[m the Editor of the SPECTATOR.] Sia,—The word inflation is
now repeated hopefully in many quarters where formerly it met only with disapproval. Yet, if one may judge by correspondence in the Press, few people even now clearly understand what the word means. One of the most valuable public services which economists could render at the present time would be to save the world from inflation by defining it.
Contrary to a widespread belief, inflation does not neces- sarily involve an increase in the amount of money in circulation, and not all such increases cause inflation.
Increases in productive capacity should be accompanied pani passu by increases in the amount of currency available. If this does not take place, then production—the creation of material wealth—is throttled down below what it might be through lack of means of exchange. Increases in currency thus necessitated, as well as those required to rectify the evils consequent upon a deliberate policy of monetary restriction, should be called expansion. Inflation only takes place when the amount of money in circulation is increased beyond the amount necessary to ensure productive capacity being fully utilized.
At the present time currency expansion is urgently required to save civilization from complete collapse. Inflation, on the other hand, using the word in its correct sense, must prove disastrous to the nations adopting it, as it always has done, and always must do.—! am, Sir, &c., HUGH P. VowLES.
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