But then sooner or later comes a turning point. The housewife discovers that the government expects to go on inflating and that consequently prices will continue to rise more and more. But I had better buy it now because next year the price will be much higher. If this insight spreads, inflation is done for, Then all people rush to buy. Everybody is anxious to reduce his holding of cash because he does not want to be hurt by the drop in the monetary unit's purchasing power.
People rush to exchange their depreciating paper money for something tangible, something real.
The knell sounds of the currency system involved. In this country we have not yet reached this second and final stage of every protracted inflation. But if the authorities do not very soon abandon any further attempt to increase the amount of money in circulation and to expand credit, we shall one day come to the same unpleasant result. It is not a matter of choosing between financing the increased government expenditure by collecting taxes and borrowing from the public on the one hand and financing it by inflation on the other hand. Inflation can never be an instrument of fiscal policy over a long period of time.