By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.

Keynes wrote this line in the aftermath of World War I, when many European governments had financed wartime expenditures through borrowing and monetary expansion, followed by sharp postwar inflation. In this period, Keynes was warning about the social and political consequences of currency debasement: inflation could redistribute wealth without explicit legislation, erode savings, and destabilize confidence in institutions. The remark appears in his 1919 book on the peace settlement, where he discusses how governments can use inflation as an indirect means of transferring resources and how such monetary disorder can undermine the economic foundations of society.

The quote argues that inflation functions like a covert tax. When the general price level rises, the real purchasing power of money holdings and many fixed incomes falls, effectively transferring wealth from holders of cash and nominal claims (savers, wage earners on fixed contracts, creditors) to debtors and to the issuer of money, typically the state. Keynes’s emphasis on “secretly and unobserved” highlights that this redistribution can occur without transparent political debate, because it is mediated through prices rather than explicit taxation. The broader significance is a warning that sustained inflation can corrode trust, distort economic calculation, and provoke social conflict by arbitrarily reshuffling wealth.