QOTD: Inflation

"Inflation is the cruelest tax."

I was trying to confirm the first person who actually wrote or said that (as opposed to quoting prior authors/speakers), to little avail.

I always thought it was Milton Friedman, but I cannot seem to confirm that it was he coined the phrase first (can’t find it online, anyway).

I did find a quote from a Fed Chair who actually took the punch bowl away, then kicked the dog , then, burned the house down to the ground to kill inflation: Paul Volcker. Volcker’s quote is as follows:

"Inflation is thought of as a cruel, and maybe the cruelest, tax
because it hits in a many-sectored way, in an unplanned way, and it hits the
people on a fixed income hardest.

But that wasn’t the quote I was looking for. Note that you will often see this quoted as "Inflation is the cruelest tax," occasionally attributed to Jimmy Carter.

Can anyone identify who first said this? You will earn my undying gratitude . . .

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Discussions found on the web:
  1. patu commented on May 22

    It would be ironic if it was “big Al”.

  2. Brian commented on May 22

    “Can anyone identify who first said this? You will earn my undying gratitude . . .”

    That and $10 will get me a cup of coffee at Starbucks.

  3. wally commented on May 22

    You have to beat 1958:
    The Cruelest Tax.
    by Theodor V Houser; Committee for Economic Development.
    Language: English Type: Book
    Publisher: [New York, Committee for Economic Development, 1958]

  4. johntron commented on May 22

    First used in popular use by Gerald Ford? See paragraph highlighted below.

    Via http://www.presidency.ucsb.edu/ws/index.php?pid=6518

    Remarks in Richmond, Virginia.
    October 23rd, 1976

    After so many years of uncontrolled inflation, we’ve cut inflation in half, and we’ll do even better in the future, because you know, as I know, that inflation is the cruelest tax of all. It hits all segments of our population, but particularly those who live on fixed incomes.

  5. johntron commented on May 22

    haha, sorry posted the same link that used in the article. d’oh.

  6. Dave Conley commented on May 22

    I second Wally — Ted Houser

  7. kett82 commented on May 22


    In The Freeman: Ideas on Liberty – September 1956 Vol. 6 No. 9 in an article called “The Great Swindle” Henry Hazlitt said, “Inflation is a tax—the cruelest and most wanton of all taxes. Under it, all creditors are systematically swindled.”

    But he was playing off the theme by Keynes in the General Theory (1936):

    “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”

    See http://www.fee.org/publications/the-freeman/article.asp?aid=243


    I’ll let you know where to send the Starbucks gift card…

  8. David commented on May 22

    According to this link, the quote is attributed to Leonard Read in 1961.


    “Many people do not realize that they cannot continue to enjoy so-called ‘benefits’ from government without having to pay for them. They do not appreciate the fact that inflation is probably the most unjust and cruelest tax of all.”

    Leonard Read 1961

    Henry Hazlitt preceeded the above with a similar quote in 1956. So the person who mentioned Hazlitt is probably correct.


    The shortened version of any quote always gets attributed to one or more people.

  9. rex commented on May 22

    I think William Jennings Bryan said something to the effect that “inflation is the coolest tax.”

  10. mike commented on May 22

    A JSTOR search (which is usually pretty comprehensive) further points to Houser.

  11. Schahrzad Berkland commented on May 22

    Secretary of the Treasury William Simon, in a speech at Southern Methodist University in September 1974:
    “Either we get higher taxes directly, or the resulting budgetary deficits produce inflation, which is the most indidious and indiscriminate tax of all.”
    P. 104, “The Biggest Con”, by Irwin Schiff
    (father of Peter Schiff of Euro Pacific Capital)

  12. roscoe ii commented on May 22

    I would go with Henry Hazlitt also. Why not call his son Thomas Hazlitt and ask? He is a publish author so his phone number should be easily found.

  13. Martin H. commented on May 22

    Again, per Google Book Search, with a date-range constrained search, we have a 1949 and 1920 reference:


    The earlier reference is the 1920 Nebraska Blue Book; on p.823 it reportedly reads in part: “Inflation is the cruelest tax of all. For the first time in American history we have double-digit inflation which reduces the income of pensioners and others on fixed incoms at a rate of more than 10% per year.”

    The full context appears difficult or impossible to obtain, however, without either unrestricted access to the University of Michigan / Google’s digital library (it is a book in that library, digitized by Google), or by purchasing the book.

