As prices for groceries and haircuts climb, and as gasoline prices soar during the start of the vacation season, Americans are pessimistic about the economy’s future.
And with the latest monthly Consumer Price Index released on Friday showing an 8.6% gain—the highest in 40 years—most product prices are unlikely to decline any time soon.
So what does that mean for consumers? Maybe the total unraveling of American capitalism, according to the much-studied English economist John Maynard Keynes.
The only catch: Keynes was observing the same phenomenon—high inflation—over 100 years ago.
Writing in 1919, amid rampant inflation in Europe, during the era of World War I and the Russian Revolution, Keynes became well known after publishing The Economic Consequences of the Peace. It included one famous passage in which he mused about some of the Bolsheviks’ criticisms of capitalism, particularly about high inflation.
“Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency,” Keynes wrote. “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”
This “arbitrary rearrangement of riches,” he continued, strikes at both the security and confidence that people have in the economic system. He went on to explain that inflation turns consumers against capitalists—“profiteers,” in his words—when they see how those individuals accrue wealth while they suffer from inflation.
He then discussed inflation in the 1910s against the backdrop of war and revolution, and the social unrest that followed. “Lenin was certainly right,” he concluded. “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.”
Keynes’ economic writing ultimately gave birth to a “Keynesian” school of economics, and he personally helped negotiate the international postwar monetary order at the Bretton Woods conference following World War II.
But it was Keynes’ discussion of inflation that first put him on the map.
Debauched currency, 2020s style
As inflation gets worse, Keynes wrote, and the value of currency fluctuates unpredictably, the relationships between those who hold that currency and those who don't falls apart. “And the process of wealth-getting degenerates into a gamble and a lottery," he said.
Americans in the 2020s know a thing or two about a debauched currency.
Gasoline is at the heart of U.S. economic identity, with a hundred-year-old car culture forming the basis of American culture. With it now just shy of $5 per gallon nationwide, cue the unraveling?
Though multiple factors are to blame for the rising gas prices—lingering supply and demand disruptions from COVID, Russia’s invasion of Ukraine, energy companies having problems increasing production, and the possibility of price gouging—consumers have started to complain. Just look at President Joe Biden’s plummeting approval rating and steady declines in the University of Michigan consumer confidence survey, which reflects increasing public concern.
“The idea that we're going to be able to click a switch, bring down the cost of gasoline, it’s not likely in the near term,” President Joe Biden said at a press conference last week. Only a quarter of voters, however, believe that he’s handling rising gas prices well, according to a new ABC News/Ipsos poll.
Conservative lawmakers are sinking their teeth into the issue. “In my state, the price of gas is so high that it would be cheaper to buy cocaine and just run everywhere,” said Sen. John Kennedy (R-LA) in a brief appearance on Fox News on Tuesday.
In 1919, Keynes wrote that though capitalists may bear the brunt of consumer anger, they’re merely a symptom of the economic system's wider failing. “The profiteers are a consequence and not a cause of rising prices,” wrote Keynes.
So how to solve it? Keynes says it’s ultimately up to the government to sort things out.
“If, however,” he wrote, “a government refrains from regulation and allows matters to take their course, essential commodities soon attain a level of price out of the reach of all but the rich, the worthlessness of the money becomes apparent, and the fraud upon the public can be concealed no longer.”
This story was originally featured on Fortune.com