Acton Institute Powerblog

Inflation: A Moral Problem

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Despite signs of a cooling economy, the Fed is holding the line on interest rates. And reason is fairly simple: Worries about inflation. While there are many good reasons for fiscal restraint in the face of the inflation threat, there are also larger moral issues at work, says Sam Gregg. Inflation strikes at the economy’s ability to assist people to achieve their full human potential. “Tough monetary policy is not just good economics,” Gregg writes. “It’s also an exercise in tough love – for all of us.”

Read the full commentary here.

Jonathan Spalink


  • John

    This is a sound perspective in the discipline. As you rightly say, this can be directly related to trying to comprehend whether the business climate and profits are real or illusionary. Accountability to shareholders thus becomes more problematic. For the household what should the saving levels be?
    I would like to promote discussion on another tentacle of economic and moral disruption that is in need of significant disciplinary action.
    The other critical discipline not currently in use is that of current accounts balance. The use of government spending or the doling out of billions through rationalized tax laws or ear tagging spending bills to the tune of 6-7000 items in one bill are both immoral. This rubber stamping of the corrupt allocations of the people’s money is one of the most damaging governmental activities in recent time.
    Balance budget or something very close except in extreme times (a great depression) are not only policies that are not only economically sound, but also morally essential. We can find quotes from Greenspan on numerous occasions testifying while his term as the Head of the Fed rationalize large government deficits if it had some economic benefit of large infrastructural gains that would advance the commercial activity. Example may be ports, public private scientific advances or transport systems. Whether we rationalize debt because we say it is the people’s money or we are tax cutters we are defending waste and promoting corruption. We should have respect for the people’s money. We should have the lowest levels of taxes as possible, but not to the exclusion of all other rules of economics.
    We also know that the focus of this redistribution of capital was to enable the prime recipient of the capital to recycle a percentage of this capital back into the coffers of the political re-election campaigns. The 5 billion dollars of debt over the last few years is also an inflationary agitator and in the end, accountability to shareholders (the people) thus becomes more problematic.

  • Dr William Gissy

    Although Dr. Gregg’s article has some merit to it he does lapse into some simplistic notions concerning inflation, the kind of inane comments one expects from those whose study of the discipline is somewhat limted.

    Let’s begin by stating that, Austrians aside, economists do not define inflation as the depreciation of currency. It should also be noted that Austrians are to economics what the Buddists are to Catholicism, not remotely related. Inflation is the persistent increase in prices which has, as a consequence, the depreciation of monetry value.

    Does inflation eat away at savings? To cite a 40 year old quote does little more than demonstrate the insignificance of the notion to the economics profession today. If I put my wealth into an account paying 3%% and inflation is 3%% the real value of my principal is protected. All nominal interest rates have an inflation premium built in. Only the foolish of the world assume that in the absence of inflation they would receive the same interest on their investments.

    Only when inflationary changes are unanticipated do we find the distortions that have Dr Gregg so concerned. While a low inflationary policy is desirable, because low inflation has little variation, to pursue a zero inflation environement could have adverse consequences in terms of employment and production. Dr Greggs less than honest reference to LBS data excluded any mention that we can also find periods where low inflation was also associated with declining employment, a fact that doesn’t serve the purposes of reactionary zealots.

    Bracket creep was a problem but economists argued for years to inflation adjust tax brackets, which we now do.

    As a last point ,I wonder if John could draw upon his vast knowledge on monetray theory to explain how debts necessarily causes inflation?

  • Christof Zellenberg

    I do highly appreciate Sam Gregg’s article! He is absolutely right with his notions on the effect of Inflation on tax brackets and the devalutaion of savings but also budget deficits in the long run.
    In fact it would be favourable if we could get rid of the inflationary preassures for our economy. At least that would put us into a more honest and transparent economic situation.
    Congratulations for this great article – once again!