6

Uncle Sam:
Swindler?

7

Why Gold

8

The Cure for Inflation

The cure for inflation, like most cures, consists chiefly in removal of the cause. The cause of price inflation is the increase of money and credit. The cure is to stop increasing money and credit. The cure for inflation, in brief, is to stop inflating. It is as simple as that.

Part II

Close-Ups

9

What Spending and Deficits Do

The direct cause of price inflation is the issuance of an excessive amount of paper money. The most frequent cause of the issuance of too much paper money is a government budget deficit.

10

What Spending and Deficits Do Not Do

In the preceding chapter we have examined some of the harm that deficits do. Let us here concentrate on what they do not do. They do not cure unemployment.

Let us turn to segments of the historical record, year by year.

11

Lessons of the German Inflation1

12

Where the Monetarists Go Wrong

In the last decade or two there has grown up in this country, principally under the leadership of Professor Milton Friedman, a school known as the Monetarists. The leaders sometimes sum up their doctrine in the phrase “Money matters,” and even sometimes in the phrase “Money matters most.”

13

What Determines the Value of Money?

The Velocity of Money

We cannot fully understand the present American and world inflations, and the consequences to which they are likely to lead, unless we fully understand the causes that determine the purchasing power of money. Perhaps the greatest obstacle to this understanding today is the continued prevalence of an old but false theory.

14

Inflation and Unemployment

For many years it has been popularly assumed that inflation increases employment. This belief has rested on both naive and sophisticated grounds.

The naive belief goes like this: When more money is printed, people have more “purchasing power”; they buy more goods, and employers take on more workers to make more goods.

The more sophisticated view was expounded by Irving Fisher in 1926: