Economics

Inflation Makes Speculators of Us All

|

Theodore Dalrymple wonders on the corrupting effects of inflation on the character of a nation and its people:

…it is clear to me when I look at the value of what I have accumulated that I have done far better out of inflation of asset values than out of saving. Like millions of others I bought assets mainly of a non-productive nature such as property (to buy which I borrowed not up to the hilt, but according to what I thought I could comfortably reimburse even if interest rates went up to 20 per cent, and therefore did not make as much as I might have done had I been more adventurous). But if instead I had simply deposited savings at prevailing rates of interest, I could not have used the accumulated money to buy more than a fraction of what I now possess.

Good for me, and good for millions of others in like situation, you might say. We have all done very well out of it. Yes, but in the process the very values that we once thought of as bourgeois – thrift, honesty, self-restraint, etc. – have been destroyed. If slow and patient accumulation is the road to personal ruin, then the opposites of bourgeois virtues seem to become wise and prudent: extravagance, craftiness, lack of self-restraint and so forth. And such qualities are bound to extend beyond the economic sphere. Inflation has the effect upon character that the Black Death once had.

Inflation has turned us all into speculators….never has the need for speculation become quite as deeply entrenched in the popular psyche, including mine, as it is now, and inflation is at the origin of this. Never before has personal financial stability or survival depended so much, as it does now, upon speculation….

See Robert Samuelson on the (temporary) taming of inflation back in the early 1980s, from the January issue of Reason magazine.

Advertisement

NEXT: Who Will Reform New York's Insane Drug Laws?

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Get ready for the inflation storm bitches! Hope you can swim!

  2. What is the best type of gold to buy? 99.9% coins (Canada makes some nice ones.)? Those mini-bullion bars? Krugerrands, so as it kick it old-school?

    Someone needs to make a modern gold or silver pieces-of-eight. When inflation gets bad enough, you’re going to want to be able to sub-divide those babies easily.

  3. SF, you can buy 1/10 and 1/20 ounce gold coins. Not with silver AFAIK.

  4. Inflation doesn’t really make speculators out of us. Speculation is when you assume a risk in the hopes of making a profit. Given the details of the bailout, especially the focus on ‘shoring up housing prices’, I have to conclude that the ‘assuming risk’ side of the equation is absent.

  5. Thrift = savings = “f-y money”, and the peons aren’t supposed to ever say “f-y” to their betters in govt, therefore thrift is to be discouraged.

  6. Wait, when did Reason magazine (“Free Minds and Free Markets”) turn against speculation?

  7. Rich people do not make money by mere labor or even intellectual cretivity. Rather, they make money by carefully counting money and strategically moving money around. because this is how rich people do it, this is how we should all do it. Their beneficient normative influence is (happily) especially strong here at the old Hit’N’Run blog, with your Ken Schultzes (“don’t tax the rich”) and KMWes (“lets give them jets”) and your Kwaisy-Babies (“deport the poor”).

    Over at the Unqualified Offerings Jim Henley denies that we worship our rich. It is hard to tell whether he is cunning, or naive, but I certainly hope the former. I think that T. looks up to him.

  8. Thanks, sage.

  9. That’s rubbish. Elon Musk is rich and is personally financing a new electric car and a space program. And he made his money starting and building a successful company. There’s a bazillion other examples.

    Not that some people aren’t merely pushing paper around, but even some of that is part of what should be happening in a healthy financial system.

  10. We have to move beyond these failed ideas of greed that have ruined the country.

    Fair economic growth, with opportunities for everyone regardless of race, gender, education, or willingness to work hard, can only come from the government.

    My fellow Americans: who is John Galt?

  11. The point is that Musk runs the engineers. The engineers do not run Musk. And that is, of course, exactly as it should be.

  12. Rather, they make money by carefully counting money

    Yep, that’s how I did it. I just kept counting my money over and over and one day I was rich.

    That’s capitalism for you.

