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ssss1First half-year.

From 1914 to 1920 all these countries experienced an expansion in the supply of money to spend relatively to the supply of things to purchase, that is to say Inflation. Since 1920 those countries which have regained control of their financial situation, not content with bringing the Inflation to an end, have contracted their supply of money and have experienced the fruits of Deflation. Others have followed inflationary courses more riotously than before. In a few, of which Italy is one, an imprudent desire to deflate has been balanced by the intractability of the financial situation, with the happy result of comparatively stable prices.

Each process, Inflation and Deflation alike, has inflicted great injuries. Each has an effect in altering the distribution of wealth between different classes, Inflation in this respect being the worse of the two. Each has also an effect in overstimulating or retarding the production of wealth, though here Deflation is the more injurious. The division of our subject thus indicated is the most convenient for us to follow,—examining first the effect of changes in the value of money on the distribution of wealth with most of our attention on Inflation, and next their effect on the production of wealth with most of our attention on Deflation. How have the price changes of the past nine years affected the productivity of the community as a whole, and how have they affected the conflicting interests and mutual relations of its component classes? The answer to these questions will serve to establish the gravity of the evils, into the remedy for which it is the object of this book to inquire.