Inflation does not add anything to a nation’s power of resistance, either to its material resources or to its spiritual and moral strength. Whether there is inflation or not, the material equipment required by the armed forces must be provided out of the available means by restricting consumption for non-vital purposes, by intensifying production in order to increase output, and by consuming a part of the capital previously accumulated.

—Ludwig von Mises. The Theory of Money and Credit, 1912.

Inflation is illegitimate for practical reasons—it does not assist the country to fight—and for moral reasons—its sole purpose being to deceive the people about the cost of the war. As with any situation where an agent deceives its principals, no good can come of it. As Von Mises explained,

A government always finds itself obliged to resort to inflationary measures when it . . . dare not levy taxes, because it has reason to fear that it will forfeit approval of the policy it is following if it reveals too soon the financial and general economic consequences of that policy. Thus inflation becomes the most important psychological resource of any economic policy whose consequences have to be concealed; and so in this sense it can be called an instrument of unpopular, that is, of antidemocratic, policy, since by misleading public opinion it makes possible the continued existence of a system of government that would have no hope of the consent of the people if the circumstances were clearly laid before them. (The Theory of Money and Credit, 1912.)

This article is an extract from the book ‘Principles of Good Government’ by Matthew Bransgrove