It’s fun to see memes suggesting that Elon Musk should buy Alphabet, Amazon, Coca Cola, Disney, Meta, Netflix, YouTube, and so forth, but of course he cannot afford all that. But we can. By we, I mean value investors. Musk’s purchase of Twitter has validated my critiques (see here, here, here, and here) of ESG-based investment (environment, social, governance), which despite its weak financial record currently constitutes about $2.7 trillion globally. And it has demonstrated the potential power of anti-ESG funds, which I have called Friedman Funds, after Milton.

An anti-ESG Friedman Fund would, firstly, short companies overvalued due to capricious or government-dictated ESG metrics and buy companies undervalued due to said metrics, and, secondly, buy controlling interests in potentially valuable companies that are going broke, or at least earning less than they could, because they went woke, as Musk and his investors recently did.

The goal of the fund would be to earn above-average risk-adjusted returns, period.

The effect of the fund would be to increase financial market efficiency and economic productivity by punishing deviations from rational valuations and rational business decision-making processes.

The first approach is widely called value investing. Although understood in general terms by investors since at least the 18th century, Benjamin Graham popularized and quantified the approach in the first half of the 20th century. The gist is to buy stocks when their market price falls below their rational value and to sell or short them when their market price exceeds their rational value. Value investors tend to buy and hold, ignoring daily price gyrations so long as the market price remains near rational value, the price toward which the stock will gravitate in anything approaching an efficient market.

A stock’s price might deviate somewhat from its rational value because investors like or hate the company because of what it makes, or how it makes it, or who runs it, or something its executives say or do. In other words, the shares of presumably “good” companies can gain from a “halo effect,” while shares of allegedly “bad” companies sometimes languish due to a “devil’s horn effect.” Some investors overestimate the importance of those various soft factors on other investors, causing them to value the stock higher (halo) or lower (horn) than the rational investor does.

ESG funds and ESG ratings – given regulatory teeth by the Securities and Exchange Commission directly, or indirectly through bond rating agencies – could produce significant halo/horn effects that value investors could exploit for their own gain while reducing financial system fragility in the process. Because ESG represents politicized and largely subjective concepts, ESG ratings can diverge significantly from reality. Unless checked by value investors, they could easily lead to bubbles (too much investment in certain assets, like dotcoms or mortgage-backed securities) or anti-bubbles (too little investment in certain assets, like fossil fuels). 

ESG bubbles could be particularly costly because the overinvestment might go into companies that actually hurt the environment or the downtrodden. As scholars like Ozzie Zehner, author of Green Illusions, have been arguing, and as Michael Moore tried to explain to fellow progressives in his 2019 documentary Planet of the Humans, very few “green” technologies provide net environmental benefits because they are inefficient, rely on tax subsidies, need rare earth metals to work, have major environmental side effects, and so forth. Similarly, as recently pointed out by Harvard Business Review, ESG ratings are not correlated with better environmental or labor regulatory compliance! 

Moreover, many social justice initiatives at major corporations, like many government programs, aid Democrat politicians but do little or nothing to help American Indians, blacks, Hispanics, women, or the poor. Once exposed, ESG darlings could become dogs overnight, hurting investors and potentially sparking a financial crisis.

The second approach that a Friedman Fund could take is typically frowned upon. According to the so-called Wall Street Rule, investors who do not like management decisions should sell instead of raising a stink. It’s a good rule of thumb because corporate management is usually well-entrenched. Most stockholder proposals fail because managers dominate corporate elections due to their control of the proxy mechanism and employee-owned shares.

A few simple rule changes, like cumulative voting, secret ballots, proxy mechanism reform, and larger board member and executive stock holdings, would make it easier for individual shareholders and institutional investors to pressure management to maximize long-run stockholder returns by making more rational business decisions, like not alienating their median customer to please vocal extremists.

