The Freeman 1972 - The Ludwig von Mises Institute

1972 THE CAUSES OF INFLATION 289abroad, its currency may be devalued,which is a partial defaultin its international obligations tomake payment in gold; or, in anoutburst of. abuse against foreignersand speculators, the governmentmay cease to honor any paymentobligations, as in the case ofthe U.S. default. All over theworld, government paper nowforms 120 national fiat standardsthat are managed and depreciatedat will.The decline of monetary freedomand the concomitant rise ofgovernment power over moneygave birth to our age of inflation.Step by step, government assumedcontrol over money, not only as animportant source of governmentrevenue but also as a vital commandpost over our economy. Theresult is continuing inflation. Onlymonetary freedom can impartstability.4Welfarism and InflationEven the noblest politicians andcivil servants can no longer be expectedto resist the public clamorfor social benefits and welfare.The political pressure that is4 Cf. Ludwig von Mises. The T he01"'J1of Money and Credit (FEE, Irvington,N. Y., 1971), pp. 413 et seq.; Murray N.Rothbard, Man, Economy, and State (D.Von Nostrand Co., Princeton, 1962), p.661 et seq.; also his concise What HasGovernment Done to Our Money? (PineTree Press, 1963).brought to bear on democraticgovernments is rooted in the popularr'ideologyof government welfa.reand economic redistribution. Itinevitably leads to a large numberof spending .programs that placeheavy burdens on the public treasury.By popular demand, weakadministrations seeking to prolongtheir power embark uponmassive spending and inflating inorder to build a "new society" orprovide a "better.deal." The peopleare convinced that governmentspending can give them full employment,prosperity, and economicgrowth. When the results fall farshort of expectations, new programsare demanded and moregovernment spending is initiated.When social and economic conditionsgrow even worse, the disappointmentsbreed more radicalism,cynicism, nihilism, and aboveall, bitter social and economic conflict.And all along, the enormousincrease in government spendingcauses an enormous increase oftaxes, chronic budget deficits andrampant inflation. 5The "redistributive" aspirationsof the voting public often inducetheir political representatives inCongress to authorize and appropriateeven more money than thePresident requests. Such programs5 Henry Hazlitt, Man V8. The WelfareState (Arlington House, New Rochelle,N. Y., 1969), p. 57 et seq.