Almost every year faculty get some list of what today’s students never knew about, such as Ronald Reagan and Bill Clinton are ancient history. Some likely don’t know about the presidency of George H.W. Bush, other than perhaps a vague knowledge that he was George W. Bush’s father and an earlier president, and none remember 9/11 and the reason we have armed forces all over the world. As I get older each year, realization of how little our students have historically seen makes teaching both more difficult but also more fun. Its fun because I get to share not just knowledge of the way the economy works, but also contextual examples allow me to teach a little bit of history. Tomorrow I will begin this year’s rendition of Money and Financial Markets, and I have to realize that many examples that I would like to use are totally foreign to their experience.

Our current students have never really seen consumer inflation. Yes, they’ve seen some prices rise, but its almost an abstraction to them, and certainly they’ve not seen an era of all prices rising steadily and outpacing incomes. Even college tuition, which has risen markedly, is almost unseen because the stated price is nowhere the actual price, and someone else is paying that anyway (parents or student loans). So they don’t understand what the real dangers of inflation are. Examples such as Socialist Venezuela’s current 80,000% hyperinflation are useful, but almost surreal.

Yet perhaps the most unrecognizable item I’ll have to teach is the most fundamental to understanding our economy: the price of money and credit–the interest rate. Yes they do understand the interest rate in the sense that it is a bill to pay. But economics is all about tradeoffs, and for every supplier there is a demander–there are two sides to every coin in economics. This generation has never been able to go down to the bank, deposit some money, and have the hope that at some point in the not so distant future that they could take that money out of the bank PLUS some interest. We’ve effectively had zero interest rates from a saving perspective for what to them is their entire lives (the idea that they might have earned interest when they were 3 or 4 years old is irrelevant). But that is changing, and I think that is a good thing. That deferring consumption is a good thing, and has some positive reward, is both biblically and economically a sound principle. We have spent the last decade globally with governments in full scale financial repression of their citizens, who systematically had 2-3% of their savings confiscated annually for letting the government borrow their savings. Yet while economic growth and associated increases in standards of living requires one to defer consumption today for a brighter tomorrow, our public policies have incentivized consumption today and punished saving for tomorrow.

For my students, I’ll spend the rest of the semester unpacking some of the implications of price controls on the most important price in our economy. For you Bereans, as you watch the continuing stock market instability, you can be sure that a return to some sort of monetary normalcy will not be without stress.