Everyone has experienced the result of inflation! Everytime we visit the grocery store or the gas pump there seems to be an increase in prices. A three-bedroom house that sold for $33,000 in 1969 is selling for $96,000 ten years later! A car which cost $3110 ten years ago now comes in a smaller size and costs $6474 (more than twice as much!). If you think inflation is bad today, read Revelation 6:6 concerning the tribulation period (a denarius equals a days wage and a measure equals about 1 quart in dry measure).
Since 1939 the U.S. dollar has lost about 80 percent of its purchasing power. It would take about 5 one dollar bills of 1980 to equal the value of one dollar bill of 1939! What you paid 20 ¢ for then would cost about $1.00 today!
Before 1933 the U.S. dollar was defined as 1/20 of an ounce of gold. In facts the U.S. government once minted a $20 gold coin which weighed Just about 1 ounce. Thus if you were to cut up an ounce of gold into 20 pieces, each piece would be worth 1 dollar. What about today? Check your newspaper for the current price of gold and figure out how many pieces you would have to cut an ounce of gold into for each piece to equal 1 dollar. For example, if gold were selling for $600 an ounce, you would have to cut an ounce of gold into 600 pieces in order for each piece to be worth 1 dollar!
Yes, the dollar which we carry in our pockets and pocketbooks and which we save in our banks is losing its value! The dollar is losing its purchasing power! It is not able to purchase as much as it used to. The dollar buys less and less. We seem to pay more but get less!
It is true that people have more dollars than they used to have. Wages have increased and workers earn more per hour than they once did. Salaries are generally higher than they were 10 years ago. But even though we have more money and more dollars. the dollar bill buys less and less. If inflation continues, we may all be multimillionaries, but we will not be able to afford a Big Mac Hamburger!
Everyone knows about the result of inflation, but very few seem to understand the real cause of inflation. Inflation involves an increase in the quantity of something. For example, when you inflate a balloon, you are increasing the quantity of air in the balloon. The balloon has expanded and become larger.
When it comes to money, the Webster’s New World Dictionary defines inflation as follows: "an increase in the amount of currency in circulation, resulting in a relatively sharp and sudden fall in its value and rise in prices; it may be caused by an increase in the volume of paper money issued or gold mined." In other words,. inflation is caused by the increase in the quantity of money! When you have too many dollars floating around, the value of each dollar decreases.
For the past many years. our nation has been printing too many dollars! The economy has been flooded with newly printed money. Of course, the government is responsible for this, because they are the only one who can print money legally. If you were to do this it would be called counterfeiting and you would be thrown into jail. If the government does it it is called inflation, and we all suffer as a result!
Why does the government need to manufacture and create more money? For many years now it has been our nation’s practice to spend more money than it takes in by way of taxes (this is called deficit spending). Every year the government spends more money than it really has (billions of dollars worth). Where does it get this money that it does not really have? The actual way in which this is done is somewhat complicated (the Federal Reserve System does this through various loans), but what it boils down to is this:
the government creates new money out of thin air (money that is of no value and that is not backed by gold), and this money is then introduced into the economy, and thus the dollar in general loses its value.
At the beginning of l940, U.S. currency and bank deposits totaled $52.7 billion. By January 1978, currency and bank deposits totaled $815.9 billion. This is a tremendous increase in the amount of money!
Suppose your class in school were to have a pizza party. If only 10 slices of pizza were available for 30 people, then each piece would be given much value! Each piece would be in great demand! If , however, someone were to bring an additional 100 pieces of pizza. then the value of each piece of pizza would be greatly diminished. So it is with money. When people have more dollars, they value each dollar less. With more and more dollars floating around in circulation, each dollar is worth less and less as far as what it is able to purchase.
Some people are fooled into believing that high prices and high wages cause inflation. These things are the result, but not the cause of inflation. It would be foolish to say that wet streets cause rain! Wet streets are the result of rain, not the cause.
If workers demand higher wares, then it seems that the company owners would have to charge higher prices for their products so that they could pay for the high wages. As the workers go to the store and see the higher prices for everything, then they will demand even higher wages. This is called the wage and price spiral (it keeps going upward and upward). But is this really the cause of inflation?
Let us first consider wages. Imagine if you were a parent and had 10 children! On Saturday morning you line them up in your kitchen and assign each a chore. You have on a plate ten cookies, and to each you promise a cookie upon completion of his assigned task. The next week you begin the same routine, but one child announces that she will not work unless she is paid two cookies (she wants a wage increase). When the others hear her demand, they all ask that their cookie salaries be doubled.
