Correspondence: Answer to J. Blundell. (1922)

From the Editors from the October 1922 issue of the Socialist Standard

In regard to their general results “Inflation” and ”Debasing” of the currency are the same, though the terms are generally used with reference to two different kinds of currency. “Inflation” is used in connection with a paper currency, and “Debasing” in connection with a metallic one. When first established the coins of a metallic currency were worth—or were of the value—of their face denomination— Pound, penny, etc. Some of the old rulers tried to rob their subjects by using inferior metal in the manufacture of the coins, or by issuing coins under the legally fixed weight. In either case the difference in value between the original coins and the altered or “Debased” ones, would form a margin for the rulers’ benefit until the debasement was discovered and new higher prices established in line with the lower real value of the new coins.

In the case of a country with an inconvertible paper currency—inflation, of course, cannot take place where the paper is convertible into gold upon demand—the purchasing point at which the paper will circulate depends upon how much “foreign” trade is carried on by the country in question, and the amount of notes issued compared with the estimate, made by the trading community, of the power and willingness of the Government to meet its liabilities, or, in other words, upon the “credit” of that particular government.

Should the Government issue notes in excess of this “credit” the notes would circulate at a point below their face denomination in the proportion of the “over-issue.” The “over-issue” would be termed “inflation,” as the notes would have been issued in numbers beyond their legitimate sphere. Poland and Austria are extreme examples of such “inflation.”

Editorial Committee.