THE AMERICAS: Development by Inflation

Inflation is widely deplored in Latin America—and widely used by governments as a technique to speed economic progress. The theory of development by inflation works in a five-phase cycle:

Printing: To spur productivity in factory and field, governments need money. The bulk of it is simply printed.

Spending: Out from state banks goes the crisp, new money to develop public and private enterprises.

Price Rise: The greater quantity of money in circulation bids up the cost of goods and services. When labor finds prices shooting up, it strikes and riots, threatening political stability.

Wage Rise: To regain labor's support, politicians raise wages. Both prices...

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