Until then, Friedman Funds have to be willing to purchase underachieving companies like Twitter through stock market purchase of controlling stakes, tender offers, or proxy votes. Yes, such tactics are often derided as “corporate raiding” but the poor state of corporate governance can render such raids economically necessary. In the 1980s and 1990s, the takeover of poorly performing corporations by funds led by corporate raiders like Carl Ichan and leveraged buyout firms like Kohlberg, Kravis, Roberts reinvigorated the US economy by forcing rational changes at stagnating or inefficient companies.

It was no accident that the classic film on corporate takeovers, Other People’s Money, hit theaters in 1991. Its famous climax pitted Lawrence “Larry the Liquidator” Garfield (played by Danny DeVito) of Garfield Investments against Andrew Jorgenson (played by Gregory Peck), head of the failing New England Wire and Cable Company, the biggest employer in a small Rhode Island town. At the company’s annual stockholder meeting, Jorgenson argued, like every other adherent of the “stakeholder” theory of the corporation, that “a business is worth more than the price of its stock. It’s the place where we earn our living, where we meet our friends, dream our dreams.”

After being derided by Jorgenson as a greedy, big-city corporate raider who “builds nothing” and is basically committing “murder,” Garfield retorted:

This company is dead. I didn’t kill it. Don’t blame me. It was dead when I got here. It’s too late for prayers. For even if the prayers were answered, and a miracle occurred, and the yen did this, and the dollar did that, and the infrastructure did the other thing, we would still be dead. You know why? Fiber optics. New technologies. Obsolescence. We’re dead alright. We’re just not broke. And you know the surest way to go broke? Keep getting an increasing share of a shrinking market. Down the tubes. Slow but sure.

You know, at one time there must’ve been dozens of companies makin’ buggy whips. And I’ll bet the last company around was the one that made the best goddamn buggy whip you ever saw. Now how would you have liked to have been a stockholder in that company? You invested in a business and this business is dead. Let’s have the intelligence, let’s have the decency to sign the death certificate, collect the insurance, and invest in something with a future. …

Me. I’m not your best friend. I’m your only friend. I don’t make anything? I’m makin’ you money. And lest we forget, that’s the only reason any of you became stockholders in the first place. You wanna make money! You don’t care if they manufacture wire and cable, fried chicken, or grow tangerines! You wanna make money! I’m the only friend you’ve got. I’m makin’ you money.

Take the money. Invest it somewhere else. Maybe, maybe you’ll get lucky and it’ll be used productively. And if it is, you’ll create new jobs and provide a service for the economy and, God forbid, even make a few bucks for yourselves. And if anybody asks, tell ’em ya gave at the plant.

Granted, Musk’s play on Twitter is somewhat different. Unlike buggy whips, microblogging isn’t a doomed industry yet. But clearly Twitter, despite its sizable first mover advantage, was losing market share to direct competitors like Parler, as well as newer “social media” concepts like Clubhouse and Mastodon, because it was alienating many customers with its over-the-top censorship of demonstrably true “misinformation” and opaque account shutdowns and throttling. That is what Musk meant when he told Twitter’s board that he could unlock the platform’s value in his offer letter. And it turns out that Twitter was overstating the number of its users by over a million, too!

Many other companies also appear to underperform their potential in the name of progressive politics. When executives and board members earn big salaries but own little stock, they have strong incentives to downplay the importance of share prices while catering to tiny but vociferous and even vicious progressive cabals. If incentives cannot be better aligned between management and stockholders from within, then somebody from the outside, like Larry the Liquidator, Musk the Magician, or Friedman Funds, must step in so that the economy doesn’t suffer the large costs associated with underutilized assets.

Thanks to occupational licensing rules (e.g., Series 65), sundry regulations, and other startup costs, I cannot start a Friedman Fund myself. But I can, and would, invest in an ably led one, as would many others interested in making Adam Smith proud by reducing economic irrationality by profiting from it.

“Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”  Professor Milton Friedman

You want to bring down inflation? Let’s make sure the wealthiest corporations pay their fair share.  President Joe Biden

Inflation is the relationship between the quantity of money in circulation and the supply of goods and services.

