﻿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 cir-
cles, 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 at-
taching 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 con-
cept and definition has perceptibly yielded, more
conspicuously indeed among practical financiers and
financial administrators than among academic econ-
omists. In banking circles there is disposition to
view the matter as essentially one of banking
solvency, and to maintain that4 “ the test of in-
flation in the credit structure is the relation of cash
holdings to deposits.” So too it is perhaps not
without significance that in the annual report5 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.