    The other source is the 1949 “Economic Report of the President: Hearings Before the Joint Committee on the Economic Report” at p. 947, original from the Library of Congress. (Why this is not available through Google Books as in the public domain is a whole ‘nother question).

    Starbucks card coordinates available upon request. :-)

  14. bullb commented on May 22

    But he was playing off the theme by Keynes in the General Theory (1936):

    The original Keynes quote is an attribution by Keynes to Lenin (this Lenin attribution itself is unverified though) from the publication
    The Economic Consequences of the Peace
    Published: New York: Harcourt, Brace, and Howe, Inc., 1920.First published: 1919

    “Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become “profiteers,” who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.”

    The book is on econlib.org. Interesting paper at http://www.richmondfed.org/publications/economic_research/economic_review/pdfs/er670101.pdf

  15. kett82 commented on May 22

    Dear Martin

    Any author quoted in that “Blue Book”? BTW, good luck with that Starbucks card from BR.

    By the way, I am sure some poor slob said a similar thing back when the Roman emperors debased the currency.

    How do you say “Inflation” in Latin?


  16. kett82 commented on May 22

    Dear bullb,

    I had a sneaking feeling Marx was behind all this.


  17. Robert Cote commented on May 22

    Thomas Jefferson wrote something similar January 12, 1819 but your spam dector software won’t allow it to post. What does that say when Lenin and Keynes get through and Jefferson does not?

  18. Momo Fader commented on May 22

    Here’s what I turn up via the Mises Institute, in a footnote to a PDF about Percy Shelley. This would date back to first quarter of the Nineteenth Century:

    In Classical Economics, vol. 2 of his An Austrian Perspective on the History of Economic Thought (Cheltenham, England: Edward Elgar, 1995), p. 182, Murray Rothbard points out that one of Shelley’s contemporaries, Lord King, referred to the depreciation of currency as “an indirect tax . . . imposed upon the community.”

    Nothing about cruelty tho. ;)

  19. me commented on May 22

    Not the first but John Anderson used it in the 1980 campaign.

    “John Anderson for President 1980 Campaign Brochure

    ‘Most polls show that if people believe John Anderson can win,

    he will win. Your support will make Anderson President.’


    The Budget

    Anderson supports fiscal measures designed to reduce the federal deficit and encourage the lowering of interest rates. He is the only candidate not advocating inflationary tax cuts for 1981. Says Anderson, “inflation is the cruelest tax of all and that is the tax I intend to cut.” Although anti-inflationary measures will require sacrifice on the part of all citizens, no sector of the society will be asked to bear a disproportionate share of the burden Anderson has said repeatedly, I will not balance the budget on the backs of the poor.”


  20. Momo Fader commented on May 22

    According to Peter Bernholz the first reference to monetary inflation may be from Aristophanes, The Frogs c. 405 BCE.

    Often has it crossed my fancy, that the city loves to deal With the very best and noblest members of her commonweal, just as with our ancient coinage, and the newly-minted gold.
    Yea for these, our sterling pieces, all of pure Athenian mould, All of perfect die and metal, all the fairest of the fair, All of workmanship unequalled, proved and valued everywhere Both amongst our own Hellenes and Barbarians far away, These we use not: but the worthles pinchbeck coins of yesterday, Vilest die and basest metal, now we always use instead.
    Even so, our sterling townsmen, nobly born and nobly bred, Men of worth and rank and mettle, men of honourable fame, Trained in every liberal science, choral dance and manly game,
    These we treat with scorn and insult, but the strangers newliest come,
    Worthless sons of worthless fathers, pinchbeck townsmen, yellowy scum,
    Whom in earlier days the city hardly would have stooped to use
    Even for her scapegoat victims, these for every task we choose.

  21. rebound commented on May 22

    Darn. Someone beat me to the Thomas Jefferson quote. Is the fact that it won’t make it through the spam filter a sign of the times?

  22. jm commented on May 23

    CD rates several percent below the inflation rate — where the Fed’s set them for about a third of the last fifteen years in order to bail out the too-big-to-fail banks — are a pretty cruel tax, too.

  23. Dr. Dan commented on May 23

    Gosh, I am surprised none figured this out.

    the actual quote is … ” INFLATION IS TAXATION WITHOUT LEGISLATION@ – Milton Friedman

    The quote “Inflation is the cruelest tax.”
    sounds naive…

  24. Eclectic commented on May 23

    Several things:

    Momo Fader – excellent work, but I think that coinage reference was to the gold content of the coins rather than inflation related to the money supply used then, per se. In other words, his writing was the equivalent of a bite one applies to a gold coin to test its relative alloy content. Aristophanes was none too happy about the introduction of fiat, and he was stuck on the notion that the currency w-a-s the value of economic exchange rather than just a nominal representation of it. Of course we know that money only represents economic exchange, because the core of all economic exchange is l-a-b-o-r, either mechanical or intellectual. Apparently that was Greek to Aristophanes.

