Its been sometime I have been trying to make some special people understand the evils of inflation. Inflation is an abstract subject most of us dont know about, let alone understand the technicalities amidst jargons. I have in my previous post have briefly touched the social part of inflation but never in a concentrated way. I understand what my friends mean when they say "tell me in layman’s language." It is not a heartening sign, that they avoid technicalities. But it could well be that knowing where they stand, their role and understanding the social changes in the light of inflation may motivate them to understand the term "inflation." This is just to highlight the brief points.
First and the foremost, is there any link between inflation numbers and society. Yes. The relation is same as the relation between society and money.
What is money? Money is an easy means of exchange. If I am selling my horses to a pig-farmer and I am not interested in taking pigs in return for my horses, there has to be a common platform where we can decide on the transaction. Money enables this transaction. There are several characteristics of money mainly that it has intrinsic value, it is not replicable, it maintains its value through times with out depreciation, it can be stored etc. With these common grounds of accepted practice gold and silver have been accepted as money and currencies throughout the ages. These precious metals have intrinsic value as precious metals, can't be man-made and are storable for ages.
But all these above practices were broken by a modern realization of combining monetary fiat and printing press. Well, not exactly a modern invention. The modern money is made of paper and has no value attributed to it other than the sovereign guarantee issued by the authorities. The modern money can be stored for long time, and is easily mutilated. Paper money is easily replicable. The blink-a-money or credit money is infinitely replicable, can be stored for long time but has absolutely no intrinsic value.
There is always a definite amount of money in circulation, money supply. But when this money supply increases solely for the reason of replication, the social hazards begin. Innocence is lost.
People, who have lack sufficient knowledge to handle their investments and savings in the era of reducing purchasing power of money, will find their retirement savings vanished into thin air. This leads to substantial social unrest, insecurity and problems to elderly citizens.
It not only an elderly or ‘20 years later’ problem. The problems also affect the younger people. This is what one economist observed, "These (reducing purchasing power of money) effects are especially strong among the youth. They learn to live in the present and scorn those who try to teach them 'old fashioned morality and thrift.' Inflation thereby encourages the mentality of immediate gratification that is plainly at variance with the discipline and eternal perspective required to exercise principles of biblical stewardship such as long term investment for the benefit of future generations."
Some notable social changes directly or indirectly related to inflation. But, over a period of time, all effects are Direct.
1. Spend lot of time thinking about money (to fight the battle against inflation, never enough money, for what we euphemistically call 'Returns')
2. People work for longer years of time (to accumulate money for comfortable retirement)
3. People take employment far away from homes (for that extra buck)
4. Chasing instant money (gambling, lottery, get-rich-quick schemes, MLM, Ponzi schemes etc)
5. Corruption, frauds and cheating (any means to be rich)
6. People are less and less involved with family
7. Weakens family bond (more nuclearisation of families)
8. Casual and promiscuous relationships rise
9. Breakdown of marriages/ Increased divorces
10. Depiction and treatment of women in art and media
11. "Catch the rich man", "Marry a rich girl" attitudes
12. Luxurious and extravagant lifestyle
13. "You live only once", "If you have it flaunt it", "Sabse badaa rupaiya" attitudes
14. Spend than save, right away right now than later, money than career, rabbits than hare
15. Less patriotism (sometimes confused/thought of as global/cosmopolitan attitudes)
16. Rise of welfare state (a subject for books and books)
17. Lack of respect for elderly, customs, traditions, scriptures and ancient wisdom
18. Borrow from future (Mortgages, Environment)
The unfortunate part is the daily and frequent experience of the above "brainwashes" people into believing and accepting the above as the regular state of affairs.
The disease of instant gratification is evident right from the government to all its citizens. It entails huge societal risk.
:) Falkor
In India, the societal effects of inflation are better understood by the older generation, who saw the value of the rupee erode rapidly during their lifetime. Given the lack of other "mature" inflation hedges (stocks, real estate, TIPS, etc.) they picked gold, silver, diamonds as the safe havens.
ReplyDeleteIt is for no reason that gold is such a popular investment for centuries.
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