In 1883, Goldwin Smith gave an address, later published as False Hopes: Or, Fallacies Socialistic and Semi-Socialistic, Briefly Answered, taking on a number of the political and economic fallacies of his time. His remarks on inconvertible paper money are still worth considering today.

The names have changed, but the impulse behind Greenback advocates has carried right through to modern government deficits and attempts to manipulate the currency.

Smith had some good observations about inflationary policies, not least that “Among the champions of paper currency there are no doubt, knaves, many a one, who know very well what they are about, and whose aim is to defraud the creditor, public and private, by paying off the debt with depreciated paper.”

Most notably, he recognized that inflation tends to favor debtors at the expense of creditors.

That’s why debt-financed deficit spending tends to be popular with the government.

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