Government and central banks can create money but they can’t create oil, copper, food, housing, hip surgeries, or Tootsie Rolls.  But government can create conditions that stifle the production of these things through taxation, regulation, import restrictions, and arbitrary credit restrictions.

The basic rule in dealing with inflation, if you are a Democrat, is to blame everyone, and everything, for the price spiral.  Never look at your own insane monetary and fiscal policy.  Then, start tinkering with the economy to show that you care.

Republicans have played the game as well, with wage and price controls by Nixon and WIN buttons (Whip Inflation Now) promoted by President Ford. But Democrats are better at the game.

Being old enough to remember the inflation of the 1960-1980 period, the tried-and-true response is to blame greedy corporations. From that follows the imposition of “windfall profits” taxes. Of course, inflation was only 1 ½% under Donald Trump, so corporations must have undergone tremendous change very quickly, with greedy people taking them over, just to frustrate Biden. That includes, of course, many of the “woke” corporations run by Progressives. They raise their prices as well.

Price controls are also part of the toolbox. Democrats know what the “just” and “honest” price should be, and thus they will attempt to fix prices to what they believe is the correct level.

The problem with price-fixing is well established since attempts go back to the Code of Hammurabi in Mesopotamia.

They were tried by Greeks and Romans, especially under Diocletian.

The Church (allied with the government) tried price fixing based on “the just” price during the Middle Ages.

Almost all Socialist governments do the same, to some degree or another. Things like the Medicare Codes, which fix the price for specific procedures, are a good example. So is rent control in Democrat-controlled cities like New York.

If you establish a price above what the market determines through free exchange, based on real supply and demand data, it will create surpluses.

If you fix prices below the real cost of production, based on free exchange and real supply and demand, you will create shortages.  This is the most common outcome.

A spinoff of shortages is long wait periods (waiting in the queue) or rationing, which is simply an attempt to equalize the misery of shortages.

An interesting book written during the last great inflation period was Forty Centuries of Wage and Price Controls by Robert Schuettinger and Eamonn Butler. The conclusion of the book, after exhaustive historical examples, is wage and price controls have never worked anywhere, at any time in history.

The reason they never work is that they never address the underlying causes of inflation, which is excessive government spending funded by monetary creation.

Price fixing inevitably leads to expansive and usually authoritarian government. For example, let’s suppose the government decides a particular item, let’s say milk, is vitally important to the population. So, they fix the price to stop public outrage.

To be even partially effective, you then must proceed to fix the price of dairy cattle, milking machines, barns, hay, farmland, farm labor, processing, transportation, and dozens of other price inputs that create what you see as the “price” of milk.

The price of anything is simply the sum of hundreds of prices of the applicable inputs. You can’t control one, without trying to control the others. Hence, attempts to control inflation through price control creates a gigantic and intrusive government that destroys the free market and its wealth-producing capacity. That is why Venezuela can sit on the largest reserve of oil per capita in the world, and be impoverished with oil over $100 a barrel.

The softer version of price controls is jawboning or attacking corporations for what the government has caused.

So, blaming corporations, taxing them heavily, and excoriating them in public (jawboning) should be expected.

Windfall profit taxes are likely as are price controls.

We may also see rationing.

Jawboning is an attempt to deflect blame onto someone else, typically business owners. Sometimes this gets very ugly when particular religious or ethnic groups are cited as exploiting inflation. Sometimes it has been Jews, sometimes ethnic Chinese,  Koreans in some neighborhoods, and sometimes kulaks.

Then, there is usually an attack on “hoarders”.

Hoarding is a rational response to expected shortages. Governments are against hoarding and prefer rationing. If you try to get supplies that you need, you are to be condemned as a hoarder. If your costs go up, you will be accused of exploitation and price gouging if you pass those costs along. If you correctly anticipate inflation and profit from it, you will be called a speculator. In all these cases, the government simply blames individuals and corporations for responding to something the government itself caused.

Finally, there is what could be called ‘the switch”.

This is a variation on the old theme of passing out public money to buy votes. Here is how it works: Take money from the public through taxation. Take money from the public secretly through currency debasement. Then hand money back to the public to help them deal with the excessive price inflation the money printing caused.

