The Thief In Your Wallet: Inflation and Morality | Danube Economics

Inflation is a game we play with ourselves – and we always lose it. In a fiat money environment, for the system to work long term – then money has to keep the value it had when we earned and saved it. If its value declines, then we end up in a world of hard-to-notice theft. Savers are robbed. Asset owners rewarded more than their fair share. Banks lose the trust of their customers – and vice versa.Treasuries finance their deficits by kicking the can down the road, by borrowing more rather than either cutting spending or raising taxes, and eventually by borrowing in order to increase government spending still further. And inflation is not just an economic problem for finance ministers to solve. It’s a moral problem for ordinary citizens too. It impoverishes the poor, the old, and those on fixed incomes with particular severity. It enriches the better-off who have assets that rise in value as their prices rise. It encourages companies to hike prices covertly – by cutting the number of potato crisps in a bag or the amount of beer in a glass. And as for workers who win higher pay through collective bargaining–inflation reduces their take-home pay while they’re still walking home. And if they strike for still more money next year to recoup their losses from inflation, that will only add another twist to the inflationary spiral. The 1980s generation of politicians who took on runaway inflation, often did so clothed in the language of morality. They were right to do so. After all, tackling inflation requires us to make the sacrifice at the heart of morality. It’s short term pain for long term gain. But why do we never learn our lessons–that inflation is a mug’s game. That restoring price stability is hard and means a loss of income, jobs, and growthBrian Griffiths was Dean of the City of London University’s business school, before he became Director of the Number 10 Policy Unit in 1985. He later served as vice-president of Goldman SachsHe chaired the Griffiths Commission on Personal Debt in 2004, and for his services, was created Baron Griffiths of Fforestfach in the House of Lords. He is also a committed Christian. It is with all of these priors in mind that he came to his latest book, titled: Inflation Is About More Than Money: Economics, Politics and the Social Fabric. Brian will be joined in discussion by Philip Pilkington. Philip is a Danube Fellow, and the author of his own new book – The Collapse of Global Liberalism and the Emergence of the Post Liberal World Order. Philip is also a talented and unorthodox economist. Both of them see economics through a moral lens. And both of them believe our institutions should be more than just score-keepers. In this episode of Danube Economics, the duo discuss their perspectives on the proper relationship between inflation and morality with the Danube Institute’s President, John O’Sullivan.