WAR  BORROWING

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debtedness  has  brought  about  inflation  —  it  is  worth
while  to  refer  to  the  current  unsettlement  of  opinion
as  to  what  constitutes  inflation.  During  the  past
two  years  there  has  raged  in  English  financial  circles, ­
  technical  and  academic,  a  controversy  recalling
in  variety  and  intensity  the  classic  bullion  debate  of
a  century  ago,  not  only  as  to  whether  inflation  really
existed  in  England,  whether  it  was  imputable
wholly  or  in  any  part  to  public  borrowing  and
whether  this  consequence  if  existent  was  avoidable
or  inevitable  —  but  more  fundamentally  as  to  what
inflation  really  is.  Seemingly  driven  to  scientific
desperation  by  the  variety  of  current  meanings  attaching ­
  to  the  word,  an  English  economist  of  note
has  lately  declared  3  “  there  is  obviously  much  to  be
said  for  abandoning  the  term  inflation  altogether,
and  so  dispensing  with  the  need  for  any  definition.”
Similarly  in  this  country.  The  old  fixity  of  concept ­
  and  definition  has  perceptibly  yielded,  more
conspicuously  indeed  among  practical  financiers  and
financial  administrators  than  among  academic  economists. ­
  In  banking  circles  there  is  disposition  to
view  the  matter  as  essentially  one  of  banking
solvency,  and  to  maintain  that 4  “  the  test  of  inflation ­
  in  the  credit  structure  is  the  relation  of  cash
holdings  to  deposits.”  So  too  it  is  perhaps  not
without  significance  that  in  the  annual  report 5  of  the
Federal  Reserve  Board  the  term  “  expansion  ”  has
3  Pigou,  “  Inflation  ”  in  The  Economic  Journal,  December,
1917,  p.  490-  .  ,
4  “  Is  There  Credit  Inflation  in  the  United  States?  ”,  circular
letter  of  Guaranty  Trust  Company  of  New  York,  March  4,
1918.
5  January  15,  1918.