INFLATION has impacts on prices of all kinds--
prices of commodities and securities--on wages,
profits, rents, interest rates, taxes, exchange rates,
and debts. It affects every institution of our economic
life and, in its extreme form, acts as a powerful en-
gine of wealth redistribution. It also often reduces
production by stimulating wasteful speculation, de-
stroying capital-building habits of economy and
thrift, and in other ways distorting normal economic
processes and breaking down moral standards.

In this and the following four chapters we shall
consider the more important results of inflation,
which, for convenience, may be grouped under the
six rubrics: debts, interest rates, foreign trade, wages,
social-welfare endowments, and democracy.

Probably the most important influences of inflation
are exercised through the relations between debtor
and creditor. Some of the more direct of these im-
pacts will be the subject of this chapter.

Who are the debtors and who are the creditors? In
answering these questions, the first fact to note is that
most people are both debtor and creditor and that

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