chapter  1
7 Pages

What is Inflation?

In the first place, it is clear that by " inflation " most people understand a substantial and rapid rise of the general level of prices, and it will be convenient to use the word here in this usual sense. At the outset, however, one must distinguish an inflation which (like that of the major Allies in and after the 1914-18 war) is arrested before the currency becomes so worthless as to require the institution of a new unit of value from one which (like the German inflation of 1923) proceeds faster and faster until there is no remedy but to introduce an entirely new currency. The first may conveniently be called " ordinary/' the second " runaway " inflation ; the essence of the difference between them-of the factor which may cause the former to turn into the latter-will be examined later.