O que é a inflação?

What Inflation Is

No subject is so much discussed today—or so little understood—

as inflation. The politicians in Washington talk of

it as if it were some horrible visitation from without, over

which they had no control—like a flood, a foreign invasion,

or a plague. It is something they are always promising to

"fight"—if Congress or the people will only give them the

"weapons" or "a strong law" to do the job.

Yet the plain truth is that our political leaders have

brought on inflation by their own money and fiscal policies.

They are promising to fight with their right hand the conditions

brought on with their left.

Inflation, always and everywhere, is primarily caused by

an increase in the supply of money and credit. In fact,

inflation is the increase in the supply of money and credit.

If you turn to the American College Dictionary, for example,

you will find the first definition of inflation given as follows:

"Undue expansion or increase of the currency of a country,

esp. by the issuing of paper money not redeemable in specie."

In recent years, however, the term has come to be used

in a radically different sense. This is recognized in the

second definition given by the American College Dictionary

"A substantial rise of prices caused by an undue expansion

in paper money or bank credit." Now obviously a rise of

prices caused by an expansion of the money supply is not

the same thing as the expansion of the money supply itself.

A cause or condition is clearly not identical with one of

its consequences. The use of the word "inflation" with these

two quite different meanings leads to endless confusion.

The word "inflation" originally applied solely to the

quantity of money. It meant that the volume of money was

inflated, blown up, overextended. It is not mere pedantry

to insist that the word should be used only in its original

meaning. To use it to mean "a rise in prices" is to deflect

attention away from the real cause of inflation and the real

cure for it.

Let us see what happens under inflation, and why it happens.

When the supply of money is increased, people have

more money to offer for goods. If the supply of goods does

not increase—or does not increase as much as the supply

of money—then the prices of goods will go up. Each individual

dollar becomes less valuable because there are more

dollars. Therefore more of them will be offered against,

say,