Friday, March 19, 2010

Liberty Quote Of The Day: Jens O. Parsson

Jens Parsson discusses how the persistent debasement of money kills society in his 1974 book "Dying of Money: Lessons of the Great German and American Inflations". The below quote is reminiscent of Murray Rothbard's description of the early "fun" portions of an inflation as a "heady wine" (click here for Rothbard's in-depth essay on German hyper inflation).

In any case, Parsson makes the point that monetary inflation always ends in a trail of tears, because it is addictive and requires an increasing volume of inflated money in order to keep the party going. As soon as the spigot is turned off, pain comes, so the spigot is never turned off. In fact, it is provides a constantly accelerating flow and ultimately either tragically deluges society in an out of control hyperinflation or, if discipline is somehow re-instituted, ends in a painful deflationary liquidation. Read on for Parsson's quote:
"Everyone loves an early inflation. The effects at the beginning of inflation are all good. There is steepened money expansion, rising government spending, increased government budget deficits, booming stock markets, and spectacular general prosperity, all in the midst of temporarily stable prices. Everyone benefits, and no one pays. That is the early part of the cycle. In the later inflation, on the other hand, the effects are all bad. The government may steadily increase the money inflation in order to stave off the latter effects, but the latter effects patiently wait. In the terminal inflation, there is faltering prosperity, tightness of money, falling stock markets, rising taxes, still larger government deficits, and still roaring money expansion, now accompanied by soaring prices and an ineffectiveness of all traditional remedies. Everyone pays and no one benefits. That is the full cycle of every inflation."
- Jens O. Parsson, Dying of Money: Lessons of the Great German and American Inflations (1974)

[HT: LB]