  13. I am an engineer you jackass.

  14. I suggest Americans worship celebrity more than wealth. The tabloid rack at the market is not full of pictures of rich people, it is full of pictures of celebrities who are often (but not necessarily) rich. The primary use of wealth seems to be gaining celebrity status.

    For better or worse, Americans are lousy supplicants. They are too mercurial, too self involved, too easily distracted. The real inflation is in celebrity status. There is a glut of fame on the market with no end in sight. I suspect most people are more aware of this than monetary inflation.

  15. Well, you have four patents, but no engineering degree.

    Regardless, it is the Wharton education that made you your big money and you know it. And that is, of course, exactly as it should be.

  16. It is the central comfort of the lazy poor to believe that you become rich only by luck or trickery.

  17. If only we all were give the same leg up to start with, we wouldn’t have to worry about it. But as the Rich get richer, the poor just get poorer.

  18. Sugrfree wins the thd. It is indeed the superior character and innate virtue of the rich that leads them to riches. We can’t all do what they do as well as them, but we can emulate them as we are best able and improve our respective lots at the margins. The heuristic data that is the light of their lodestar lives is far more valuable than any taxes we might (but really shouldn’t) force them to pay at the point of a gun.

  19. “What is the best type of gold to buy? 99.9% coins (Canada makes some nice ones.)? Those mini-bullion bars? Krugerrands, so as it kick it old-school?”

    Gold, the new bubble.

  20. Waldo’s entertaining because I can’t tell if he’s a spoof or not.

  21. Hey waldo, are your lame attempts to drive traffic to your lame blog working at all?

  22. “It is the central comfort of the lazy poor to believe that you become rich only by luck or trickery.”

    That’s so true.

  23. “It is indeed the superior character and innate virtue of the rich that leads them to riches.”

    Witness Hetty Green.

  24. It is indeed the superior character and innate virtue of the rich that leads them to riches.

    Well, I can skip lunch. I wouldn’t be able to eat it with all the words you just put in my mouth.

  25. There are as many kinds of rich people as there are kinds of poor people.

    Feel free to use which ever stereotype reinforces your biases.

  26. Over the years, I’ve seen precious little evidence that gold is really all that good a hedge against inflation.

    Unless, of course, you buy it before the price goes up. 🙂

    I suppose the best tactic would be to try to find out what the gold bugs are buying right now with the profits they’re getting from selling nine hundred plus dollar an ounce gold. You can be pretty sure they’re not ploughing them back into inventory.

    They’ll do that when the price goes back down again. 🙂

  27. I wouldn’t be able to eat it with all the words you just put in my mouth.

    Don’t you usually have “something” in your mouth at lunch time anyway? Glory holes are perverted, dude.

    Dee: Why would you wanna have sex with someone you can’t see?

    Dennis: Well, Dee, I think the real question is…why wouldn’t you wanna have sex with someone you can’t see?

  28. Given the ever increasing liquidity injections the government has been shooting up the arm of our junkie economy, I’d say gold is right priced at $900/oz. Wouldn’t surprise me at all if it topped $2000 by years end. I put my money into silver. It was half priced last Nov. Hard to say which will do better in the coming inflation storm. The longer it takes to hit the more ferocious when it does.

    Better hunker down in something besides dollars. Euros, yen, and the rest of the worlds fiat currencies aren’t likely to weather the storm either. Property is good. Metals should hold up their end. By the time it blows through and we start cleaning up the damage, guns and bullets might prove to be the only sound investment.

  29. Better hunker down in something besides dollars.

    Big house with a big wine cellar. Worse case, I’ll spend the end times in a drunken haze.

  30. Thorstein (or which ever tiresome troll you really are),

    Working at a state university in a poor state gives me a perspective that most collectivists don’t have. I see poor kids every day lifting themselves out of poverty with the simple application of hard work. To suggest that poor people remain poor due to circumstances completely out of their control is to spit in the faces of the hard-working kids. You can succeed in this country, if you want to. Telling poor kids that they will remain that way until abstract concepts like racism completely come to an end is trapping them in poverty. Hard work alone may not make you fabulously rich, but it can easily move you into the middle class in half a generation.