It is almost a perfect circle. Give the money back to the public that you took from them, to acculturate the public to taking government money and make them politically dependent on politicians.

A good example has actually been proposed. Drive up the cost of fuel by harassing and regulating oil producers, forcing the Green agenda, and printing excessive money. Then ride to the rescue by sending the public a check so they can deal with the high fuel costs. Since the government is running huge deficits anyway, simply print the money you will pass out to the public. The belief is the public will be too stupid to understand the game.

A variation of this scheme was the stimulus checks. Shut the economy down using Covid restrictions, causing great pain. Relieve some of that pain by sending checks to those harmed, hopefully, to make them grateful and dependent.

Thus, the way not to fight inflation is to harass and harangue businesses and housewives, print excessive money to pass out to the public to help with inflation, impose wage and price controls, blame corporations, and impose “windfall” profit taxes.

As to what to do to really fight inflation, the following steps are necessary. If inflation is too much money chasing too few goods, one needs to decrease the amount of money and increase the supply of goods.

Slow dramatically the growth of government spending and the growth of the money supply.

Increase the supply of goods by deregulating and rewarding production. Avoid at all cost wage and price controls, rationing, and windfall profit taxes. Foster vigorous competition, knocking down legal and regulatory barriers that block new producers from entering the market.

In short, do the opposite of what Democrats propose.

If the program is both credible and consistent, consumer hoarding will stop as the public learns there is no rational reason for doing it. When supplies of goods and services are reliable, and if prices moderate, there is no reason to buy before prices climb even further. It takes time to break the back of inflationary psychology. However, if the underlying cause, too much money and too few goods is addressed, the inflation will subside.

The collapse in the price of digital currencies, particularly Bitcoin, has not only significantly damaged Americans who invested or traded in the currency but its credibility as a tool for governments to control their citizens.

An estimated one in every six Americans has owned, invested, traded, or used a cryptocurrency at least once, taking advantage of its encrypted property: No outside agency, including the government, can track its ownership or use.

The collapse has been staggering: In November Bitcoin (stock symbol BTC-USD) peaked at $67,802. It closed on Thursday at $28,315, a breathtaking decline of nearly 60 percent. At the same time, Wall Street’s S&P 500 Index (stock symbol SPX) declined by just 16 percent.

Commentators blame a combination of factors, including inflation, the decline on Wall Street, and the tweet from Elon Musk that Tesla will no longer be accepting Bitcoin to purchase his company’s cars.

One underlying cause, however, enjoyed scant exposure: the announcement by the White House, by executive order, that it was moving ahead with plans to develop a “central bank digital currency” (CBDC) as a tool to replace not only the dollar but the entire commercial banking system. Once in place, the U.S. CBDC would be melded into CBDCs of other central banks around the globe, making private cryptocurrencies not only irrelevant but illegal.

It’s already happening in China, where the communists have banned Bitcoin while developing their own CBDC.

The Executive Order released by the White House on March 9 is just now resonating among supporters of cryptocurrencies who are seeing the implications. As that EO states explicitly, America “must play a leading role in international engagement and the global governance of digital assets.” It orders Federal Reserve Chairman Jerome Powell “to continue its research, development, and assessment efforts for a U.S. CBDC.”

Powell is only too happy to oblige, declaring that a CBDC “could serve as a complement to, and not a replacement of, cash and current private-sector digital forms of the dollars, such as deposits at commercial banks.”

This is a canard of the first order. Once installed, all financial transactions will take place with the new digital currency, making those commercial banks irrelevant. Norbert Michel, writing in Forbes, makes it clear that CBDCs will not “complement” the existing private banking system in the U.S. but will replace it altogether. He wrote:

I believe that the Fed should not launch a CBDC. Ever.

And I think Congress should amend the Federal Reserve Act, just to be on the safe side….

[Under a CBDC] the federal government, not privately owned commercial banks, would be responsible for issuing deposits [which is] a major problem for anything that resembles a free society….

