Idealistic, fanatical libertarians—the Mises types, Rothbardian and Randian—like to shout from the rooftop that “inflation is a monetary phenomenon.” But that’s mastery of the obvious.

Maybe there are still some five-year-olds out there who imagine inflation to be the fault of merchants raising prices so as to screw their clients and, thus also the fault of conservative politicians who support merchants. But most people grasp that more money chasing the same number of goods and services makes prices rise. To call inflation a monetary phenomenon is like the assertion that running involves legs. The real questions are why, from whom, and to where are we running?

Since money does not print itself, inflation is more than a monetary phenomenon.

It’s about governance—so it’s ideological, political, and sacrificial in nature. Ultimately, it’s theological. This is because inflation is a ritual wherein we take from some parts of the community and give to others. It’s a ritual because we want it to stay mysterious. We look away, so to speak; we accept its complexity because we’re trying to diffuse panic, envy, and sadism. In this tragic sense, the new fans of the Austrian School don’t understand the School of Salamanca from which they claim to be descended.

In the end, money is just the medium of inflation.

Inflating its supply is a way of gaining the time and funds by which we manage social conflicts and mass movements. Therefore, it’s about class or ethnic tensions. Lately, it’s even about navigating the war between the sexes. Inflation is always a matter of us versus them. Losers take from winners; winners take from losers. Which of these we are depends on who wins.

To the extent that inflation sustains a nascent or dying social order by redistributing wealth through a hidden tax, it sublimates violence. Monetary policy is warfare by other means.

Prussian general and military theorist Carl von Clausewitz famously said, “War is simply the continuation of political intercourse with the addition of other means.” The idea is reversible: “Politics is simply the continuation of military intercourse with the subtraction of its principal means.” The fact that we can flip these ideas— i.e., that war is politics and politics is war—indicates the locus of monetary policy, the holy grail of governance. It’s the ultimate means of financing the solution to any crisis.

At the frontier between politics and war, what causes one to turn into the other is often a proper or improper dose of inflation. Domestically, depending on how it’s deployed, who benefits or suffers, the relative damage to the economy, and how good it is for the society at large, inflation can either keep us together or rip us apart. In foreign policy terms, it can also mean the difference between overcoming or surrendering to an external enemy.

In domestic politics, inflation arises most frequently in the context of what classical authors called “distributive justice.” By contrast, and in theory at least, the other two classical modes of justice, criminal and civil, are simple. With criminal justice, you figure out who broke the law and decide how to punish them; with civil justice, you figure out who broke a contract and decide how to compensate the other party—simple. Distributive justice is more complicated because it ensures that everybody gets their slice of society’s pie. That’s why this mode of justice frequently muddles the other two.

Jury nullification and fake charges brought against political opponents signal the deeper group sentiments that distributive justice addresses. In the end, distributive justice is about satisfying the mob, that is, making sure certain social castes won’t grow resentful and brutish. Traditionally, inflation is the means of taxing a general populace in order to maintain a government. Traditionally, that same government’s primary concern is keeping the peace by balancing society’s coalitions. Thus, inflation is not just a monetary phenomenon. It’s a mechanism used to modulate conflict.

Maybe an alien race lands a spaceship on the White House lawn. A crisis always occasions a response by the government, which always incurs a cost. When we turn to the government to solve our problems—and can anyone honestly recall the last time we didn’t turn to the government to solve a problem?—then we have to pay for it. And we almost always do so by inflating the currency.

Inflation can be less damaging in the short term so long as economic growth outpaces it. Welfare and social programs are the “bounty” of the purchasing power siphoned away from money when a government adds to its supply and creates inflation. So long as these programs keep the right people happy and so long as the inflation that sustains them doesn’t destroy the larger economy, the ritual works. Distributive justice can be an effective way of maintaining social stability.

But no matter how you look at it, inflation, as a means of financing government programs that are thought to help people, doesn’t conform to the rigorous view of private property shared by most of the American founders.

James Madison in Federalist 44, for example, rails against “the pestilent effects of paper money on the necessary confidence between man and man.” In particular, once a government abandons the natural restrictions placed on it by using silver and gold as money, it turns to inflation to expand its sphere of influence, thus violating the rights of some individuals to benefit others. Inflation pits those who depend most on the government against those who rely relatively less on the government.

