banks into irresponsible lending, the people into promiscuous borrowing and reckless spending, and the economy to the edge of the precipice. Such is the awful cost of social engineering, of governments trying to satisfy their totalitarian aspirations by economic subterfuge. Do think of that the next time you kneel before the altar of the blessed welfare state, the sainted NHS or the humanitarian foreign aid. If you do, I bet you’ll get up on your feet straight away.