How does inflation accelerate the collapse of society?

How does inflation accelerate the collapse of society?

“...... If inflation is not eliminated soon, none of our technological and scientific advances will prevent us from suffering a huge financial catastrophe that would destroy almost everything that civilization has created over the past few hundred years. Ludwig von Mises on money and inflation philosopher George Santayana pointed out that "those who do not remember the past are doomed to repeat the mistakes of the past," and in this day and age, we are making great economic mistakes that have brought destruction to countless pasts. Societies. Central banks are inflating our money supply at a rate that could lead to the collapse of our economies and the collapse of civilization. In this article, we will use Rome as an example to explore the damaging effects of inflationary policy. "No matter how dovish or benign it may seem at first, inflation policy ... It's always [fatal] in the long run. Have tried many times, but always failed. It does not solve social problems; This infuriates them and inexorably leads them to self-destruction. William Orfels, Unbridled Greatness: Why Civilization Fails

There are multiple definitions of inflation. Some people use it to refer to an increase in the overall price level, or so-called price inflation, others use it to refer to an increase in the money supply issued by the government or central bank, which is called money inflation. For the purposes of this article, we will focus on the latter phenomenon, which can be considered as a more dominant phenomenon because currency inflation leads to price inflation. Or as the 20th-century economist Ludwig von Mises explained: "Prices rise because more money is being asked for, looking for goods in quantities that have not increased." Newspapers or theorists refer to higher prices as "inflation."

But inflation is not a rise in prices, but an increase in prices. Inflation is the new money injected into the market. It is these new funds that drive up prices. "Ludwig von Mises on Money and Inflation In the early years of the Roman Republic, the Roman state pursued a policy of territorial expansion, and each time it conquered neighboring regions, the state plundered the treasury of the defeated empire and increased its own treasury. However, after the defeat against the Germans in AD 9, Emperor Augustus terminated the policy of expansion and wealth from foreign lands ceased to flow. Augustus and subsequent emperors faced a shortage of income as a result. The increase in taxes can only be made without sparking a rebellion, thus, as Joseph Tante explains: "When extraordinary expenses arise, the supply of coinage tends to be insufficient." To solve this problem, Nero began a policy in 64 AD, and later emperors found it increasingly irresistible. Joseph Tant, The Collapse of Complex Societies

This policy involved devaluing the value of Roman standard silver coins (dinarius) by injecting cheap metals such as copper into them and "slashing" gold and silver coins, or in other words, reducing the value of gold and silver coins. Their size. The excess precious metal obtained from cutting and demeaning coins was then used to mint more coins, and the Roman state used these newly minted coins to pay off its debts and expenses, and to fill the pockets of politicians and political insiders. The modern version of this policy is to expand the supply of paper money or digital currency.

However, whether it is devaluation and cutting coins in order to create more coins, printing more paper money, or adding numbers to accounts held by central banks, the result is the same - monetary inflation. Other things being equal, the amount of money increases, which leads to rising prices and an increase in the cost of living. During monetary inflation, newly created money does not enter the economy in a uniform way. It often enters the economy first through the hands of politicians. Because these people and institutions are able to spend newly created money before monetary inflation pushes up prices, they benefit from inflation.

Or as Jesus Huerta de Soto wrote: "The [monetary inflation] process leads to a redistribution of income in favor of those who first receive the injection or dose of the new monetary unit, to the detriment of the rest of society, who find that the prices of goods and services begin to rise with the same monetary income." "Jesus Huerta de Soto, Money, Bank Credit and Economic Cycles In ancient Rome, the state took advantage of the delay between the devaluation of the dinar and the market to achieve its devaluation. It used newly minted and devalued coins to pay off debts and expenses, and its price did not reflect the increase in the money supply. In this way, Rome's political elite found a way to increase spending at any time without raising taxes.

Thus, following the example set by Nero, whenever the emperor faced a shortage of funds, sought to expand his army, made new projects or plans, or simply expanded the treasury, he devalued and cut coins and increased the supply of money. Money. As Mises wrote: "If you want to study [inflation] today, go to the museum, where there are coins minted in the past, and see what happened to the silver coins of the ancient Roman Empire... There you will see what governments do in order to profit by counterfeiting the monetary system and illegally increasing the amount of money against the will of the people. "Ludwig von Mises and Ludwig von Mises on Money and Inflation By 200 AD, the dinar devalued to 50% of its original silver content, and the consequent price increase became impossible to ignore.

