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Theft as Economic Policy

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Here’s a letter of mine to the Wall Street Journal:

Praising higher inflation, your reporter writes that “Governments in the U.S. and elsewhere, and many U.S. households, are sitting on mountains of debt.  A little more inflation could in theory reduce the burden of servicing and paying that off, because while debt payments are often fixed, the revenue and income that households and governments generate to pay it off would rise with inflation” (“Low-Inflation Doctrine Gets a Rethink, but Shift Is Unlikely [2]“, Feb. 22).

Whoa.

The rise in revenue and income caused by inflation is nominal, not real.  Printing more monochrome pictures of dead statesmen doesn’t increase the supply of resources for use in repaying debts.

Nevertheless, inflation does reduce debt burdens, but it does so by enabling debtors to repay debts with money worth less than the money that they borrowed.  Importantly, this reduced burden is caused by nothing more glamorous than theft: government smears green ink on plenty of paper and then puts that paper into circulation.  The resulting devaluation of the dollar transfers wealth involuntarily from creditors (and dollar holders) to debtors – the biggest of whom these days is Uncle Sam.

I’m appalled that your paper camouflages such thievery as respectable economic policy.

Sincerely,
Donald J. Boudreaux

(HT to Craig Kohtz for alerting me to this appalling report in the WSJ.)

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