[10] It will simplify the argument to ignore the fact that the value of gold in terms of commodities is itself a fluctuating one, and to treat the value of a currency in terms of gold as a rough measure of its value in terms of “real resources” generally. On whom has the tax fallen? Clearly on the holders of the original 9,000,000 notes, whose notes are now worth 25 per cent less than they were before. The inflation has amounted to a tax of 25 per cent on all holders of notes in proportion to their holdings. The burden of the tax is well spread, cannot be evaded, costs nothing to collect, and falls, in a rough sort of way, in proportion to the wealth of the victim. No wonder its superficial advantages have attracted Ministers of Finance. Temporarily, the yield of the tax is even a little better for the Government than by the above calculation. For the new notes can be passed off at first at the same value as though there were still only 9,000,000 notes altogether. It is only after the new notes get into circulation and people begin to spend them that they realise that the notes are worth less than before. What is there to prevent the Government from repeating this process over and over again? The reader must observe that the aggregate note issue is still worth $36,000,000. If, therefore, the Government now prints a further 4,000,000 notes, there will be 16,000,000 notes altogether, which by the same argument as before are worth $2.25 each instead of $3, and by issuing the 4,000,000 notes the Government has, just as before, transferred an amount of resources equal to $9,000,000 from the public to itself. The holders of notes have again suffered a tax of 25 per cent in proportion to their holdings. Like other forms of taxation, these exactions, if overdone and out of proportion to the wealth of the community, must diminish its prosperity and lower its standards, so that at the lower standard of life the aggregate value of the currency may fall and still be enough to go round. But this effect cannot interfere very much with the efficacy of taxing by inflation. Even if the aggregate real value of the currency falls for these reasons to a half or two-thirds of what it was before, which represents a tremendous lowering of the standards of life, this only means that the quantity of notes which the Government must issue in order to obtain a given result must be raised proportionately. It remains true that by this means the Government can still secure for itself a large share of the available surplus of the community. Has the public in the last resort no remedy, no means of protecting itself against these ingenious depredations? It has only one remedy,--to change its habits in the use of money. The initial assumption on which our argument rested was that the community did _not_ change its habits in the use of money.