The problem is that there is no limit to the level of control that the government could exert over people if money is purely electronic and provided directly by the government. A CBDC would give federal officials full control over the money going into — and coming out of — every person’s account.

No less worthy than Warren Buffet and his partner, Charlie Munger, have come out opposed to digital currencies, but only for practical and not political reasons. Buffet told his audience of shareholders in April that bitcoins aren’t a “productive asset,” that they don’t produce anything tangible:

Whether it goes up or down in the next year, or five or 10 years, I don’t know. But the one thing I’m pretty sure of is that it doesn’t produce anything.

It’s got magic to it and people have attached magic to lots of things.

But with the collapse in the price of Bitcoin and its close relatives, the magic is gone, and along with it the excitement the White House is trying to gin up over replacing the dollar with it.

Buffet made clear that he wouldn’t touch a Bitcoin even if one were handed to him:

If you said … for a 1% interest in all the farmland in the United States, pay our group $25 billion, I’ll write you a check this afternoon. [For] $25 billion I now own 1% of the farmland.

[If] you offer me 1% of all the apartment houses in the country and you want another $25 billion, I’ll write you a check. It’s very simple.

[But] if you told me you own all of the bitcoin in the world and you offered it to me for $25, I wouldn’t take it. Because what would I do with it? I’d have to sell it back to you one way or another.

It isn’t going to do anything. The apartments are going to produce rent and the farms are going to produce food.

Buffet’s partner Charlie Munger added:

In my life, I try to avoid things that are stupid and evil and make me look bad … and bitcoin does all three.

In the first place, it’s stupid because it’s still likely to go to zero. It’s evil because it undermines the Federal Reserve System….

And third, it makes us look foolish compared to the Communist leader in China. He was smart enough to ban bitcoin in China.

Munger is mostly correct (China is moving ahead with its own CBDC). But the losses the free market has inflicted on cryptocurrencies since last November have severely damaged their credibility along the way. That damage is likely to delay significantly any immediate implementation of the totalitarian scheme by the Fed.

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This article was published by The New American and is reproduced with permission.

Just twenty years ago, economists and bureaucrats triumphantly proclaimed the apotheosis of macroeconomic stabilization policy. The “Great Moderation” saw a long spell of full employment, income growth, and low and steady inflation. How we long for those days now!

While labor markets appear healthy, this could quickly change. Meanwhile, inflation has surged: Consumer prices are up more than 8 percent, and producer prices more than 11 percent, from a year ago. We haven’t seen inflation this bad in more than a generation. Wages are rising, too, but not enough to keep up with inflation. American households are getting squeezed. Political unrest is increasing. And continuing global conflict will only make market turmoil worse.

It’s very tempting to return to the policy consensus of yesteryear. But that would be a mistake. While U.S. economic performance was admirable during the late twentieth century, it rested on a Faustian bargain: we accepted the harmful idea that economies needed some inflation—just a little bit—to grease the wheels. As a result, we put far too much power in the hands of unaccountable central bankers. Subjecting monetary policy to bureaucratic whims is one reason we experienced, in barely over a decade, a crippling financial panic and record-breaking inflation.

It’s time to set the record straight. We don’t need inflation to achieve full employment and economic growth. Dollar-depreciation economics just isn’t true. Furthermore, there are strong moral arguments against tolerating inflation. Descriptive economics and prescriptive political economy concur: When it comes to monetary policy, we need to fundamentally change the rules of the game.

Inflation doves claim dollar depreciation has beneficial economic consequences. Inflation increases investment by raising the returns on securities relative to highly liquid forms of wealth, such as cash or checking accounts. Furthermore, because inflation decreases real (purchasing power–adjusted) wages, it makes hiring workers easier. If central bankers keep inflation in the 2 percent range, they can supposedly give the economy a permanent shot in the arm.

Not so fast. Markets don’t work this way. These views rely on a permanently exploitable form of “money illusion,” whereby the public never gets wise to policymakers’ tricks. But even a passing conversation with American citizens reveals they’re well aware of when inflation happens and what it does to their earnings. Nor are they rubes when it comes to their investment choices. When we dig a little deeper, we see the inflation doves make two big errors.

