Hans F. Sennholz’s Inflation, or Gold Standard? is an Austrian pamphlet written after Nixon’s closing of the gold window and the breakup of Bretton Woods. Its argument turns on a causal distinction: inflation is the monetary authorities’ creation of new money, while rising prices are later and uneven effects. The target is therefore not “high prices” in isolation but political power over money, which lets governments tax, borrow, and redistribute without open consent.
It is not money, as is sometimes said, but the depreciation of money — the cruel and crafty destruction of money — that is the root of many evils.
For Sennholz, inflation is both an economic process and a moral injury. It transfers wealth from creditors, savers, pensioners, wage earners, and fixed-income groups toward debtors, governments, and those first in line for new money. It weakens contract, saving, and calculation, then encourages the very controls—price ceilings, wage controls, subsidies, and exchange restrictions—that make market coordination still harder. Monetary disorder becomes cumulative because every intervention creates new political demands.
Many currencies have suffered total destruction and their replacements are eroding again.
The historical narrative traces how this disorder became institutionalized. Money began as a market commodity, but governments monopolized mints, detached monetary names from metallic weight, imposed legal tender, issued paper substitutes, and concentrated reserves in central banks. The banking system, in this account, ceased to be a decentralized network of redeemable claims and became an engine of coordinated credit expansion.
Commercial banks are forced to hold their reserves as deposits with the central bank, which becomes the “banker’s bank” with all the reserves of the country.
Sennholz connects this machinery to the fiscal politics of the modern welfare state. Democratic demand for benefits makes balanced finance politically difficult, while deficit spending and central-bank credit offer a way to postpone visible costs. The popularity of social expenditures is therefore not incidental to the monetary argument; it is one reason inflation becomes a regular instrument of policy.
Such programs as social security, medicare, anti-poverty, housing, economic development, aid to education, environmental improvement, and pay increases for civil servants are so popular that few politicians dare to oppose them.
The pamphlet’s Austrian business-cycle analysis follows from the same premise. Credit expansion lowers market rates below the level warranted by real saving, stimulates projects that cannot be completed on existing resources, and temporarily masks falling real wages or rising costs. The boom is therefore not prosperity but misdirection; recession is the exposure of earlier monetary falsification. Internationally, Sennholz reads the dollar crisis in parallel terms: American deficits and credit expansion drove pressure on gold reserves, weakened exchange rates, and ended in suspension of payment rather than monetary discipline.
The second half defends the gold standard as the monetary constitution of a free society. Sennholz does not treat gold as a magical cure for scarcity, debt, or bad policy. Its virtue is institutional: gold is a marketable commodity outside the printing press, and gold redemption makes paper and deposits claims rather than political tokens. He distinguishes the gold-coin standard from gold-bullion and gold-exchange arrangements, arguing that the latter keep the language of gold while centralizing reserves and inviting suspension.
His reform program is liberal rather than technocratic. He opposes a sudden official parity decree imposed by the same state that destroyed convertibility. Instead he calls for monetary freedom: legal gold ownership and trade, enforceable gold clauses, private minting, competing monies, and only then any possible restoration of official redemption. The book’s title is consequently a moral alternative as much as an institutional one. Inflation signifies managed paper, hidden redistribution, and expanding compulsion; the gold standard signifies contract, private property, and limits on government power over money.
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