Isaiah 1:22—“Your silver has become dross, Your drink diluted with water.”
Over 700 years earlier than Christ, we learn the above indictment of Israel’s southern kingdom of Judah from the prophet Isaiah. This precept—commanding simply weights and measures and condemning dishonest scales—is reaffirmed a number of occasions all through Scripture (Leviticus 19:35-36; Deuteronomy 25:13-16; Proverbs 11:1; 16:11; 20:10, 23; Hosea 12:7; Amos 8:5; Micah 6:10-11; Ezekiel 45:10). A part of the judgment concerned the pure financial penalties of dishonest cash by way of inflationary debasement and the ensuing debasement of products provided on the market in change for cash, particularly, foods and drinks.
The context offers each motive to consider that, not solely have been these practices society-wide, however have been allowed and even inspired by the civil rulers (Isaiah 1:23). At finest, they benefitted from the corruption and did nothing to cease the fraud. These fraudulent and dishonest practices had penalties that pervaded their society, particularly harming the sincere, the harmless, and the susceptible.
Whereas financial inflation has varied financial results—predictable and shocking, direct and oblique—this text seeks to discover the results of financial inflation on meals. Particularly, debased forex results in debased meals and warps the construction of manufacturing such that choices and behaviors are altered.
Others have famous this connection. Isaiah noticed the connection between fraudulent silver debasement and product debasement some 2,700 years in the past! Gary North, in his financial commentary, wrote regarding Isaiah 1:22,
Verse 22 factors to the “drossification” of silver. This might seek advice from silver typically, or it could have been restricted to the financial unit. In both case, the authorized difficulty was fraud by deception. That which was debased was circulating as one thing priceless. This produced analogous outcomes. The wine was blended with water. The debasement of silver, the steel of honesty and commerce, had led to the debasement of a consultant shopper good. Why? As a result of financial inflation is predicated on deception. This deception then turns into common as costs rise. Producers minimize corners. The phantasm of top quality merchandise is maintained, simply because the phantasm of top quality cash is maintained. Within the fashionable phrase, “what you see is what you get,” not utilized. What males noticed was not what they received. They knew this, which was why Isaiah used the metaphor of dross. He knew they might acknowledge the connection. (emphasis added)
The closeness of the outline signifies a single course of, however, “What has silver got to do with wine?” Since cash is economy-wide, financial inflation can also be economy-wide, affecting all types of products, providers, and decisions. Saifedean Ammous, in his The Fiat Normal: The Debt Slavery Various to Human Civilization, writes (p. 111),
Cash, being part of each financial transaction, has a pervasive impact on most facets of life…. [For example, take] two explicit distortions: how fiat’s incentives for elevating time desire have an effect on farmland manufacturing and meals consumption decisions, and the way fiat authorities financing facilitates an activist authorities function within the meals market by way of interventionist farm rules, meals subsidies, and dietary tips.
Praxeologically, this is smart. As debasement or financial inflation pervades the value and manufacturing construction, value inflation happens—altering the financial scenario for human actors, benefitting some and disadvantaging others. Producers, particularly the sincere—who’re additionally shoppers, should take into account price-costs of inputs for what they produce, and can’t merely “pass on costs to consumers”—are compelled right into a trilemma.
The sincere producer, who acknowledges he’s getting much less with the devalued cash, can 1) promote on the similar costs for devalued forex, be defrauded, and take a loss; or, 2) improve costs, presumably lose prospects and market share, and open himself as much as buyer displeasure and even attainable value management laws. Tempting the sincere and benefitting the dishonest, a 3rd possibility presents itself—debase the product in response to the debased cash however current it as an identical quantity and high quality as earlier than on the similar value. (We might make this a quadrilemma if we add shutting down manufacturing). In actual fact, the sincere are deprived—presumably even berated—ought to they continue to be sincere, due to this fact, there’s a tendency through which the sincere are pushed from the market. They both turn into dishonest or go away the market.
