author: Tyler Durden
Written by Michael Matulef through The Mises Institute,
Every serious economical illusion begins with a distortion of the word. Inflation utilized to mean what it actually means to this day — an artificial expansion of money and credit. In time, however, it was redefined to describe its consequences alternatively than its cause.
This deliberate reversal of language serves a political purpose: it shifts the blame from those who make money, to those who spend it, transforming the act of financial fraud into a simple statistical "show".
The effect is deep.
By redefining inflation, governments obscured its character, economists lost its meaning and citizens began to accept their gradual impoverishment as an inevitable fact of life.
The Austrian tradition — more than any another — seeks to reconstruct this lost clarity: to call things their appropriate names and remind us that inflation is not a symptom of a failure of capitalism, but a government attack on money itself.
Nature of inflation
Inflation, understood by the Austrian School, is not a general increase in prices, but an artificial improvement of money supply. Everything else is due to this cause. Prices do not emergence evenly or spontaneously. There are reasons why prices can rise, there are reasons for supply and demand. However, prices are now mostly expanding due to the fact that additional monetary units are being introduced into the economy, which changes the production structure and distorts the economical calculation from scratch.
As Ludwig von emphasized Mises inbook economical Freedom and Interventionism.
Today there is simply a very reprehensible and even dangerous semantic confusion that makes it very hard for non-experts to realize the real state of affairs. Inflation, as this word has always been utilized everywhere, especially in this country [United States], means an increase in the amount of money and banknotes in circulation and in the amount of bank deposits audited. But present people usage the word "inflation" to specify a phenomenon that is the inevitable consequence of inflation, that is, the tendency of all prices and wage rates to increase. As a consequence of this lamentable confusion, there is no longer any indication of the origin of this increase in prices and wages. There is no more word to describe the phenomenon that has been called inflation so far. It follows that no 1 cares about inflation in the conventional sense of the word. Just like you can't talk about something that doesn't have a name, you can't fight it. Those who pretend to fight inflation are actually fighting only the inevitable consequence of inflation - rising prices. Their efforts are doomed to neglect due to the fact that they do not attack the origin of evil.
Only later, erstwhile this political convenience required, the definition was distorted to mean "general price increases". This semantic trick allowed governments to claim that they were innocent, at the same time committing an act that they redefined.
Murray Rothbard led Mises' observations to the logical conclusion in book The Case Against the Fed:
The only culprit for inflation, the national Reserve, constantly launches an attack around "inflation", for which virtually everyone else in society seems to be responsible. We see an old robber trick that starts screaming "Stop, thief!" and runs down the street pointing to others. We are beginning to realize why it has always been crucial for the Fed and another central banks to have an aura of seriousness and secrecy. due to the fact that if society knew what was going on, if it could teardrop the veil of the impenetrable Wizard of Oz, it would shortly discover that Fed, far from being a essential solution to the problem of inflation, is the heart and origin of the problem.
Each enlargement, argued Rothbard, is simply a form of legalized falsification that "steals all moneyholders", redistributing assets from savers and producers to those closest to entry points of fresh money. Prices adjust unevenly due to the fact that fresh money does not go into all pockets at once. It flows — first to borrowers, banks, and state contractors — before it spreads to a wider economy. This "Cantilon effect" is crucial for Austrian understanding: the fresh currency changes prices, which gives emergence to further chances, with injection points; Inflation brings benefits to those who receive fresh money first, and punishes those who receive it last.
How shows Jörg Guido Hülsmann in book How inflation Destroys Civilization, inflation results from "a violation of the basic principles of society", transforming what should be a fair economical exchange into systematic fraud. Inflation is not only a monetary distortion, but a moral hazard that spoils the language of economical communication itself. erstwhile Fiducial inflation "changes moral hazard and irresponsibility into an institution," destroys the ability of the pricing strategy to convey the truth. In specified an environment, where "Everything is what it is called, it is hard to explain the difference between fact and lie," prices cease to act as credible signals coordinating business decisions. Inflation "it tempts people to lie about their products, and continuous inflation encourages habit of regular lies," by spreading This corruption "like cancer for the remainder of the economy." As a result, society is simply a society in which the economical coordination measurement itself has been falsified at its source, leaving entrepreneurs to navigate with systematically distorted signals that prevent sustainable economical calculations.