    On the behalf of my hard-working kids, both black and white: Fuck you.

  31. The government imposes hidden taxation through inflation. All economic crisis have their basis in the actions of government.

    AND WE HAVE A WACKY bARRACKY.

    wHAT A MISERABLE FAIULURE. What an idiot. What a commie.

  32. Housing is going to take awhile to sort out. I’m going to pass on metals and sit on raw, undeveloped land.

  33. But if instead I had simply deposited savings at prevailing rates of interest

    Um…

    Long term savings usually do better in investments (despite the current blipping) rather than “prevaling rates of interest,” which make more sense for short term holdings, but are generally affected by the level of inflation anyway. Plus, unless you’re living on a fixed income, your ability to earn enough to buy what you want isn’t very affected by inflation.

    Low, stable and predictable rates of inflation are preferable to the alternatives to any of those for a variety of reasons, and at the extremes all bets are off, but I don’t think anything that’s happened at least since the 70’s (or even then) has had to turn anyone aspiring to “bourgeois virtues” into a spendthrift against his will. IOW, I call bullshit.

  34. “Theodore Dalrymple wonders on the corrupting effects of inflation on the character of a nation and its people”

    Actually, if you read Theodore Dalrymple, you will learn that EVERYTHING corrupts the character of a nation and its people, so there’s no point in worrying about inflation. I mean, we’re already damned, every one of us, so why not party? As for myself, I wonder about the corrupting effects of being named, you know, Theodore Dalrymple.

  35. Holy shit, Dan T is back! And he’s still a fuck!! I just shit my pants in joy!!!!!!

  36. Worse case, I’ll spend the end times in a drunken haze.

    You’re Robert Neville!

  37. Hey waldo, are your lame attempts to drive traffic to your lame blog working at all?

    I tried to go to his blog, but clicking the link just produces a page with thousands of barely distinguisable blogs, and I have trouble finding his…

  38. Warty,

    Yeah, I kind of wondered if that was the case.

  39. By the time it blows through and we start cleaning up the damage, guns and bullets might prove to be the only sound investment.

    Powser and artillery are the only conciliatory measures we should adopt!

  40. Sugarfree, I think you misunderstand the argument. Carefully counting money and moving it around is hard work. It requires focussed attention, math skills and everything else. Speculation, if you do it right, is hard work.

    My point isn’t that the kind of work your poverty-stricken kids do is blameworthy, but simply that it is not as praiseworthy as the kind of work that rich people do.

    Now, this Dalyrymple fellow is saying that the right way to make money is speculation, and that that is somehow bad. He is right that speculation is the right way to make money. He is wrong that this is bad. It is good because it is a way of honoring the rich in our own society. like Mr. Balko sed, imitation is the sincerest form of flattery (unless it is plagiarism).

    I am not concerned with how your students choose to while away their hours, just so long as their moral compasses are reliably converging on the vector directed toward Wall Street at all times. This is the best guidance that you can give them, and, I also think, despite your tortured and somewhat mysterious protetations here at the Hit’N’Run, that you, in fact do.

  41. Taktix?,

    I made it to his blog. The best post is his ultra-timely discussion of Dan Savage and Rick Santorum. Did you hear Savage made up a naughty word using Santorum’s name?

    Saturday, February 7, 2009
    Santorum, and the hilarity that ensues.

    (I’m not linking him.)

  42. Thorstein,

    Which part of “Fuck You” did you not understand? Was it because I spelled it correctly?

    Oh, boy. A new troll. Woo.

    Sarcasm is a form of ironic speech or writing which is bitter or cutting, being intended to taunt its target.

    This is the last bit of bait I give you, so chew it slow and savor it.

