ABSTRACT
This chapter explains a kind of government borrowing usually implies future taxation to service the debt. It is therefore a device to substitute future taxation for current taxation. Current taxation is much easier adapted to differences in family composition, and for a large family a smaller amount of taxation is needed than for a small family, to induce a certain uniform per capita restriction of consumption. The chapter deals with only one type of inflation: that arising from the issue of new money by the government, or at its order, to obtain some of the real resources that it desires by bidding them away from the private sector through a rise in prices that continues over a period of years. If inflationary finance is substituted for a value-added tax in a closed-economy general equilibrium setting, the differential incidence will be largely on the holders of claims fixed in money value in proportion to the size of those claims.