Turning to foreign policy, what greater social program is there than war?

Whether it’s pillaging other nations to offset our own failing economy or defending against an invader, war almost always brings inflation because it destroys more than it yields. If most citizens want a war, or, conversely, if most are happy when a war ends, then we all might stomach the inflation that pays for it.

But if the conflict is, in truth, internal, that is, if the so-called war being sublimated by inflation is a civil war, then the so-called monetary phenomenon grows in response. Along comes a crisis that exacerbates our differences. It can be anything: again, a war, or maybe just an economic downturn, or a more generalized “war on poverty,” perhaps a work stoppage, a plague, or even a technological or societal shift that unexpectedly changes the nature of the economy in a way that affects a whole lot of citizens. It doesn’t matter what it is. Maybe an alien race lands a spaceship on the White House lawn. A crisis always occasions a response by the government, which always incurs a cost. When we turn to the government to solve our problems—and can anyone honestly recall the last time we didn’t turn to the government to solve a problem?—then we have to pay for it. And we almost always do so by inflating the currency.

This is why inflation grows unsustainable either at the beginning or the end of a social order. And these are the same thing, i.e., the same event. It depends on your perspective and on which side of it you end up. Both the North and South during the American Civil War printed lots of money. Another way of viewing WWII is as a struggle between competing monetary regimes. A less inflationary regime in the U.S. destroyed greater inflationary regimes in Germany, Italy, and Japan. But the more inflationary regime doesn’t always lose. Pedro I and Enrique II minted competing coins in fourteenth-century Castile as the House of Ivrea succumbed to the House of Trastámara. Enrique II won, yet his money was more adulterated than that of his rival. The more inflationary regime defeated the less inflationary regime. So, during a war, inflation can also be salutary and patriotic, especially if your side wins. Maybe the side that deploys a less inflationary policy is beholden to creditors that don’t have the nation’s best interests in mind.

From the hegemonic vantage of the Pax Americana and the post-Cold War era, a still not insignificant number of citizens in Western nations imagine that once upon a time along came a new religion or a freer or more just form of government, which then proved robust if not outright invincible for many centuries. After a rocky start, Jeffersonian democracy coordinated a large agglomeration of different people in ways that allowed American civilization to succeed beyond anyone’s wildest dreams. Reducing America to the issue of economic viability, historically she’s been graced with relatively fewer bouts of inflation and smaller reallocations of wealth. High inflation and heavy reallocations are the normal course of business in many countries, and they correlate well with poverty and lack of social cohesion.

A stable money supply and a dynamic market economy are factors that can compensate for the inevitably unfair distribution of wealth, on the one hand, and the destructiveness of inflation to those who are productive, on the other. A large antifragile economy and a massively liquid currency make for more sociopolitical resilience than expected. That is, until the destruction and reallocation of wealth stop working or aren’t worth it to most people.

When this happens in the modern era, it’s often the case that the radical left threatens to destroy property and people if it can’t get its way. Meanwhile, most of the so-called moderates and those on the right know enough to stay out of cash and buy assets, hoping that inflation-financed government programs can hold the masses at bay.

At some point, however, welfare and social programs might no longer satisfy the mob, and the inflation that finances it might become destructive to the class of people it’s supposed to help. Then, the middle class and the wealthy of all political stripes have a problem: their assets will be expropriated by various means, from theft to punitive taxes. More often than not, this will happen under the approving eye of their own political representatives. Finally, a monetary phenomenon will morph back into what it always already was—a political phenomenon and, failing that, a matter of the rule of law and, failing that, violent conflict.

So, unless you think money multiplies magically all by itself, inflation isn’t a monetary phenomenon. It’s a governing mechanism that political elites use or abuse. As such, it’s a human phenomenon. Inflation is about how or how not to live the good life, but it’s also about a short list of deadly alternatives, including crime, rebellion, tyranny, and anarchy.

Portrait of Carl von Clausewitz by Wilhelm Wach — Wikipedia