Saifedean Ammous critiques the Keynesian argument that inflation is beneficial because it incentivizes spending and investment over saving. He contends that this perspective misunderstands the fundamental relationship between saving, consumption, and investment, and leads to harmful economic distortions.

1. Saving is the Foundation of Investment

Ammous argues that saving is not a drag on economic activity, as Keynesian models often imply. On the contrary, savings are the foundation of investment. Without savings, there is no pool of capital to fund productive ventures, build infrastructure, or grow businesses. Inflation, by eroding the value of money, discourages saving and, therefore, reduces the resources available for meaningful investment.

2. Consumption is Not the Problem

Contrary to Keynesian claims, Ammous asserts that humans have an insatiable desire to consume. The economic challenge is not insufficient demand but the trade-off between consuming today and consuming in the future. Inflation distorts this trade-off by penalizing those who choose to save and plan for the future. Instead of encouraging productive investment, inflation forces people into short-term consumption that may not align with their true preferences.

3. Inflation Erodes Financial Security

By destroying the value of money over time, inflation undermines people’s ability to save and plan for the future. Ammous emphasizes that this loss of financial security forces individuals to spend on goods and services they may not value as much as the stability and peace of mind that come from saving. This creates a misallocation of resources, reducing overall economic well-being.

4. The Fallacy of Aggregate Spending

Ammous criticizes the Keynesian focus on aggregate metrics like GDP or total spending, arguing that these measures ignore the quality and value of economic output. Economic activity is not valuable simply because it occurs; its value depends on whether it meets people’s real needs and desires. Inflation, by incentivizing spending for its own sake, leads to wasteful and unproductive activity.

5. Inflation as Hidden Redistribution

Ammous describes inflation as a form of hidden taxation or redistribution, where wealth is transferred from savers to borrowers, and often to governments and financial institutions. This process undermines the incentives to save and invest—the true drivers of long-term, productive economic growth.

6. Consumption Does Not Need Coercion

Finally, Ammous dismisses the notion that inflation is necessary to compel consumption. People naturally consume to meet their needs and improve their quality of life. Destroying the value of money does not create new economic value; it simply forces individuals into economically inefficient behaviors.

In summary, Saifedean Ammous argues that expanding the money supply via interest fiat credit expansion ,which leads to inflation, is not a driver of healthy economic activity but a destructive force that undermines saving, distorts investment, and erodes financial security. Sound money—money that retains its value over time—fosters a healthier balance between consumption, saving, and investment, leading to more sustainable and meaningful economic growth.