If a government resorts to inflation, that is, creates money in order to cover its budget deficits or expands credit in order to stimulate business, then no power on earth, no gimmick, device, trick or even indexation can prevent its economic consequences.
Interpretation
Government-induced inflation leads to inevitable negative economic impacts that cannot be hidden by manipulation.
Henry Hazlitt's quote highlights the dangers of government intervention in the economy through inflationary practices. When a government resorts to printing money to address budget deficits or expand credit, it undermines the currency's value and ultimately leads to adverse economic consequences that cannot be avoided, irrespective of any measures taken to counteract these effects.
In practice
This quote can be used in a discussion about fiscal policy during a debate on government spending.
A man with a scant vocabulary will almost certainly be a weak thinker. The richer and more copious one's vocabulary and the greater one's awareness of fine distinctions and subtle nuances of meaning, the more fertile and precise is likely to be one's thinking. Knowledge of things and knowledge of the words for them grow together. If you do not know the words, you can hardly know the thing.
Mere inflation-that is, the mere issuance of more money, with the consequence of higher wages and prices-may look like the creation of more demand. But in terms of the actual production and exchange of real things it is not.
Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousandfold by a factor that is insignificant in, say, physics, mathematics or medicine - the special pleading of selfish interests.
The only way we could remember would be by constant re-reading, for knowledge unused tends to drop out of mind. Knowledge used does not need to be remembered; practice forms habits and habits make memory unnecessary. The rule is nothing; the application is everything.
The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice.
Economics is haunted by more fallacies than any other study known to man
Microfinance recognizes that poor people are remarkable reservoirs of energy and knowledge, posing an untapped opportunity to create markets, bring people in from the margins and give them the tools with which to help themselves.
The modern corporation must manufacture not only goods but the desire for the goods it manufactures.
That's why the American Recovery & Reinvestment Plan won't just throw money at our problems, we'll invest in what works
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
The collapse of the global marketplace would be a traumatic event with unimaginable consequences. Yet I find it easier to imagine than the continuation of the present regime.
The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.
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