Two Economic Errors of Inflationary Policy

First, inflation doves fail to recognize that investment returns respond to the dollar’s purchasing power. Interest rates on securities such as bonds have two components: the desired rate of return and compensation for inflation over the duration of the asset. When markets expect more inflation, suppliers of capital demand higher returns. Demanders of capital are happy to oblige: paying more in depreciated dollars doesn’t sacrifice real purchasing power. This blunts the effects of inflation on investment.

Its true inflation disincentivizes holding cash and other liquid forms of wealth. But if anything, this is a cost, not a benefit! As a tax on liquidity, inflation causes people to reduce their liquid wealth holdings, because these holdings rarely scale with inflation the way other securities do. Cash, of course, has no yield, so when inflation increases, holders of cash eat the entire dollar erosion. To the extent people try to avoid this stealth tax, society becomes poorer. Having cash and cash substitutes on hand is useful to meet regular transaction demands. Avoiding the inflation tax means people use up other resources, including time, to economize on liquidity. All those resources could have been put to some beneficial purpose in the absence of inflation.

The second error is a special case of the first. It merely happens in labor markets instead of capital markets. Just as investors are sensitive to their purchasing power–adjusted returns, workers are sensitive to their purchasing power–adjusted wages. People aren’t blind. They see prices rising at the car lot, the rental office, the gas pump, and the grocery store. Because we negotiate wages less frequently than other prices, inflation does lower wage values for a little while. But once people get wise and are free to renegotiate, they demand higher dollar wages to compensate for their lost purchasing power. Since employers are enjoying higher dollar incomes, they don’t mind paying higher dollar wages. But the dollar is cheaper than it once was. Net result: neither employers nor employees can afford more goods and services than before.

The persistence of dollar-depreciation economics is best explained by the prejudices of the political class, not the strength of its arguments. Many policymakers, including central bankers, believe the economy would flounder without their constant supervision and intervention. They exaggerate the problems with markets and—much more importantly—the efficacy of technocratic solutions. Yet there’s something more insidious than policy ineffectiveness going on here. If the only problem with inflation were that it didn’t work, it would be, at most, an irritant. This overlooks the moral aspects of inflation, which are grave indeed.

If economics is a science, political economy is an art. When we participate in public discourse, we’re not having a narrow economic conversation. We’re having a broad political-economic conversation. Value-free economics ends where value-laden policy proposals begin. And when we look at the values implicit in inflationary policy schemes, we see much that should offend us. To paraphrase the great Chicago political economist Frank Knight, we must grab the bull by the tail and stare the situation square in the face.

Inflationary Policy Fails Conventional Normative Tests

If, as we’ve argued, the positive economic analysis of low-inflation-as-shot-in-the-arm for the economy does not hold, what does that imply for normative judgment and prescription?

There are some who are unable to avoid inflation. As we noted, cash has no yield. Those who rely heavily on cash, such as the unbanked, are hurt the most by a depreciating currency. Who are these people? According to a 2019 Federal Deposit Insurance Corporation report, “Younger households, less-educated households, and Black, Hispanic, and American Indian or Alaska Native households were more likely to use [nonbank financial] transaction services, as were lower-income households and households with volatile income.”

Simply put: the poor with low credit, and especially minorities among them. Not only do their cash holdings suffer under an inflationary regime, but their relative lack of formal education—itself likely a reflection of broader social injustices—means they have less leverage with which to negotiate for better wages to compensate for eroded real incomes.

There is virtually no normative framework that justifies a policy regime that burdens the poor and marginalized. Since there’s no clear upside to inflation, its regressive effects are prima facie unjustifiable. Consider two of the most prevalent political-philosophical paradigms:

Rawlsian justice-as-fairness would say that from the “original position” behind the “veil of ignorance,” no reasonable person would favor an institutional arrangement that disproportionately hurts those at the bottom of our economy as does inflationary monetary policy. If one were to enter into this economy not knowing in what socioeconomic position one would start, no one would favor a system in which those at the margins of our society are handicapped against upward mobility by monetary policy. Yet this is precisely the barrier current policy places in their way.

