Recently one of my favorite bloggers, Israeli Water Engineer, wrote about fears of deflation in the United States: “This is bad. The only solution to world indebtness is controlled inflation….”

I commented that deflation is a pretty good thing; he replied and I replied back (go read it).

Though this discussion is about deflation, I actually have much stronger views about inflation. I think inflation is absolutely the worst economic policy that can possibly be effected, a million times worse than recession. Recession, see, harms everyone. But inflation is a dagger in the back of the people who hold society upright, the people who work hard for a long time and save their money with prudence and wisdom. I think there is a case to be made that inflation is at the very root of all the ills of modern society.

Why don’t other people see it this way?

Let’s be clear about some terms: deflation is a decrease in the money supply, and it typically leads to decreasing prices (it does not equal decreasing prices). Inflation is an increase in the money supply, and it typically leads to increasing prices (it does not equal increasing prices). Actually, “prices” are just the number of dollars (or whatever currency) it takes to buy any old good or service. So we can express the cost of stuff in terms of dollars or the cost of dollars in terms of stuff: when the supply of one side increases, its value decreases relative to the other side, and when the supply of one decreases, its value increases relative to the other side.

Progressives love inflation because it’s inherently destabilizing. How so? Suppose you’re 25 years old, just starting out in the world after graduating from university and with a lot of debt. If inflation starts eating away at the money supply, your debt can be wiped away soon! So don’t bother paying it off. Instead, spend your money extravagantly on vacations and fancy clothes, and maybe buy a house that you don’t really need (with a huge mortgage, of course). Why not? It’s not like money means anything or has any value. Now suppose you’re 75 years old, worked your entire life, saved money, raised a family, paid off your debts and finally retired to enjoy your old age. If inflation starts eating away at the money supply, your retirement savings can be wiped away soon! But don’t bother complaining, because progressives love the idea that no one will ever be able to retire (except from government careers, with pensions tied to the inflation rate): after all, it was progressives who came up with the idea that one who doesn’t work should not be able to eat. Inflation is how the young generation steals from their elders.

Suppose you’re 25 years old, just starting out in the world after graduating from university and with a lot of debt. And suppose you can’t count on inflation to take care of your debt for you. What do you do? You move in with your parents. You get a job. You become a productive person. You live frugally, saving money and making careful, wise decisions. Progressives hate the thought that this could happen. People who get jobs, become productive, live frugally, save money and make careful, wise decisions are the enemies of progressivism everywhere, because they are independent and they don’t need progressives or government to organize their lives. Now suppose you’re 75 years old, worked your entire life, saved money, raised a family, paid off your debts and finally retired to enjoy your old age. Due to mild deflation, you’re able to stretch your savings out for a long time, which means you won’t need to depend on charity or welfare. Progressives hate the thought that this could happen. People who stretch their savings and don’t depend on charity or welfare are independent and they don’t need progressives or government to organize their lives.

You don’t have to read between the lines to see how deflation is fear in this article about Japanese beef bowl restaurants. Take this sentence:

Japan’s big three beef bowl restaurant chains, the country’s answer to hamburger giants like McDonald’s, are in a price war.

If I were Japanese and I liked beef bowls, I’d be thrilled. But progressives, who are joyless and whose ultimate goal is to suck the joy out of life like marrow from a bone, write things like:

It is a sign, many people say, of the dire state of Japan’s economy that even dirt-cheap beef bowl restaurants must slash their already low prices to keep customers.

The article goes on to criticize restaurants that provide food to people inexpensively. Sure, those businesses are competing to make their supply match consumers’ demand – but it’s, you know, destructive to be too efficient. Instead, they should make agreements with other companies so they can all keep their prices artificially high – because that would really benefit everyone.

Anyway, some prices do fall and no one complains about them: prices for technology. Why is it a problem to progressives when the price of a beef bowl declines but not when the price of a computer declines? Is it because one is due to deflation and one is not? No one ever seems to present any evidence to show that deflation leads to less expensive beef bowls but that less expensive computers are caused by something else. Perhaps that’s because progressives habitually conflate declining prices with deflation.

In fact, prices can fall for any number of reasons. One is improvements in technology: my parents bought my brother and me a Nintendo (NES) for $100 back in 1987. Now they have a Nintendo (Wii) and NES consoles cost about $15 (not adjusted for inflation). Another reason for prices to fall is increases in worker productivity or efficiency. These are much harder to observe in real life, but even a slightly attentive reader will realize that these are the factors driving the falling prices in Japanese beef bowls (in fact, the article even says that the original beef bowl chain became dominant by being extremely efficient). Actually, increasing worker productivity is both a cause and an effect of decreasing prices, which I find pretty cool!

Finally, the increase in value of dollars compared to other goods and services is what makes us value dollars as currency. If the decline in value of dollars continues and gets out of control, no one will want dollars any more. I don’t mean this to scare anyone – I don’t have any particular affinity for dollars over any other currency, except that my main debts and savings/investments are in dollars – but we should keep in mind that our civilization is built from the ground up on value stored in money. If that money loses its value, civilization as we know it will be over.