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
Today, if you look at financial systems around the globe, more than half the population of the world - out of six billion people, more than three billion - do not qualify to take out a loan from a bank. This is a shame.
The need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe.
Drug companies spend more on advertising and marketing than on research, more on research on lifestyle drugs than on life saving drugs, and almost nothing on diseases that affect developing countries only. This is not surprising. Poor people cannot afford drugs, and drug companies make investments that yield the highest returns.
One of the evils of paper money is that it turns the whole country into stock jobbers. The precariousness of its value and the uncertainty of its fate continually operate, night and day, to produce this destructive effect. Having no real value in itself it depends for support upon accident, caprice, and party; and as it is the interest of some to depreciate and of others to raise its value, there is a continual invention going on that destroys the morals of the country.
The accepted ideas of any period are singularly those that serve the dominant economic interest...What economists believe and teach, whether in the United States or in the Soviet Union, is rarely hostile to the institutions - the private business enterprise, the Communist Party - that reflect the dominant economic power. Not to notice this takes effort, although many succeed.
Unlimited economic growth has the marvelous quality of stilling discontent while maintaining privilege, a fact that has not gone unnoticed among liberal economists.
Subscribe for the occasional hand-picked quote. No noise.