Inflation and the Christian
(1) Harried housewives struggle week after week to stretch their household budgets in the midst of rising prices. Even Christian mothers who prefer staying home to raise their children in the fear and admonition of the Lord often feel forced into the job market to help maintain the family standard of living.From this black picture arises a crucial question: What attitude should Christians take concerning the problem of "inflation"? Is inflation primarily an economic problem about which the Bible has nothing to say? Is it primarily a governmental problem which is best left to the civil authorities to handle? Or is inflation a moral problem at heart and, thus, a problem Christians should take a strong stand on?(2) Businessmen find themselves being hit with rising costs for raw materials, supplies, and wages on one side. And on the other they encounter stiff resistance from consumers against needed price increases if their businesses are to remain solvent.
(3) Government officials, especially at the local and state levels, find that rising prices require increased taxes simply to maintain existing levels of governmental services Officials at the national level find themselves pressured to impose price controls on businessmen, who are wrongly blamed for rising prices. The public cry for government protection is ironic because the national government is actually responsible for the problem of "inflation".
(4) Elderly people who have retired on fixed incomes find their incomes being eroded by rising prices. They turn to government for relief -- either for increased "welfare" benefits, or for higher social security payments which haven't been earned. This imposes still higher costs on those who produce goods and services.
(5) Christian institutions find themselves in an especially tight squeeze because they exist only on voluntarily contributed funds. Over the last two decades many private colleges have quietly closed their doors because of the difficulty of competing with tax-supported institutions which can mandate operating funds via the power of taxation. And foreign missionaries find they need more dollars each year to maintain their families and work in foreign countries because the American dollar has depreciated vis-a-vis foreign currencies.
If you will note, each time I have referred to the problem of "inflation," I enclosed the word in quotes. My reason is to distinguish between the problem of inflation that people complain about (i.e. rising prices) versus the cause of rising prices (i.e. increases in the money supply). If we as Christians hope to produce a beneficial salting influence in society (Matt 5:13), then we must not only base our policy decisions on biblical principles, but we must also interpret reality correctly. Even the most well-intentioned Christian can do great harm if he bases his policy decisions on faulty information. Thus, when we come to the problem of "inflation," we must determine exactly what inflation is. An erroneous understanding of what inflation really is has led many people to ignorantly favor policies that are both unbiblical and positively harmful.
The popular definition of inflation as "rising prices" is both inaccurate and misleading. It hides a clear-cut cause-effect pattern and thereby confuses people as to what must be done to cure the problem. A scientifically accurate definition of inflation is "an injection of new money into the economy" or simply "an increase in the money supply". This definition focuses on the underlying cause of rising prices rather than on the subsequent effect of inflating the money supply. Thus, it directs people's attention to solving the real problem instead of diverting their attention to surface symptoms. Prices are rising today because some agency has been increasing the supply of money in the recent past.
Once this cause-effect pattern is recognized, then the door swings open to discovering the cure. Who has control over the money supply? The national government does, through the Federal Reserve System! (Congress spends money they don't have by ordering the Treasury Department to print bonds. and then monetizing the bonds through the banking system with the help of the Federal Reserve Bank. When the newly created "deficit money" is injected into the economy via government spending, people who receive the newly created money use it to bid scarce resources away from others. It is this competitive bidding process that causes prices to spiral upward.)
Once this process is understood, it immediately becomes clear that the problem of rising prices cannot possibly be caused by "grasping businessmen" or even "militant labor unions," but that persistently rising prices are caused by the government money-creators themselves! Then, Eureka! the only possible solution becomes too clearly evident to escape. The problem of rising prices can be cured only by eliminating the cause of spiraling prices, that is, by eliminating government deficits that are monetized via the Federal Reserve System.
Our national politicians and bureaucrats aren't stupid. They certainly recognize this cause-effect pattern between inflation of the money supply and rising prices. But, since they are reluctant to relinquish the heady power that accrues to them as spenders of money, they purposely try to mislead the public by pointing the finger of blame at "avaricious businessmen" and "greedy labor unions." Thus, we hear of a fictitious "wage-price spiral" which supposedly feeds on itself and requires government controls as a remedy -- when the real problem is simply too much government spending.
Realizing these things, what attitude should Christians take in solving the problem of inflation?
Since no amount of godliness can make up for erroneous thinking, it is incumbent on Christians to excise the problem at the root. Since our national government has proven by half a century of performance that it is incapable of disciplining itself to live within its income, then it must be disciplined by' those who created it. We must remove the national government's deficit-creating and money-creating power. This can be done in a number of ways: (1) a constitutional amendment to prohibit spending in excess of tax income, (2) a constitutional amendment to eliminate the income tax. (3) a law to prohibit the Federal Reserve System from holding government bonds, or better yet, (4) dismantling the FRS which has sewed for over 60 years as an "engine of inflation" and as a meddling agency to destabilize the economy instead of to stabilize it.
As Christians we must recognize that inflating the money supply: (1) is an insidious method of taxation and collective theft and is, therefore, forbidden by God's Word (Ex. 20:15, 17; Pr. 11:1), (2) is a treacherous means which rulers can use to demoralize and buy off the people, thus bending citizens to their will (Ps. 232.3), (3) serves to remove mothers from the home and thus to weaken their moral influence on children (II Tim. 1:5), and (4) leads to the destruction of Christian institutions and weakens the "salting influence" of Christians in society (Matt. 5:13).
Biblical Economics Today Vol. 1, No. 6 (December/January, 1978-1979)
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