    On Thomas Jefferson’s quotes (referenced by a couple of posters) – It would be difficult to credit the passage in that letter of his to Albert Gallatin as implying that inflation was a tax and that it was the cruelest tax. It was just that he was fearful of the formation of a central bank. In that sense he was grossly wrong. Alexander Hamilton put in place what became the central bank, the Fed, and that facilitated the great economic expansion that built the country. The central bank is a good thing; it’s the sometimes-faulty application of monetary policy that is its greatest failure.

    Jefferson and Aristophanes were both wrong about fiat. Jefferson was a Renaissance man, but he was no good at economics. He died penniless because of profligate spending. Monticello was ultimately a casualty of sub-prime lending and not even remotely related to inflation.

    Martin H – I am very impressed. It’s looking to me like your 1920 date has got it so far!

    On Keynes, Adam Smith and David Hume – I wouldn’t thought that one these persons might have been first to use the exact term “cruelest tax” to describe inflation. However, I’ve done a word search of Keynes’ (not all his other writings) “General Theory” and he never used the word “cruelest.” He only used “cruelty” once and not about inflation.

    The Keynes quote referenced above by poster ‘bullb’ generally speaks to Keynes’ criticism of the Treaty of Versailles and its horrendous economic punishment of Germany and Austria. Keynes was ahead of his time. If the U.S., France and Britain had listened to him, his theories would’ve led to something of a post-WW I equivalent of “The Marshall Plan” that the U.S. used successfully with Japan after WW II. Keynes was on the committee that recommended the economic policies applied to Germany after WW I, and he was bitterly opposed to them but was unable to sway the opinions of his co-members.

    Here Keynes summarized his criticism (quoting from link provided by another poster):

    “But the spokesmen of the French and British peoples have run the risk of completing the ruin which Germany began, by a peace which, if it is carried into effect, must impair yet further, when it might have restored, the delicate, complicated organisation, already shaken and broken by war, through which alone the European peoples can employ themselves and live.” End quote.

    Keynes was observing the hyperinflation of the Weimar Republic and his opinion was generally that the economic policies of the Treaty of Versailles had probably caused it. Indeed, Hitler forced France to surrender in the same rail car in which Germany had surrendered in WW I.

    However, in the general sense of inflation, Keynes wasn’t too offended by it, as long as it didn’t lead to anything like hyperinflation. He was a proponent of applying pressure on money currency value so as to force it to move and take risk rather than simply accrete more wealth to the wealthy. I have to say that if he’d played word association with the word ‘inflation,’ I don’t think he would’ve immediately responded with anything like “cruelest tax.” His politics were certainly left-leaning, but I don’t think he was an advocate of debauching the currency.

  25. John commented on May 23

    Carl Schurz? This is from memory so my details are not exact.

    Schurz wrote an essay against inflation in the post Civil War era. I think the quote, or something like it, is in that essay.

    Schurz was a very interesting guy. He was a refuge from the 1848 revolution in Germany. He settled in the US, Minn I think, became an abolitionist, and in the Civil War accepted a commission. After, he was a carpetbag Senator for Missouri during Reconstruction.

    Anyhow, the idea behind the quote is very old, and I suspect became folklore long ago.

  26. John F. commented on May 23

    Barry: your undying gratitude, while perhaps of karmic value, has the same marginal cost as a subscription to one of your online services. If you raise the stakes, I’ll go the extra mile to try and answer the next hard one for you. It looks like karma was enough for this one.

  27. Eclectic commented on May 23

    John, on Carl Schurz:

    John, you get an A-plus for effort, but unfortunately Schurz never quite united inflation and taxation into a common expression of “greatest cruelty.”

    Indeed he railed against inflation in post-Civil War essays, and you could obviously extrapolate that he’d have today called it the “cruelest tax,” but he didn’t coin the term (unless you can find it elsewhere in his writings) but only spoke philosophically against the destruction of the value of money species resulting from incompetent authoritative actions of what is now the central bank.


