In Jim Cook's Archive


I don’t think there is any example in history of a country creating new money to pay its bills and not suffering ruinous consequences. If that policy continues long enough, it promises disaster. Unfortunately, there may be no other option for the U.S. because the alternative is deflation and the monetary authorities and the politicians will sell their souls to avoid this type of punishment. It’s either keep inflating, or suffer a depression. While the latter may be inevitable someday, nobody in Washington wants to be around for it. So they will keep printing, hand-over-fist and we will continue to see the excesses that inflation fosters.

The great economic thinker Henry Hazlitt (1894-1993) described the inevitable consequences of inflation, “It is harmful because it depreciates the value of the monetary unit, raises everybody’s cost of living, imposes what is in effect a tax on the poorest…wipes out the value of past savings, discourages future savings, redistributes wealth and income wantonly, encourages and rewards speculation and gambling at the expense of thrift and work, undermines confidence in the justice of a free enterprise system, and corrupts public and private morals.”

He continued, “A period of inflation is almost inevitably also a period when demagogy and antibusiness mentality are rampant.  If implacable enemies of the country had deliberately set out to undermine and destroy the incentives of the middle classes to work and save, they could hardly have contrived a more effective set of weapons than the present combination of inflation, subsidies, handouts, and confiscatory taxes that our own politicians have imposed upon us.”

Mr. Hazlitt explained further, “In a free enterprise system, with an honest and stable money, there is dominantly a close link between effort and productivity on the one hand, and economic reward on the other.  Inflation severs this link.  Reward comes to depend less and less on effort and production, and more and more on successful gambling and luck.” I might also add that it finances socialism, corrupts the culture, divides the country, encourages law breaking, promotes social ills and ensures our decline and fall.

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