Full text: Government Debts and Inflation: Stumbling-Blocks in the Way of Keynesian Full Employment Policy

as threatened to take place. Certainly "inflationary 
expectations" must have been very restrained (it is also 
remarkable that the British Government borrowed long-term 
at rates far below the inflation). 
Further, it is characteristic that inflation rates, in the opinion 
of most economists, can be brought down only after years. 
They are resistant. 
Again, while a constant rate of inflation will affect the 
creditor-debtor relations, it seems that otherwise people 
adjust to it and are not unduly upset by it. Thus, it would 
seem that it is acceleration (or deceleration) of inflation 
which (beyond the influence on debt value) affects the shares 
of various people in the income. 
We can imagine a constant rate of inflation by considering 
the shift of wages to prices, and prices to wages. If other 
cost elements - agricultural and raw materials, imports,and 
indirect taxes - move in proportion to wages, and if wages 
adjust to the last period's price increase, aiming at a real 
wage target which corresponds to the increase in productivity - 
then a given rate of inflation will be transmitted from one 
period to the next (inherited inflation). The income distribution 
grosso modo will be unchanged. This transmission mechanism 
explains why a reduction of the rate of inflation can not be 
obtained quickly.

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