If people who earnestly believe in ghosts decide to host a séance, they’re no more likely to conjure an apparition than if non-believers host a similar ceremony simply as a lark.

A ring of candles, a drop of blood, earnest believe: none of these will summon spirits. And so the rest of us – the unwitting public who might find ourselves endangered if hungry ghosts were unleashed upon the world – need not fear any gathering of believers. The force of their belief can’t hurt us.

But inflation is a ghost who can be summoned by belief.

Inflation can only be summoned by belief.

And inflation hungers. But this ghost will not pursue us equally. Rather, inflation is like a spirit of vengeance, aggrieved by inequality. Inflation gobbles fortunes while forgiving debts.

Corporate executives – people with the power to set prices – have contributed most to inflation’s summoning. Their belief, within the financial séance, has mattered more. And, as they tend to be more wealthy than the average person, they have the most to fear.


Inflation is a rise in the prices of all goods and services. Wages rise, and so do prices, each increasing ostensibly in response to the other.

Consider an example: if the price of apples increased but all other food prices stayed the same, that would not be inflation. That might reflect a poor apple harvest. Apples would become more expensive relative to other goods.

But if, after this poor apple harvest, grocers raise the prices of apples, then notice that people are actually willing to pay those higher prices, and then decide to raise all their other prices too, just to see, and then workers demand higher wages in order to afford their more expensive groceries, that is inflation.

Inflation is a pressure to keep relative prices the same. Which results from belief – in our example, grocers simply believing that two lemons should cost as much as an apple, even after a poor apple harvest, and workers believing that they should be able to afford an apple with the wages of five minutes’ work, just like they could last year.

This distinction – that inflation occurs because people believe one good should not become more expensive compared to another – is essential to understanding the origins of our current episode of inflation. Which has a lot of roots – disruptions to Chinese manufacturing, shipping snafus, embargoes against Russian energy exports – but the story begins with wages.


In response to the Covid-19 pandemic, many workers realized that they were being unfairly undercompensated. People switched to better-paying jobs. Employers had to offer more money to retain staff. Briefly, it seemed as though workers would become more expensive relative to corporate profits, executive pay, or consumer prices.

Our current episode of inflation can be understood partly as a game of tug-of-war between workers and corporations. Workers insist that they should be valued more than they previously were – in response, their wages increase. Then executives tug back, insisting that workers were already treated well enough – they set prices higher, negating the increase in workers’ buying power.

If a single executive behaved this way, that corporation might suffer. If a can of Coca-Cola cost two dollars while a can of Pepsi cost only one, people might switch to Pepsi. But if many executives coincidentally behave like a cartel, all raising their prices at the same time, then they maintain the séance. Despite needing to pay high wages, their profits rise. So do their personal salaries. They reinforce their belief about the status of workers.

And their belief creates inflation.

See, for example, the New York Times article, “Food Prices Soar, and So Do Companies’ Profits.


Increased fuel and shipping costs have also contributed to rising prices, but these didn’t cause the inflation we’re experiencing today.

In our economy, fuel is used for almost everything: powering farm equipment, transporting goods across the country, hopscotching components along the supply chain, even commuting to work. As fuel costs rise, all production becomes more expensive.

You might imagine that if prices were raised to reflect the rising cost of fuel, we’d see something like inflation. But it costs just as much to ship ten pounds of cheap trinkets as it does to ship ten pounds of intricate devices; it costs just as much for a janitor to drive to work as for an executive. Boosting every wage to account for increased commuting costs would compress the percentage gap between executive and worker salaries. Raising the price of all goods to account for increased shipping and manufacturing costs would make formerly cheap products become relatively more expensive.

Instead, prices and wages have increased by a percentage of what they were before. Real occurrences in the world – beleaguered workers bargaining for higher salaries, a shipping crunch when people stuck at home bought furnishings online, a war in Ukraine – caused some prices to rise. Belief lifted all the others.


Our current episode of inflation has also been abetted by unhappiness.

Because inflation arises from belief, it always has psychological roots. People with the power to set prices will set them higher if they believe that other people are also setting higher prices. But right now, inflation has also been bolstered by the psychological malaise of consumers.

During an interview with Ezra Klein, economist J. Bradford DeLong offers an explanation for the end of inflation in the U.S. in the 1970s:

And Paul Volcker says, ‘We’ve gotten ourselves into a situation in which people don’t just expect inflation next year to be what it was last year. People expect inflation next year to be what it was last year plus a bit more.”

“ ‘I’ve got to fix this and I got to fix this by hitting the economy on the head with a brick and keep hitting until people understand that no, if they insist on raising their prices, they’ll have no demand for their products.’ ”

In this description, DeLong correctly describes the root cause of inflation as belief. Inflation happens because the people with power to set prices believe that inflation is happening. And DeLong describes a way for inflation to end: convincing those people, the ones who are setting prices, that consumers will stop buying things.

Our current period of inflation began with wages rising – due to the pandemic, people wouldn’t come to work unless they received higher wages. Then executives raised prices. Everyone needs to eat, so consumers have few options if executives raise food prices in concert, but people could choose not to buy a new computer or couch. Raising those prices could have caused a drop in demand, which would have ended the brief kindling of inflation.

