The Great Swindle; H. Hazlitt

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 systemat ically swindled. "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 Mr. Hazlitt is a contributing editor to Newsweek in the June 25, 1956 issue of which this article first appeared. [200 ] 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 modem 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 in terest and repay capital in currency units of the same value as those they borrowed? They include the big cor porations, 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 forth coming 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 27 per cent in buying power over the past decade.

The British pound sterling lost 35 per cent; the French franc 66 per cent. The currency units of Chile, Paraguay, Bolivia, and Korea had their purchasing power prac tically 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 [201 ] 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 poli ticians and monetary managers profess to be incessantly combating. CURRENCY UNITS Loss of purchasing power, 1946-55 Portuguese Dominican Egyptian Haitian Indian Pakistan Ceylon Lebanese Belgian Swiss Gennan Honduran Irish Italian Guatemalan Costa Rican Danish Ecuadoran Per Cent o 2 2 3 10 10 11 16 19 19 22 24 24 24 25 27 27 27 Per Cent U. S. 27 Canadian 28 Netherlands 29 Norwegian 29 Iranian 30 Venezuelan 30 S. African 31 Spanish 31 Swedish 31 ELSalvador 32 Turkish 32 Hong Kong 33 Thailand 33 Malayan 34 New Zealand 34 British 35 Colombian 46 Uruguayan 46 [ 202] Iceland Mexican Nicaraguan Australian Finnish Austrian Peruvian Brazilian Greek French Japanese Israel Indonesian New Taiwan Chilean Paraguayan Bolivian Korean Per Cent 48 48 49 50 52 54 59 60 61 66 67 68 69 85 91 91 95 99 THE POWER TO DESTROY ALEXANDER HAMILTON perhaps spoke more wisely than he realized when he referred to the power to tax as the power to destroy. Neither in Hamilton's time nor in the nineteenth century were extreme taxation burdens im posed in free and civilized countries. The right of a man to retain the property which he might earn or inherit was taken for granted as one of the natural rights which figure so largely in the thinking of the Founding Fathers of the American Republic.