Will Dollars Save the World?

Will Dollars Save the World?

Will Dollars Save the World?

Will Dollars Save the World?

Excerpt

Germany is the outstanding case of a demoralized production imposed by stupid controls from without. We come now to countries which have disorganized and prevented production by unintelligent government interference from within. To keep from making this story too repetitive, by discussing the remarkably similar interventions of each government in turn, it will be more convenient to present a sort of composite photograph of the situation in a single country, which we shall call Ruritania. The situation in Ruritania will be found to apply, with only minor modifications, to most of the countries of Europe. While Belgium and Switzerland, for example, have freer economies than those in this composite picture, other nations are subject to even more extensive dictation.

Ruritania's budget is unbalanced. Heavy sums are being spent on armaments, on subsidies to nationalized industries running a deficit, on food subsidies, and on increasing pensions, family allowances, and other forms of social security -- but obviously, the government points out, none of these expenditures can be reduced. Tax rates have been kept up or increased on the higher incomes. A capital levy has been added. Further nationalization and socialization are discussed. Sales taxes on luxuries, with one or two exceptions, have been reduced.

It is surely not the finance minister's fault if these arrangements are not bringing in more revenue. Meanwhile the volume of money in circulation has risen enormously and is still rising. The government, however, is holding down interest rates so that it can borrow cheaper and encourage business borrowing. This policy, however, also increases the inflationary pressure.

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