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A Roman Lesson on Inflation

“While it is the duty of the citizen to support the state, it is not the duty of the state to support the citizen” – President Grover Cleveland

The point President Cleveland made back in the 1880s was that individuals and vested interests had no rights to preferential treatment by a government elected to represent all. For if preference is given, it is always at the expense of others.

Those days are long gone, and the last president to take this stance was Calvin Coolidge in the 1920s. He was followed by Herbert Hoover, who was very much an interventionist. As Coolidge reportedly said of his Vice-President, “That man has given me nothing but advice, and all of it bad”. Hoover was criticised for his disastrous intervention policies by Franklin Roosevelt, who succeeded in ousting him in the 1932 election, and then outdid him with even more intervention. The outflows of gold generated by accelerating government spending and the Fed’s monetary policies led in 1933 to the suspension of gold convertibility for American citizens and the devaluation of the dollar in 1934 from $20.67 to $35 per ounce of gold.

Interventionsism has increased ever since, not just in America but in all other advanced nations. The socialisation of earnings and profits and the regulation of our behaviour by governments dominates economic activity today. Despite the warnings of sound-money theorists, a process that commenced nearly a century ago has not yet led to economic collapse, though the dangers of escalating state liabilities are a growing threat to economic stability.[i]

A point that is ignored by nearly everyone is that government spending is an expensive luxury for any economy, tying up capital resources in the most inefficient way. Furthermore, governments, through tax and the diversion of savings and monetary inflation, destroy personal wealth. Yet, it is clear both through observation and economic logic that a successful economy is one that instead maximises personal prosperity.

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