We live in a time of great gaslighting on the state of the economy in the United States. President Donald Trump tells us that we are living in a “golden age” of economic prosperity. Trump has also said that if he were to give himself a grade on his economic policy, he’d give himself an “A-plus-plus-plus-plus-plus-plus.”
Yet many Americans continue to fall behind as price inflation rises, first-time homebuyers encounter soaring home prices, and employment growth has flatlined. Bankruptcies are rising and delinquencies on credit cards and auto loans are at the highest levels we’ve seen since the Great Recession. Wage growth is slowing, and shipping indices are rapidly falling to the levels we saw during the global financial crisis in 2009.
So how is this a “golden age”? Well, the answer is that it’s a golden age for some people. It’s a golden age for those who benefit in an inflationary economy. Those who already own immense amounts of assets are generally doing very well. Those who are in the financial sector and benefit more directly from monetary inflation continue to see big gains. Owners of multiple houses and huge portfolios of equities are doing fine. This is exactly what we’d expect to see after more than 15 years of inflationary monetary and fiscal policy that is specifically designed to bail out banks and keep prices high.
During this time, growth in the money supply has been momentous. Over the past five years, consumer prices have risen by more than 25%. Nearly $6 trillion of new money has been created since 2019. And nearly two-thirds of all the dollars now in existence were created in the past 15 years.
As we know from the insights of the Austrian School economists, and from pre-Austrian scholars like Richard Cantillon, monetary inflation does not affect everyone equally. Some get rich while many ordinary people see a rapidly rising cost of living.
Often this impacts younger and lower-income families the most. We’re seeing this now in stagnating labor markets. We see it in the average age of homeowners, which continues to rise rapidly. We see it in affordability indices for homebuyers, which are at some of the worst levels we’ve seen in decades.
But the effects of our inflationist economy go beyond mere statistics. As Guido Hülsmann has shown in his pioneering book The Ethics of Money Production, culture itself can change as sound money disappears and inflation dominates. Spending is rewarded more than saving. Short-term thinking makes more sense, and long-term planning appears to be foolhardy. The culture itself turns more to consumption rather than investment. Younger people are perhaps the most affected, as they have never known anything else.
In this issue of The Misesian we look at how this kind of economy affects Gen Z and we look at what can be done to reclaim an economy based on saving, investing, and looking to the future. This will be of great economic and political importance going forward. John Maynard Keynes—the father of our hollowed-out inflationist economy—said that in the long run we are all dead. Keynes may not have cared about it, but those of us who have children, and who hope to have grandchildren someday, still care very much about the long run.
I suspect that many of our readers do too.