    Quoting him from the link:

    “Of all agencies which human ingenuity can invent, there is none that so insidiously robs human labor of its earnings and
    makes the fortunes of the poor man the football of the rich, as a currency of fluctuating value. To call it the
    peoples’ money is as cruel a mockery as to call loaded dice the honest man’s chance against a sharper. It is the [most insidious agency]* to make the rich richer and the poor poorer.” End quote.

    *[my brackets added] – I suspect the “agency” he was describing was the desire of industrial borrowers to inflate the currency and thus deflate the value of their debts to be repaid, as was possibly the intent regarding the Ohio legislative action he was also referring to.

    He was really angry at the irresponsible, if not immoral, actions of men of governmental influence rather than the ordinary results of inflation that occur in any society, even primitive ones that are barter based.

    No society can prevent inflation, and even the ordinary component of it that can’t be prevented is still the cruelest tax, because it, like inventory shrinkage from theft, is all but impossible to fully address until the tax is already extracted.

    Nope – looks like the Nebraska Blue Book of 1920 is still the earliest source of the exact phrase use, assuming the quote is accurate.

    I’ve learned something from you however, indirectly. It turns out that Schurz was the post-Civil War advocate of responsible reconstruction regarding the defeated South, much the same that Keynes was the failed advocate of the same for post WW I Germany and Austria. That is, he advocated a kind of “Marshall Plan” for the South.

  28. John commented on May 23

    Thanks very much for the Schurz URL. I had no idea his papers were on the web.

    I last read him decades ago, so my memory is pretty spotty, alas. I stand corrected, thank you. I think his objection to inflation is still valid.

    Schurz is also interesting to me at least for his opposition to American imperialism.

  29. Eclectic commented on May 24

    What is inflation?

    Here’s the Eclectic (Eclectic’s) definition:

    It is the failed mutual recognition of the occurrence of a reorganization of currency unit value that is erroneously attributed to profitable economic exchange, even if the failed recognition is only subconscious, and even if all parties to the exchange collectively fail the recognition.

    Profit is itself an erroneous philosophical concept because by definition it can only exist in the form of a mismatching of price and cost, and thus profit hampers both the most efficient allocation of economic resources and the marginal attainment of philosophical infinity in human productivity.

    The marginal attainment of philosophical infinity in human productivity is the true source of all wealth creation (and has been since the dawn of human civilization). This is because the real objective of all human economic endeavors, even if only understood subconsciously, is the marginal philosophical attainment of zero cost for goods and services.

    Mankind misconceptualizes this objective as being the marginal philosophical attainment of infinite riches via profitable economic exchange, because the concept of profitable economic exchange, even though erroneous, is the only means the human mind can conceive of in its attempt to philosophically and marginally attain zero costs for goods and services.

    In other words, profit, as an incentive to economic exchange, although an erroneous concept, is yet a logical and necessary, albeit imperfect, substitute that is used by mankind for the purpose of attaining its true economic objective.

  30. John commented on May 24

    That is a startling thought. The most efficient economic system yields zero cost and zero profit?

    You know, it sounds reasonable? As Allen Ginsberg asks “When can I go into the supermarket and buy what I need with my good looks?”

    I’m going to have to think about this. Why would I work if everything I want costs nothing?

  31. Eclectic commented on May 24


    You’re overthinking the point.

    Why do you work so much now?… when rather bountiful food for eating, color tv, the Internet, ac/heating, a generally quiet and peaceful life, reasonable transportation, pretty reasonable law inforcement, almost unlimited entertainment, life altering and life extending technology, and the freedom for intellectual and recreational endeavor… are all so easily, commonly and inexpensively obtained already.

    These things are not without cost… yet the marginal approach that human productivity has made towards philosophical i-n-f-i-n-i-t-y has already give you these things.

    You must open up intellectually and absorb these concepts I have introduced, or all they will be to you are fanciful notions from an exotic and philosophical person named Eclectic.

  32. Eclectic commented on May 24

    “That is a startling thought. The most efficient economic system yields zero cost and zero profit?”

    That’s right, John… it happens at the point in which human productivity philosophically r-e-a-c-h-e-s infinity.

    At that point, all money ceases to have exchange value. All commodities become Inherent Commodities (infinitely valuable and universally owned, and yet not priceable or exchangeable – like sunlight, gravity, the tides, etc.) and all wealth becomes vested as the sum totals of 1)- pure intellect, and 2)- all Inherent Commodities. These are the only permanent vestments of abstracted wealth.

    Inherent Commodities are those commodities that are pre-existent elements of attained infinite productivity in terms of human perception.

    Here, you can read my developed thoughts on this and other macroeconomic topics:


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