Introduction

Jörg Guido Hülsmann is probably known to many who are members or followers of the Mises Institute for his massive biography of Ludwig von Mises, Mises: The Last Knight of Liberalism. I am presently reading through that work. For this month’s Contemplations blog, however, I will draw from a short pamphlet he authored back in 2004, How Inflation Destroys Civilization. February 10, 2022, this pamphlet was republished by the Mises Institute under the title The Cultural and Spiritual Legacy of Fiat Inflation. Sometime in the future I would like to do a TakeAway review of the pamphlet, but for this month I thought it would be fitting to focus on sections 7 and 8 from the pamphlet that address how fiat inflation leads to the demise of spiritual values with the consequent demise of civilization that depends on those values for its just and moral existence. Because the Christian worldview is the foundation for this blog, I agree with Hulsmann that inflation and economic irrationality destroy the spiritual bedrock values on which civilization is built and maintained. The very fact that in the United States we can speak of $33-trillion debt without any depth of understanding what economic and moral dangers such debt holds for our nation is evidence of how inflation destroys both rational and moral precepts that undergird a culture.

Inflation Undermines Christian Family Values

Throughout his pamphlet Hülsmann describes the devastating effects of fiat inflation, giving rise to the fractional-reserve banking system, the increase of public and personal debt, the undermining of legitimate entrepreneurship, and the decrease in quality of manufacturing products, these among many other destructive effects. Hülsmann in part 8 of this short pamphlet (p. 16) discusses how fiat inflation and the rise of the welfare state leads to what he calls suffocating the flame of Christian family values. How does inflation lead to this effect?

First, with the constant increase of public debt the welfare state emerges and usurps private responsibility through the politicization of all areas of life. For those of us who care to be aware, we are first-hand witnesses of this phenomenon in the United States. There was a time when people felt frantic about the fact that from the inception of Johnson’s Great Society legislation in the late 1960’s to the turn of the 21st Century, state expenditures for HEW was just over $5-trillion dollars. The welfare state has now encroached on nearly every area of an individual’s life from retirement to health care to public education. As stated above, people can nonchalantly speak of a $33-trillion dollar government debt in the blink of an eye without grasping what that means for the economy and where the nation is headed economically and morally. When people turn to the state for all their needs, human values change. Hülsmann points out that massive public debt represents a major factor in the decline of the family. Perennial inflation slowly but assuredly destroys the family, thus suffocating the earthly flame of Christian morals (p. 16).

Second, the Christian family generates a particular type of morals that can undergird and uphold a society. Among others, such values include understanding the legitimate place of authority, heterosexual marriage between a man and a woman, and prohibition of incest and abuse of children that appears so prevalent today. Hülsmann points out where families live according to Christian values, marriages stay in tact, offspring are loved and care for, and children respect their parents. For those who truly believe in Jesus, the Christ, the reality of the Triune God and the truth of the Christian faith is passed on. I would also add that where a nation stands on Christian values, a Christian consensus comes about, whether or not everybody is a believer. With these values come the responsibilities that families take on in educating their children, charitable assistance in times of need, and a work ethic that maintains the subsistence of the family and society. Most or all of these responsibilities have been hoisted upon the welfare state. Government expenditure escalates, taxes increase, and inflation sets in due to state fiscal policy, thus individuals no longer hold to the responsibilities that once belonged to families. When it comes to charitable giving, people say, I gave at the office. It’s called taxes.

Third, as Hülsmann points out, compassion cannot be bought (p. 18). Amazingly, Americans continue their donations to charities, but not at the level that once existed, especially when adjusted for inflationary costs of living. I might add not only can compassion not be bought, but neither can education and health care when it is placed in the hands of the state. Because the welfare state, and statism in general, is grossly inefficient economically, it must depend on taxes. People bow and praise the holy state because government bureaucrats slow down the rate of spending rather than reducing spending in large sums as they should. People’s taxes will continue to rise, and state spending will continue to escalate. Because people look to the state for a life, we are trapped in a nonstop escalating cycle. Government continues to tax, but taxes alone cannot come near paying for what politicians have promised people via their campaigns and once in office. Hence the state continues running the printing press and floating loans with the consequent absorption of capital that should be used in the manufacturing and production of goods and services (p. 18). The free market, the production of income, savings, and wealth, and the manufacturing of quality goods and services cannot coexist with statism and government’s infiltration of every area of the economy and life. The excessive welfare state of our days is a direct attack on the producers of Christian morals . . . The welfare state systematically exposes people to the temptation of believing that there are no time-tested moral precepts at all (pp. 18-19).

