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Let’s call inflation what it really is

Jerry Bowyer | The debasement of currency is theft and the destruction of wealth


Federal Reserve Chairman Jerome Powell prepares to testify before a House committee. Associated Press/Photo by Graeme Jennings (pool)

Let’s call inflation what it really is

A recent poll shows that almost 9 in 10 Americans are “extremely worried” or “very worried” about inflation. That’s quite understandable. Nearly every category of price measurement has spiked in the past year, as have surveys of consumer perceptions of inflation, business perceptions of inflation, and market indicators of expectations of future inflation. As recently as this spring, inflation was still a hotly debated topic, even in conservative circles. For instance, I had an on-going friendly debate with Ramesh Ponnuru of National Review, who argued in the New York Times that inflation was nothing to worry about. I disagreed.)

That debate is now over: inflation is here and we need to be clear-eyed about its consequences. The question to answer next is whether the inflation will remain. It probably will as most market indicators say so. The Wall Street Journal reports that the purest market expression of inflation expectations, one based on a particular kind of Treasury Bond called “TIPS,” is signaling a rising risk of inflation over the next ten years. Central bankers now predict that the high inflation, which they failed to predict in the first place, will only be “transitory.” Markets disagree, and so does the general public which does its own shopping. To paraphrase the Marx Brothers, when they go to the store they choose to believe their lyin' eyes over the tongues of official monetary authorities. And now, with recent revelations of heavy trading on stocks by Fed officials, an ethical no-no, confidence in the ethical integrity as well as the technical competence of the institution is under attack.

But the recent charges of insider trading by Fed officials are small-ball corruption compared to what the Fed itself has been doing out in the open: robbing consumers of our purchasing power. What is frequently missed in the technical discussions about monetary economics is that the whole thing is, at root, a moral issue. In short, inflation is theft. Inflation robs the people—the poor most of all—and transfers the plunder to government and financial institutions.

From the standpoint of the ruling class, this is not a bug, it’s a feature. It gives the central government immense power, in some ways greater than the power to tax. To be direct, the Torah calls the debasement of units of measurement such as currency an “abomination” (Dueteronomy 25:13-16). Solomon agreed (Proverbs 11:1). So did the prophets (Isaiah 1:22; Amos 8:4-6). It’s probably not a coincidence that there is a correlation between the Roman emperors who debased the currency and those who persecuted the Church. Both are ways of abusing the image of God and are therefore attempted assaults on that image which we bear. The deeper reason is that inflationist ideology is really, at its most basic, a belief in the divinity of the state (and those who operate it).

Critics of inflationist ideologies rightly call our modern currency “fiat” money, but let's not forget where that word “fiat” comes from. It is Latin for “Let there be.” It is the phrase used by the historic Latin Bible (the Vulgate) to describe the acts of creation recorded in Genesis 1. “Fiat lux”; “Let there be light.” Fiat money is based on the illusion that the political state can create through decree. But we cannot. God creates by decree; our creation is only analogous to his. We use labor to restructure the things God created from nothing.

Western Christianity figured this out and by the late Middle Ages, Christian theologians understood that debasement of currency was theft. The great theologian and economist de Molina, in his Treatise on Money, argued that debasement of currency was morally indistinguishable from King Ahab seizing Naboth’s vineyard.

While de Molina and his fellow late Medieval Catholic theologian colleagues failed to persuade the Catholic Church and states of the moral imperative of sound money, the idea did take hold in northern Europe, especially among Calvinists. This is perhaps why, even now, Switzerland remains one of the most “hard money” states to this day. Second and third-generation reformers often included inflationary policies in their catechisms under the section about what is required in the commandment “Thou shalt not steal.”

We won’t solve our current inflationary crisis merely on the basis of the recovery of technical knowledge about monetary dynamics (though technical competence is part of the prudence that is needed.) The modern world didn’t forget the technical means to safeguard sound money; it intentionally rejected the moral imperative as it threw off all other moral imperatives as unwelcome restrictions on our desire to do whatever we want. And for that, we’re all going to be paying the consequences.


Jerry Bowyer

Jerry Bowyer is the chief economist of Vident Financial, editor of Townhall Finance, editor of the business channel of The Christian Post, host of Meeting of Minds with Jerry Bowyer podcast, president of Bowyer Research, and author of The Maker Versus the Takers: What Jesus Really Said About Social Justice and Economics. He is also resident economist with Kingdom Advisors, serves on the Editorial Board of Salem Communications, and is senior fellow in financial economics at the Center for Cultural Leadership. Jerry lives in Pennsylvania with his wife, Susan, and the youngest three of his seven children.

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