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A TREATISE ON MONEY

BK. IV

true of an Income Deflation, provided its incidencehas been fairly equal on all the factors of production.But it is true of a Commodity Deflation. In short,to stabilise prices at the bottom of a CommodityDeflation would be a stupid thing to do. But withthis all “ stabilisers ” would agree.

There is one other general conclusion which legiti-mately emerges from this discussion, namely that theprincipal evils of a Credit Cycle are due to its Defla-tion phase and not to its Inflation phase. Thus realadvantages may ensue if, when a Commodity Infla-tion has passed over into an Income Inflation, noattempt is made to go back to the old state of affairsbut stability is preserved at the new level of incomes.The state of affairs in which the supply of moneyallows the equilibrium price-level to rise over the longperiod a little faster than efficiency-earnings, so thatthere is a progressive moderate bias in favour of Com-modity Inflation, is, therefore, vastly preferable to onein which the price-level is slowly falling relatively toearnings. The advantages to economic progress andthe accumulation of wealth will outweigh the elementof social injustice, especially if the latter can be takeninto account, and partially remedied, by the generalsystem of taxation ;—and even without this remedy,if the community starts from a low level of wealthand is greatly in need of a rapid accumulation ofcapital.

(ii.) The Incidence oe Commodity Inflation

A Commodity Inflation really does increase theresources available for new investment and serves toaugment Society ’s stock of wealth. This respect, inwhich it totally differs from an Income Inflation andfrom a Capital Inflation which do no such thing, hasbeen commonly overlooked by those who do not dis-tinguish different kinds of Inflation from one another.