Additional Spiritual Casualties of Fiat Inflation

Part 7 of Hülsmann’s pamphlet (p. 13) actually begins his exploration of how fiat inflation undermines spiritual values in a culture. Part 8 discussed above puts the crowning cap on his discussion. I will briefly delineate what Hulsmann designates as the casualties of fiat inflation (pp. 13-16) in part 7.

First, because inflation destroys the purchasing power of money, people have to spend an extraordinary amount of time managing their assets and investments. No longer can we simply depend on having a healthy savings account. Indeed, these days leaving cash in the bank not invested is dangerous as inflation eats away at the value of the money simply lying there. It is a shame, but once having money in a savings account was considered to be frugal. At retirement age, I know so many people, having worked all their lives who are frighten about having enough income to continue to live on for the rest of their lives. The state should have never taken over the retirement plans for individuals. One’s social security account does not exist. The state spent the money years ago. This means retirement has been placed in an immoral pay-forward systems that puts retirees at odds with younger people who are starting out in their early productive and working years. The precept addressing the Biblical stewardship of money has fallen on hard times.

Second, the concern over the value of money leads people to consider higher-paying careers that would not otherwise be at the top of their lists except for its lucrative returns that will put them in better stead for retirement years. There has become a large financial rift between certain types of work and those sought out in the worlds of industry and corporations. This is especially ludicrous when one reflects on how the state and major industries and corporations are bed partners.

Third, inflation makes society cling to materialistic values (p. 15). As the economy descends into more and more ill-health, people, whether they want to or not, must place heavy emphases on their monetary decisions.

Fourth, continued inflation leads to the a lower quality of production (pp.15-16) Small businesses, and even large firms, industries, and corporations cut corners as prices increase in both production and consumer goods. Although technological innovation can ward off some of the inferiority in products, as a whole, innovation is a victim of inflation as well. What we are witnessing now is the desire of corporations to become political so as to gain a favored market share, regardless of the quality of their products.

Fifth, a failing economy leads to a blurred distinction between truth and lie (p. 16) In this postmodern age, rhetoric has become king, and what sounds good is true. Hence, the cost of advertising rises to create a language to convince people of the quality of what they purchase. The fractional-reserve banking system is a product of the distinction lost between what is true and false. The history of money-runs on banks bears this out. What people believe is safely in the bank is not there.

Conclusion

In this short 19-page pamphlet, Jörg Guido Hülsmann provides much food for thought, not only regarding economic catastrophes that come about due to fiat inflation, but also how inflation and the destruction of the value of money leads to and is continued by moral and spiritual decay. Economics, family, ideas about justice and frugality, and people’s moral and spiritual values are not separate compartments. They are a way of living out what we believe to our core in the world.

Hülsmann, J. G. (2004). How Inflation Destroys Civilization. Auburn, AL: Mises Institute.

[Jörg Guido Hülsmann is a Senior Fellow at the Mises Institute located in Auburn, AL. Additionally he is a member the European Academy of Sciences and Arts and the Pontifical Academy for Life. He is a professor of economics at the University of Angers where he also directs the Master of Law and Finance and co-directs the bachelors of Law and Economics. He has taught courses in economics, including macroeconomics, money, banking, and finance. He has authored several books, including an extensive biography of Ludwig von Mises, Mises: The Last Knight of Liberalism.]

John V. Jones, Jr., Ph.D./October 14th, 2023

CHRISTIAN THOUGHT/ANALYSIS/Economics