Ludwig von Mises on Money and Inflation.pdf - The Ludwig von ...

and, therefore, impairing their conditions. If the government taxes, takes
away something from the taxpayers, then they are forced to restrict their
expenditures but there is no reason for general price changes. ose people
to whom the government gives the higher salaries are in a position to buy
what the other people used to buy and can no longer buy because they
had to pay the taxes. Changes would result from the fact that some things
which taxpayer Mr. A used to buy are now bought no longer by Mr. A but
by government employee Mr. B. is would tend to increase some prices
of the things Mr. B buys and to reduce the prices asked for the things
Mr. A can no longer buy. But no revolutionary change takes place in the
general height of prices. is is what goes on continually in a country the
government of which has a balanced budget. But there is another way,
another method. And the government uses this other method.
e government prints the additional money. As you know it is very
easy for the government to print money. And if the government prints
this money, what is the effect e effect is that those to whom the government
gives this new money, in this instance government employees,
are now in a position to buy more. Nothing has changed in the world;
everything is as it was yesterday; there are no more goods available; but
there is more money today because the government made it and gave it
to certain government employees, let us say armaments workers. It may
be for the best possible purpose. We do not discuss the items in the government
budget, but only the total amount. And now the government
gives money to some people, and these people appear on the markets with
an additional demand, with a demand that didn’t exist yesterday. Lord
Keynes was enthusiastic about this demand, you know; he thought it was
wonderful; yes, it is true. He called this increasing demand bringing about
“effective demand.” Of course, this is a very correct description. But the
thing is that prices are going up. But what does it mean
Let us take potatoes as the example. ere are no more potatoes on the
market. But there is more money in the hands of the people who want to
eat potatoes. While yesterday it was enough for a man to spend one dollar
to buy potatoes for his need, today he needs more. He needs today, let us
say, two dollars, only because there is more money, not because anything
else has changed. If he were only to offer one dollar, then the man who got
the additional money from the government would say, “Ho, ho! I will pay
$1.10 and I will get the potatoes and you can go home empty-handed.”
And this is the thing we all are experiencing today—price increases due to
inflation.
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