Worth Inflation & Meals Decisions
From the patron facet, if we merely take into account the obvious consequence of financial inflation—value inflation—it’s not troublesome to additionally see how this impacts an financial system’s meals consumption. When meals costs improve as a consequence of financial inflation, shoppers have just a few choices—buy much less, buy the identical quantity and sacrifice elsewhere, search cheaper substitutes, wait to buy, search exterior help, shift to residence manufacturing, go into debt or draw from financial savings, dietary compromise, and so on.—however their meals decisions can’t stay unaffected.
Just lately (February 21, 2024), one article, titled “It’s Been 30 Years Since Food Ate Up This Much of Your Income,” offered the next graphic documenting percentages of shopper earnings devoted to meals:
Unsurprisingly, rising shopper costs, particularly on the grocery retailer, have been arguably a serious difficulty within the 2024 presidential election. On this direct means, folks skilled the results of inflationary financial coverage on their weight loss plan.
Sarcastically, even whereas rising meals costs pressure household budgets, some official inflation metrics—just like the widely-cited Core CPI—exclude meals altogether, masking the impact of inflation. Rothbard referred to as this a trick of the “economic spin doctors.” He recounted how, in January 1990, the price of residing index reached over double-digit proportions—approaching the inflationary peaks of the Nineteen Seventies—public concern was largely muted. Why was this the case?
…the financial spin docs have been fast to leap to their duties. You see, for those who take out the quickest rising value classes—meals and power—issues don’t look so dangerous. Meals went up by 1.8 % in January—an annual rise of virtually 22 %; whereas power costs went up by a minimum of 5.1 %—an annual improve of over 61 %.
If meals is excluded, the reported inflation quantity is decrease than what folks expertise in meals purchases. Subsequently, it’s inescapable that inflation impacts weight loss plan. Conversely, how might inflation not have an effect on weight loss plan? What’s measured doesn’t change what folks eat, however what folks can afford will.
Layering irony upon irony, when the results of financial inflation turned manifest in value inflation throughout the Nineteen Seventies, significantly in meals, Richard Nixon appointed Earl L. Butz to function secretary of the US Division of Agriculture partially to handle meals value will increase by way of central planning.
Rising meals costs—largely because of the unrestrained financial inflation that adopted 1971—have been changing into a political drawback. Trying to deliver down meals costs by way of extra inflation, subsidies, cronyism, and bureaucratic administration, Butz advised farmers, “Get big or get out.” Artificially low rates of interest flooded farmers with capital to extend productiveness, successfully squeezing out smaller farmers and consolidating remaining farmers. Whereas this did end in decrease meals costs, it was not the end result of a free market however of government-managed manufacturing and distortion. Saifedean Ammous, once more, explains (pp. 113, 114),
As costs of extremely nutritious meals rise, persons are inevitably compelled to switch them with cheaper options. Because the cheaper meals turn into a extra prevalent a part of the basket of products [used in core CPI], the impact of inflation is inconspicuous….
By subsidizing the manufacturing of the most affordable meals and recommending them to Individuals because the optimum elements of their weight loss plan, the extent of value will increase and forex debasement is much less apparent.
By flooding the meals system with low cost, sponsored energy, the federal government masks actual inflation whereas shaping shopper conduct. Artificially-subsidized meals—when included within the “basket of goods” used within the principally meaningless Shopper Worth Index (CPI)—seems to scale back value inflation. Individuals, nonetheless, are successfully pushed away from and towards meals decisions they in any other case wouldn’t have made as a result of sure meals are taxed and others are sponsored.
“Price rises do not elicit equivalent increases in consumer spending; they bring about reductions in the quality of consumed goods” (p. 113). Shoppers are pushed to artificially cheaper, sponsored, and fewer nutritious meals options. Wealth appears to be growing—and there have been historic wealth will increase due to real manufacturing alongside synthetic progress—however it’s largely farcical. Whereas weight problems was seen as a sign of wealth, now it’s arguably the alternative: “obesity is actually a sign of malnutrition.” Simply as fiat inflation impoverishes whereas giving the impression of elevated wealth, weight problems appears to symbolize abundance when it’s truly a type of malnutrition. In different phrases, “your wine has become water” (Isaiah 1:22).
