The Moral Issue of Honest Money; G. North

Gary North THE MORAL ISSUE OF "HONEST MONEY" BECAUSE of the nature of the eco nomics profession-"guild" might be a better word-it is necessary to put quotation marks around the words, "honest money." Economists will go to almost any lengths to avoid the use of moral terms when they dis cuss economic issues. This has been true since the seventeenth century, when early mercantilistic pamphlet writers tried to avoid religious con troversy by creating the illusion of moral and religious neutrality in their writings. This, they falsely imagined, would produce universal agreement, or at least more readily debatable disagreements, since "sci entific" arguments are open to ratio© Gary North, 1982. Gary North, Ph.D., is President of the Institute for Christian Economics. The ICE pub lishes a newsletter, Biblical Economics Today. A free six-month trial subscription is available by writing to SUbscrjption Office, ICE, P.O. Box 8000, Tyler, Texas 75711.

76 nal investigation. The history of both modern science and modern eco nomics since the seventeenth cen tury has demonstrated how thor oughly unreconcilable the scientists are, morality or no morality. Nevertheless, traditions die hard. Economists are not supposed to in ject questions of morality into their analyses. Economics is still suppos edly a "positive" science, one con cerned strictly with questions of "if ... then." lithe government does A, then B is likely to result. lithe gov ernment wants to achieve D, then it should adopt policy E. The econo mist is completely neutral, of course. He is just an observer who deals with means of achieving ends. The economist can therefore deal with "complete neutrality," with this sort of problem: "If the Nazis wish to ex terminate 50,000 people, which are THE MORAL ISSUE OF "HONEST MONEY" 77 the most cost-effective means?" No morali ty, you understand, just sim pIe economic analysis.

The problem with the theory of neutral economics is that people are not neutral, effects of government policies are not neutral, social sys tems are not neutral, legal systems are not neutral, and when pressed, even economists are not neutral. Be cause societies are not neutral, the costs of violating a society's first principles have to be taken into ac count. But no economist can do any more than guess about such costs. There is no known way to assess the true costs to society of having its po litical leaders defy fundamental moral principles and adopt any given policy. And if the economists guess wrong-not an unlikely prospect, given the hypothetical moral vac uum in which economists officially operate-then the whole society will pay. (This assumes, of course, that policymakers listen to economists.) The inability ofeconomists to make accurate cost-benefit analyses of any and all policy matters is a kind of skeleton in the profession's closet.

The problem was debated back in the late 1930s, and a few economists still admit that it is a real theoreti cal problem, but very few think about it. The fact of the matter is simple: there is no measuring device for bal ancing total individual utility vs. to tal dis utility for society as a whole. You cannot, as a scientist, make interpersonal corp.parisons of subjec tive utility. THe better economists know this, but they prefer not to think about it.'i They want to give advice, but as s¢ientists they cannot say what policy is better for society as a whole.! This is why politicians and policy makers have tb rely on intuition, just as the eCOIllomistsdo. There is no scientific standard to tell them whether or notl a particular policy should be imposed. Without a con cept of morality-that some policy is morally superior to another-the economists' "if .~ . . then" game will not answer the Iquestions that need to be answered. Without moral guidelines, thete is little hope of guessing correctlyconcerning the true costs and benefit$to societyas a whole of any policy . .1'he economist, as a scientist, is in lilO better position to make such estimations than anyone else. If anythinig, he is in a worse position, since h~s academic training has conditioned him to avoid mixing moral issues and economic analysis.

He is not used to dealing with such questions. What Is HonestiMoney? Honest money is a social institu tion that arises from honest deal ings among acting individuals. Money is probalbly best defined as the most mark~table commodity. I accept a dollar in exchange for goods or services that I supply only be78 THE FREEMAN February cause I have reason to suspect that someone else will do the same for me later on. If I begin to suspect that others will refuse to take my dollar in exchange for their goods and ser vices in the future, I will be less willing to take that dollar today. I may ask the buyer to pay me a dol lar and a quarter, just to compen sate me for my risk in holding that dollar over time. A currency uni t functions as money-a medium of voluntary ex change-only because people expect it to do so in the future. One reason why they expect a particular cur rency unit to be acceptable in the future is that it has been acceptable in the past. A monetary unit has to have historic value in most in stances, ifit is to function as money.

Occasionally, meaning very rarely, a government can impose a new cur rency unit on its citizens, and some times this works. One good example is the introduction of the new Ger man mark in November of 1923, which was exchanged for the old mark at a trillion to one. But nor mally the costs are so high in having people rethink and relearn a new currency unit that governments avoid such an imposition. Historic Stability The question policymakers must ask themselves is this: To avoid the necessity of imposing a totally new currency unit on a population, what can be done to convince people that the future usefulness of the c·ur rency in voluntary exchange will re main high? What can be done to im prove the historic value of money in the future? In other words, when people in a year or a decade look back at the performance of their na tion's currency unit, will they say to themselves: "This dollar that I'm holding today buys pretty much what it bought back then. I think it's safe for me to continue to accept dollars in exchange for my goods and ser vices, since people trust its buying power. I have no reason to believe that its purchasing power will fall in the future, so I can take the risk of accepting payment in dollars to day." If people do not say this to themselves, then the dollar's pur chasing power is undermined. Peo ple will demand more dollars in pay ment, meaning prices will go up, if they suspect that prices will go up.

This, in turn, convinces more people that the historic value of their money has been unreliable, which then leads to higher prices. The economist will tell you that prices cannot continue to go up un less the government, working with the central bank, accommodates price inflation by expanding the currency base. The economist is correct in the long run, whatever the long run is these days, or will be in a few years. But governments have a pernicious tendency to accommodate price in1982 THE MORAL ISSUE OF "HONEST MONEY" 79 flation. Dr. Arthur Burns was forth right about this back in 1976: These days the Federal Reserve is now and then described as pursuing a restric tive monetary policy. The Federal Re serve is described as being engaged in a struggle against inflation. The Federal Reserve is even charged with being more concerned about inflation than about un employment, which is entirely false. It is by generating inflation, or permitting in flation, that we get unemployment on a massive scale eventually. But let us in the Federal Reserve ask this question: Are we accommodating inflation at the present time or not? The answer-the only honest, professional answeris that, to a large degree, we are accommodating the inflation; in other words, are making it possible for inflation to continue. 2 So we get a kind of self-fulfilling prophecy. The government expands the money supply in order to finance its deficits, or create a temporary economic boom, or whatever, and the prices for goods and services rise.

Everyone in the "great American auction" has more dollars to use in the bidding process, so prices rise. Then the public gets suspicious about the future value of money, because they have seen the loss of purchas ing power in the past. They demand higher prices. Then the Federal Re serve System is encouraged by poli ticians to accommodate the price in flation, in order to keep the boom going (to keep the "auction" lively). The dollar loses its present value, because it has lost its historic value, which encourages people to discount sharply its future value. The secret of retaining the pub lic's confidence iin any currency unit is simple enough: convince users of the money that the issuers are re sponsible, reliable, and trustworthy. Government and its licensed agents have a monopoly of money creation. Private compet!itors are called coun terfeiters. Sad\y, in our day, it is very difficult tolunderstand just what it is that count~rfeiters do, econom ically speaking, that governments are not alreadYldoing. Fiat money is fiat money. (P~rhaps the real legal issue ought to ibe the illegal use of the government's copyrighted ma terial. Copyrigh,tinfringement makes a much more logical casefor Federal prosecution th~n counterfeiting.) Who Guards tHe Guardians?

There is an. ancient question that every society must answer: "Who guards the gu~rdians?" Or in more contemporary· u.sage, "Who referees the referees?" 1I'he public needs an impersonal guardian to restrain the actions of thosel who hold a legal mo nopoly of money creation: the gov ernment, the c¢ntral bank, and the commercial bap-ks. The public can guard the guarHians if citizens have the right to go down to the local bank and receijve payment in gold, silver, or some I other money metal. The issuers of money need only stamp on the paper money (or check, 80 THE FREEMAN February or deposit book entry) that the holder of the currency unit has a legal right to redeem his warehouse receipt for a stated weight and fineness of a specific metal. 3 Whenever the issu ing agencies begin to issue more re ceipts than they have reserves of metal, the public has the option of "calling the bluff' of the issuers, and demanding payment, as promised by law. It is this restraint-implicit economically, but explicit legally which serves as the impersonal guardian of the public trust.

