egrees, have since the beginning of the
war been expanded artificially, regardless of the usual restraints
upon such expansion--to which we refer later--and without any
corresponding increase in the real wealth upon which their
purchasing power was based; indeed in most cases in spite of a
serious reduction in such wealth.

It should be clearly understood that this artificial and
unrestrained expansion, or inflation, as it is called, of the
currency or of the titles to immediate purchasing power does not
and cannot add to the total real purchasing power in existence, so
that its effect must be to reduce the purchasing power of each unit
of the currency. It is in fact a form of debasing the currency.

The effect of it has been to intensify, in terms of the inflated
currencies, the general rise in prices, so that a greater amount of
such currency is needed to procure the accustomed supply of goods
and services. Where this additional currency was procured by
further inflation--that is, by printing more paper money or
creating fresh credit--there arose what has been called a vicious
spiral of constantly rising prices and wages and constantly
increasing inflation, with the resulting disorganization of all
business, dislocation of the exchanges, a progressive increase in
the cost of living, and consequent labor unrest.

It is of the utmost importance that the growth of inflation should
be stopped; and this, although no doubt very difficult to do
immediately in some countries, could quickly be accomplished by
abstaining from increasing the currency--in its broadest sense, as
defined above--and by increasing the real wealth upon which such
currency is based.

The cessation of increase in the currency should not be achieved
merely by restricting the issue of legal tender. Such a step, if
unaccompanied by other measures, would be apt to aggravate the
situation by causing a monetary crisis. It is necessary to attack
the causes which lead to the necessity for the additional currency.

The chief cause in most countries is that the governments, finding
themselves unable to meet their expenditures out of revenue, have
been tempted to resort to the artificial creation of fresh
purchasing power, either by the direct issue of additional
legal-tender money or more frequently by obtaining-