THE  PRICE  LEVEL

169

14  Compare  American  Economic  Review,  December,  1917,  p.
938,  with  Journal  of  the  Royal  Statistical  Society,  July,  1917,  p.
487.

ently  Professor  Nicholson’s. 14  Both  theoretical  exposition ­
  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  shorttime
  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  invasion ­
  ”  which  precedes  the  “  period  of  incubation.”
If  it  be  assumed  that  since  our  entry  upon  a  regime ­
  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  stability ­
  of  prices  for  the  first  seven  months  would  seem
to  be  in  a  measure  accounted  for.  It  is  reasonable  to