Inflation is a moral wrong

The final inflation numbers are in for 2021, and they show that—at 7 percent—inflation was the highest it has been since 1982, and that’s the bad news. The worse news is that, while 40 years ago the United States was nearing the end of a long inflationary cycle, our current inflationary cycle is young, less than two years old.

What’s behind it all? The short answer—a moral crisis. We need to get past the notion that macroeconomic phenomena are merely technical in nature and that, because math is involved, the factors are spiritually and morally neutral. They are not. Equations, no less than philosophical treatises, are expressions of a worldview built on a set of religious presuppositions.

Late-medieval theologians built the great age of monetary stability. They rightly saw that currency debasement and inflation are a form of robbery. Sound currency was seen as a moral imperative and was firmly established primarily in Protestant nations such as the Netherlands, the United Kingdom, and later the United States. Under these stable monetary regimes, the world prospered as never before. Since debasement was forbidden, government spending capacity was limited to the revenues gotten through taxation or borrowing. Prices remained stable for centuries. The poor were protected from a loss of purchasing power. Savers were protected from the erosion of the value of their savings. This rewarded them for saving their wealth, creating the enormous pools of capital that built the industrial infrastructure of the modern world. Sound money encouraged thrift, thrift built a constituency for sound money, and together they constructed a virtuous cycle of deferred gratification.

But in the early 20th century, there came a moral revolution. A young group of Edwardian intellectuals, who ironically appropriated for themselves the name the “Cambridge Apostles,” led by John Maynard Keynes, revolted against all things Victorian. They rejected belief in God, adherence to the traditional moral code, encouragement of the virtues of thrift and sound money.

“We entirely repudiated a personal liability on us to obey general rules,” Keynes stated. “We claimed the right to judge every individual case on its merits, and the wisdom to do so successfully. This was a very important part of our faith, violently and aggressively held, and for the outer world, it was our most obvious and dangerous characteristic. We repudiated entirely customary morals, conventions, and traditional wisdom. We were, that is to say, in the strict sense of the term, immoralists.”

Several of the “apostles” spread their “faith” into various fields, such as philosophy and literature. Keynes evangelized for immoralism in economics, especially monetary economics. He repudiated what he called the “puritan” propensity toward savings, calling it a “fetish.” He attributed market dynamics to mere “animal spirits,” which fit well with the real-life intermarriage between the Keynes and Darwin extended families. He called for the “euthanasia of the renter” (i.e., saver) and used his talent for academic politics to shift the academic, and then later, policy consensus toward his peculiar economic views.

Keynes’ rejection of women, both sexually and socially, aligned with his rejection of the idea of deferred gratification. “In the long run, we’re all dead,” he said. No parent would ever say that. Keynesianism wrestled against the declining consensus of classical economics throughout the 20th century, winning the day more often than not. John F. Kennedy was the last gasp of classical economics before the plunge into full debasement, which started with Lyndon Baines Johnson, accelerated under Richard (“we’re all Keynesians now”) Nixon, and continued under Jimmy Carter.

But the triumph of full-on Keynesian economics also created the conditions for its repudiation. Because it was tried, its failure was put on full display. The stagflation of the 1970s was supposedly an impossibility under Keynesian theory, and the gigantic trial and painful error of that decade led to a resurgence of the particular brand of classical theory known as supply-side economics. The last time inflation was this high, in 1982, was the last gasp of Keynesian policy about to be supplanted by supply-sideism, which took such firm hold that inflation remained moderate for the ensuing 38 years.

The hard-won lessons of monetary economics have now been utterly forgotten by Democrats and are only dimly remembered by Republicans such as Fed Chair Jerome Powell, who was appointed by Donald Trump.

It’s time to remember and to rebuild the theological foundations of sound money. Inflation is an affront to our Creator because it is an affront to his image-bearers. It arrogantly sets aside the commandment “Thou shalt not steal!” It gives divine prerogatives to the state. Christians must oppose it, not just as part of political point-scoring, but as part of our prophetic witness against social evil.