The Theory of Money and Credit - Ludwig von Mises [207]
In this great conflict the advocates of public control cannot do without inflation. They need it in order to finance their policy of reckless spending and of lavishly subsidizing and bribing the voters. The undesirable but inevitable consequence of inflation, the rise in prices, provides them with a welcome pretext to establish price control and thus step by step to realize their scheme of all-round planning. The illusory profits which the inflationary falsification of economic calculation makes appear are dealt with as if they were real profits; in taxing them away under the misleading label of excess profits, parts of the capital invested are confiscated. In spreading discontent and social unrest, inflation generates favorable conditions for the subversive propaganda of the self-styled champions of welfare and progress. The spectacle that the political scene of the last two decades has offered has been really amazing. Governments without any hesitation have embarked upon vast inflation and government economists have proclaimed deficit spending and "expansionist" monetary and credit management as the surest way toward prosperity, steady progress, and economic improvement. But the same governments and their henchmen have indicted business for the inevitable consequences of inflation. While advocating high prices and wage rates as a panacea and praising the administration for having raised the "national income" (of course, expressed in terms of a depreciating currency) to an unprecedented height, they blamed private enterprise for charging outrageous prices and profiteering. While deliberately restricting the output of agricultural products in order to raise prices, statesmen have had the audacity to contend that capitalism creates scarcity and that but for the sinister machinations of big business there would be plenty of everything. And millions of voters have swallowed all this.
There is need to realize that the economic policies of self-styled progressives cannot do without inflation. They cannot and never will accept a policy of sound money. They can abandon neither their policies of deficit spending nor the help their anti-capitalist propaganda receives from the inevitable consequences of inflation. It is true they talk about the necessity of doing away with inflation. But what they mean is not to end the policy of increasing the quantity of money in circulation but to establish price control, that is, futile schemes to escape the emergency arising inevitably from their policies.
Monetary reconstruction, including the abandonment of inflation and the return to sound money, is not merely a problem of financial technique that can be solved without change in the structure of general economic policies. There cannot be stable money within an environment dominated by ideologies hostile to the preservation of economic freedom. Bent on disintegrating the market economy, the ruling parties will certainly not consent to reforms that would deprive them of their most formidable weapon, inflation. Monetary reconstruction presupposes first of all total and unconditional rejection of those allegedly progressive policies which in the United States are designated by the slogans New Deal and Fair Deal.
2 The Integral Gold Standard
Sound money still means today what it meant in the nineteenth century: the gold standard.
The eminence of the gold standard consists in the fact that it makes the determination of the monetary unit's purchasing power independent of the measures of governments. It wrests from the hands of the "economic tsars" their most redoubtable instrument. It makes it impossible for them to inflate. This is why the gold standard is furiously attacked by all those who expect that they will be benefited by bounties from the seemingly inexhaustible government purse.
What is needed first of all is to force the rulers to