## The Deadly Effects of Inflation: An Explanation of Henry Hazlitt's Essay
**Background**
This essay was written by Henry Hazlitt, an American economist, and first published in 1946. In it, he outlines 10 harmful consequences of inflation.
**1. Malinvestment**
Inflation distorts price signals, leading businesses to make poor investment decisions. They may invest in projects that are not needed or that will become unprofitable when inflation subsides.
**2. Waste**
People may rush to buy goods and services they don't need to protect themselves from inflation. This leads to the wasteful use of resources.
**3. Unjust Redistribution of Wealth and Income**
Inflation hurts people with fixed incomes, such as retirees and savers, more than those with incomes that rise with inflation, such as investors and workers.
**4. Growth of Speculation and Gambling**
People may turn to speculating on goods or assets in the hope of profiting from inflation, rather than investing in productive activities.
**5. Immorality and Corruption**
Inflation can lead to unethical behavior, such as fraud, bribery, and hoarding.
**6. Disillusionment, Social Resentment, Discontent, Upheaval, and Riots**
People may become frustrated with the deteriorating economic situation, leading to social unrest.
**7. Bankruptcy**
Businesses may find it more difficult to make a profit and may be forced to go bankrupt.
**8. Increased Government Controls**
Governments may implement policies to try to control inflation, which can reduce economic freedom.
**9. Eventual Collapse**
If inflation is not controlled, it can lead to the collapse of the economic system.
**Examples**
* **Malinvestment:** During a period of high inflation, businesses may invest in expensive new factories to produce goods. However, when inflation subsides, these goods may become too expensive for consumers to buy, leading to losses for the businesses.
* **Waste:** People may rush to buy food, even if they don't need it right away, to avoid paying higher prices later. This can lead to food waste.
* **Unjust Redistribution of Wealth:** Retirees who rely on fixed incomes are more likely to be hurt by inflation than working-age people whose incomes rise with inflation.
* **Speculation:** People may invest in gold or real estate in the hope of profiting from inflation, rather than investing in productive businesses.
* **Social Unrest:** During periods of high inflation, people may become frustrated with the economic situation and take to the streets to protest.
**References**
* Hazlitt, Henry. "The Consequences of Inflation." The Foundation for Economic Education. 1946. [https://www.investopedia.com/articles/insights/122016/9-common-effects-inflation.asp](https://www.investopedia.com/articles/insights/122016/9-common-effects-inflation.asp)
* "What are the negative effects of inflation?" Investopedia. [https://www.forbes.com/advisor/personal-finance/why-is-inflation-bad/](https://www.forbes.com/advisor/personal-finance/why-is-inflation-bad/)
* "Inflation." Wikipedia. [https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Inflation](https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Inflation)
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