The government can always change the law. Governments do this 'all the time. Whenever there is a major war, for example, govern ments suspend specie payments. They also suspend civil liberties, and for the same reason: to increase the power of the state at the expense of the citizens. Governments in peace time are frequently unwilling to re establish pre-war taxes, pre-war civil liberties, and pre-war convertibility of currencies, long after the war is over. Civil libertarians have not generally understood the case for a gold standard as a case for civil lib erties, despite the obvious historical correlation between wartime sus pension of civil liberties and war time suspension of specie payments. When the authorities declare the convertibility of paper into specie metals "null and void," it sends the public a message. "Attention! This is your government speaking. We are no longer willing to subject our selves to your continual interference in our governmental affairs. We no longer can tolerate illegitimate re strictions on our efforts to guard the public welfare, especially from the public. Therefore, we are suspend ing the following civil right: the public's legal right to call our bluff when we guarantee free convertibil ity of our currency. This should not be interpreted as an immoral act on the part of the government. Con tracts are not moral issues. They are strictly pragmatic. However, we as sure you, from the bottom of our col lective heart, that we shall never expand the money supply, or allow the historic value of the currency to depreciate. It will be just as if we had a gold standard restraint on our printing presses. However, such re straints are unnecessary, and be sides, they are altogether too re straining. "

RedeemabilityRequired Critics of the gold standard tell us that the value of any currency is de pendent on public confidence, not gold. But what the critics refuse to admit is that the existence of the civil liberty of redeemable money is an important psychological support of the public's confidence in money. Even when the public does not un derstand the gold standard's theo retical justification-an impersonal guard of the monopolistic guard1982 THE MORAL ISSUE OF "HONEST MONEY" 81 ians-citizens can exercise their judgment on a daily basis by either demanding payment in gold (or sil·· ver, or whatever) or not demanding payment. Like the free market it self, it works whether or not the bulk of the participants understand the theory. What they do under stand is self-interest: if there is a profit to be made from buying gold at the official rate, and selling it into the free market (including foreign markets) at a higher price, then some people will enter the markets as middlemen, "buying low and selling high," until the government realizes that its bluff has been called, and it therefore is forced to reduce the ex pansion of the money supply.

What is the morality of a gold standard? Simple: it is the morality of a legal contract. A government's word is its bond. A government promises to restrain itself in the cre ation of money, in order to assure citizens that the monopoly of money creation will not be abused by those holding the monopoly grant of power. The gold standard is very much like a constitution: an impersonal, reli able institution which has as its pre mier function the counterbalancing of potentially damaging monopolis tic power. "Flexible" Money Flexible money is a euphemism for the government's ability to in crease (but, historically speaking, rarely to decrease) the money sup ply. The degree of flexibility is de termined by· the political process, not by the ditrect response of those affected, namely, individual citizens who would oth.erwise have the right to demand pa)1ment in gold. Flexible money means monetary inflation.

Very flexible money means a whole lot of monetary inflation. Monetary inflation means, within 24 months, price inflation~ Civillibert~rians instantly recog nize the danger of "flexible admin istrative law,~' or "flexible censor ship," or "flexible enforcement of speed traps." .Yet they have great difficulty in re~ognizing precisely the same kind of evil in "flexible mone tary policy."'Fhe threat comes from the same instjtution, the civil gov ernment. It comes for the same rea sons: the desire of the government to increase its arbitrary exercise of monopolistic power over the citi zenry, and tolhnit public resistance. The inflationary implications of "flexible monetary policy" can be seen in a revealing exchange between Arthur Burns rand Henry Reuss: DR. BURNS: Let me say this, if I may: the genius of m9netary policy-its great virtue-is that it is flexible. With respect to the growth r~nges that we project for the coming year, as I have tried to advise this committee from time to time-and as I keep reminding others, including members of my own Federal Reserve family-our go~l at the Federal Reserve 82 THE FREEMAN February is not to make a particular projection come true; our goal is to adjust what we do with a view to achieving a good perfor mance of the economy. If at some future time I should come to this committee and report a wide discrepancy between our projection and what actually happened in the sphere of money and credit, I would not be embarrassed in the slightest. On the contrary, I would feel that the Fed eral Reserve had done well and I would even anticipate a possible word of praise from this generous committee.

