Thursday, April 23, 2009

Luther: Is Inflation Theft?

Justin, Claudia and Matt have offered solid arguments. I would like to suggest, however, that we are asking the wrong question. Inflation is not theft. But is inflation fraud?

In a free society with private currencies, contracts between currency providers and customers would establish whether inflation amounts to fraudulent behavior. Of course, private currencies are effectively banned in the US--the government is the sole provider of legal tender. So in order to claim that government sponsored inflation is fraud, we would first need to show that the government has an obligation to provide a stable currency. Does such an obligation exist? I will leave this for you to decide.


KipEsquire said...

Oops -- I didn't see this before I commented at the original entry.

One of the elements of the tort of intentional misrepresentation (i.e., fraud) is that the victim must reasonably rely on the misrepresentation. But who "reasonably relies" on the government not to debase the currency anymore?

David Z said...

Kip - if you found out that there was a government agency the sole purpose of whose functionaries is to go around punching people in the face, and that in-fact this agency has been in existence for 94 years, would you argue that due to the longevity of the agency's existence, nobody reasonably relies on not getting punched in the face anymore? Just a thought... Overall I think the questions raised in this series of posts are pretty good ones worth consideration.