We have inflation again, the result of the Federal Reserve Board increasing the value of gold from the $350/ounce average from 1981 to 2001 -- to around $950 in mid-2009, as I write. That's about 200% inflation, which we see in the tripling of oil and gas prices -- and will soon see in the tripling of the price of everything else. (The recession has only retarded inflation in these areas, not ended it.)
Hazlitt, whom H.L. Mencken once called one of the few economists who could write clearly, wrote this little book in the late 1960s, as the inflationary spiral of the mid-1960s to 1981 was just beginning. It's a little gem and an excellent companion to his classic, "Economics in One Lesson."
It isn't really dated at all, as the same economic errors are repeated throughout history. Like Ron Paul today, Hazlitt insists that the only way to prevent inflation is to return to the gold standard. He writes:
"Nothing has more clearly demonstrated the need for the gold standard than its abandonment. Since that occurred, in Britain in 1931 and in the United States in 1933, the world has been plunged, both in wartime and in peacetime, into a sea of paper money and unending inflation."
What a brillant book ! Hazlitt does a great job of explaining how inflation is developed. An increase in the supply of money and credit and the expectations of it continuing is what inflation is all about. What is incredibly scary is the this book was written in 1960.. what would Hazlitt think about today's Federal Reserve decisions? The book does a wonderful job of explaining inflation and also a great case (again) for the gold standard. One thing he does write and I don't agree is that inflation "redistributes" wealth.. HUH? Inflation hits the poor harder than the rich. So many great concepts about the economy, this book is a very good use of your time.
Hazlitt's tracts on economics are a pleasure to read. Inflation is an underrated evil. Unemployment is the perennial boogeyman of the plebeians and the the politicians. The gold standard is considered by many laymen to be a throwback to the Middle Ages. Why? They normally can't say. Typically they mutter something about Paul Krugman like a mysterious séance. Under the pretense of creating full employment the Federal Reserve has both directly and indirectly devalued the dollar. This book, originally published in 1960, points out the problem with the government's guarantees on housing loans that could never be paid off. How prescient!
Under the current tax code the poorest of Americans pay little or no income tax. This is fine. Even Adam Smith advocated a progressive tax. Inflation is a silent a tax that takes money from the pockets of the rich and poor alike and, for obvious reasons, affects the poor as much or more than the rich. Those with fixed rate debts benefit from inflation, but people from lower socioeconomic classes rarely have the credit scores or the savvy to protect themselves from the perils of adjustable rates. A politician cannot claim to care about the poor while advocating the sort of wanton borrowing for deficit spending that causes inflation.
I found Hazlitt's arguments to be persuasive, but not supported by a lot of empirical analysis. I expected Hazlitt, who is an economist, to cite more empirical studies. But overall I enjoyed reading the book. It moves quickly and is not filled with academic jargon.