Monetary Analysis in Italy

Abstract

(3) If, however, the public uses the released funds for financing new expenditure, such borrowing will indeed be indicative of an inflationary process. The origin of the inflationary impulse must then be attributed to the private sector of the economy. (4) Borrowing by the Treasury from the commercial banking system for the purpose of financing expenditure has, by itself, exactly the same inflationary character as borrowing from the central bank. (5) Borrowing by the Treasury from the public by issue of short-term debt for the purpose of financing expenditure can be actually, and is at least potentially, of an inflationary character. Such borrowing can fundamentally be justified only if serving to counteract the undesirable deflationary effects of spontaneous hoarding in the private sector of the economy. Mr. Chairman, I am very grateful to you that you have taken the initiative for this panel discussion and that you have been so kind as to ask me to tell this illustrious gathering something about the methods the Nederlandsche Bank has been using to unravel the mystery of inflationary and deflationary developments. I do not claim that this method gives any final answer to the problem. I do believe, however, that it can be instrumental in attaining a better understanding of the strictly monetary aspects of the inflationary and deflationary process. Thus it may, perhaps, be helpful to both central banks and treasuries in better adapting their policies to fighting that curse of slow but persistent inflation that seems to be upon our present day world and to the lifting of which all our efforts should be dedicated.