Friday, August 14, 2009

The Evils of Inflationary Monetary Policy

I have bemoaned our government's monetary policies on this blog for months. Herbert Schlossberg has written an excellent critique of inflationary monetary policy in Idols For Destruction that I want to share with you:

"Counterfeiting is the modern equivalent of alchemy[Medieval attempts to turn lead into gold]. When gold and silver were the only money, technology could not meet the challenge of imitating it. But when paper was given the power to command economic goods, people could mimic the official press with the unofficial one. This modern form of theft, like all others, comes from envying the possessions of other people and the coveting that impels one to obtain them. To understand the modern American economic system, as well as that of other Western nations, we must consider how alchemy has been brought up to date. Whether in the form of changing base metal to precious metal, or of counterfeiting government banknotes on clandestine presses, this process, like all theft, transfers purchasing power from its real owners to other people. It does so simply by inflating the supply of money. This is the original economic meaning of "inflation" before it was distorted to signify a general increase in prices. When we understand that there is no economic difference between flooding the nation with money from counterfeiters' presses and doing the same thing with money from the official press, then we begin to comprehend the nature of modern inflations."

Schlossberg continues:

"This modern version of alchemy is what Ludwig von Mises used to call "the philosophy of stones into bread," referring to the temptation of Jesus. That is the alchemist's trick of creating something of value without work. Whether the wizard mutters incantations, mixes formulas, or runs printing presses, he attempts to produce bread without bothering to plow, sow, reap, grind, and bake. He tries to create value ex nihilo and imitate the creative power of God. What he really accomplishes is the taking of someone else's bread."

The state's attempts control the economy and the nation's willingness to let it happen is idolatry, plain and simple.

1 comment:

Ryan Jankowski said...

We have recently added Schlossberg's chapter 5 of 'Idols for Destruction' to our audio collection and is available free for anyone that might be interested.

God bless!