ABSTRACT
As we pointed out in the last chapter, the system of consistent deflation developed without any theoretical background. It was practical statesmen and not theoretical economists who hit upon this solution, not for any theoretical considerations but out of practical necessity. Their object was to reduce budgetary expenditure, and it was in order to make the cuts in civil service salaries more bearable that efforts were made to lower the cost of living. Apart from this, the desire to be able to compete with foreign rivals and to attract tourist traffic also contributed to the endeavours to lower prices and charges in general. Those who applied this new method were unaware that they were inaugurating a new system. They merely thought that they were applying a rather more drastic and less orthodox method of deflation. Having realised the difficulty and grave disadvantages of deflating by means of credit restrictions, they had to devise some alternative method, and in their search for a practical solution they hit upon consistent deflation.
