"Once we recognize the intimate connection between credit expansion and money production in the modern financial system, we can see how deeply fiat money and privileged banking distorts the economic order. Banks earn seigniorage—the profit from money creation—by extending loans, and can therefore outcompete other sources of financing, be it people’s personal savings or independent lenders. As a result, credit is centralized in the system of credit-expanding banks and investment decisions are dictated by the short-term logic of said system. Changing diets is just one consequence of the distortions engendered, albeit one that no one, pace Selgin, has investigated until now.
Since investment has flown into the production of grains, pork, and poultry, productivity in these fields has increased more than in beef production, and the supply of these foodstuffs has risen while their prices have fallen relative to the supply and price of beef. People’s food budgets are generally pretty fixed, meaning that even though incomes rise the extra income goes to the purchase of other consumer goods, not food, a generalization known as Engel’s law.3 Beef therefore increasingly becomes a luxury, something only regularly consumed by the well-to-do, which working-class and lower middle-class people only enjoy on special occasions. Had the gold standard endured, this distortion of production patterns and diets might not have happened. We might then, perhaps, have had to do without KFC and Chick-fil-A, but then again, Chick-fil-A is only a palliative when a man is constrained to subsist principally on chicken, the broccoli of meats."
Kristoffer Mousten Hansen is a research assistant at the Institute for Economic Policy at Leipzig University and a PhD candidate at the University of Angers. He is also a Mises Institute research fellow.