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.
Interpretation
Inflation increases money supply but doesn't equate to real demand or production.
Henry Hazlitt's quote emphasizes that simply increasing the money supply, leading to inflated wages and prices, does not truly enhance economic demand or result in the production of tangible goods. Instead, it highlights the misconception that more money automatically translates to a more prosperous economy, disregarding the underlying principles of production and value.
In practice
In an economic lecture discussing the impacts of monetary policy.
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.
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.
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.
Economics is haunted by more fallacies than any other study known to man
I think one of the most important facts of basic income would be that it's not only a redistribution of income, but also of power. So the cleaners and bin men would have a lot more bargaining power.
You know, I think of the global economy as an inverted triangle, resting on the shoulders of the American consumer. And if the American consumer cannot have enough disposable income in order to maintain a standard of living that creates more opportunities generation after generation, that's bad for everybody.
It's one thing to recognize that the gap between the rich and everybody else is growing like a cancer; it's another thing to come up with useful solutions.
An economy can survive with 10% of the population insolation. It can't survive when 50% of the population is in isolation.
Deficit spending is simply a scheme for the 'hidden' confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.
By adoption of these principles, the long-felt want for a uniform medium will be satisfied. The taxpayers will be saved immense sums of interest, discounts, and exchanges. The financing of all public enterprises, the maintenance of stable government and ordered progress, and the conduct of the Treasury will become matters of practical administration. The people can and will be furnished with a currency as safe as their own government.
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