the raising of prices a game of ring-a-round-a-rosy and everybody following his neighbor. A book, "Keeping up with Lizzie," has been patterned on this idea. This notion that in the price-raising process prices influence each other in endless chains or circles is quite correct, but the notion that the initial step is arbitrary and that there is really no beginning or end of the process is incorrect. Prices do not lift themselves by their own bootstraps.
In short, the process by which inflation raises prices is misunderstood because, at any stage, it is almost invisible. The only big reason the grocer can give for raising his prices is that the wholesaler has raised his. The only big reason any expert on a particular price can give is that other prices have risen. But when one price thus boosts another it simply transmits the boosting power of the underlying inflation.
16. Other Causes than Money
The price level is affected not simply by the quantity[1] of money in the strict sense but by a number of other factors. The price level may rise not only because of an increase of money (whether primary money like gold or secondary money like paper), but also because of an increase of deposit currency, "money I have in the bank," which is paid out in checks, or because of an increase in the rapidities of circulation of the money or deposits, or because of a decrease in the volume of
- ↑ There are still a few students of money who do not accept any form of the "quantity theory" of money. Fortunately, however, the proposal of this book, described in Chapter IV, is not bound up with this theory, even in the form stated in my Purchasing Power of Money. See below, Appendix II, §1, D, E.
