The Great Swindle

July 1, 1957

A year ago (Newsweek, June 25, 1956) I printed here, under the above title, a table showing the depreciation, in terms of domestic purchasing power, of the currencies of 53 countries in the ten years from 1946 to 1955. This table had been compiled by Franz Pick. He has now carried it forward, for the nine-year period from January 1948 to December 1956, in the 1957 edition of his Currency Yearbook. I present the results below, showing the depreciation of 56 currencies in that period.

It is important to keep this appalling worldwide picture constantly before our minds. For it reminds us that inflation is nothing but a great swindle, and that this swindle is practiced in varying degrees, sometimes ignorantly and sometimes cynically, by nearly every government in the world. This swindle erodes the purchasing power of everybody’s income and the purchasing power of everybody’s savings. It is a concealed tax, and the most vicious of all taxes. It taxes the incomes and savings of the poor by the same percentage as the incomes and savings of the rich. It falls with greatest force precisely on the thrifty, on the aged, on those who cannot protect themselves by speculation or by demanding and getting higher money incomes to compensate for the depreciation of the monetary unit.

WHY INFLATION?

Why does this swindle go on? It goes on because governments wish to spend, partly for armaments and in most cases preponderantly for subsidies and handouts to various pressure groups, but lack the courage to tax as much as they spend. It goes on, in other words, because governments wish to buy the votes of some of us while concealing from the rest of us that those votes are being bought with our own money. It goes on because politicians (partly through the second- or third-hand influence of the theories of the late Lord Keynes) think that this is the way, and the only way, to maintain “full employment,” the present-day fetish of the self-styled progressives. It goes on because the international gold standard has been abandoned, because the world’s currencies are essentially paper currencies, adrift without an anchor, blown about by every political wind, and at the mercy of every bureaucratic caprice. And the very governments that are inflating profess solemnly to be “fighting” inflation. Through cheap-money policies, or the printing press, or both, they increase the supply of money and credit and affect to deplore the inevitable result.

The following table is based on official cost-of-living indexes, many of which understate the real extent of currency debasement. Russia and its satellite countries are omitted because disparities between actual and “official” price levels are so wide and the statistics are meaningless. The American dollar, to which so many other currencies are ostensibly tied, itself shows a depreciation of 15 percent in the period. The British pound sterling, the world’s most important trade unit, lost 34 percent, the French franc 52 percent, the currencies of Chile, Paraguay, Bolivia, and Korea, from 93 to 99 percent.

CURRENCY SHRINKAGE

Percentage Decline in Purchasing Power of Monetary units January 1948–December 1956