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Pastimes : Austrian Economics, a lens on everyday reality
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To: Aloysius Q. Finnegan who wrote (353)11/6/2008 11:04:00 AM
From: TimF  Read Replies (1) of 445
 
I'd say that wars can and have been fought on a gold or other commodity standard, but when the government is allowed to expand the money supply it can raise more money (even adjusted for the resulting inflation), effectively its an inflation tax.

In the short or sometimes in the medium run this can help a government make it through a crisis, but in the medium to long run your heading for trouble if you try to finance things by inflating the currency. Look at Zimbabwe (not that financing the government through printing money is their only horrible economic policy but its key, and also lead to other bad policies like price controls).

Disclaimer - Although I'm interested in Austrian economics, I am not an expert, and I didn't research the issue in response to your question. I make no claim that my thoughts above represent the "Austrian" position on this issue.
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