Keynes on Inflation

by Don Boudreaux on June 5, 2009

in Inflation

On this day in 1883 John Maynard Keynes was born.  (And in something of an irony, it is also the day listed as Adam Smith's birthday, for it is the day he was baptized in the year of his birth, 1723.)

Here's one of Keynes's keenest insights, from pages 220-233 of The Economic Consequences of the Peace (1919):

By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.  By this method, they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some.  The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth.  Those to whom the system brings windfalls . . . become 'profiteers', who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished not less than the proletariat.  As the inflation proceeds . . . all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless.


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