Remember: Inflation is the creation of money [currency] and credit out of thin air. The CONSEQUENCE of inflation is a rise in prices. It is the REDUCTION of purchasing power of the dollar that causes the rise in prices.
The Ethics of Money Production, Jörg Guido Hülsmann, pp. 185-188
8. SOME SPIRITUAL CASUALTIES OF FIAT INFLATION
Fiat inflation constantly reduces the purchasing power of money. To some extent, it is possible for people to protect their savings against this trend, but this requires thorough financial knowledge, the time to constantly supervise one’s investments, and a good dose of luck. People who lack one of these ingredients are likely to lose a substantial part of their assets. The savings of a lifetime often vanish into thin air during the last few years spent in retirement. The consequence is despair and the eradication of moral and social standards. But it would be wrong to infer that inflation produces this effect mainly among the elderly. As one writer observed:
These effects are “especially strong among the youth. They learn to live in the present and scorn those who try to teach them ‘old-fashioned’ morality and thrift” [emphasis added]. Inflation thereby encourages a mentality of immediate gratification that is plainly at variance with the discipline and eternal perspective required to exercise principles of biblical stewardship—such as long-term investment for the benefit of future generations.8
Even those citizens who are blessed with the knowledge, time, and luck to protect the substance of their savings cannot evade inflation’s harmful impact, because they have to adopt habits that are at odds with moral and spiritual health. Inflation forces them to spend much more time thinking about their money than they otherwise would. We have noticed already that the old way for ordinary citizens to make savings was the accumulation of cash. Under fiat inflation this strategy is suicidal. They must invest in assets the value of which grows during the inflation; the most practical way to do this is to buy stocks and bonds. But this entails many hours spent on comparing and selecting appropriate issues. And it compels them to be ever watchful and concerned about their money for the rest of their lives. They need to follow the financial news and monitor the price quotations on the financial markets.
Similarly, people will tend to prolong the phase of their life in which they strive to earn money. And they will place relatively greater emphasis on monetary returns than on any other criterion for choosing their profession. For example, some of those who would rather be inclined to gardening will nevertheless seek an industrial employment if the latter offers greater long-run monetary returns. And more people will accept employment far from home, if it allows them to earn a little additional money, than under a natural monetary system.
The spiritual dimension of these inflation-induced habits seems obvious. Money and financial questions come to play an exaggerated role in the life of man. Inflation makes society materialistic. More and more people strive for money income at the expense of other things important for personal happiness. Inflation-induced geographical mobility artificially weakens family bonds and patriotic loyalty. Many of those who tend to be greedy, envious, and niggardly anyway fall prey to sin. Even those who are not so inclined by their natures will be exposed to temptations they would not otherwise have felt. And because the vagaries of the financial markets also provide a ready excuse for an excessively parsimonious use of one’s money, donations for charitable institutions decline.
Then there is the fact that perennial inflation tends to deteriorate product quality. Every seller knows that it is difficult to sell the same physical product at higher prices than in previous years. But increasing money prices are unavoidable when the money supply is subject to relentless growth. So what do sellers do? In many cases the rescue comes through technological innovation, which allows a cheaper production of the product, thus neutralizing or even overcompensating the countervailing influence of inflation. This is for example the case with personal computers and other products made with large inputs of information technology. But in other industries, technological progress plays a much smaller role. Here the sellers confront the above-mentioned problem. They then fabricate an inferior product and sell it under the same name, along with the euphemisms that have become customary in commercial marketing. For example, they might offer their customers “light” coffee and “non-spicy” vegetables—which translates into thin coffee and vegetables that have lost any trace of flavor. Similar product deterioration can be observed in the construction business. Countries plagued by perennial inflation seem to have a greater share of houses and streets that are in constant need of repair than other countries.
In such an environment, people develop a more than sloppy attitude toward their language. If everything is whatever it is called, then it is difficult to explain the difference between truth and lie. Inflation tempts people to lie about their products, and perennial inflation encourages the habit of routine lying. We have already pointed out that routine lying plays a great role in fractional-reserve banking, the basic institution of the fiat money system. Fiat inflation seems to spread this habit like a cancer over the rest of the economy.9
8 Thomas Woods, “Money and Morality: The Christian Moral Tradition and the Best Monetary Regime,” Religion & Liberty 13, no. 5 (September/October 2003). The author quotes Ludwig von Mises. See also William Gouge, A Short History of Paper Money and Banking in the United States, to which is prefixed an Inquiry into the Principles of the System (Reprint, New York: Augustus M. Kelley,  1968), pp. 94–101.
9The relationship between fiat inflation on the one hand, and misperceptions and misrepresentations of reality on the other hand has been brilliantly discussed in Paul Cantor’s case study on “Hyperinflation and Hyperreality: Thomas Mann in Light of Austrian Economics,” Review of Austrian Economics 7, no. 1 (1994).