Inflation

Genre and scope: this file is a brief single-author newspaper polemic by Ludwig von Mises, reprinted from 1951, aimed at wartime finance, rearmament, inflation, and price control. Its thesis is direct: inflation is not merely rising prices but the state’s expansion of money and bank credit to finance expenditure; price increases follow from that cause, and price controls only transform the pressure into scarcity.

The government provides a part of the funds required for rearmament by inflation, that is, by increasing the quantity of money in circulation and the amount of bank balances subject to check.

Mises begins by fixing the definition. Rearmament must be paid for somehow: by taxation, borrowing, or monetary expansion. If the state taxes, civilian purchasing power falls as military demand rises; if it inflates, military demand is added to unreduced civilian demand. The conceptual move is to shift attention from prices themselves to the monetary process that makes a general price rise unavoidable.

The unavoidable consequence of inflation is the emergence of a general tendency of all prices to rise.

The essay’s middle section turns from definition to policy critique. Mises argues that official anti-inflation policy mistakes symptoms for causes. Governments claim to fight inflation while continuing the monetary expansion that produces it; what they actually fight is the visible price rise, through controls.

What the bureaucrats have in mind when talking about "fighting" inflation is not avoiding inflation, but suppressing its inevitable consequences by price control.

For Mises, price ceilings cannot repeal scarcity. If prices are fixed below market-clearing levels, the marginal producers whose costs are highest can no longer operate profitably; their withdrawal reduces supply and worsens the shortage. The historical appeal is to American wartime experience under the Office of Price Administration, where controlled prices for basic goods produced queues, rationing pressures, and absence from shelves rather than genuine cheapness.

Inflation, in conjunction with price control, brings about scarcity.

The argumentative structure is therefore causal and sequential: monetary expansion produces excess demand; excess demand raises prices; price controls suppress the signal but not the underlying condition; suppressed prices reduce production and produce shortages. Against administrative stabilization, Mises offers only one remedy: stop creating additional money and bank credit for the Treasury.

Economists know very well that there is only one means available to prevent a further rise in all commodity prices, namely, to end inflation entirely.

A further core move is distributive. Mises denies that inflation lets the public escape the cost of government spending. The cost of rearmament must fall somewhere; inflation merely conceals and redistributes it, especially against those least able to protect themselves from monetary depreciation.

With inflation as well as with taxation, it is the citizens who must foot the total bill.

The final section, “A Semantic Trick,” is the essay’s polemical climax. Mises claims that officials redefine inflation as its consequence—the rise in prices—so that responsibility can be shifted from monetary policy to merchants and manufacturers. This semantic displacement lets the state pose as defender of consumers while continuing the very monetary expansion that raises the cost of living.

To avoid being blamed for the nefarious consequences of inflation, the government and its henchmen resort to a semantic trick.

The charge is moral as well as economic: the state creates the condition, blames business for the result, and then expands regulatory power in the name of protection.

This is a classical case of the thief crying “catch the thief.”

The relevance of the piece lies in this compact Austrian account of inflation as a monetary and political phenomenon. Mises treats price control not as a technical supplement to monetary policy but as an evasion of responsibility, one that converts open price increases into hidden rationing and scarcity. Its enduring force is the insistence that fiscal choices cannot be made costless by changing monetary units, and that language itself becomes part of interventionist policy when the cause of inflation is renamed as its effect.