However, the harm goes far beyond false price signals, entering the moral tissue of civilization. Inflation "constantly reduces the purchasing power of money" and "the consequence is despair and the elimination of moral and social norms." Through a policy based on in debt, "Western governments have introduced their citizens into a state of financial dependency unknown to the earlier generation." This dependency destroy Nature :
High debts are incompatible with financial self-sufficiency and so tend to weaken self-reliance besides in all another areas. The indebted individual yet becomes accustomed to asking for aid to others, alternatively of seeing the economical and moral pillar of his household and wider community. Wishful reasoning and submission replace sobriety and independent judgment.
Worse"Inflation makes materialistic society. More and more people search money income at the expense of individual happiness." Output a culture in which "fiducial inflation leaves a distinctive cultural and spiritual stain on human society" — a stain that transforms independent citizens into dependent subjects, undermines standards sustaining civilization and yet reveals inflation as "a power of social, economic, cultural and spiritual destruction."
Inflation as a life experience
The real theatre of inflation is not a spreadsheet, but a house. The harm is intimate — felt not in economical aggregates but in the silent transformations of everyday life. Inflation works like the cruelest and most reckless tax, due to the fact that it strikes invisiblely, undermining the purchasing power of the same people who are least prepared to defend themselves from it. It destroys the relation between effort and reward, between discretion and security.
Inflation punishes savings and rewards debt. Those who save on money lose; those who borrow money at least temporarily. Saving virtue becomes foolish, and the recklessness of the speculator gains in favor. In time, full societies change their time preferences — impatience replaces urgency, consumption replaces production and saving. erstwhile the money signal is corrupted, society loses its sense of direction for the future. Inflation decides by teaching people to live for the present. This is simply a civilization collapse.
In everyday life this is revealed gradually. A middle-class household that erstwhile went out all week now eats at home. A young individual who saves on the home discovers that the dream from year to year withdraws. The pension, which was promised safety through "stable" investments, realizes that stableness was valued nominally alternatively than actually. Everyone adapts — economically, psychologically, morally. The harm is slow, individual and cumulative.
The Austrian economist views inflation not as a statistic, but as a past of distortion — a past of moral inversion, misallocation, and progressive social demoralization. The disaster is not only higher prices, but besides mixed values and distorted choices. Inflation is in fact a lie against time and values, and like any lie, it yet breaks under its own contradictions.
Summary: Solid money as the foundation of civilization
The way forward is not mysterious; It's a choice. The societies that want to emergence after the moral and economical demolition of inflation must begin where corruption began: money itself. The Austrian solution requires a return to fair money — money that cannot be inflated according to its own will, which retains value over time and reunite effort with reward.
Calling for healthy money is demanding that the fact be restored as the foundation of economical life. Inflation is primarily a lie — a lie rooted in a average we usage to communicate values. erstwhile this average is corrupted, the moral architecture of society falls with it. Restoring healthy money means restoring the conditions in which civilization can develop: where savings accumulate alternatively than destruct where long-term planning replaces short-term desperation and currency becomes an ally of virtue alternatively than an engine of vice.
Inflation, which degrades and demoralizes, continues not by economical necessity, but by political and social consent. past does not comfort those who ignore economical law indefinitely. The choice of healthy money is to choose civilization alternatively of decomposition. The Austrian school does not offer utopian promises, it offers clear clarity: reasonable money is simply a prerequisite for a free and civilized society, and their absence is simply a condition for barbarism.
Translated by Google Translator
source:https://www.zerohedge.com/
