Forward:
Most of us have at least a general idea of what we think inflation is. Inflation is the state of affairs in which prices go up. Inflation is an old, old story. Inflation is almost as ancient as money is, and money is almost as ancient as man himself.
It was probably not long after the earliest cave man of the Stone Age fashioned his first stone spearhead to kill boars with, perhaps thirty or forty thousand years ago, that he began to use boar’s teeth or something of the sort as counters for trading spearheads and caves with neighboring clans. That was money. Anything like those boar’s teeth that had an accepted symbolic value for trading which was greater than their intrinsic value for using was true money.
Inflation was the very next magic after money. Inflation is a disease of money. Before money, there could be no inflation. After money, there could not for long be no inflation. Those early cave men were perhaps already being vexed by the rising prices of spearheads and caves, in terms of boar’s teeth, by the time they began to paint pictures of their boar hunts on their cave walls, and that would make inflation an older institution even than art. Some strong leader among them, gaining greater authority over the district by physical strength or superstition or other suasion, may have been the one who discovered that if he could decree what was money, he himself could issue the money and gain real wealth like spearheads and caves in exchange for it. The money might have been carved boar’s teeth that only he was allowed to carve, or it might have been something else. Whatever it was, that was inflation. The more the leader issued his carved boar’s teeth to buy up spearheads and caves, the more the prices of spearheads and caves in terms of boar’s teeth rose. Thus inflation may have become the oldest form of government finance. It may also have been the oldest form of political confidence game used by leaders to exact tribute from constituents, older even than taxes, and inflation has kept those honored places in human affairs to this day.
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(Approximately 220 pages)