CHAIRMAN REUSS: You would get it, and the word of praise would be even louder and more deeply felt if you came up and said that due to the change in circumstances you· were proving once again that you were not locked on auto matic pilot and were willing to become more expansive if the circumstances warranted. Either way you would get praise beyond belief. 4 Praise beyond belief! Who wants anything less? Just take the mone tary system off"automatic pilot," and turn it over to those whose short-run political goals favor a return of the inflation-generated economic boom, once the boom has worn off because the printing presses are not acceler ating the output of fiat money-fiat money being defined as former warehouse receipts for metal, in which even the pretense of a ware house has been abandoned. Gold is a tough-minded automatic pilot. Politically, there is a great deal of flexibility in monetary affairs. Few people even pretend to understand monetary affairs, and most of those who do really do not understand the logic of the gold standard. The logic is very simple, very clear, and uni versally despised: It is cheaper to print money than it is to dig gold.

Problems with Fiat Money Fiat money is indeed more flexible than gold, especially in an upward direction. Fiat money allows the government to spend newly manu factured money into circulation. It allows those who gain early access to the newly created fiat money to go out and buy up scarce economic resources at yesterday's prices-prices based on supply and demand condi tions that were being bid in terms of yesterday's money supply. But this leads to some important problems. 1. Yesterday's prices will climb upward to adjust for today's money supply. 2. People will begin to have doubts about the stability of tomorrow's prices. 3. Producers and sellers of re sources may begin to discount the future purchasing power of today's dollar (that is, hike today's prices in anticipation). 4. The government or central bank will be severely tempted to "accom modate" rising prices by expanding the money supply.

5. And the beat goes on.

1982 THE MORAL ISSUE OF "HONEST MONEY" 83 Paying for the Guards It is quite true, as Milton Fried man has stated so graphically, that the gold standard is expensive. 5 We dig gold out of the ground in one lo cation, only to bury it in the ground in another location. We cannot do this for free. Wouldn't it be more ef ficient, meaning less wasteful of scarce economic resources, Dr. Friedman asks, just to forget about digging up gold? Why not keep the government or the central bank from expanding the money supply? Then the same ends could be accom plished so much less wastefully. Save resources: trust politicians. This is a very strange argument, coming as it does from a man who understands the efficiency of market processes, as compared to political and bureaucratic processes. The gold standard is the way that individual citizens, acting to increase their own personal advantage, can profit from any monetary inflation on the part of the monetary authorities. They can "buy low and sell high" simply by exchanging paper money for gold at the undervalued, official exchange rate, and hoarding gold in expectation of a higher price, or selling it into the free market at a higher price. Why is the price higher?

Because individuals expect the gov ernment to go back on its promise, raise the official price of gold (that is, devalue the currency unit), or close the gold window altogether. Citizens can becC!>me future-predicting, risk -bearing,! uncertainty-bearing speculators in a very restricted mar ket, namely, ~he market for govern ment promise$. It allows those who are skeptical about the trustworthi ness of government promises to take a profit-seeking position in the mar ket. It allows those who trust the government-. ~o deposit money at 6 per cent or 10 per cent or whatever. Each side cart speculate concerning the trustwortihiness of government promises con~erning redeemability of the currenclY,or more to the point, government promises concerning the future stabilitjYof the currency unit's purchasing power. Let the Market Function Defenders· of the commodity fu tures markets+-and this includes Dr.

Friedman-argue that the exis tence of a ma:r-ketfor future delivery and future payment of commodities smooths out· market prices, since it opens the market to those who are willing to bear the uncertainties of predicting th~ future. Those who are successful predictors increase their profits, and tl).erefore increase their strength in establishing market prices according to the true future conditions of! supply and demand. Those who ane less successful soon are forced out of the futures mar kets, thereby Ipassing along capital to those who: are more successful predictors. Th~ public is served well 84 THE FREEMAN February by such markets, for obvious rea sons. Prices adjust to future con sumer demand more rapidly, since accurate future-predictors are being rewarded in these markets. Then why not a market for future government promises? Why not a market which can test the govern ment's willingness to deliver a stated quantity and fineness of gold or sil ver (but preferably gold, given in ternational exchange)? The monop olists who control the money supply then are faced with a market which offers rewards to those who are will ing and able to "call the monopo lists' bluff' and demand gold for the government's warehouse receipts.

