sábado, 9 de enero de 2016

An age of loose money not only destroys savings; it corrodes character.

Inflation’s Moral Hazard

by Theodore Dalrymple

Runaway inflation in Germany, which turned money into wallpaper, undermined the Weimar Republic and led to Hitler’s rise.
Information from the most diverse sources sometimes coalesces and provokes reflection on a subject to which one has not previously given sufficient thought. This happened to me recently with regard to the effect of monetary inflation on human character. With many observers predicting a substantial rise in inflation as a result of various government spending programs undertaken to reverse the current global downturn, the topic is anything but academic.

I was reading The Innocence of Edith Thompson, by Lewis Broad, a book about a notorious murder in 1920s London. Freddy Bywaters was a handsome young sailor, Edith Thompson an unsatisfactorily married woman. They had a torrid love affair, and Bywaters eventually stabbed Thompson’s husband to death as he walked home one evening from the theater with his wife. Thompson’s love letters to Bywaters, prosecutors claimed, were an incitement to murder—such an incitement that they rendered her a murderess herself. She was found guilty of the deed and hanged. Broad’s book—written in 1952, 31 years after the event—happens to mention Thompson’s comparative prosperity. She managed a millinery shop and earned enough to put her in the middle class: “six pounds per week,” as the author puts it, “or twelve pounds in our debased currency.” A doubling of prices in three decades called a debasement of the currency? What would Broad have written if he knew what was to come in the years ahead?

Then I began reading Ursa Major, a study of Doctor Johnson by C. E. Vulliamy. It was hostile to the great man; but from the point of view of inflation, what was interesting was Johnson’s pension from the crown. Worth 300 pounds per year when granted in 1762, Vulliamy informs us, it would have been worth 800 pounds at the time of Ursa Major’s publication in 1946.

But that 800 pounds, according to Broad’s book, would have been worth only 400 pounds as recently as 1921. If we put these two stories together, it means that 300 pounds in 1762 was the equivalent of 400 pounds in 1921; or, in other words, that in a century and a half, prices rose in Britain by about 33 percent, an overall rate so slow as to have been almost imperceptible year to year, even decade to decade. Such stability must have seemed more a fact of nature than a consequence of human behavior or policy, and therefore something that would last forever.

Of course, calculations of prices between different historical epochs can be inexact, if only because some things available to later ages were not available to earlier ones. What was the price of a chocolate bar in 1762? We can never know: bars of chocolate did not exist then.

Nevertheless, I can attest to a prolonged era of price stability from evidence in my own lifetime. When I was born, it cost one and a half times as much to send a letter as it did 100 years earlier. In my childhood, during the fifties, we still used the same coins, with the same denominations, that people had used during the Victorian era. The silver coins were still made of silver, not a worthless silvery metal. Occasionally, we would even come across pre-Victorian coins. Their continued use was not absurd: though prices had risen, they still bore some resemblance to what they had been in the earlier time. When my grandmother gave me a florin—one-tenth of a pound—I felt rich. It was enough, in any case, to buy a paperback book; between 50 and 60 times as much would be required now.

I also remember the vast white five-pound notes, as grandiose and almost as large as professional diplomas or nineteenth-century share certificates, that my father kept in a roll in his pocket, only 100 or 200 of which would have been needed in those days to buy a decent house. And it was still possible for a boy like me to buy something—albeit only a stick of gum—with the smallest coin of the realm, a farthing, worth one-960th of a pound. That something could be sold for such a tiny fraction of money might seem a sign of general poverty. But though the Britain of my youth lagged economically, it was far from poor.

The regime of relative price stability soon collapsed. During the sixties and seventies, the sums of money of which everyone spoke increased, first by a little and then by a lot (and how nonchalantly we now speak of trillions of dollars or euros!). All that had seemed solid, to paraphrase Marx, melted into air.

At the time, I gave no thought to the effects of this inflation, which tended to be discussed in purely economic terms—experts would ask, say, whether inflation was compatible with satisfactory economic growth. In a naive way, I assumed that since most people’s income tended to rise with inflation, there was nothing to worry about. I did not suffer personally because of it, nor did most of the people I knew. If a product once cost y and now cost 10y, what did it matter, so long as your income had gone up by ten times, too? Since people seemed better off, at least measured by what they could consume, one could even assume that incomes had risen faster than inflation.

