Does this sound familiar?
Prices rose as the value of the currency endlessly fell; savings dwindled while debt loads rose; a spirit of gambling took hold, and bribery flourished.
That’s from a book review at Mises.org – of a really old book called Fiat Money Inflation in France. Some things, apparently, never change.
Regardless of what our modern day politicians and pundits say, our current economic circumstances are hardly unprecedented. This story of monetary inflation and fiat money has been told many times from John Law’s Mississippi bubble in France to the Mississippi bubble in England to the period in the late 1700s in France referenced in the book.
Here’s another line from the book that should sound familiar. Speaking of the victims of inflation:
which “creates on the ruins of the prosperity of all men of meager means a class of debauched speculators, the most injurious class that a nation can harbor”
On whom did this vast depreciation mainly fall at last? Men of small means.
Inflation benefits bankers, brokers and politicians because they are the first recipients of newly created money. It is the average person and especially the poor who suffer the most. The widening divide betwen rich and poor is not some scheme hatched by the Republican party. It is a direct result of our monetary system and no matter which party is in charge, it will continue until we end our flirtation with fiat money. The preferred Democratic alternative is to tax the rich and redistribute the income but that only ends up hurting the working class as well since the capital is consumed rather than invested.
Anyone who wants economic justice should first look to the gold standard:
The purpose of a gold standard — what makes it so indispensable to a system of economic justice — is that it takes the power to create money and credit at will out of the politicians’ hands — in fact, out of anyone’s hands. No man, no matter how virtuous and saintly, can long resist the call of the money machine; and the political world, where virtue and saints are always in meager supply, is a particularly dangerous place for it to reside.
I hate to sound like an old fogie but some things were better in the old days:
Using the French monetary collapse of 1796 as a lesson to teach a greater point — to warn against fiat currency — the book is unabashedly supportive of a gold standard. At the time of its publication in 1896 this position was not only respected; it was mainstream — proponents of paper money were the kooks. Now the shoe is firmly on the other foot: polite people do not talk about a gold standard. Maybe they should start.
It seems the lessons of fiat money have to be learned again every few generations. Let’s hope our generation figures it out soon. The book can be bought for a non inflationary $10 through the Mises Institute.
One last note: the architects of the late 1700s French fiat money system were mostly sent to the guillotine. Hmmm….