8 the average wage exceeds that of the average productivity). Another view attributs inflation to the wage push exerted by trade unions. Actually it was a matter of surprise that things worked relatively well, because many economists had thought that the system could not work without an industrial reserve army. It has to be noted, though, that there existed a substitute for that in the influx of labour from agriculture, from households and from abroad. The acceleration of inflation started only in the seventies. Could this be interpreted as a delayed but necessary consequence of a long period of full employment? I think that the well known special factors - rise in raw material and food prices, the oil shock, and a wage explosion which can be understood in political terms - are sufficient to explain what happened. I shall not go into the further development of inflation from the middle 70'ies which was influenced by weakening of productivity growth which inturn resulted from unemployment and restrictive policies. This decade of inflation gives rise, however, to some observations. It is remarkable that high and sometimes exorbitant (as in Israel!) rates of inflation have never led to hyper inflation as in the time after the first world war in Central Europe. Neither unlimited increase of velocity of circulation, nor de-monetisation and dis-intermediation has even so much