The inflationist or expansionist doctrine is presented in several varieties. But its essential content remains always the same.

All the economic arguments in favor of inflation are untenable. The fallacies have long since been exploded in an irrefutable way.

There is, however, a political argument in favor of inflation that requires special analysis. This political argument is only rarely resorted to in books, articles, and political speeches. It does not lend itself to such public treatment. But the underlying idea plays an important role in the thinking of statesmen and historians.

[2] [Some of the problems that have arisen since are referred to in the Editor’s Introduction on p. 13. H.E.B.]

A return to the actual use of gold would be certain to have effects that would scarcely be welcomed. It would lead to a rise in the price of gold, or, what is the same thing, to a fall in the prices of commodities. The fact that this is not generally desired, and the reason why it is not, have already been dealt with. We may confidently suppose that such a fall in prices would cause just as much dissatisfaction as was caused by the process of expelling gold from circulation.

The events of recent years reopen questions that have long been regarded as closed. The question of the freedom of the banks is one of these. It is no longer possible to consider it completely settled as it must have been considered for decades now. Unfortunate experiences with banknotes that had become valueless because they were no longer actually redeemable led once to the restriction of the right of note issue to a few privileged institutions. Yet experience of state regulation of banks-of-issue has been incomparably more unfavorable than experience of uncontrolled private enterprise.

The more the view regains ground that general business fluctuations are to be explained by reference to the credit policy of the banks, the more eagerly are ways sought for by which to eliminate the alternation of boom and depression in economic life. It was the aim of the Currency School to prevent the periodical recurrence of general economic crises by setting a maximum limit to the issue of uncovered banknotes.

Irving Fisher’s scheme is symptomatic of a tendency in contemporary currency policy which is antipathetic to gold. There is an inclination in the United States and in Anglo-Saxon countries generally to overestimate in a quite extraordinary manner the significance of index methods. In these countries, it is entirely overlooked that the scientific exactness of these methods leaves much to be desired, that they can never yield anything more than a rough result at best, and that the question whether one or other method of calculation is preferable can never be solved by scientific means.