﻿THE PRICE LEVEL

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completely replaced “ inflation ”— without, how-
ever, 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 con-
cern 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 in-
crease 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 state-
ment 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 In-
flation ” in Annals of American Academy of Political and So-
cial 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).