It may seem unusual that an economist would talk about culture. Usually, we talk about prices and production, quantities produced, employment, the structure of production, scarce resources, and entrepreneurship.
But there are certain things that economists can say about the culture, and more precisely, that economists can say about the transformation of the culture. So what is culture? Well, to put it simply, it is the way we do things. This can include the way we eat — whether or not we dine with family members on a regular basis, for example — how we sleep, and how we use automobiles or other modes of transportation. And of course, the way we produce, consume, or accumulate capital are important aspects of the culture as well.
‘Your Silver Has Become Dross’ – A Cause for Bad Behavior
Some excerpts of “How Fiat Money Destroys Culture” by Jörg Guido Hülsmann:
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Before the twentieth century and widespread access to fiat money, debt was far less common and there were cultural imperatives against going into debt for consumption. Credit for households, for example, was virtually unknown before the twentieth century, and only very poor households fell back on debt to finance consumption.
But in a fiat money system, as price inflation diminishes the value of one’s monetary savings, we are encouraged to adopt a short-term perspective. That is, we need to hurry up to obtain credit as soon as possible and obtain revenue from that debt as soon as possible because savings lose value if we just hold on to cash.
It no longer makes sense to save up money for a decade to buy a house, for example. It is much more opportune to go into debt to buy a house immediately and to pay back the loan in devalued money. There is then a generalized rush into leverage in a fiat money system since debt- financed investment brings greater returns than savings in cash or equity-financed investments.
It needs to be stressed that this tendency has no natural stopping point. In other words, fiat money systems tend to make people insatiable in their quest for ever higher monetary returns on their investments. In a natural monetary system, as savings increase, the return on investments of all sorts diminishes. It becomes ever less interesting to invest one’s savings in order to earn a return, and thus other motivations shift into the foreground. Savings will be used increasingly to finance personal projects including the acquisition of durable consumers’ goods, but also philanthropic activity. This is exactly what we saw in the West during the nineteenth century.
By contrast, in a fiat money society, you are more likely to increase your returns by remaining in debt and continuing to chase monetary revenue indefinitely by leveraging more and more funds.
You can imagine, then, how this inflation and debt-based system, over time, will begin to change the culture of a society and its behavior.
We become more materialistic than under a natural monetary system. We can’t just sit on our savings anymore, and we have to watch our investments constantly, and think about revenue constantly, because if it is not earning enough, we are actively getting poorer.
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Read the rest here…
There’s also an audio version.
