In 1979, Broughton Knox, an Australian minister, could say,

Inflation is sinful and it should be recognised as such. It is a new sin.¹

Inflation, the decline of purchasing power over time, is seen today as a key component of economic management. There are a number of reasons economists argue that inflation is necessary. From the US Federal Reserve itself, one reason given is that,

If inflation expectations fall, interest rates would decline too. In turn, there would be less room to cut interest rates to boost employment during an economic downturn.²

What the Fed is saying is that without managing inflation they would not have the ability to cut interest rates and stimilate the economy in a downturn. Thus, their thinking is in keeping inflation at a rate of around 2%, some level of macro-control over the economy is maintained.

But we need to remember that this 2% is an unseen tax on all currency holders. Without the ability to increase your wealth greater than the inflation rate, your purchasing power decreases.

Why does Knox say this is a sin? He points out that although there are intrinsic reasons for inflation, such as natural scarcity, "most price rises are the result of sin"¹: for example, monoplistic pricing, the greed of unions, etc. In particular, the greatest offender is the government with their monopoly over the money supply.

The idea of deficit budgeting, or living beyond one's means, is now an accepted method for governments. They don't have to worry about bankruptcy because they control the money. When bills are due, just print more! But living beyond one's means like this always hurts someone.

In a talk by the Australian Reserve Bank Govenor, Bernie Fraser, in 1993³, three harmful impacts of inflation are listed:

• changes in the distribution of income and wealth.

• inefficiencies in economic decision making.

• shortening of time horizons.

Higher prices doesn't mean getting richer. Generally gains are for those who can take advantage of the situation at the expense of others. For example, those with assets are much more advantaged than those without. This uneven change in wealth distribution causes suffering for the weak and financially un-alert. In effect, Government inflation policy is a hidden tax on the poor, not the rich; take from the poor, give to the rich.

Not all economists are alike, Ludwig von Mises writes,

Inflation is a policy. And a policy can be changed. Therefore, there is no reason to give in to inflation. If one regards inflation as an evil, then one has to stop inflating.⁴

In the Australian early 80s inflation was about 10%, and Knox wrote again,

It is quite a simple sin, namely taking other people's money without giving anything in return. In ordinary life we call this stealing. This is what those who cause inflation are doing, stealing your savings, 10% each year.⁵

This is a moral problem that has continued. Governments continue to live beyond their means, steal from the poor and give to the rich. The Bible calls people to honest dealings, with true weights and measures. Yet this sin in particular has created an economic system with immoral dealings at every level. Where are those who, like Knox, stand and condem it as a sin?

We should deal with this form of inflation as the moral problem it is. Call on governments to stop! The easiest way would be a move to a Bitcoin standard. But, alas, loosing control of your money may be too much for governments to bear.