THE
INFLATION
CRISIS,
AND
HOW TO
RESOLVE
IT

THE
INFLATION
CRISIS,
AND
HOW TO
RESOLVE
IT

HENRY HAZLITT

Copyright © 1978 by Henry Hazlitt

All rights reserved. No portion of this book may be reproduced without written permission from the publisher except by a reviewer who may quote brief passages in connection with a review.

P10 9 8 7 6 5 4 3

Manufactured in the United States of America

Library of Congress Cataloging in Publication Data

Hazlitt, Henry, 1894-

Preface

This book was first planned as a revised edition of my What You Should Know About Inflation, first published in 1960. But inflation, not only in the United States but throughout the world, has since then not only continued, but spread and accelerated. The problems it presents, in a score of aspects, have become increasingly grave and urgent, and have called for a wider and deeper analysis.

Part I

Overall View

1

What Inflation Is

No subject is so much discussed today—or so little understood—as inflation. The politicians in Washington talk of it as if it were some horrible visitation from without, over which they had no control—like a flood, a foreign invasion, or a plague. It is something they are always promising to “fight”—if Congress or the people will only give them the “weapons” or “a strong law” to do the job.

2

Our Forty-Year Record

A casual reader of the newspapers and of our weekly periodicals might be excused for getting the impression that our American inflation is something that suddenly broke out in the last two or three years. Indeed, most of the editors of these periodicals seem themselves to have that impression. When told that our inflation has been going on for some forty years, their response is usually one of incredulity.

3

The Fallacy of “Cost-Push”

In chapter 1, I declared that inflation, always and everywhere, is primarily caused by an increase in the supply of money and credit.

There is nothing peculiar or particularly original about this statement. It corresponds closely, in fact, with “orthodox” doctrine. It is supported overwhelmingly by theory, experience, and statistics.

4

False Remedy: Price Fixing

As long as we are plagued by false theories of what causes inflation, we will be plagued by false remedies. Those who ascribe inflation primarily to a shortage of goods, for example, are fond of saying that “the answer to inflation is production.” But this is at best a half-truth. It is impossible to bring prices down by increasing production if the money supply is being increased even faster.

5

What “Monetary Management” Means

Ever since the end of World War II, the public in nearly every country has been told that the gold standard is out of date, and what is needed in its place is “monetary management” by the experts. It is interesting to notice what some of the consequences of this have been.