Revolution? Yes. We. Can.

German economist Jörg Guido Hülsmann brilliantly defaces the arguments for inflation and makes the case for deflation in his essay "Deflation and Liberty" which is essential reading. The passages below are my favourite parts.

Paper money has produced several great crises, each of which turned out to be more severe than the preceding one. Moreover, paper money has completely transformed the financial structure of the western economies. At the beginning of the 20th century, most firms and industrial corporations were financed out of their revenues, and banks and other financial intermediaries played only a subordinate role. Today, the picture has been reversed, and the most fundamental reason for this reversal is paper money. Paper money has caused an unprecedented increase of debt on all levels: government, corporate, and individual. It has financed the growth of the state on all levels, federal, state, and local. It thus has become the technical foundation for the totalitarian menace of our day.

On free money.

What kind of money would prevail in a free society? Theoretical considerations and historical experience all point to the same answer: a free society would use precious metals as money. Payments would be made in coins made out of gold, silver, platinum, copper, or whatever other substance would combine scarcity with the physical advantages of these metals.

By contrast, paper money has always been fiat money, that is, it has always been imposed by the coercive power of the state. It is not the money of the free market but the money of a partially enslaved society.

Why the powerful stay powerful.

Inflation is an unjustifiable redistribution of income in favor of those who receive the new money and money titles first, and to the detriment of those who receive them last. In practice the redistribution always works out in favor of the fiat-money producers themselves (whom we misleadingly call central banks) and of their partners in the banking sector and at the stock exchange. And of course inflation works out to the advantage of governments and their closest allies in the business world. Inflation is the vehicle through which these individuals and groups enrich themselves, unjustifiably, at the expense of the citizenry at large. If there is any truth to the socialist caricature of capitalism—an economic system that exploits the poor to the benefit of the rich—then this caricature holds true for a capitalist system strangulated by inflation. The relentless influx of paper money makes the wealthy and powerful richer and more powerful than they would be if they depended exclusively on the voluntary support of their fellow citizens. And because it shields the political and economic establishment of the country from the competition emanating from the rest of society, inflation puts a brake on social mobility. The rich stay rich (longer) and the poor stay poor (longer) than they would in a free society.

The follies of inflation.

The Japanese governments of the 1990s sought to fix the economic crisis through increasingly heavy doses of inflation. But the only result of this policy was to give a zombie life to the hopelessly bureaucratic and bankrupt conglomerates that control Japanese industry, banking, and politics. After almost fifteen years of mindless inflation, Japan's economic crisis has turned into a fundamental political crisis that sooner or later will bring the country to the verge of revolution.

This is also what will happen to the West, if citizens let their governments have a free hand in monetary affairs.

And when is that revolution that Hülsmann is talking about coming?

Gerald Celente says in the next few years.

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