- The cultural consequences of inflation…
- The great irony of socially oriented money…
- The PASSIVE stream of income that could absolutely MAKE your retirement…
Dear Reader,
An article drifted in over the transom this past weekend, “The Cultural Consequences of Inflation,” by title.
From which:
- Inflation is a hidden tax with devastating economic and moral consequences; it encourages the population to go into debt by making credit cheaper, and it penalizes saving… Not only that, but it is also a spiritual burden. It drives people to seek ways to protect their savings, making society more materialistic, causing people to prioritize money over happiness, and often forcing them to migrate, thereby breaking family and patriotic ties…
- Inflation forces all participants to dedicate more time to money and investments rather than to starting a family. Under a debt-based system, family ties represent a far greater sacrifice, contributing to rising divorce rates, later ages of first marriage, and fewer children. Inflation has pushed women into the labor market, reduced the costs of leaving the family unit, and increased the number of single mothers and divorces…
- [Inflation] also creates tensions between taxpayers and recipients, employers and employees, men and women, or retirees and young professionals, fostering a sense of identity-based conflict or group polarization.
Debt-Based Money vs. “Natural Money”
I do not ascribe all the evils here listed to inflation alone. Yet I believe there is justice here.
The debt-based monetary system — and the inflation to which it is prone — often works corrosive societal effects.
“It has a very important impact on our culture,” writes German economist Jorg Guido Hulsmann.
Under “natural money” like gold — Herr Hulsmann explains — consumer prices tend to decrease over time.
The result is a gradual and healthful deflation.
Thus natural money encourages the virtues of saving… thrift… and deferred gratification.
It sets the mind to the future:
- In a free economy with a natural monetary system, there is a strong incentive to save money… Investments in savings accounts or other relatively safe investments also play a certain role, but cash hoarding is paramount.
Debt-Based Money Allowed the 20th Century
Prior to the 20th century, explains Hulsmann, debt was a cultural taboo — a large scarlet “D.”
Credit for households was virtually unknown. Only the poorest households resorted to debt-financed consumption, and only from necessity.
Then the 20th century came along with its wars… its social movements… its world-improvers… and its cranks.
Gold is a famously uncooperative agent of change.
It resists social uplift, in the fashion that an old man might resist a new pair of slippers.
Gold turns away from the sound of trumpets.
“You go over there,” gold says. “I’m staying here.”
“The trouble with gold is that it turns its back on world improvers, empire builders and do-gooders,” wrote authors Bill Bonner and Addison Wiggin in Empire of Debt.
“The nice thing about gold is that it is so unresponsive,” they continued. “It neither laughs nor applauds.”
And that is precisely why gold could not endure.
The Allure of Debt
As I have written before:
Only a debt-backed system of paper money could finance the great wars, the social improvements and the fevered dreams of the 20th century.
Yet the same debt-based money seeped its way into the cultural marrows… got into the societal bloodstream… and went to work.
The slow grind of saving yielded the lure of the fast buck. Herr Hulsmann argues the debt-based system encouraged a short-term perspective.
“Fiat-money systems tend to make people insatiable in their quest for ever higher monetary returns on their investments,” he notes.
Hurry, hurry, hurry, becomes the imperative. More, more, more.
Hulsmann argues the natural monetary system fosters different incentives.
As savings increase under such a system, the return on investments of all sorts tends to diminish.
Natural Money Promotes Philanthropy
Instead of chasing rainbows, for example, people direct their monies in pursuit of other worthwhile interests — including philanthropy:
- It becomes ever less interesting to invest one’s savings in order to earn a return, and thus other motivations shift into the foreground. Savings will be used increasingly to finance personal projects including the acquisition of durable consumers’ goods, but also philanthropic activity. This is exactly what we saw in the West during the nineteenth century.
“By contrast,” Hulsmann adds,”in a fiat money society you are more likely to increase your returns by remaining in debt and continuing to chase monetary revenue indefinitely by leveraging more and more funds.”
Thus the debt-soaked society loses something of the human face. Concludes the German:
- You can imagine, then, how this inflation and debt-based system, over time, will begin to change the culture of a society and its behavior.
- We become more materialistic than under a natural monetary system. We can’t just sit on our savings anymore, and we have to watch our investments constantly, and think about revenue constantly, because if it is not earning enough, we are actively getting poorer.
It is a point to ponder of a June day.
Weimar Germany
I hazard it is no coincidence that a German is the author of these words.
The hyperinflation of Weimar Germany spawned cultural degradation on a scale truly titanic.
It fanned, ultimately, the political career of a certain moustached corporal of Austrian provenance.
The hyperinflation lingers to this day within the German memory.
There exists in my possession a 1923 German 100,000-mark banknote.
It is worth infinitely more money as a historical curio than it was as money:
At its time of issuance, 100,000 marks could not fetch one lone cup of coffee.
The Great Irony of Socially Oriented Money
The United States confronts no such currency destruction today. I do not suggest it does.
Nor do I suggest that a restoration of sound money would transform every heart to gold… or cure all societal ailments.
Yet it seems this Hulsmann fellow has hooked onto something.
Perhaps our paper money system has not only debased our economics and our politics… yet also our culture.
And perhaps our socially inclined money — with high irony — has somehow turned us less social.
Brian Maher
for Freedom Financial News