Why not just rely on the standard commodity contracts for gold in the commodity futures markets? Won't skeptics be able to take their profits this way? Why bring in the "spu rious" issue of a convertible cur rency? The answer is simple enough: once society has given a monopoly to the government to create money, then the full redeemability of the currency unit is a direct, immedi ately felt restriction on government power. Of course the free market in commodities allows speculators to take advantage of monetary infla tion, if their timing is correct. But this does not mean that the public at large will exercise effective action to force a political change in present monetary policy. There is no imme diate self-interest involved in expending resources in what could prove to be a fruitless, expensive campaign to stop the inflation. Fixingthe Responsibility In the commodities market, one investor wins, and one investor loses (unless the price stays the same, in which case only the broker wins). By establishing the gold standard-full redeemability of gold on public de mand-the government forces the Treasury to risk becoming an im mediate, measurable loser. It forces the Treasury's officials to come back to the politicians and announce, "Folks, we have lost the bet. The public has called our bluff. They have drained us of our gold. We can't go on much longer. We have to stop the inflation. We have to convince the public to start trusting the currency, meaning that they should start trusting our competence in securing them a currency with a future. We have to balance the budget. Stop in flating!"

An open commodities market in gold is desirable, of course. But it is no substitute for a gold standard, if the state has a monopoly of money creation (along with its licensed subcontractors, the banks). Unless there is full redeemability, the Treasury is not forced by law to "go long" on its promises whenever any one else wants to "go short." Without full redeemability, the Treasury, meaning the government, 1982 THE MORAL ISSUE OF "HONEST MONEY" 85 can keep on shorting its own prom ises, despite the response of orga nized commodities markets, until an expensive and successful political campaign can be launched to stabi lize the money supply. As free mar ket analysis tells us, these cam paigns are expensive to launch because of such factors as informa tion costs, costs of organizing pres sure groups, and the lack of an im mediate, short-run pay-off to "investors" who contribute money to such a program. Full redeemability allows market forces to work. Self interested forecasters can speculate in the government promises market.

The public never has to be told to vote, or send letters of protest, or do anything. The self-interested specu lators-a small but well-capitalized elite-will do the "policing" job for the citizens free of charge. 6 (Well, al most: there are transaction costs.) So when we are told that it is in efficient to dig gold out of the ground, only to deposit it in a vault, we are not being told the whole story. By tying the currency unit to that gold which is wonderfully expensive to mine, as any monetary brake should be and must be-the body politic en lists a cadre of professional, self-in terested speculators to serve as an unpaid police force. This police force polices the trustworthiness of gov ernment monetary promises. The public can relax, knowing that a hard core of greedy capitalists is at work for the publi~ interest, monitoring Federal budgets, Federal Reserve policies, and $imilarly arcane topics.

By forcing th~ Treasury to "go long" in its own promises market, the guardians a~ guarded by the best guards of all: I future-predicting, self interested sp~culators whose job it is to embarrass Ithose who do not honor contracts-monetary contracts. Conclusions' I suppose IIcould invest more time in presentingi graphs, or faking some impressive..]ooking equations, or citing innurPerable forgotten de fenders of t~e gold standard. But I think I have (reached the point of di minishing r~turns. The logic of the gold standarc1lis really fairly simple: Treasury moropolists, like all other monopolists~ cannot be trusted to honor their Pliomises.Better put, they cannot be trusted at zero cost. The gold standard is one relatively in expensive w~y to impose high costs on government monetary officials who do not hpnor their implicit con tracts with the body politic to moni tor and deliver a reliable currency unit that will have future value-a trustworthy :p1oneysystem.

There are' moral issues involved: honoring c(>t\tracts, preserving so cial stabili tYi, providing a trustwor thy governIAent. There are civil lib erties issue$ involved: protecting citizens from unwarranted taxation through monetary inflation, protect86 THE FREEMAN February ing citizens from arbitrary (read: "flexible") monetary policies, and restricting the expansion of govern ment power. There are economic is sues involved: designing an institu tional mechanism that will bring self interest to bear on political-eco nomic policies, to stabilize purchas ing power, to increase the spread of information in the community, and to increase the political risks for money monopolists. No doubt, I could go on, but these arguments seem sufficient. The real question is more funda mental: Do we trust governments or the high costs of mining precious metals? William McChesney Mar tin, Dr. Burns' predecessor as Chair man of the Federal Reserve Board, gave us the options back in 1968, in the midst of an international mone tary crisis: "It's governments that you have to rely on. Basically, you can't rely on a metal for solvency."7 Those of us who cannot bring our selves to trust the government with any monopoly over the control of money prefer to trust a metal. It may not be the best thing to trust, but it is certainly more reliable than gov ernments.

