INFLATION OF CURRENCY.

Wairarapa Age, 15 December 1920, Page 4

INFLATION OF CURRENCY.

The influthpi <»!' ''i!'-,!' !l !".l eurrency was onp ('J tin' chief riiiises for the rise of prices between ISM! ami 1020; Hit l cheek to inflation witliin tbe hist oitfht months is the fundani imi tal reason why prices ;ire lnlla lion, briefly, is the rreniion of buying power without a corresponding quantifalive increase in Iho production of merchandise and service to bo exchanged: Ii" the rii'M;' 1 .:! ;*;' ! ' ll (> t|>> s creation of buying power took the form of h>ni!.i mude by banks on promissory notes of one form or another. The result was a largo increase in "deposit's. "• or credit accounts against which borrowers could draw rdipciuf.s, and in paper iiiioney jsp-iiw] '"ivy' Tim Federal Reserve banks. This inflated credit was used by (lie borrowers to bid up the prices of materials and wages of labour and to grant more extensive ip ciuioinijrs. J'n the. l'nited ; Slates' ilie process of dopatior, fortuv.ately has 'been checked in time to preserve our gold standard, howni] inritiuy is essential to real business prosperity and healthy social conditions, and apparently wo shall succeed in avoiding' the evils of an irredeemable paper ctirreney here (says an American paper). The return to a healthy price basis, however, after an era of inflated, speculative prices, is'; pajj'.fy'! f;> tu.-j rry businesses. The decline in prices causes losses, vet tljese, lo,sso„s are only an offset to the-; profits made (luring the prPP-Pfli'iff ' period of inflation, j