Inflation and You

Inflation and You is a brief wartime essay in public economics, written for non-specialist Americans rather than for theorists. Mises’s first concern is clarity: inflation is not a mysterious force that only experts may discuss, but a political and monetary process whose consequences fall on ordinary households, workers, savers, farmers, and taxpayers.

The layman, therefore, has the right to ask the specialist to explain the matter and to do so in simple terms.

Mises defines inflation monetarily. Rising prices are not the essence of inflation but its consequence: the essential act is an expansion of money and money substitutes, especially bank credit. This distinction lets him reject price control as a cure. Legal ceilings may delay, disguise, or redistribute the pressure, but they do not remove the added purchasing power that is bidding for goods.

Everybody knows that inflation consists of a large increase in the available quantity of money and money substitutes such as bank credits.

The essay’s central analytical move is to ask who is harmed and who may temporarily gain. Mises stresses that inflation does not raise all prices, wages, and incomes at once. It moves through the economy unevenly. Some groups receive new money before the prices they pay have risen; others face higher living costs before their own incomes adjust. This uneven sequence makes inflation a process of redistribution as well as depreciation.

Mises begins with creditors, but he uses the term broadly. A creditor is not merely a banker or bondholder; it is anyone owed money in the future. Savings accounts, insurance policies, pensions, annuities, bonds, mortgages, salaries fixed by contract, and Social Security claims all represent deferred monetary rights. Inflation may leave the number of dollars unchanged while reducing what those dollars can buy.

Every person who has a legal claim to deferred payments of any kind is a creditor.

This is why Mises treats inflation as especially destructive to the modest and provident classes. It punishes the very arrangements by which people try to secure independence across time: thrift, insurance, retirement saving, and contractual planning. Debtors may gain when they repay in cheaper dollars, and some owners of real assets may escape part of the loss, but these gains are not social gains. They are transfers made through monetary disorder, and they do not prevent the nation’s real capital from being consumed.

For all these millions of people, every further step toward inflation means a further decline in the real value of the claims or credits they have saved up by years of toil and sacrifice.

The essay also considers possible hedges and finds most of them unreliable for ordinary citizens. Holding cash does not preserve purchasing power. Foreign exchange, gold, jewels, houses, farms, or stocks may be inaccessible, taxed, controlled, illiquid, or exposed to new political risks. A few groups may benefit temporarily, especially debtors or those who receive higher prices early, but Mises insists that such gains are partial and unstable.

Its political warning follows from its economic argument. Inflation does more than raise the cost of living. It weakens trust in contracts, savings, and the future; it makes prudent people feel cheated; and it encourages resentment against markets, creditors, employers, and government. Mises does not reduce dictatorship to inflation alone, but he sees inflationary policy as part of a broader belief that the state can spend without imposing real costs.

The final policy issue is war finance. Mises distinguishes genuine taxation and genuine borrowing from bank-financed deficits. Taxes openly transfer purchasing power to the state. Real bond purchases transfer existing savings. But when government borrowing is financed through bank credit, new money substitutes enter circulation and produce inflationary effects. His conclusion is that inflation is not an unavoidable wartime fate but a chosen method of finance—one that hides burdens, redistributes wealth arbitrarily, and corrodes liberal economic habits.