  43. Is Dan T doing some avant-garde performance art? His posts are like a verbal Dance Floor Dale (NSFW or sanity).

  44. Neville… Neeeevvvville

  45. Uhm, Waldo’s blog is some kind of parody, right? Cooked up by James Dobson to make pinky brains look like a bunch of Ed Rooney’s and Dean Wormers.

  46. “It is indeed the superior character and innate virtue of the rich that leads them to riches.”

    John E. du Pont – Thorstein’s idea of virtue.

  47. Speculation is a terrible way to make money. It doesn’t work.

    Seriously. You could pick stocks at random and do as well as the most Wall Street money managers.

    The only way to reliably make money in the stock market is with inside information, or (almost the same thing) with a serious in-depth knowledge of a particular industry that you aren’t going to come by in business school.

    Do you actually know how much a typical stock broker makes? $53,000. That’s about as much as an entry-level engineer. Considerably less than you would make in a technology field.

  48. I made it to his blog. The best post is his ultra-timely discussion of Dan Savage and Rick Santorum. Did you hear Savage made up a naughty word using Santorum’s name?

    SugarFree,

    That was a reference to Where’s Waldo, as his intellectual level seems on par…

  49. Most rich people that I’ve met, incidentally, didn’t get rich through speculation. They invariably started their own business – whether it was a software company, or something more exotic, like freelance weather photography, art, music, or writing.

    I’ve never met anyone that got rich through speculation in the markets.

  50. Thorstein = Dave W?

  51. “Come out, Neville!”

    Wow, a new troll AND a spammer to give the Anonymity Douchebag a run for his money in Waldo? Christmas did come early this year, stimulus or no.

  52. Thorstein = Dave W?

    I thought Dan T was the Farces Wanna Mo troll. Do I have them confused?

  53. As an old friend once told me, you can marry more money in five minutes than you make in a lifetime. The surest way to wealth is to have good fortune to be born to very wealthy parents (see Hetty Green, the early years) or to marry money (see John McCain). Other methods, such as hard work, thrift, innovation or speculation are far less reliable. Even rather profitable (though less savory) activities like dealing drugs or becoming a slum lord are far from certain. Oh, I readily concede that a lack of scruples and a willingness to screw one’s fellow man with utter impunity can be rather handy in the accrual of material wealth, there are no guarantees.

  54. Taktix?,

    Curse your cleverness!

  55. Hazel, I have. I know one man who was middle class, and bet it all on a penny stock that went through the roof.

    Everyone else (including my clients) were entrepreneurs, benficiaries or divorcees.

  56. I thought Dan T was the Farces Wanna Mo troll. Do I have them confused?

    Yes you do. Dave W. is Farces and HFCS and conspiracy theories. Dan T. was “well the people in that community choose to live like that so if you don’t like it you can move”.

  57. Speculation is a terrible way to make money. It doesn’t work.

    You are right. I should have used the more correct term “nvestment.” By way of explanation of was addressing in Dalrymple’s commentary using its own terms, but that concedes too much. Investment is the best way to make money. Whether it is effective or not, it is a cardinal virtue because it is what rich people do.

  58. Ska – I have a cousin who married an heir to one of the spice families (no, not the Atreides). I think he improved to 8 or 9 figures with the marriage.

    He was a pretty shifty operator, and I think he would have found his way into big money anyway, but this was something of a coup.

  59. Thorstein, you must hate Obama. All that stimulus is going to cause so much conspicuous consumption…

  60. You guys are losing your clever to name-calling. If you want to argue with a troll, don’t be a troll. Speculation is just a dirty word in this context. If I buy stock, I am speculating that someday it will be worth more than my basis. If I start a company, I am speculating that I will be able to run a profit. Inflation is a decent benchmark for whether an economic action is worth “speculating” on, as do-nothing is money depreciating.

