Conventional wisdom has it that there is in Eastern Europe, especially in the USSR, a significant amount of repressed inflation. Although until recently official price statistics showed hardly open inflation, there are some indicators that are alleged to indicate repressed inflation. In this connection the widespread shortages, the ratio of collective farm market prices (CFM prices) to state retail prices, the volume of personal savings accounts and an indicator developed by Holzman (1960) are often cited.' Using these indicators, Bronson and Severin (1966, p. 516) come to the conclusion that in the USSR during the early 1960s inflationary pressures were growing. In the same vein Schroeder and Severin (1976, p. 631) constructed an alternative price index for the USSR that slowly but steadily rises over the period 1955-1975. This price index, it was assumed, is more accurate than the official Soviet retail price index, whose deficiencies are analysed by Bornstein (1972). Portes (1977) argued that in the centrally planned economies (CPEs) little serious hidden or repressed inflation can be demonstrated. One of his arguments is that savings behaviour is often misinterpreted (Portes and Winter, 1978). Another argument was that many of the phenomena could be explained microeconomically in terms of the disequilibrium relative prices of particular goods. (This argument is supported by Pickersgill, 1977). A third argument was that there was no evidence of suppressed inflation in the behaviour of CFM prices. Although the first two arguments seem fundamentally correct, this third argument is erroneous, at rate for Poland and the USSR since 1971. Portes (1977, p. 121) gives a table for two CPEs, Hungary and Poland, which purports to show that behaviour of CFM food prices and state retail food prices is consistent with macroeconomic equilibrium on the consumption goods market for all but a few brief periods during the years 1955-1975. Examination of the data for Poland, however, gives a widening gap between state retail and free market prices for the years 1971-1975, a fact that must have been noted by Portes, for he admitted (1977, p. 110) that in Poland in the period 1972-1975 there was some evidence of repressed inflation. Portes also uses a table (p. 121), published by Garvy (1977),2 in which Holzman's indicator shows that between 1955 and 1971 repressed inflation in the USSR has fallen. The weakness of Portes' argument is as follows. (a) In his econometric work with Winter (Portes and Winter 1977, 1978) he has to admit that: any final judgment on the question of repressed inflation, that began this investigation, must await the disequilibrium estimation for which this paper and Portes and Winter (1977) provide a basis (Portes and Winter, 1978, p. 17). This disequilibrium estimate having not yet been published, it seems somewhat premature already to draw conclusions from it. (b) His work is based on research on data of Czechoslovakia, GDR, Hungary