Why inflation is deadly

Inflation is awful for what it is in theory. For what it does to people in practice. And for what it reflects. So forgive me if I say a few things everyone knows. As sometimes we forget what we know (I’m the first culprit myself), the following is just to jog your memory.

Inflation is too much money chasing too few goods. In the West, the amount of available goods mostly depends on private economic activity. The amount of money chasing them mostly depends on how much currency rolls off the printing presses controlled by the government or, more typically these days, by the quasi-independent central banks to which governments like to delegate this function. As the government can control production only indirectly, inflation is caused by governments printing (or borrowing, which amounts to the same thing) too much money. Why would any government want to print too much money? Because it wants to spend too much. And why would it want to do a silly thing like that? Because this enables it to reshape society in its own image, that of corrupt, selfish, ignorant materialists.

In his book The Time of Turbulence, the self-admittedly infallible Alan Greenspan, who operated the American printing press from 1987 to 2006, confirms the first half of this homespun wisdom: ‘Excess government spending causes inflation.’ The second half is proved by numbers.

Western governments began to pursue aggressive economic activism in the 20th century. Whether the subsequent violent death of the best part of half a billion people was a direct result of this development or its unfortunate side effect is outside my immediate subject. I just want to compare the inflation figures in the last sane century, the 19th, with the 20th, the first ‘American century’ (it was described as such by the publisher Henry Luce).

Behold: £100 pounds in 1850 became £110 pounds in 1900 — a negligible inflation of 10% over 50 years. That meant that a baby born at the time with a silver spoon in his mouth, which utensil equalled, say, a solid middle-class income of £500 a year, could live his whole life in reasonable comfort even if he never made a penny of his own. Conversely, £100 in 1950 became £2000 in 2000 — a wealth-busting, soul-destroying inflation of 2,000%. This brought the economy to the forefront of human endeavour: with money losing value at that rate, people had to devote every waking moment to chasing pennies wherever they could find them. They also realised that saving and conservative long-term investment would lead them straight into the gutter. Saving became ruinous; borrowing, logical. Why not borrow £100,000 if you know that in a few years its real value would drop by an order of magnitude? And, for the same reason, why save £100,000? Thus the hysterical, feverish, soulless materialism of modernity isn’t just a consequence of original sin. It’s a result of systematic government policy.

The knock-on effect pushed the banks into irresponsible lending, the people into promiscuous borrowing and reckless spending, and the economy to the edge of the precipice. Such is the awful cost of social engineering, of governments trying to satisfy their totalitarian aspirations by economic subterfuge. Do think of that the next time you kneel before the altar of the blessed welfare state, the sainted NHS or the humanitarian foreign aid. If you do, I bet you’ll get up on your feet straight away.


War in our time

Alain Juppé, the French foreign minister, believes that the crisis in Europe is existential. Like the writings of Sartre and Camus? No, more like 1940, the year in which the French, in anticipation of the Stockholm syndrome, fell in love with their conquerors. Like a pre-war girl from a good family, la belle France first put up some token resistance, then surrendered, then began to cohabit with her rapist only to marry him in the end and live happily ever after.

At least the ‘happily’ part was the plan. But Mr Juppé isn’t happy any longer. Things have gone sour, like a corked bottle of Meursault. The current crisis ‘raises the spectre of a return to violent conflict on our continent… [undoing] what we have created… since the foundation of the European community.’ The solution? How do we get out of the hole into which we’ve dug ourselves? Clearly unfamiliar with the Anglo-Saxon idiom, Mr Juppé thinks we should keep digging. ‘We’ve gone too far not to go further.’ Who could argue with this logic?

This is in line with the thinking of my many French friends who come up with highly creative arguments in favour of the EU. ‘It’s thanks to the EU,’ said one, ‘that Europe has been at peace since the war.’ Ignoring the obvious fact that the war ended in 1945 and the EU has only existed for 20 years, I simply replied that it’s colour TV that’s the real factor of peace. ‘What does colour TV have to do with it?’ ‘About as much as the EU.’

When, in response to a similar argument, I suggested to another chap, at that time a high official in the Commission, that most federations in history, from the USA to Yugoslavia to the USSR, ended up with the constituent parts murdering one another, he gave me that clichéed Gallic shrug. ‘Comparaison n’est par raison,’ he said (a comparison isn’t an argument), thereby refuting the opposite view first put forth by Aristotle.

One would think that the man responsible for the conduct of French foreign policy at this fraught time would have a clearer sense of history. Or at least one would have thought this in the past, before Europe fell into the hands of amoral, self-serving spivs. And, in addition to those qualities, the bureaucrats from the two principal powers, Germany and France, also suffer from all sorts of delusions. The Germans don’t want to be German any longer, but the French do. Though the Germans, overcome with Auschwitz guilt, hate themselves, they want everyone to be just like them. The French, though still sometimes talking about les sales boches over a glass of rouge, are ready to go along. Bringing up history seems futile in this asylum run by the lunatics. But, since I’m not due back in France until Christmas, some of the more obvious parallels have to be drawn.

When Prussia got a shot of energy after first having been kicked from pillar to post by Napoleon but then ending up on the winning side, she decided to bring all the German principalities together. To that end in 1818 she created Zollverein, a customs and eventually currency union of all Hohenzollern bailiwicks. The principalities who feared, correctly, that this would lead to Prussian domination were bribed with subsidies and cheap loans (follow the parallels?). Soon other German or at least Germanic states were drawn in. By 1866 most of them had been brought to heel. When Austria proved too stubborn, she was attacked, but managed to hold her own. Two years later another holdout, Schleswig-Holstein, wasn’t so lucky.

In 1870 Prussia led her North German Federation and several southern German states in a victorious attack on France. A year later the First Reich, now including the formerly French Alsace-Lorraine, finally came together under Prussia’s aegis. We all know what happened over the next 70-odd years.

The EU has been pieced together on a larger scale but using the same strategic blueprint. First you stuff them full of carrots, then, should anyone throw up, beat them down with the stick. Seeing that the carrots are coming up in a geyser, the stick may well see the light of day in the near future. But, contrary to Juppé’s lament, this wouldn’t be the undoing of ‘everything the EU has created’. It’ll be the natural result.

Alas, if there is something for which no historical parallel can be drawn, it’s Britain’s role in the madhouse proceedings. She isn’t the doctor any longer. She’s one of the inmates.