The Inflation Worries

The recent survey finding that some eight in ten Americans are displeased with President Trump’s handling of inflation is best understood as an indictment of the fiat money regime that fuels today’s affordability crisis. CNN calls the persistence of high prices a “historic liability” for Mr. Trump. Yet the dissatisfaction among Americans more likely reflects a growing awareness that the nation won’t be able to defeat inflation with a fiat currency.Only 17 percent approved of Mr. Trump’s “handling of the cost of living,” according to the survey of American adults, conducted by the Associated Press and the National Opinion Research Center. That sentiment among voters, per CNN, exceeds levels of discontent with presidents over “wars gone wrong, botched crisis responses and even major scandals like Watergate.” This suggests that the fiat money crisis is on a scale with such challenges.The voter disappointment, per the AP survey, stems in part from Mr. Trump having centered on his 2024 presidential campaign upbraiding his predecessor in the White House for “inflation and promising to lower prices.” There were ample grounds for criticism. Prices had surged by some 20 percent between 2020 and the election, in part due to reckless federal overspending and unneeded Covid stimulus handouts. When Mr. Trump acceded to office in 2025 with a Republican Congress, their policies helped to slow the rate of inflation. Yet the cumulative effect of the Biden inflation lingered, meaning that prices did not revert to their earlier levels. This is in large part a result of the fiat money system that has been in place since America in 1971 ended the dollar’s gold convertibility. With a fiat dollar, prices tend only to ratchet ever higher — never back down.By contrast under a gold standard, in which the dollar was set by law at a fixed weight of specie, the discipline of convertibility helped impose a degree of discipline on governments and central banks. Even when the cost of goods rose, as they did in wartime, the requirement to redeem dollars in gold tended to cause prices to later fall back. That price stability was interrupted by President Nixon’s breach of the gold convertibility obligation under Bretton Woods.Stubborn inflation is synonymous with the rise of the fiat dollar. Yet the end of honest money helped foment, too, fiscal profligacy that has sent America’s debt soaring past $40 trillion. That exceeds America’s gross domestic product. In 1971, when a dollar was valued at a 35th of a gold ounce, the national debt stood at about 35 percent of GDP. The dollar today fetches about a 4,100th of a gold ounce — a plunge in value that is an inverse of the debt surge.Investor fears over debt, and consumer ire over prices, spotlight the need for monetary reform. In the latest number of the Interest Rate Observer, monetary sage James Grant traces these woes to the 1970s-era purge of gold from the currency system. “The dollar would henceforth cheapen and the public debt increase,” he laments. The dollar’s reserve role, he adds, “and paper money itself made those things possible. We think they made them inevitable.”So it’s no coincidence that escalating consumer frustration over inflation comes amid increasing investor wariness over America’s credit worthiness. These issues are in effect two sides of the same debased coin. The Wall Street Journal puts the problem in a global context, marking how today’s “bond-market rout” has “debt levels as a background risk factor.” In short, investors are starting to worry whether highly indebted nations will be able to repay their loans.

The Inflation Worries

The Inflation Worries

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