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Jorg Guido Hulsmann's
2008 masterpiece The Ethics of Money Production exposes the full extent of the
monetary phenomena the Federal Reserve is solely responsible for creating. Gauging
inflation on the basis of a price index is vastly misleading. Below is an
excerpt from my review of Hulsmann's
book:
Inflation’s legacy
Inflation’s standard definition is
too narrow to provide an appreciation of the extent of its harm; it is far
more than a deterioration of the currency’s purchasing power.
It’s also much more than a “hidden tax.” Government’s
perennial fiat inflation is a subtle WMD. Consider:
1. In funding wars, it allows government
to ignore the fiscal resistance of its citizens.
2. It benefits the central government at
the expense of secondary and tertiary governments.
3. It turns moral hazard and
irresponsibility into an institution, and guarantees recurring economic
crises.
4. By making credit cheap, it
encourages businesses to finance their ventures through borrowing rather than
equity. Because of market competition, few firms can resist the offer of low
credit, making them more dependent on banks. As Pius XI noted in 1931, it
puts a dictatorship in the hands of lenders who regulate the life-blood of
the entire economic system.
5. Fiat inflation drives people to
invest in capital markets where few will have the expertise, time, and
inclination to monitor their investments properly. In former times people
could save simply by holding gold and silver coins.
6. Under a perennially increasing
price level, the average citizen finds his best strategy is personal debt,
which weakens self-reliance and independence.
7. Under chronic fiat inflation, people will tend to choose their
employment based on monetary returns. Money then becomes the prime or only
consideration for personal happiness.
8. Perennial inflation deteriorates
product quality. Industries that cannot overcompensate
inflation with technological innovation turn to other means, such as
producing an inferior product under the same name. Lying, which is bound up
with fractional-reserve banking, tends to spread like a cancer over the rest
of society.
9. By fueling the exponential growth of
the welfare state, fiat inflation fosters the decline of the family. Families
become degraded into “small production units that share utility bills,
cars, refrigerators, and especially the tax bill.” The welfare state
drives the family and private charities out of the “welfare
market.”
As
Hulsmann concludes, “fiat inflation is a juggernaut
of social, economic, cultural, and spiritual destruction.”
George F. Smith
Read his book : The
Flight of the Barbarous Relic
Visit his website
Read his blog
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