The Deep Roots of Inflation Fears

Back in 2006, the historian Michael O’Malley wrote an article for Common-place about links between fear of economic inflation (money losing value in the real world) and racial fears. Specifically, he looked at the debate in the late 1800s between maintaining a gold standard for US currency and adding a silver standard:

Arguments for gold aimed at the working class often linked gold to both a high standard of living and the intrinsic superiority of the Anglo-Saxon race. “Take a look at the company before you sit down at the feast,” an anti-silver tract warned workingmen. Who had silverites invited? “Half civilized, half clad peoples, who are weak and ignorant, who have little or no commerce; where bullfights abound and schools do not; where human labor is in sharp competition with the meek and lowly jackass; where the breech-clout is preferred to a full suit.”

In his 2013 book Face Value: The Entwined Histories of Money and Race in America, O’Malley extended that exploration, going back to the early republic and up to the present. This month he discussed some aspects of that history in this episode of Back Story, the radio show/podcast.

O’Malley’s chapter 3 analyzes reactions to paper currency that the US federal government issued during the Civil War at the same time it was enlisting African-American soldiers for the first time in decades. Opposition rhetoric claimed that paper money had less value than specie and those black soldiers had less value than white. Of course, both helped the Union to win the war.

Toward the end of his book, O’Malley notes parallels between such fears and some people’s anxieties today. The election of President Barack Obama in 2008, coinciding with the Bush-Cheney recesssion, prompted sudden new interest in gold. In turn, gold dealers became the leading sponsors of several political commentators on the right.

O’Malley notes a pattern in those advertisers and pundits warning about about “Zimbabwe-style” inflation. Why is that their chosen metaphor, he asks, rather than the better known and more significant inflation in post-WW1 Germany? Perhaps because of the underlying racial component.

More disquieting, because it’s more influential, is how so many economists and politicians have focused on inflation in recent years even though it’s hardly appeared. While international banks warn about deficit spending, most industrial nations that followed austerity programs have recovered more slowly or suffered double-dip recessions compared to those that responded with economic stimulus. Meanwhile, unemployment remains a major problem, one that central banks are supposed to address.