    With the dawn of the internet it doesn’t matter how much money you have or your background much. Anyone can learn how to save, invest, get a good loan, or start a business. Also, it’s essentially free. Speculator isn’t a dirty word, it’s just another name for an independent agent in a free market. If you don’t want to participate, then that is up to you.

  61. Not to mention that speculating on inflationary real estate is not actually productive to the economy. Parking in a savings account would be more productive in that the bank could loan it out for productive business purposes.

  62. Why start a company? There are plenty of companies and other things to invest in already. The point is that we are all investors, and to the extent we aren’t, we should be.

    I mean, there is nothing wrong with putting your name on a company, but it is better to get other people to do the labor and thinking about production and designh and sales and the other details. Don’t pay them too much or give them too many benefits, though. They are not worth it. The key is too keep the investors happy because they moral fiber will make the company strong and separate it from the weak ones.

  63. It’s about time for the “Aristocrats” joke, methinks.

  64. phalkor: I’m using the word “speculation” to mean “uneducated guessing”. If you start a business, you better have more than a wild guess as to whether it’ll make a profit.

    As far as the stock market is concerned, unless you spend all day on it and specialize in a narrow sector, you probably aren’t going to know enough to make an educated choice.

    But if you own your own business, you pretty much know everything about that business. Hence, it’s a safer bet than putting money into the stock market.

  65. Why start a company? There are plenty of companies and other things to invest in already.

    I mean, there is nothing wrong with putting your name on a company, but it is better to get other people to do the labor and thinking about production and designh and sales and the other details.

    Because you lack information upon which to make educated guesses as to what is likely to make money in the future. Duh.

    Not all businesses suceed you know. Some of them fail.

  66. I’m really liking this Thorstein character, but I think he’s maybe a little unidimentional. Maybe you could come up with a few other things to fixate on, Thor, hmm?

  67. Maybe it’s the Internet, but I’m finding it harder and harder to tell pretend crazy from real crazy.

  68. I am just happy to have finally found a blog where everybody thinks as I do. This whole thing with the Demmycrats seizing power kind of got me down for a bit, but now I feel like an early Christian who has found a nice catacomb.

  69. Mencken on the writings of Thorstein (Veblen):

    [It is] a cent’s worth of information wrapped in a bale of polysyllables…. It was as if the practice of that incredibly obscure and malodorous style were a relentless disease, a sort of progressive intellectual diabetes, a leprosy of the horse sense. Words were flung upon words until all recollection that there must be a meaning in them, a ground and excuse for them, were lost. One wandered in a labyrinth of nouns, adjectives, verbs, pronouns, adverbs, prepositions, conjunctions and participles, most of them swollen and nearly all of them unable to walk.

  70. “I am not concerned with how your students choose to while away their hours”

    I could while away the hours,
    A’top of Stephanie Powers,
    In Dallas or Danang,
    I could rise above flirtation,
    Try my hand at masturbation,
    If I only had a wang.

  71. Time for me to get outta the business of sense-making.

    At my age I can afford speculation, my drugs of choice keep me convinced that I know what I’m doing.

  72. The GinSlinger raises a good point. What did happen to UO today?!?!?!?!

  73. “I am just happy to have finally found a blog where everybody thinks as I do.”

    First, not everyone here thinks, let alone thinks alike. Second, use the word “Demmycrats” and you’re going to feel like an early Christian alright… the kind the Romans fed to the lions.

  74. Why would anyone question the honesty, trustworthness, or honor of the dhimmierats?

    Why anyone can tell the Fearless Leader is sane, can’t you?

  75. I’m thinking Thorstein might be the latest incarnation of Lefiti.

    That, or he’s just a random douche.

    Thorstein: Epic Fail.

  76. Jose Ortega Y Gassett,
    Thorstein is just another a-hole leftwing troll, like Leftitty.

  77. I’m a smarmy little buttmunch who comes on here and posts to display what I believe to be my superior intelligence.

Please to post comments

Comments are closed.