Obviously, this deficit must be paid for later by tax increases, which will have to be sufficient to cover both interest costs and repayment of principal. The tax increases, however, may very well be enacted only by succeeding administrations. Consequently, the party engaging in deficit spending is likely to escape public blame—a circumstance that makes the inflation-plus-borrowing policy highly appealing and increases the likelihood that it will be repeated, leading to a debt spiraling out of control. In recent years, the escalating U. S. government debt has been cleverly disguised by accounting procedures that include funds required for future Social Security obligations as government revenue. Motivated by expediency rather than principles, politicians of the two largest parties embrace such procedures, because the scam enables them to propose popular new applications for an illusory budget "surplus" (
).
In order to realize purpose (2) above, the inflationary funds must enter the money and capital markets, resulting in a short-term decrease in the interest rate, which enables increased borrowing by businesses and generates an economic "boom." The free-market interest rate, as we have seen previously, is implicit in the value scales of the investors, lenders, and borrowers in the marketplace (pp. 4.7:6-13). In the short run, the increased supply of present money results in an interest rate lower than this natural interest rate. The inflation of the 1920s, as Rothbard documented, was precisely such a credit expansion by banks to business, and the remainder of this analysis will be concerned with inflation of this kind. 
Previous
