In the previous article, I discussed the social consequences of the welfare state; now I want to focus on inflation—or more precisely, on central bank policy. Inflation can broadly be defined as an artificial increase in the money supply that ultimately drives up prices, but this definition overlooks the fact that it is a process in which prices first rise in the capital goods of industries furthest from final consumption and then gradually spread throughout the entire system. Therefore, in an inflationary process, there are a few winners who reap substantial profits, and many losers whose purchasing power declines.

It can be said that inflation is caused by governments, both through monetizing debt and by allowing commercial banks to violate general legal principles regarding the deposit contract. Inflation is a hidden tax with devastating economic and moral consequences; it encourages the population to go into debt by making credit cheaper, and it penalizes saving, reducing time preference. Not only that, but it is also a spiritual burden. It drives people to seek ways to protect their savings, making society more materialistic, causing people to prioritize money over happiness, and often forcing them to migrate, thereby breaking family and patriotic ties. …

The reality is that human motivations are heavily influenced by the political and economic context. Hülsmann continues explaining that monetary expansion first reduces the incentives to save. Families are the school of love and virtue, and they are sources of sacrifice and generosity—but they are not only founded on spiritual grounds, but also on economic ones, rooted in the division of labor and capital accumulation. Inflation forces all participants to dedicate more time to money and investments rather than to starting a family. Under a debt-based system, family ties represent a far greater sacrifice, contributing to rising divorce rates, later ages of first marriage, and fewer children. Inflation has pushed women into the labor market, reduced the costs of leaving the family unit, and increased the number of single mothers and divorces.

To conclude, Hülsmann finally explains how inflationary culture also reduces the time spent on selfless activities like simply being with others, which becomes instrumentalized as “networking”—transforming friendships from relationships of trust into utilitarian arrangements. Every society has individuals with perverse attitudes, but they are usually few and must bear the consequences, including the cost and loss of good company. With inflation, however, these attitudes are subsidized, and the meaning of good and evil is reversed. It also creates tensions between taxpayers and recipients, employers and employees, men and women, or retirees and young professionals, fostering a sense of identity-based conflict or group polarization. Incentives to save in cash are eroded, and savings must either be spent on consumption or invested. In low-income households, the former is more common. The average worker, who only saves in ways he understands—namely, in cash—and who distrusts opening investment accounts with banks or brokers and knows nothing about financial markets, is left with no savings. Inflation has destroyed the working class’s culture of saving, erasing its sense of transcendence.