The Cruelest Tax of All

Yesterday we considered the subjective theory of value and how the use of money has made it harder to see how both parties benefit in an economic transaction. Still, currency has benefited humanity by making trade easier and more efficient. But at the same time, the use of money raises the prospect of inflation.

Inflation occurs when the value of money decreases and the cost of goods and services rises. As the purchasing power of a unit of currency goes down, merchants must raise prices to maintain and expand their businesses. Because money is worth less, prices must go up even to sustain profits, let alone increase them. Inflation has been called “the cruelest tax of all” because it especially hurts the poor and the elderly, some of the most vulnerable people in society. As prices rise, the money that these groups have been able to set aside does not go as far. They spend more and more for less and less.

Increasing the money supply drives much of this inflation. Governments worldwide have embraced fiat currency by detaching their currencies from a fixed standard based on a rare commodity such as gold or silver and printing money whose only value is the government’s say-so. Governments can now keep printing money to create new programs and giveaways for their constituents without worrying much about whether these things are actually affordable. However, as more money is printed, it becomes more common, and the more common something is, the less individuals value it. They start demanding more of it in economic exchanges by raising prices.

This kind of inflation is at odds with Scripture’s demand for just weights and measures, which is given in Leviticus 19:36 and in many other texts. In biblical times, buying and selling was commonly conducted by using scales that balanced goods against weights. If the weights or scales were dishonest, people could be cheated. For example, an unscrupulous fig merchant could inscribe a one-pound weight (to borrow a modern measurement) with the mark of two pounds. Buyers would then pay for two pounds of figs as the merchant weighed out the fruit because the weight said two pounds. Yet, in reality, these unsuspecting buyers would receive only one pound of figs. God’s Word forbids this kind of dishonesty in buying and selling, and inflation driven by increasing the money supply is a kind of unjust weight and measure because the government can devalue the currency at a whim by printing more of it.