The End of Inflation

A steady, uninterrupted price rise will eventually snowball out of control. Shrewd observers discover early that it pays to buy in advance and pay later. They sell their bonds and all other assets with a fixed dollar value and instead buy common stocks and real estate. Every round of higher prices increases the number of people who try to protect themselves against inflation in the same way. They buy stocks which are no longer cheap. Eventually most everyone is trying to do the same thing, only to discover that business transactions require both buyers and sellers for the same merchandise. The Treasury finds it difficult to sell new bonds to the public; they finance public expenditures by raising the money supply even more and thus help to increase the inflationary trend.

Inflation has run its course when people start buying goods they do not want, solely for the purpose of getting rid of money in order to protect themselves against its loss of value. The monetary unit is no longer a usable means of exchange, and the economy must start all over again. This is the logical end of hyperinflation.

Public authority can stop this collapse much earlier through its control of government spending and the money supply. People can demand such action because they know that inflation is not an act of God and can be avoided by taking the appropriate steps at the right time.

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