Yet this was a crude way of looking at things, as my father’s fate should have instructed me. He sold his business in the sixties, at the end of the period of price stability that had reigned throughout his life, for what then seemed a large amount of money. He was a man who, for both temperamental and ideological reasons, held a deep contempt for financial speculation and wheeling and dealing, with the result that he did nothing as inflation inexorably eroded his savings. He grew poorer and poorer through the remaining 30 years of his life, and might have sunk into poverty had he not moved into a house that I owned. And this after reaching a level of wealth that, relatively speaking, was greater than I shall probably ever know.

For a while, I was angry about what seemed my father’s improvidence and lack of foresight. As the current financial crisis has conclusively demonstrated, however, not everyone is blessed with foresight, not even those whose livelihood depends primarily on the claim of possessing it. My father was born of a generation that saw money as a store of value, a far from dishonorable notion—and one that, when it reflected reality, helped give a lot of people peace of mind. And as I reach the age when inflation might cause me some embarrassment, even hardship, my sympathy with my father’s plight has grown. I am no longer young enough to fight another day, economically speaking: the destruction of my wealth by inflation would be final. In an aging population, more and more people are in my position, which helps explain why an age of prosperity can be an age of anxiety, even without a financial crisis.


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Theodore Dalrymple some of 367 titles

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Muslim unrest presents an ongoing danger to the peace of France.
January 5, 2016
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An Englishman reflects on his travels in urban America.
Autumn 2015
On the Need to Think Clearly
Reflections on Paris
November 15, 2015
Chancellor with Attitude
Britain’s finance minister seeks to increase his popularity by insulting voters’ intelligence.
November 2, 2015
Where’s the Denominator?
A newspaper peddles spurious claims about the cruelty of American immigration policy.
October 19, 2015
Never the Twain
On the paradox of good writers with bad ideas
October 11, 2015
Terror’s Reach
After this year’s attacks, tourists—and their money—are avoiding Tunisia.
September 3, 2015
Why We Love Falstaff
There is some of Shakespeare’s incorrigible rogue in all of us.
Summer 2015
Isis Happens
On the linguistic constructions of liberal intellectuals
August 6, 2015
David Cameron’s Muslim Muddle
The British prime minister didn’t go far enough—though he went further than most politicians.
July 30, 2015
Through a Glass, Dishonestly
Thoughts on the attacks in Tunisia and elsewhere
June 30, 2015
Into Darkness
When the victim isn’t blameless
Spring 2015
Pre-Traumatic Stress Disorder
On the phenomenon of campus “trigger” warnings
May 27, 2015
Britain in Crisis
David Cameron’s troubles are just beginning.
May 11, 2015
Fascists in Kilts
The Scottish National Party could hold the balance of power in the next British Parliament.
May 5, 2015
The New Whitney: A Reply
Against the fashionable tendency to regard ugliness as beauty
April 30, 2015
A Monument to Tastelessness
The new Whitney Museum looks like a torture chamber.
April 22, 2015
In the Near Hereafter
Michel Houellebecq’s latest novel could foretell France’s future.
March 30, 2015
The Man Who Made Singapore
Lee Kwan Yew willed a well-ordered and disciplined society into existence.
March 23, 2015
Macron Economics
A minor economic reform leads to panic in France.
March 18, 2015
The Rimbaud of Cwmdonkin Drive
Dylan Thomas, the last true bohemian
Winter 2015
The Coulibaly Chronicles
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February 27, 2015
Denial and Grandiosity
Some observations after the Copenhagen killings
February 17, 2015
Looking Away from Europe’s Muslim Problem
It’s easier to condemn Steven Emerson than to confront issues of assimilation and culture.
January 22, 2015
Tyranny of the Minority
There is more to fear in one terrorist than to celebrate in 99 well-adjusted immigrants.
January 9, 2015
Equating Prudence with Cowardice
France must continue to mock, bait, and needle its Muslims.
January 7, 2015
Imagine No Religion
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December 24, 2014

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