﻿THE PRICE LEVEL

169

ently Professor Nicholson’s.14 Both theoretical ex-
position and inductive verification of the quantity
theory of money have been largely concerned with
what might be described as progressive movements,
that is to say, with long time periods in which the
volume of credit or currency increased in the one
case or diminished in the other — not, it is true, at
uniform pace but without recurrent reversal. But
in connection with certificate borrowing, we have to
do with at least the possibility of a rhythmical short-
time movement — an expansion of credit during the
period in which government deposits created by
credit-paid certificate issues are liberated by public
expenditure, and a possible contraction of credit
during the period in which credits so dispersed are
applied to the reduction of commercial loans and
eventually absorbed in reserves or investments.
The question thus arises — not heretofore discussed,
so far as the present writer is aware — how long a
period of currency inflation is necessary to produce
a corresponding rise in prices. Reverting to useful
medical parallelism, allowance must be made for a
“ period of exposure ” or even a “ period of in-
vasion ” which precedes the “ period of incubation.”

If it be assumed that since our entry upon a re-
gime of active war financing the period of incubation
in the United States has been at least as long in the
United States as that in England, the relative stabil-
ity of prices for the first seven months would seem
to be in a measure accounted for. It is reasonable to

14 Compare American Economic Review, December, 1917, p.

938, with Journal of the Royal Statistical Society, July, 1917, p.

487.