Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

758 Money, Bank Credit, and Economic Cyclesa large portion of this “inflationary tax.” Maurice Allais hasgiven an abundantly clear assessment of this point. He states:Given that any creation of money exerts the same effects aswould a true tax imposed on all whose income is diminishedby the rise in prices which inevitably follows theissuance of new money, the profit derived from it, which isactually considerable, should return to the state and thuspermit it to reduce the overall amount of its taxes. 59Nonetheless, we suggest a much more favorable option:that the state should relinquish its power to issue money andthus accept an obligation to rely on taxes in order to finance allof its expenditures, which it would be required to do withcomplete transparency. As a result of the above, citizenswould directly perceive the entire cost involved and wouldhence be sufficiently motivated to subject all public agenciesto the necessary monitoring.8. The Proposed System Fosters Peaceful, Harmonious Cooperationamong Nations. An analysis of the history of military conflictsover the last two centuries plainly reveals that many ofthe wars which have ravaged humanity could have been completelyprevented or would have been much less virulent if it59 Comme toute création monétaire équivaut par ses effets à unvéritable impôt prélevé sur tous ceux dont les revenus sevoient diminués par la hausse des prix qu’elle engendreinévitablement, le profit qui en résulte, considérable à vrai dire,devrait revenir à l’État en lui permettant ainsi de réduired’autant le montant global de ses impôts. (Allais, “Les conditionsmonétaires d’une économie de marchés,” p. 331)In the same place, Allais identifies the following as one of the most strikingparadoxes of our time: though the public has become more aware ofthe serious dangers involved in government use of the money press, citizensremain completely ignorant of the identical dangers which the system ofcredit expansion unbacked by real saving poses in the form of fractional-reservebanking. The Spaniard Juan Antonio Gimeno Ullastres has studied thetax effect of inflation, though unfortunately he fails to mention the consequencesof the credit expansion fractional-reserve banking entails. Seehis article, “Un impuesto llamado inflación,” published in Homenaje aLucas Beltrán (Madrid: Editorial Moneda y Crédito, 1982), pp. 803–23.