Capitalism, Economic Dynamics

By MichaŁ Kalecki; Jerzy Osiatyński et al. | Go to book overview

A Model of Hyper-inflation1 [ 1] (1955/1962)

1. The two characteristic features of hyper-inflation are a very rapid rise in prices and a general tendency to convert money into goods. These two features are closely interlinked. The reason for hoarding of goods is the anticipation of a continuous rapid increase in prices; in turn, the hoarding of goods contributes to the pace of the rise of prices. Such hyper-inflations as occurred recently developed in war or post-war periods. Indeed, in such periods scarcity of goods may be associated with large budget deficits and possibly also with large expenditures on private investment. These result in a substantial rise in prices and a drastic reduction in real wages. The adjustment of wages to a higher level of prices is frustrated by the resulting increase in prices. In this way a spiral of prices and wages develops which, if it lasts long enough, may lead to the state of hyper-inflation. The loss of confidence in money leads to universal hoarding of goods. This accelerates the increase in prices and, as we shall see later, basically changes its mechanism.

In fact, under hyper-inflation certain important features of the system are transformed. Long-term lending ceases altogether, and liquid assets other than money are depleted before long. The free- market rate of interest closely approaches the anticipated increase in prices. This is nothing else but a symptom of universal hoarding: as every lender is prepared to hoard goods, the operation of lending has to yield comparable advantages. However, government borrowing from the banks still continues at low rates of interest, in fact at no interest at all if the government prints money. Also, private banking credits are given at relatively low rates of interest, and such credits are actually a privilege available mainly to big business. Indeed, with a very rapid increase in prices only a small part of such credits is repaid in real terms.

The theory of hyper-inflation is of interest (even though the phenomenon is rather exceptional) because this phenomenon is striking

____________________
1
This paper is an altered version of a lecture given at Cambridge University in 1955.

-90-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this book

This book has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this book

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited page

Bookmark this page
Capitalism, Economic Dynamics
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
/ 636

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.