Is Inflation, Deflation, Theft?

From: j
Sent: Monday, January 28, 2019 5:00 PM
To: Walter Block <>
Subject: Inflation and Deflation

Hey Walter,

I hope you are well. I enjoyed taking the LSAT this past Saturday. Now, I wait until February 15th, to see how I did.

I have an economics question for you, sir. I understand how inflation is a form of theft, but wouldn’t deflation also sometimes be equal to theft? If our currency was back by gold, once again, and masses of people felt the need to cash out their paper currency for gold, would that be a near debasement of sorts?

I am trying to understand the Austrian view of equity when it comes to currency. Does the Chicago school differ in their response to this?

In Liberty,


From: Walter Block []
Sent: Monday, January 28, 2019 6:02 PM
To: jdg247
Cc: William Barnett
Subject: RE: Inflation and Deflation

Dear J:

I’m asking that my friend Bill Barnett answer these questions, since he specializes in money-macro from an Austro-libertarian perspective.

Best regards,


Dear J:

First, one must define inflation.  There are two basic meanings: an increase in the stock of money and an increase in the general level of prices.

Monetary inflation is not necessarily theft.  It is not if money is a commodity, and the coins are full bodied, and any banknotes or demand-deposits are fully; i.e., 100%, commodity backed.  However, monetary inflation that takes the form of less than full-bodied coins, or banknotes or demand deposits that are less than fully backed by a commodity are a form of theft.

As far as price inflation is concerned, if the general level of prices increases, it is not necessarily theft.  If it occurs because of an increase in a commodity money, then it is not theft.  Or if the general level of prices increases because of a decrease in extant goods because of, e.g., a natural disaster, it is not theft.  However, if price inflation occurs because of an increase in fiat money; i.e., less than fully-backed banknotes or demand deposits, or less than full-bodied coins, it is theft.

If our money was full-=bodied gold coins and our bank-notes and demand deposits were fully backed by gold, and people wanted to redeem their bank notes and or demand deposits for fully-backed gold coins, there would be no change in the stock of money, but merely a change in the form of money.  There would be neither debasement nor enhancement of the money stock.

As far as the Chicago school, taking Friedman as the man, they would not agree with my analysis.

William Barnett


1:41 am on January 30, 2019