In the words of Harold Mattingli, the Roman state at this time "was steadily heading for bankruptcy." Therefore, despite rising prices, the state decided to continue its inflationary policy in an attempt to maintain the illusion of prosperity. The result: "By the second half of the third century, money became worthless to the point that the state resorted to forced labor ... The state could not rely on money to meet its needs, so much so that taxes in the form of supplies "could be used directly by the military and other government departments, or in the form of gold bars, to avoid having to accept their own worthless coins." Joseph Tant, The Collapse of Complex Societies

The American historian Otto Friedrich, speaking about what happens to society when the monetary system is gradually destroyed by inflation, explains: "If all money becomes worthless, then all governments, all societies, and all standards." Otto Friedrich, Before the Flood

This collapse of the social order was evident in ancient Rome. Between 235 and 284 AD, the Roman state could not afford to pay for it, and hordes of deserters roamed the countryside, plundering towns and farms. Barbarians sacked and burned towns, destroyed crops, stole livestock, and took the Romans into slavery. The average reign of an emperor was several months, and many Roman emperors were executed, while 30 different people claimed succession. Civil wars are common. The population has decreased. In the areas under Roman control, violations prevailed. "It takes a century from barbarism to civilization; It only takes a day to go from civilization to barbarism. "Will Durant, Reformation: A Story of Civilization In 301 AD, Emperor Diocletian made the mistakes many politicians made during times of inflation while trying to cope with rapidly rising prices.

He refused to acknowledge that price increases were largely driven by the country's monetary inflation policy, instead trying to solve the problem by imposing price controls on commodities such as wheat and other necessities. However, these price controls led to shortages, merchant bankruptcy, and a sharp decline in trade between Rome's regions. "Pure necessity led to the repeal of this law." Lactansius, an advisor to Emperor Constantine, explained. Diocletian briefly considered restoring the value of coinage, but the country lacked sufficient reserves of silver and gold. Faced with huge spending and growing debt, Diocletian and the emperor who followed him felt constrained and continued to pursue inflationary policies. "Just as when you start using certain drugs and you don't know when or how to stop it, so does [inflation], the government doesn't know when and doesn't know how to stop.

Ludwig von Mises on Money and Inflation Hyperinflation appeared in the first half of the 4th century due to the state's long-term inflationary policy. Joseph Tante wrote: "In the 2nd century, the quantity of wheat (about 9 liters), under normal conditions, was sold for 1/2 dinar... The same amount of wheat sold for more than 6,000 dinars in 335 AD and over 10,000 dinars in 338. In 324, the gold solids were worth 4250 dinars, but by 337 it was worth 250,000 dinars. By 363, its value reached 30,000,000 dinars to solids. Joseph Tant, The Collapse of Complex Societies

Dinar savings held by civilians are almost zero. Those who could not pay their taxes were imprisoned, so some families abandoned their homes and property, or sold their children into slavery. "When talking about inflation, we should not forget ... Depriving the masses of their savings would put them in danger of despair..."Ludwig von Mises on money and inflation Peasants became dependent on their next harvest. Whatever crop is introduced, it is sold immediately to pay taxes. If barbarians attacked, or drought or locusts destroyed their crops, they borrowed money from neighbors, starved, or were imprisoned by the state. "Surprisingly, in the case of famine, farmers suffer first, and they tend to flock to cities with food reserves." Joseph Tant, The Collapse of Complex Societies

As a result of increasing lawlessness, unrest and rebellion, political elites feel that their power is disappearing, and they become desperate. Despite widespread poverty and famine, the state became more authoritarian and continued to increase taxes and inflation. However, by the 5th century, the peasants were battered by a long period of state plunder, so that, as Joseph Tante wrote: "The predominance of the empire declined so sharply that many peasants were indifferent to the dissolution of Roman rule, while some peasants actively joined the ranks of the Roman Empire." "The intruders ... The Roman Empire lost its legitimacy and viability ... The Empire could no longer afford the problem of its own survival. Joseph Tant, The Collapse of Complex Societies

The story of Rome contains often overlooked but important lessons. One of these lessons is that when government or banking elites claim the right to expand the money supply without limits, it sets off a fire that can quickly spiral out of control, eventually leading to economic collapse, revolution, and even outright social collapse. Collapse. The only way to guard against the dangers of monetary inflation policy is to take control of the currency away from governments and central banks. The interaction of people voluntarily exchanging in the market inevitably results in a widely used form of money that no one or institution can manipulate. As Mises writes: "Over a long period of evolution, governments, or groups of government, have promoted the idea that money is not just a market phenomenon, but whatever money the government says." But money is not what the government says it is ... Money is a universally accepted and commonly used medium of exchange; It is not something created by the government; It is something created by people buying and selling in the market. "Ludwig von Mises .