The Ethics (or lack of) Of Inflation - Part One.

As an overview I will mention that the end result of inflation is a decrease in the purchasing power of the currency. Part One will address the origin of inflation and the system, emphasizing whether these are ethical or not.

Inflation is a good word because it induces the thought of a balloon which induces the thought of floating away. Prices rise and in hyperinflation the sky is the limit!

Another good analogy is dilution. Imagine yourself ordering orange juice at a restaurant. It comes and it is thick and nutritious and fresh squeezed like it states on the menu. If those managing the restaurant add water to the juice and do not change the 'fresh squeezed' description on the menu then you will be cheated even if your palate is not fine enough to detect the sham.

This is where ethics enters in. To dilute (or inflate) surreptitiously is untrustworthy. It is clear that the inflator benefits from the theft of a portion of someone else's property or wealth. Inflation (dilution) is untrustworthy and it is theft. This is exactly the reason why counterfeiting is a crime!

We have made the transition now to money (our ballon and orange juice analogies served us well). The origin of the inflation is the existence of a fiat currency. Instead of the currency being defined as a portion of a measurable unit of a commodity, it is merely authorized by government decree. The government declares it as legal tender without tying it to anything that has real value. The origin of inflation is when the government prints more of this fiat money. Ethically it is criminal because it is nothing more than government sanctioning its own counterfeiting which is still theft and deceit.

When a counterfeiter prints money he or she directly benefits. But the government is a large entity so to who and how do the benefits flow? First of all the system requires compliance. There cannot be alternatives or renegade banks that are not part of the inflation scheme. The necessary requirement is the establishment of a central bank combined with legal tender laws. Once this central bank system is in place the inflation of a national currency is possible.

This is where I will pick up next time in a future blog entry.

P.S. There is only one statesman knowledgeable enough about classical liberalism and principled enough to speak honestly about these violations of civil rights and that is Ron Paul.