JCR Vol. 07 No. 01: Symposium on Inflation

The inflation crisis is now an international phenomenon. The whole industrialized world is suffering from chronic price inflation, and no government seems to be able to do anything about it.

When those of us associated with Chalcedon began warning people of the impending inflation, back in 1964, few listeners took us seriously. They simply cold not accept the fact that governments would not control their monetary policies. But year after year, as monetary inflation has continued, thereby producing price inflation, people have learned the grim reality of what we warned about a decade and a half ago.

The problem facing us today is massive. Few people understand the inflation process, and when people don’t understand what the cause of their problem is, and the problem gets serious enough, then they are likely to make serious errors—personal financial errors, political errors, and policy errors. If Christians have no better understanding of the causes and cures for inflation than the secular world does, then we are not going to be in a position to exercise effective leadership.

The trouble is, everyone thinks he knows what inflation is all about. A person who wouldn’t venture an opinion concerning physical chemistry or astrophysics is ready with an explanation for inflation. About the only things not going up in price today are dime-a-dozen solutions to inflation. And given their value, they shouldn’t be going up in price; the supply of them keeps increasing too fast.

What the latest issue of The Journal covers is the inflation question: causes, effects, cures, and ineffective solutions that have failed in the past. We hope that people who have read this issue will have a far better perspective on the subject: what to do about it personally, what the political authorities should do, and what we can expect them to do. We can expect them to take steps that will compound the problems.

The intellectual father of modern price inflation was John Maynard Keynes. It is the universal popularity of Keynes’ ideology—and ideology favorable to government intervention and printing press money—which has led to the monetary policies of today. Ideas have consequences, and Keynes had some exceedingly bad ideas.

The professors in the universities who have infected two generations of students with Keynesian economic theory are still in power, fully tenured, and still somewhat respectable. But these men are now trapped by their own ideology: price inflation is wiping out faculty salaries and pensions. This is precisely what Keynes said would happen: the reduction of real purchasing power, despite nominal increases in wages. Instead of the workers getting deceived by this phenomenon, it has been the professors.

When this era’s economics are destroyed by the ravages of inflation controls, unemployment, and market instability, the utter nonsense published by the economists over the last 40 years will be seen for what it was: incomprehensible, overly mathematical propaganda for the construction of a statist society. What Christian laymen need to understand in advance is that professional economists, supposedly orthodox in their Christian faith, have generally bought the Keynesian ideology. We have to be ready to abandon all such attempts to fuse Keynesian economics and Christian faith. We have to disassociate ourselves from all versions of baptized Keynesianism, so that when public repudiation comes in the wake of economic destruction, Christians will be able to say, “We warned you about this. Now listen to us while we lay out the answers.”

One of the nicest features of the last 15 years of international price inflation has been the erosion of faculty pension funds, university endowments, and the reputation of the big-name Keynesian advisors. They still have some prestige left, just as they still have some money left in their pension funds, but they are in trouble. The public is beginning to catch on. If these economic doctors can’t seem to be able to beat inflation in their own lives, why should anyone take them seriously? These two-bit emperors have no clothes. All they have left to cover themselves are their Ph.D.’s. Now that these have been debased through overproduction, they don’t mean as much as they used to.

The Bible does have answers. It has solutions to the problem of inflation. They Keynesians have never taken the Bible seriously as a guide to economic policy, including the Keynesians who teach on Christian college campuses. We have to be able to spot nonsense solutions when they are offered in the name of Science or Christianity.

Can we have inflation and unemployment simultaneously? The Keynesians used to say no. Now we see both.

Can the boom-bust cycle be avoided through “fine-tuning” the economy? the Keynesians used to say yes. Now we know how wrong they have been.

Will the government be able to find a politically acceptable solution to inflation before mass inflation wipes out the middle class? None has been able to do it so far.

Will the middle class wake up in time? Some of them have, but as they do, prices rise even more rapidly, as they seek to find inflation hedges. Will any of these hedges really work? Did any of them work in the great German inflation of 1921-23?

What will be the effect on society of continuing inflation? Who will be hurt most? Will anyone profit?

All of these questions are covered in the latest issue. Keynesians in the classroom won’t appreciate the answers, but The Journal isn’t aimed at them anyway, except insofar as you would aim a shotgun.

The economies of the West are in serious trouble, and this trouble is going to become far worse over the next half decade. Christians had better be forewarned. If Christians fare no better in the coming crises than humanists, then they will hardly be in a position to offer advice after the crash.