Financing government spending by increasing the quantity of money looks like magic, like getting something for nothing. To 2 268 take a simple example, government builds a road, paying for the expenses incurred with newly printed Federal Reserve Notes. It looks as if everybody is better off. The workers who build the road get their pay and can buy food, clothing, and housing with it.

The proposition that inflation is a monetary phenomenon is im- portant, yet it is only the beginning of an answer to the causes of and cures for inflation. It is important because it guides the search for basic causes and limits possible cures. But it is only the begin- ning of an answer because the deeper question is why excessive monetary growth occurs.

Inflation is a disease, a dangerous and sometimes fatal disease, a disease that if not checked in time can destroy a society. Ex- amples abound. Hyperinflations in Russia and Germany after World War I—when prices sometimes doubled and more than doubled from one day to the next—prepared the ground for communism in the one country and nazism in the other.

The one thing all the items used as money have had in common is their acceptance, in the particular place and time, in return for other goods and services in the faith that others would likewise accept them.

CHAPTER 9 Compare two rectangles of paper of about the same size. One is mostly green on the back side and has a picture of Abraham Lincoln on the front side, which also has the number 5 on each of its corners and some printing. You can exchange this piece of paper for some quantity of food, clothing, or other goods.

Two classes of workers are not protected by anyone: workers who have only one possible employer, and workers who have no pos- sible employer.

In addition to protecting union members, government has adopted a host of laws intended to protect workers in general: laws that provide for workmen’s compensation, prohibit child labor, set minimum wages and maximum hours of labor, establish com- missions to assure fair employment practices, promote affirmative action, establish the federal Office of Safety and Health Adminis- tration to regulate employment practices, and others too numer- ous to list.

Enforcing a high wage rate. If, somehow or other, a union can assure that no contractor will pay less than, say, $15 an hour for a plumber or a carpenter, that will reduce the number of jobs that will be offered. Of course, it will also increase the number of persons who would like to get jobs.

Physicians are among the most highly paid workers in the United States. That status is not exceptional for persons who have benefited from labor unions. Despite the image often conveyed that labor unions protect low-paid workers against exploitation by employers, the reality is very different.

If Gallup were to conduct a poll asking: “What accounts for the improvement in the lot of the worker?” the most popular answer would very likely be “labor unions,” and the next, “gov- ernment”—though perhaps “no one” or “don’t know” or “no opinion” would beat both. Yet the history of the United States and other Western countries over the past two centuries demon- strates that these answers are wrong.