Are we headed for hyperinflation? Consider the Web site of the National Inflation Association (NIA), www.inflation.us – with the subtitle Preparing Americans for Hyperinflation. According to the NIA, “The United States now has over $76 trillion in total debt obligations. Our budget deficit in February of 2011 alone was a record $225.5 billion, more than the entire year of 2007.” The NIA believes that the U.S. federal government will not be able to balance its budget, let alone pay off its existing national debt. Inflation is therefore inevitable as the government will have no alternative. Not everyone agrees with this assessment, however. Looking at the situation very differently, Wall Street Journal Economic Editor David Wessel concluded that an “immediate outbreak of inflation is improbable.” The economy, after all, is stagnant. How could there be inflation? Of course there are special circumstances that could arise, Wessel admits. But these are nonetheless unlikely.
How are we to evaluate the inflation question? Is there more sense in the “big picture” analysis of the NIA? Or is there more sense in the detailed analysis of David Wessel? The NIA takes the long view while David Wessel is trying to see what may be lurking around the next corner. What we find in the NIA and WSJ is two approaches to the same question. In the game of prediction, “big picture” analysis usually won’t tell you want is going to happen in the short run; and most details of the moment are mere trivia when it comes to the long run.
Those who specialize in long run thinking are sometimes called “philosophers,” or lovers of wisdom. One of the more relevant philosophers of the last century was Jose Ortega y Gasset, who wrote a remarkable little book published in 1930 under the title The Revolt of the Masses. One of the core themes of the book is that, “for good or ill,” the masses have ascended to “complete social power.” Ortega called this situation “the greatest crisis that can afflict peoples, nations, and civilization.” He noted that mass man is only concerned with his own well-being while remaining ignorant of the principles that make civilized existence possible. “They do not see behind the benefits of civilization,” he wrote. “The mass man has a radical ingratitude towards all that has made possible the ease of his existence.” This might include the principles of economics, thrift and industry. The mass man is focused on the immediate future, and immediate gratification. He does not look to the long run. “The long run is a misleading guide to current affairs,” wrote John Maynard Keynes. “In the long run we’re all dead.” (Spoken with due sensitivity to the spirit of the age.)
Something is definitely lost when we adopt a negative attitude toward the long run. In a chapter titled “Primitivism and History,” Ortega argued that “Nature is always with us.” Civilization, however, is not Nature and is not always with us. Civilization is artificial and fragile. “If you want to make use of the advantages of civilization,” he warned, “but are not prepared to concern yourself with the upholding of civilization – you are done.” Civilization exists because of long run thinking. It is maintained by long run thinking. Therefore, civilization is imperiled at a time when nearly everyone is focused on the short run. A key symptom is found in a general want of historical knowledge. “The most ‘cultured’ people today are suffering from incredible ignorance of history,” wrote Ortega. “I maintain that at the present day, European leaders know much less history than their fellows of the nineteenth, even of the seventeenth century.”
A similar statement could be made with regard to economic knowledge. Just as we have been losing our sense of history, we have been losing that sense which says “a penny saved is a penny earned.” If the mass man is merely concerned with his immediate gratification, and if he has no regard for the economic long-run, is not indebtedness his destiny? And once he finds himself ruined by short-sightedness, what desperate measure will he next employ? Retrogression is likely, Ortega predicted. By this he meant “typical movements of mass men, directed, as all such are, by men who are mediocrities, improvised, devoid of long memory and a ‘historic conscience,’ they behave from the start as if they already belonged to the past….”
If we look back at history, we see that inflation and economic stagnation can exist together. We also see that inflation is the natural course of government when leaders prove themselves ignorant. And why should leaders be any more enlightened than the so-called “experts” and professors who advise them today? What was taken as common sense for centuries is now considered out-of-date. The same John Maynard Keynes quoted above also said, “In truth, the gold standard is already a barbarous relic.” Indeed! The Roman Emperor Caracalla debased the silver denarius from 95 percent silver to 50 percent and then 0.5 percent. Barbarian mercenaries in service to the emperor would not accept payment in Roman coins, but insisted on payment in gold.
History suggests that all fiat currencies are headed for worthlessness. We do not know, of course, how long it will take in any given case. The National Inflation Association has a number of intriguing charts, which readers may wish to evaluate for themselves (see https://inflation.us/charts.html). The one that caught my attention is titled “Fed & Treasury Total Money (FTTM).” According to this chart the Fed & Treasury total money supply began to skyrocket after the 2008 economic meltdown. The NIA set down the following note below the chart, “The DOW Jones has rallied 97 percent from its low in March of 2009. However, adjusted for real inflation, the Dow Jones is about equal to where it was in 1963.”
Inflation is already here, and worse is coming.