Shrinkflation & Skimpflation
On the producer facet, many have seen—whether or not anecdotally or in any other case—the phenomenon referred to as “shrinkflation.” In explaining financial concept and inflation to highschool seniors, I requested for a scholar to supply a bag of chips and maintain it up (there was by no means a category that didn’t have one). I’d instruct the coed to make use of two fingers to pinch close to the highest of the bag and run them down—exhibiting all of the air—till they lastly hit the chips. This was one illustration of how inflation impacts merchandise, particularly meals. Some vigilant observers have chronicled examples.
Jeff Degner in his Inflation and the Household—the place he traces the impacts of financial inflation’s impression on marriage and the household—develops this level a bit additional in a footnote (p. 81, n12),
There may be proof that the ancients additionally acknowledged a connection between debasement, inflation and meals high quality. The Jewish prophet Isaiah (1:22, King James Model) declared, “Thy silver is become dross, thy wine mixed with water.” If taken actually, the prophet appears to establish what fashionable economists have referred to as “shrinkfation” or a decreasing of the standard of meals in response to a lowered high quality of cash that’s related to debasement and inflation together with declining well being outcomes and life expectancy. Certainly, the US has not saved tempo with the remainder of the OECD nations with respect to life expectancy will increase, and has even begun to say no in recent times, a scenario that many blame on low high quality meals merchandise. See Avenado and Kawachi (2014) for believable meals high quality hyperlinks together with different options of the inflation tradition and their impression on mortality and morbidity outcomes within the US…
Shrinkflation is maybe the only and most literal type of this course of—smaller portions are offered for a similar or elevated costs. Not solely do costs have a tendency to extend, however the financial unit actually purchases much less. The producers, in response to the financial debasement and elevated value inflation, discover intelligent methods to scale back the product—presenting it as the identical quantity—lest they merely settle for being defrauded.
When it comes to meals high quality and diet, Degner, once more, highlights a attainable connection between financial coverage and reproductive well being,
As for any connection between organic actuality and expansionary cash provides, this may at first look appear to be a tenuous connection. Nonetheless, it has just lately been instructed that inflationary financial coverage degrades the standard of meals and diet (Ammous 2021), which can in flip impression reproductive well being. Certainly, weight loss plan, diet, and meals safety are among the many elements that healthcare specialists name the “social determinants of health.” These have been proven to impression fertility, maternal morbidity, and mortality, all of which counsel that the function of value will increase in issues of weight loss plan, well being, and dwell births shouldn’t be dismissed out of hand as irrelevant or trivial (Kozhimannil et al. 2019). (p. 81)
Mental Debasement and the Interventionist Paradigm
Many have famous the results of meals value inflation on well being and well-being, particularly amongst essentially the most susceptible. Nonetheless, misunderstanding the causal chain between financial coverage and value inflation, and never understanding the causal penalties of many years of presidency interventions, the issue is normally misdiagnosed and the would-be options are counterproductive. Even recognizing the failure of previous and present authorities interventions, many function inside a paradigm the place the one reply is to name for extra authorities intervention.
For instance, in “How inflation is hurting the diets of low-income Americans” we learn, “Despite government programs encouraging and subsidizing healthy foods, the problem is only growing.” The interventionist mindset will even acknowledge authorities failures—whereas “encouraging and subsidizing healthy foods,” they admit “the problem is only growing”—however will virtually inevitably name for extra intense authorities intervention to handle the issue. The identical article continues, “As much as these advocacy and subsidy programs help, the downward trend in healthy eating is pervasive. Inflation makes shopping for healthy food harder but not impossible. It’s about habits as much as price tags.” In different phrases, the federal government interventions assist and the issue is worsening concurrently.
One other examine, “Food inflation and child undernutrition in low and middle income countries” argues, “This evidence provides a strong rationale for interventions to prevent food inflation and mitigate its impacts on vulnerable children and their mothers.” To be honest, the authors may imply healthcare “interventions” relatively than authorities interventions, however it’s uncommon to learn any articles that don’t name for an growing function of the state.
Sound economics is important to accurately diagnose the issue and to acknowledge and keep away from false options primarily based on misdiagnoses. And, if the reader is just not but satisfied that the Fed—as a central banking establishment—has any curiosity in intervening in your weight loss plan, see the next pre-Thanksgiving tweet from the St. Louis Fed (for which I’m indebted to a earlier Mises article):