But unhappy people are more likely to buy things. I’ve certainly felt this in my own life, spending too much money on stuff I didn’t need when I was feeling crummy.

Incidentally, this is why Facebook (& Instagram, & …) is designed to make users unhappy. The users of Facebook are the product that Facebook sells to advertisers, and an unhappy user is more desirable to advertisers than a happy user. By intentionally cultivating unhappiness in emotionally-addictive ways, Facebook can offer advertisers a premium product: the attention of people who are more likely to buy things as they attempt to fill an empty ache inside.

The lingering malaise of the pandemic and the scary ways that our world has changed have made people more likely to buy things, even when prices should feel “too high” compared to last year. Which means that the concerted price increases set by executives have kept causing inflation instead of reducing demand.


Legal U.S. currency has only a modicum of inherent value, primarily aesthetic. I’ve heard that a high denomination bill can be rolled into a tube and used to snort cocaine in front of potential romantic partners. Some people think that this showy behavior is alluring.

Mostly, though, U.S. currency is considered valuable because we believe it is, together. The value of money is a collective fiction. Like medieval outbreaks of Tarantism, we keep dancing because we fear that we might die if we ever stopped.

Currency intervenes in every exchange. You can’t directly trade a bail of hay for fifteen-minutes’ legal help in the modern world.

Once upon a time, the value of U.S. currency was backed by gold. Like dollar bills, gold has only limited inherent value, primarily aesthetic. Because gold glitters, it was made into jewelry. In the modern world, gold is also a useful catalyst for certain chemical reactions, but during the glory days of gold – to which some disingenuous or ignorant politicians argue that we should return – gold held value because people believed in its value together. Collectively, people believed that a particular weight of it could be traded for a bay of hay, and that a particular weight could be traded for legal help, and this allowed everything in the world to be assessed with the same measure.

The relative value of goods and services is fixed in the short term. Legal help is judged to be just so difficult to produce, so fifteen minutes should be worth the same as a certain amount of hay. Over longer timespans, these relationships can drift: if a team of programmers creates an AI script that provides legal help much more abundantly than human lawyers, each fifteen minutes of legal help should be worth less hay.

But there’s no constraint on how hay should be priced with respect to a currency whose value is created by belief. As long as the relative prices of hay and legal help stay the same, both a bail of hay and fifteen-minutes’ legal help could be priced at a gram of gold, or a tenth of a gram, or a hundredth. In each case, the world functions the same way. Hay can be traded for currency which can be traded for legal help.

But belief still matters. If lots of people harvest hay, then the aesthetic preferences of any one person aren’t important. But if one person buys up all the hay fields, and then that person decides that gold isn’t particularly attractive, that person might demand twice as much gold in exchange for hay. This demand would be temporarily irksome, but if everyone agrees that this hay merchant has good aesthetic taste – maybe gold was never as pretty as we thought! – people will start trading twice as much gold as before for hay, and for legal help, and for labor. The world still works. Gold was only ever a measuring stick. As long as everyone switches together, it doesn’t matter whether the measuring stick is delineated in inches or centimeters. The numbers change – eight inches, twenty centimeters – while the actual size of objects stays the same.


Ah, but wait. The world in motion stays the same: a bail of hay is still worth fifteen-minutes’ legal help. But the static world has changed. A dragon, lounging atop his golden horde, had known that he could trade those mounded coins for seven years of legal help. It was a mighty stash.

Suddenly – and all because an influential merchant decided that he didn’t like the look of gold – the dragon can only buy three years of help. The people’s belief crept in like a thief. The dragon’s great wealth was stolen.

The dragon would obviously feel irate.


Because money has no inherent value, the terms of monetary exchange are set by collective belief. And in recent months, inflation has been summoned by conflicting beliefs: workers claim that they were undervalued, executives claim that they weren’t.

This is the crux of inflation: whether or not relative values should change. Should some things become more expensive, compared to others, or should all things cost more money?

In my opinion, it’s reasonable for workers to become more expensive. Workers were treated unfairly for decades! And it’s reasonable for certain foods to become more expensive – there’s a war in Ukraine!

But some corporate executives disagreed, refusing to believe that workers or food should become more expensive relative to other things. And then, instead of balking, unhappy consumers kept on buying things.


To recap: the beliefs of powerful people caused inflation. Now many of those same powerful people are upset, because inflation attacks their dragonish hordes. If somebody already has a bunch of money – a bank account with ten million dollars of savings – then a world in which all costs and wages suddenly double will see this person become half as wealthy. If somebody else has debt – a credit card bill, a mortgage, unpaid student tuition – then they’ll become half as poor.

Unless inflation goes so far that we entirely unravel our collective fiction – everyone waking from the collective dream that currency holds any value – only wealthy people will be hurt. Inflation hungers after their large, fictitious numbers.

And yet it was wealthy people’s belief – perhaps real, perhaps purported in bad faith – that summoned inflation in the first place.