Money Neutrality is the economic concept that printing money only raises prices without raising wealth and overall economic well-being.

To explain this to my 14-year-old, I told a story about the Spanish colonization of South America. The colonizers found a lot of silver, which was a hard currency in medieval Europe. When they took a large amount of it back to Spain, the amount of silver in the country quadrupled. In terms of silver, Spain was four times wealthier, but were they four times better off?

The answer is no. Everything simply became four times more expensive. 

Furthermore, this influx of stolen silver distorted society. The Spanish elites who funded the colonization and owned the stolen silver were wealthier than ever. The average Spaniard,  however, who did not participate in colonization, had to suffer higher prices.

I did not expect my son to comment: “That sounds a lot like the world today.”

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