Joe Weisenthal is an editor and host at Bloomberg who has recently been using his large Twitter platform to cast stones at the inflation hawks. In one recent thread, Weisenthal mocked the people worried about the falling purchasing power of the US dollar, and claimed in fact that it would be immoral for currency to maintain its value over time.
As we’ll see, although Weisenthal’s thought experiment of a time traveler is a bit whimsical, it provides a good opportunity for us to explore the underlying economics. The whole episode underscores, once again, why the Austrian school provides the public with a beacon of light amid the confusion of our financial punditry.Weisenthal’s Time Traveler
Below is the original tweet, which is largely self-explanatory, though interested readers can see me grappling with Weisenthal by clicking here.
In context, Weisenthal (and Adam Singer) are poking fun at the Ron Paul–types who are upset at the steady decline in the dollar’s purchasing power since the Fed was formed in late 1913. Weisenthal thinks it is absurd to expect that actual currency would maintain its market value over the course of a century. Why, what would such a “hoarder” have done to benefit society all that while?Shrinking the Time Scale
To cut to the chase, Weisenthal is completely mistaken: there was nothing immoral about the classical gold standard and its maintenance of the dollar’s purchasing power over long stretches. But it will be easier to pinpoint the flaw in Weisenthal’s thinking if we first consider a simple story.
Suppose Joey is a teenager who cuts lawns for extra income and he typically makes $25 a weekend. Joey wants to buy a $300 Xbox, so he saves his weekly lawn-mowing money under his mattress. After three months, Joey takes the saved $300 in cash to the mall and buys the coveted electronics.
Does Joe Weisenthal have a problem with this scenario? Did the market economy function immorally by allowing...