The Great Swindle

June 25, 1956

We live in the Age of Inflation. It has become a fixed idea among governments that their paramount economic aim must be to maintain “full employment,” and that full employment can be maintained only by deficit financing, artificially cheap money, or direct recourse to the printing press.

Once under way, inflation sets in motion powerful special interests which demand its continuance. For it benefits some groups of the population at the expense of all the rest. Inflation is a tax-the cruelest and most wanton of all taxes. Under it, all creditors are systematically swindled.

CYNICAL DEFENSE

“He that would hang his dog,” says an old proverb, “gives out first that he is mad.” He that would swindle a creditor must first give him a bad name. The late Lord Keynes did this by calling him the “rentier.” He implied that the rentier was simply an idle plutocrat who lived on unearned interest at the expense of the struggling workers. In his General Theory (page 376) Keynes spoke of “the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital. Interest today rewards no genuine sacrifice.”

But who in the modern world are the creditors, the “rentiers”? They include, in addition to the holders of mortgages and corporate bonds, the thrifty, the small people who put their money in savings deposits or life-insurance policies, and all the owners of government bonds, who were induced to take these bonds for patriotic reasons. And who are the debtors who are being relieved of the allegedly dreadful burden of having to pay interest and repay capital in currency units of the same value as those they borrowed? They include the big corporations, the big holders of common stocks, and the speculators who have learned how and when to jump in and out and exploit the value of a depreciating currency.

I append a table compiled by Franz Pick for his forthcoming 1956 edition of Pick’s Currency Yearbook. This shows the depreciation of 53 currencies in the ten years from 1946 to 1955, as measured by each government’s own cost-of-living index. This table, it will be noted, shows that the U.S. dollar, the world’s monetary pivot, shrank 17 percent* in buying power over the past decade. The British pound sterling lost 35 percent; the French franc 66 percent. The currency units of Chile, Paraguay, Bolivia, and Korea had their purchasing power practically wiped out.

Some of the countries whose currencies suffered worst, such as Formosa and Korea, were struggling with special war or defense problems. But this was obviously not true in Chile, Paraguay, or Bolivia. The truth is that this shocking swindle by governments of their own citizens was brought about in most cases by deliberate monetary or credit inflation. And it was all done under the pious pretense that inflation is a sort of calamity visited on a country by malevolent outside forces, which the politicians and monetary managers profess to be incessantly combating.

CURRENCY UNITS

[^*This entry was originally published and ranked as 17, but was corrected to 27 in the article of July 23, 1956.—Ed.]