The Control of Inflation and Deflation
The 1930's taught us the evil consequences of a deficiency of total monetary demand for goods and services. When, for one reason or another the total amount of monetary purchasing power falls off and money expenditure on all sorts of goods and services in consequence declines, all lines of production in all regions become more or less simultaneously unprofitable. Workers are dismissed and output is reduced. The evil spreads in a vicious circle. A decline in the demand for shirts reduces the incomes of shirtmakers who have less to spend on boots. Bootmakers are thrown out of work and have less to spend on furniture; and so on. Mass unemployment of resources results. The real income of the community is reduced and-(particularly in those areas in which unemployment is most highly concentrated)—standards of living are quite unnecessarily lowered, while productive power runs to waste in idleness. But perhaps more important than this material result is the spiritual malaise resulting from the feelings of frustration which must accompany unwanted idleness in a world of poverty. We are all agreed that measures must be taken to stimulate total monetary demand and to prevent it from falling below the level necessary to sustain a high output and high employment when the time next comes-as sooner or later it assuredly will come-when a deficient total demand threatens to engulf us in a major depression.