wvbill wrote:From a web site reader:
In this preposterous hypothesis wouldn't inflation be
> possible?
It is characteristic
of current political thinking to welcome every suggestion which aims at enlarging the influence
of government. Inflation can be pursued only so long as the public still does not believe it will continue. Once the people generally realize that the inflation will be continued on and on and that the value
of the monetary unit will decline more and more, then the fate
of the money is sealed. Only the belief, that the inflation will come to a stop, maintains the value
of the notes. If the practice persists
of covering government deficits with the issue
of notes, then the day will come without fail, sooner or later, when the monetary systems
of those nations pursuing this course will break down completely. The purchasing power
of the monetary unit will decline more and more, until finally it disappears completely. The most serious dangers for American freedom and the American way
of life do not come from without. What is needed to prevent any further credit expansion is to place the banking business under the general rules
of commercial and civil laws compelling every individual and firm to fulfill all obligations in full compliance with the terms
of the contract. If you have to convince a group
of people who are not directly dependent on a solution
of a problem, you will never succeed. Only to bureaucrats can the idea occur that establishing new offices, promulgating new decrees, and increasing the number
of government employees alone can be described as positive and beneficial measures. The issue is always the same: the government or the market. There is no third solution. As a result, while attempts to clean up and recapitalize the US and European financial systems make sense, and are needed to support any eventual recovery, this will not immediately stop the process
of financial contraction and economic decline. Fiscal stimulus similarly can soften the blow
of the recession but will not directly address the underlying problems, and many countries are constrained by high debt levels.
