《Friedrich Hayek - Can We Still Avoid Inflation》.pdf

Can We Still Avoid Inflation? Friedrich A. Hayek In one sense the question asked in the title of this lecture is purely rhetorical. I hope none of you has suspected me of doubting even for a moment that technically there is no problem in stopping inflation. If the monetary authorities really want to and are prepared to accept the consequences, they can always do so practically overnight. They fully control the base of the pyramid of credit, and a credible announcement that they will not increase the quantity of bank notes in circulation and bank deposits, and, if necessary, even decrease them, will do the trick. About this there is no doubt among economists. What I am concerned about is not the technical but the political possibilities. Here, indeed, we face a task so difficult that more and more people, including highly competent people, have resigned themselves to the inevitability of indefinitely continued inflation. I know in fact of no serious attempt to show how we can overcome these obstacles which lie not in the monetary but in the political field. And I cannot myself claim to have a patent medicine which I am sure is applicable and effective in the prevailing conditions. But I do not regard it as a task beyond the scope of human ingenuity once the urgency of the problem is generally understood. My main aim tonight is to bring out clearly why we must stop inflation if we are to preserve a viable society of free men. Once this urgent necessity is fully understood, I hope people will also gather the courage to grasp the hot irons which must be tackled if the political obstacles are to be removed and we are to have a chance of restoring a functioning market economy. In the elementary textbook accounts, and probably also in the public mind generally, only one harmful effect of inflation is seriously considered, that on the relations between debtors and creditors. Of course, an unforeseen depreciation of the value of money harms creditors an