You are forced to inform them that you only have ten cookies and therefore there is no way you can raise their wages to twenty cookies UNLESS YOUR WIFE INCREASES THE COOKIE SUPPLY BY BAKING MORE COOKIES.. Without more baking, you can only give some of your gang more cookies if you give others less cookies. You cannot have a general rise in cookie wages unless you bake more cookies!
The same is true in our nation’s economy. If there is no increase in the supply of money, an increase in wages would not cause inf1ation it would cause unemployment. Five of the children would receive a wage increase (2 cookies instead of 1), but the other five would have to be laid off!
Now consider prices. Imagine that you are at an auction. As with the other people there. you have a certain amount of money in your wallet with which to bid on the things you want. Suddenly a millionaire bursts into the room carrying a bushel basket full of $20 bills. He proclaims the good news that you all are going to be richer by two hundred dollars! Will you be able to buy more goods with the extra money? The amount of goods available to be auctioned has not changed. You and the other people now use your new money to bid against each other for the items that are for sale. As a result you are paying much higher prices for the same merchandise (these illustrations–the cookie wages and the auction–are adapted from Tax Target: Washington by Gary Allen, "76 Press, 1978, pp. 52-53).
Our nation’s economy is like a huge auction. You cannot have a general rise in prices without an increase in the money supply. We have more money, but the money we have buys less. Suppose that, by a strange miracle, every family in the United States were to wake up one morning to find four times as much money in its pockets and its bank account as on the night before. Every family might think of all the things they will now buy with the extra money. The firstcomers might be able to buy things at the old prices but soon the prices would rise. A general increase in the money supply will result in a general increase in prices and wages, and this is what has been happening in our nation for several decades (What You Should Know About Inflation, 2nd Edition, by Henry Hazlitt, Funk and Wagnalls, p. 138).
In the economy there are dollars which have real value (dollars earned by hard work), but mixed in with these are dollars of no value (dollars created by the government money-makers). As a result the dollar in general loses its value.
In the religious world, there are Bible believers who use certain terms such as "saved," "faith," "born again," "Christian," "filled with the Spirit," etc. These terms have real value and are loaded with meaning because the well-taught believer understands how the Bible defines these terms, The problem comes when multitudes of people begin using these same terms in a way that has no value or true meaning.
For example, suppose a person asked this question to a group of people: "How can a person be born again?" If 10 mature believers stepped forward and all gave God’s answer, then the term "born again" would have great value. On the other hand, if 10 "religious" people came forward and each one gave a completely different answer, then confusion would result, and the term "born again" would be of little value to the person who asked.
Today we are seeing a great increase in religious activity and vocabulary, but it is all very cheap and of little value. TOO MUCH is without Heaven’s touch. The Holy Spirit of God gives value and worth to such things. Without Him, man is left with cheap substitutes and empty phrases. Just as we should not get all excited if everyone were somehow to receive a gift of $20,000, so we should not get all excited about a general increase in religious activity. If God is not in it, what good is it?
The worst kind of inflation is not money inflation, but people inflation. Paul wrote to the Corinthians and said, "Now some are ______________ _____ (blown up, inflated with pride – 1 CORINTHIANS 14:18; see also 1 Corinthians 14:6: 5:2; 13:4). Such people put a value on themselves which greatly exceeds their true value and worth. There is an unhealthy increase in the quantity of exalted thoughts about themselves. In Romans 12:3 believers are warned not to think of themselves N_____________ H ______________than they ought to think. Those who are inflated (1 Cor. 8:1) think that they know something, when in reality they know _________________ (1 Cor. 6:2). The inflated person thinks that he is _______________ when he is really _________________ (Galatians 6:3).
The cure for this kind of inflation is to begin to see yourself as God sees you (as revealed in His Word). How does God see you apart from Christ (Romans 3:10-19? Ephesians 2:1-3,11-12; 14:17-19 Titus 3:3)? _______________________________ How does God see you IN CHRIST, assuming you are really saved (1 Corinthians 1:2; 1:30: 6:11; 2 Corinthians 5:17; Ephesians 1:7; Romans 6:18,22; 8:1 Colossians 3:12; 1 John 3:1)? _____________________________________________________
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