The Great Swindle


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 owncost-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 practically wiped out.

Currency Units

Loss of purchasing power (percent), 1956-55

Portuguese       0
Dominican       2
Egyptian       2
Haitian       3
Indian       10
Pakistan       10
Ceylon       11
Lebanese       16
Belgian       19
Swiss       19
German       22
Honduran       24
Irish       24
Italian       24
Guatemalan       25
Costa Rican       27
Danish       27
Ecuadoran       27
U. S.       27
Canadian       28
Netherlands       29
Norwegian       29
Iranian       30
Venezuelan       30
S. African       31
Spanish       31
Swedish       31
 El Salvador       32
Turkish       32
Hong Kong       33
Thailand       33
Malayan       34
New Zealand       34
British       35
Colombian       46
Uruguayan       46
Iceland       48
Mexican       48
Nicaraguan       49
Australian       50
Finnish       52
Austrian       54
Peruvian       59
Brazilian       60
Greek       61
French       66
Japanese       67
Israel       68
Indonesian       69
New Taiwan       85
Chilean       91
Paraguayan       91
Bolivian       95
Korean       99

      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 calamity visited on a country by calamity visited on a country by malevolent outside forces, which the politicians and monetary managers profess to be incessantly combating. []

Newsweek, June 25, 1956

Bad Money Discourages Production


As money is the sinews of every business, the introducing of a doubtful medium—and forcing it into currency by penal laws—must weaken and lessen every branch of business in proportion to the diminution of inducement found in the money.

Pelatiah Webster, Strictures on Tender Acts, 1780


September 1956



Henry Hazlitt (1894-1993) was the great economic journalist of the 20th century. He is the author of Economics in One Lesson among 20 other books. He was chief editorial writer for the New York Times, and wrote weekly for Newsweek. He served in an editorial capacity at The Freeman and was a board member of the Foundation for Economic Education. 

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