The Inflation Crisis and How to Resolve It

by Henry Hazlitt

Henry Hazlitt knew the works of Mises as well as anyone but he was not mainly a theoretician. He was a financial journalist, commentator, and interpreter of current events. In this sense, he was one of a a learned economist with both feet in the real world of politics, financial markets, and the economics of everyday life. The Inflation Crisis and How to Resolve It , newly in print in hardcover at a low price, is his masterpiece on money. The book reappears just in we are in the midst of an inflation crisis even if the effects are not yet fully felt. By inflation, he didn't mean rising prices. He meant the tendency of government and the central bank to print money in pursuit of prosperity. In this sense, no book could be more directly related to our own times, as Bernanke and Company use and abuse the power of the Fed as never before. He begins with an overview of what inflation is and covers the abysmal record of government money management. He clearly explains the cause and first comes the printing and then come the business cycles and price increases. He explains that the only real cure for all of the effects is to treat the end the government's power to print. For this reason, Hazlitt favors a gold standard. The first section is perfect as an introduction to the topic but the second section is enormously valuable for anyone who wants more depth on the topic. He explains what is wrong with monetarism, what is wrong with demand-side management, what is wrong with the Phillips Curve, what is wrong with theories about "unused capacity," what is wrong with government stimulus packages, what is wrong with inflation indexing, why inflation tends to be global now, and he even adds a very thoughtful critique of Hayek's proposal for free choice among it does go nearly far enough to reform money. From a readers point of view, Hazlitt's book is pure pleasure. As Mencken said of him, he was the only economist of his generation who could really write. He is clear as a bell, and why? Because he had a passion for explaining economics to every living person. He did not think that economics should be left to the academy or to investment firms. Like Mises, he believe it was the business of everyone. This book came out in 1978 and it's been thirty years out of print. It was supposed to be a redo of What You Should Know About Inflation, but as Hazlitt said, it turned into a completely new book. This is one that the Mises Institute wanted to have in print for many years, and it is an event to celebrate that it is finally here, in a beautiful edition at a rock-bottom price. 191 page, Hardcover, 978-1-933550-56-5

Genres: Economics, Finance, History, Nonfiction

191 pages, Hardcover

First published January 1, 1978

About the author

Henry Stuart Hazlitt was an American journalist who wrote about business and economics for such publications as The Wall Street Journal, The Nation, The American Mercury, Newsweek, and The New York Times.

Reviews

[Ryan · Rating 5 out of 5]

Interestingly it doesn't matter if you're reading The Wall Street Journal, The Economist or a report directly from the Federal Reserve itself – more often than not inflation is referred to as if it is some wild beast that can never be fully understood or completely stopped. And yet when you break it down, by the very definition of inflation we know that this is completely false. Why? Because inflation is not the rise in prices or the devaluation of money. Inflation is the increase in the supply of money and through this it causes a rise in prices and the devaluation in money. Hazlitt does an excellent job of making this distinction clear. And it’s an important distinction to make. If one does not understand the causes of a problem he will be unlikely to have success in stopping it.

Another element of the book that many readers may find enjoyable is the way in which Hazlitt demystifies the supposedly crazy concept of “The Gold Standard” and why it is a natural system that evolves after a breakdown in other forms of money valuation. It is much more than an arbitrary system of money no better or worse than any other. My only wish for Hazlitt’s book would have been for it to cover this concept in depth earlier in the book than it did. Although when he ties this concept into the resolution for the inflation crisis it becomes clear why he works it in when he does.

Finally, I think the book is important now as much as ever. Today many Americans are living on much tighter budgets and they are seeing the cost of living going up much faster than their increases in pay. This is often used as the justification for more government spending, largely to pay for so called “safety nets.” Unfortunately the question is rarely asked why the cost of living is going up faster than increases in pay. After reading Hazlitt’s book it becomes clear that more government spending from a government that is already broke will only worsen the problem and hurt those who can least afford it.

At times the book was above my level of understanding but without a doubt still provides a very accessible breakdown of how money works and will continue to be a very valuable resource for years to come. If a reader is willing to re-read pages and take it as slowly as he or she find it necessary, even one never formally trained in economics can understand nearly all the ideas Hazlitt puts forth. As a friend of mine said, the book makes money as simple as it should be...but no simpler.

[Corey Keast · Rating 5 out of 5]

Still Relevant

What can I say? If you read Hazlitt 50 years ago he's as relevant as today. Inflation is an outcome of governments manipulation of the money supply. Best step forward is to allow for different currencies to be used as legal tender.

[Kama Lidia · Rating 2 out of 5]

Quite an interesting book at first, but with each chapter the story gets so America-centered it’s difficult to read. It seems like the author has forgotten that USA is not the only country in the world.

[Paul · Rating 5 out of 5]

Excellent book. He basically describes Bitcoin 40 years before it was created as the only thing that can save our inflation crisis.

[Ian Hodge · Rating 5 out of 5]

Henry Hazlitt has a way of explaining things that is clear - crystal clear. In this book he explains what inflation is. It is nothing more than the expansion of the money supply. That definition, however, has undergone change. Now inflation is defined as an increase in prices. Shifting the definition, however, has not made things clearer. It has instead hidden the relationship between the quantity of money on the one hand, and the quantity of goods on the other. This ratio is expressed as a price, and when the quantity of money expands faster than the quantity of goods, prices rise.

That money supplies everywhere are manipulated by national banks such as the Fed in the USA, is evidence that governments everywhere have formed an alliance with their central bankers to expand the money supply whenever it suits them. This, in turn, is the cause of the boom-bust cycle which is now common place throughout the world. It is hidden by improvements in productivity, but as events in Europe have highlighted, that does not last forever.

Hazlitt thus gives a clear explanation of inflation - expansion of the money supply - and its disastrous effects on the economy. But there is only one way to resolve the economic crisis brought on by inflating the money supply. You just have to stop inflating. Period. That's the rather unique - but only - solution to what is increasingly an inflation crisis around the world.

But no one, it appears, is looking for the genuine solution to the one issue that has brought on the global financial crisis.