Citizen Control of Money

The repudiation of debt through debasement of the currency is an ancient trick for not paying the bills. Default is at least done in the open. Inflation is much more destructive and dishonest, especially when the largest debtor—the government—controls the money supply.

Adam Smith notes in The Wealth of Nations that “WTien national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid. The liberation of the public revenue, if it has even been brought about at all, has always been brought about by a bankruptcy; sometimes by an avowed one, but always by a real one, though frequently by a pretended payment.”

Over the centuries, governments have used the theft of inflation to finance unpopular endeavors. In a free nation, adventurism at home with massive transfer programs, or abroad with no-win wars, would be impossible, since the people would simply refuse to pay the higher taxes, or loan the government the necessary money. On the other hand, a popular cause would elicit the necessary funding through loans, donations, or taxes.