Friday, 31 October 2014

Commentary

Inflation and Monetary Manipulation as Incentives for Corruption

Posted by Alex Chafuen
November 29, 2012

by Alex Chafuen

The Adam Smith Institute (U.K.) has published a valuable piece reminding readers about the corrupting effects of inflation.   My professor of professional ethics, at the Catholic University of Argentina, taught us that printing money was “lying, knowing that you are lying, and stealing, knowing that you are stealing.”[1]   But the ethics of monetary policy and its actors did not occupy more than 10 minutes of one class of his course.

Peter Twigg writes that “The ultimate corruption is the single, most cynical, abuse of the people by the State (your government), in perpetrating the myth that inflation is an economic disease that government cannot stop. The truth is that government perpetuates inflation and that it remains in the government’s interest to maintain a level of inflation. The truth is that government makes itself out to be the victim of inflation when in fact it benefits from inflation.”

Only at very high levels of price inflation does the so-called Tanzi-Olivera effect comes into play, where price inflation rises faster than taxes and politically determined prices and salaries; thus, paradoxically, the size of the government sector relative to the economy is reduced.  Destruction of the Rule of law, however, continues.  This was the case in my native Argentina and other Latin American countries.  Vito Tanzi continues to be a friend of the movement, collaborating with the Istituto Bruno Leoni in Italy.

 

 

[1] Cayetano Antonio Licciardo ((1923–1999) a former Minister of Economics of Argentina.

Visit Adam Smith Institute…

image: flickr.com/ztephen