Mises Wire

Monetary inflation is highly desired by the state. This has been the case thought history and still is the case today. That is because inflation facilitates government spending beyond revenue it takes through taxation. Government spending gives rulers, politicians and bureaucrats greater centralised control and commanding power over people's lives (i.e., the economy and society).

 

As such, from the statist economics standpoint, the definition of inflation had to be distorted and the public miseducated about it —so that the process of currency debasement (i.e., monetary inflation) may go unnoticed and accepted by those whom it hurts the most, the general pupation.

 

So, this confusion in terms is not coincidental, it is deliberate. Given the rise of Keynesian economics and the inherently inflationary fiat dollar standard we, humanity, live under for fifty years now.

 For example, this report claims that most Americans believe “corporate greed, profiteering and price gouging” is the cause of the current inflation crisis in the United States, where price inflation hit a 40 year record high. 

What’s more unsettling is the same report found that the majority of those polled also believe that the government should step in and resolve the problem. In other words, the public wants the causer of the problem to solve the problem.

Such is the depth of economic misinformation and miseducation we face. Perhaps, if the public knew that since the establishment of the current US central bank in 1913, the dollar lost more than 95 percent of its purchasing power relative to gold (the commodity that gave the dollar its initial value, stability and global acceptability), they wouldn't blame the inflation crisis on “corporate greed”. 

Economist and social philosopher Murray Rothbard wrote: 

"Government is inherently inflationary because it has, over the centuries, acquired control over the monetary system. Having the power to print money (including the "printing" of bank deposits) gives it the power to tap a ready source of revenue. Inflation is a form of taxation, since the government can create new money out of thin air and use it to bid away resources from private individuals, who are barred by heavy penalty from similar "counterfeiting." Inflation therefore makes a pleasant substitute for taxation for the government officials and their favored groups, and it is a subtle substitute which the general public can easily—and can be encouraged to—overlook." 

The government’s monetary agency and the current fiat money system are the cause for today’s increasingly inflationary and chaotic monetary situation. Not corporate greed, speculators, free-market capitalism, Vladimir Putin, or the weather. 

Under a fiat currency regime, the central bank can easily, artificially and systematically increase the money supply, almost like a magic trick, which makes inflation (mild or severe) the norm. And this inflationary process gradually destroys the purchasing power of the currency resulting in higher prices. This policy, while benefiting the government and associates, defrauds the people and impoverishes society, economically and morally. 

Economist Hans F. Sennholz noted:

It is not money, as is sometimes said, but the depreciation of money—the cruel and crafty destruction of money—that is the root of many evils. For it destroys individual thrift and self-reliance as it gradually erodes personal savings. It benefits debtors at the expense of creditors as it silently transfers wealth and income from the latter to the former. It generates the business cycles, the stop-and-go boom-and-bust movements of business that inflict incalculable harm on millions of people.

Professor Sennholz further noted:

Monetary destruction breeds not only poverty and chaos, but also government tyranny. Few policies are more calculated to destroy the existing basis of a free society than the debauching of its currency. And few tools, if any, are more important to the champion of freedom than a sound monetary system.

 

A generalised rise in the prices of goods and services, is a consequence of inflation, not inflation itself. Inflation was classically (pre-Keynesian economics) defined as an artificial increase in the supply of money and credit. 

Nowadays it makes sense to use the terms monetary inflation to specify the artificial increase of the money supply, on one hand. And use price inflation to refer to a generalised rise in prices of goods and services on the other. 

Irrespective of the confusion in definition, inflation stealthily distorts and debilitates the economy, steals the people's purchasing power and impoverishes society while benefiting the ruling political and business elites. 

History (and common sense too) makes it clear that fiat currency regimes are unsustainable arrangements that always and inevitably fail. As such, there is no reason to believe today’s cruel and oppressive fiat currency regime will defy Natural law to stand the test of time. 

Evidence suggests it is more sensible to believe the fiat dollar standard too will crumble. And when it does, we hope economic miseducation and misinformation will crumble along with it.