KeepingGovernmentHonest The case for a gold standard is the case against arbitrary civil govern ment. While politicians may well re sent "automatic pilots" in the sphere of monetary policy, if we had a more automatic pilot, we would have less intensive "boom-bust" cycles. When the "automatic pilot" is subject to tinkering by politicians or Federal Reserve officials, then it is not au tomatic any longer. The appeal of specie metals is not the lure of magical talismans, as some critics of gold seem to imply. Gold is not a barbarous relic. Gold is a metal which, over millennia, has become acceptable as a means of payment in a highly complex insti tutional arrangement: the monetary system. Gold is part of civilization's most important economic institu tion, the division - of - labor - based monetary system. Without this di vision of labor, which monetary cal culation has made possible, most of the world's population would be dead within a year, and probably within a few weeks. The alternative to the free market social order is govern ment tyranny, some military-based centralized allocation system. Any attempt by the state to alter men's voluntary decisions in the area of exchange, including their choice of exchange units, represents the true relic of barbarism, namely, the use of force to determine the outcome of men's decisions.

The gold standard offers men an alternative to the fiat money sys tems that have transferred massive monopolistic power to the civil gov ernment. The gold standard is not to be understood as a restraint on men's 1982 THE MORAL ISSUE OF "HONEST MONEY" 87 freedom, but just the opposite: a means of restraining that great en emy of freedom, the arbitrary state. A gold standard restores an element of impersonal predictability to vol untary exchange-impersonal in the limited sense of not being subject to the whims of any individual or group. This predictability helps to reduce the uncertainties of life, and there fore helps to reduce the costs of hu-· man action. It is not a zero-cost in-· stitution, but it has proven itself as an important means of reducing ar bitrary government. It is an "auto matic pilot" which the high-flying, loud-crashing political daredevils resent. That, it seems to me, is a vote in its favor. @ -FOOTNOTESIFor those who are curious about this great debate over the impossibility of making inter personal comparisons of subjective utility, see the exchange that took place between Sir Roy Harrod and Lionel Robbins: Roy F. Harrod, "Scope and Methods of Economics,"· The Eco nomic Journal (Sept., 1938) and Lionel Rob bins, "Interpersonal Comparisons of Utility: A Comment," The Economic Journal (Dec., 1938).

For some "new left" cQnclusions concerning the A Glut of Money results of this debate, see Mark A. Lutz and Kenneth Lux, The Challenge of Humanistic Economics (Men~o Park, Calif.: Benjamin/ Cummings, 1979),i pp. 83-89. For my own ob servations on its implications, see Gary North, The Dominion Cov~nant: Genesis (Tyler, Texas: Institute for Christian Economics, 1982), ch. 4. 2Federal Reserve Consultations on the Con duct of Monetary 'Policy, Hearings Before the Committee on Bapking, Currency and Hous ing, House of Representatives, 94th Congress, 2nd Session (July 127 and 28, 1976), pp. 26-27. Printed by the lJ.$. Government Printing Of fice, Washington, D.C. 30n money as a Iwarehouse receipt, see Mur ray N. Rothbard, M.an, Economy and .State (New York: New York Ut;liversity Press, fI96211975), pp.700-3. 4FederalReserv~ Consultations, p. 13. 5WritesProf. Fri~dman: "My conclusion is that an automatic commodity standard is neither a feasible nor a desirable solution to the problem of establishing mpnetary arrangements for a free society. It isnbt desirable because it would involve a large cQst in the form of resources used to produce the monetary commodity."

Capitalism and Freedom (Chicago: University of Chicago Press, 1962), p. 42. 6"By creating m~nitors with a vested interest in the maximization of a given set of values, property rights repuce the social cost of moni toring efficiency.",Thomas Sowell, Knowledge and Decisions (N~w York: Basic Books, 1980), p.125. 7William McCh~sney Martin, quoted in the Los Angeles Tim~~ (March 19, 1968), Pt. I, p. 12. IDEAS ON LIBERTY IT CAN, I think, be laid down as a universal rule that all inflation is caused by the acts or politics of government, aplOng which is any large increase in the debts of the central government. A large increase in government debt by borrowing at the banks Greates a glut of money, which causes money to lose value. SAMUEL B. PETTENGILL, "Inflation Is a Burglar"