THE  PRICE  LEVEL

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completely  replaced  “  inflation  ”—  without,  however, ­
  in  any  wise  affecting  the  soundness  and
sobriety  of  counsel  given  by  individual  members  of
the  Board  in  public  addresses  and  in  semi-official
reviews  of  the  financial  situation. 0
Fortunately,  it  is  not  requisite  for  our  purpose  to
determine  this  question  of  terminology.  Our  concern ­
  lies  not  in  establishing  the  title,  of  the  disorder
but  in  ascertaining  its  presence  and  in  identifying  its
cause.  To  debate  dialectically  as  to  what  constitutes
inflation,  with  a  view  to  eventually  concluding  that
that  which  we  have  is  or  is  not  inflation  —  is  to  drag
a  red  herring  across  the  trail.  The  specific  problem
before  us  is  to  ascertain  whether,  and  if  so  to  what
extent,  war  borrowing  or  rather  a  particular  mode
of  war  borrowing  is  the  direct  cause  of  rising  prices,
a  phenomenon  which  in  accepted  philosophy
will  follow,  other  things  being  equal,  an  increase ­
  in  the  circulating  medium.  There  is  indeed
a  small  group  of  political  economists  and  practical
financiers  who  deny  the  validity  of  the  quantity
theory  of  money  upon  which  the  foregoing  statement ­
  rests,  and  to  these  the  analysis  upon  which  we
are  about  to  enter  will  prove  unconvincing.  But  the
consensus  of  opinion  has  long  been,  and  at  the
present  time  more  than  ever  is  in  definite  affirmation
of  the  doctrine  that  with  no  counteracting  increase
6  Thus  Professor  A.  C.  Miller’s  “  War  Finance  and  Inflation ­
  ”  in  Annals  of  American  Academy  of  Political  and  Social ­
  Science,  January,  1918;  Mr.  Paul  Warburg’s  “Appeal  for
Thrift  to  Counteract  Increasing  Inflation”  in  Federal  Trade
Information  Service,  April  25,  1918;  and  the  repeated  editorial
utterances  of  the  Federal  Reserve  Bulletin  (see,  for  example,
November,  1918,  pp.  1047-8).