Similarly, if the supposed benefit to investment is illusory, as detailed above, Pareto optimality would also come down in favor of monetary stability. Since market bargaining eliminates the supposed beneficial effects of inflation on investment and employment, the poor would gain and nobody else would lose if we could transition to a non-inflationary regime. Our current monetary framework is not Pareto optimal: by rejecting inflationary monetary policy, we could benefit one or more groups of people—in this case, the poor—without hurting others.

Yet both of these examples, while normative, are not quite moral. They are instrumental arguments, rather than intrinsic arguments, and thus neglect an important dimension of normativity. Morality has to do with what is best because it is good for its own sake. It is concerned with what is and contributes to the “good life” for human beings qua persons. Several interrelated moral perspectives add additional weight to our critique.

The personalist tradition, adopting Immanuel Kant’s second formulation of his categorical imperative, insists that persons, as rational beings, must never be treated as means to an end but always as ends in themselves with inherent dignity and worth. Imposing the costs of inflation upon the savings and incomes of the poor for the sake of an ephemeral—or worse, imaginary—economic stimulant effectively uses one group of people for the ends of another. The cash holdings of the poor may not be much, but those savings should be theirs to use as they choose, without being stealth-taxed by a misguided inflationary policy with no justification for the common good.

Speaking of the common good, the Catholic tradition of social thought defines it as “the sum of those conditions of social life which allow social groups and their individual members relatively thorough and ready access to their own fulfillment.” Certainly, the capital and income needed for one’s livelihood fall within these categories. Furthermore, we cannot simply look out for our own interests, but through the principle of solidarity, “every social group must take account of the needs and legitimate aspirations of other groups, and even of the general welfare of the entire human family.” Thus, morally speaking, the inherent dignity of each human person not only serves as the foundation of individual rights but of our responsibilities to one another. Inflationary policy injures, rather than serves, the common good, and by the principle of solidarity people cannot overlook the harm done to others, even if it does not directly harm them.

There is a relation here to Kant, whose principle incidentally has ancient Christian antecedents and has been integrated into broader personalist social thought by figures such as the nineteenth-century Orthodox Christian philosopher Vladimir Soloviev or Pope John Paul II, among others. As Soloviev put it, “Pity which we feel towards a fellow-being acquires another significance when we see in that being the image and likeness of God. We then recognize the unconditional worth of that person; we recognize that he is an end in himself for God, and still more must be so for us.”

So, too, on this personalist moral basis we must regard inflationary policy not merely as mistaken but, in a sense, inhumane. Indeed, this personalist ethic formed the anthropological foundation of the German economist Wilhelm Röpke’s Humane Economy: “I see in man the likeness of God; I am profoundly convinced that it is an appalling sin to reduce man to a means.” And Röpke, too, criticized inflationary policy along the same lines we have above, writing, “no great perspicacity is needed to recognize the close kinship between lack of respect for property and indifference to the value of money.” To the extent the poor often must rely on cash as a store of value, the two coincide. Inflationary policy lacks basic respect for the property of the poor.

Of course, public policy is always imperfect—morality is not reducible to law. But neither may law violate morality. Rather, as Thomas Aquinas argued, civil law must be based upon, while also striving to approximate, the natural moral law in the particular circumstances of our political life together. Likewise, our monetary policy ought to contribute to the common good, rather than detract from it as it does now.

A more responsible monetary regime isn’t about scoring partisan points, nor is it reducible to economic soundness. Good money does require good economics, but this isn’t sufficient. Rather, monetary stability is a matter of striving for a more humane economy, especially for the poor. Like all economic institutions, monetary institutions should enable all persons to flourish. As inflation ravages the U.S. economy, it’s clear our monetary policy—and the unaccountable technocratic-bureaucratic class that implements it—fails this basic test.

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This article was published by AIER, American Institute for Economic Research, and is reproduced with permission.