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Dylan Grice: Witch Hunts, Inflation Fears, and Why I'm Bearish in 2013

January 22nd, 2013

by Michael Skocpol

Witch hunts, beheadings, and the Sex Pistols

Grice came armed with historical data intended to illustrate that the link between inflation and societal breakdown has a long track record, dating back at least as far as ancient Rome.

According to Grice’s data, the silver content of ancient Roman currency dipped from approximately 50% to next to nothing during the 3rd century, around the same time that the emperor Diocletian began widespread persecution of Christians within the Roman Empire.

Grice presented an overlaid graph purporting to show that, as the rate of inflation rose in England during the late 16th and early 17th centuries, the incidence of witch trials spiked. Similarly, the beginning of Robespierre’s infamous guillotine-heavy “Reign of Terror” during the French Revolution “coincides with a collapse in the currency,” Grice said. (“Notice I say ‘coincides,’” Grice cautioned, “not ‘causes.’”)

Perhaps the “most spectacular” – and most familiar – example, according to Grice, is the rampant inflation in Weimar Germany that paved the way for Hitler’s rise to power and the Holocaust.

Grice acknowledged that he was presenting “very, very extreme examples,” although he noted that the most recent period of inflation in the US – the 1970s – had its own milder symptoms of social breakdown. “This was a decade wracked with social tension, wracked with political scapegoating,” Grice said. He said the 1970s album by the Sex Pistols, “No Future,” captured the 1970s zeitgeist nicely – money and saving are essentially about creating “links to the future,” Grice said, and those bonds frayed in the ’70s.

“You save money so you can spend it tomorrow,” he explained. “You only do that if you can reasonably expect to have something left, that your savings will be worth something.”

Back to the future?

Grice acknowledged that none of this may seem, at first blush, to be relevant today – after all, the US hasn’t experienced serious inflation since those Sex Pistol days more than 30 years ago. But he sees signs that some of the “hallmark features” of these turbulent episodes are “bubbling to the surface” once again.

“In the US, median household income has gone nowhere for 20 years. Median incomes have been flat, per capita real income zero – no growth,” he said. “This is a staggering thing. This isn’t supposed to happen.” Meanwhile, he noted, “income inequality has been becoming a political issue,” both in the US and more explosively in Greece.

To Grice, these are telltale signs of the kind of misunderstood and unpredictable redistributive effects that accompany reckless monetary policy. In the current case, he said, the handsomely bailed-out financial sector has been a highly visible beneficiary of economic and monetary policies, while a record proportion of US households have gone onto food stamps in the wake of the financial crisis. It’s no coincidence that the rhetoric of “the one percent” and “the 47 percent” has dominated in recent years.

“This wealth redistribution has absolutely been there for all to see, and it’s not necessarily a natural thing,” Grice said. “We’re seeing the consequences of past monetary experimentation.”

Ongoing developments will only perpetuate and exacerbate the trend. “We’re already seeing more money printing, more monetary experimentation,” he said.

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