II

INFLATION AND DEFLATION

93

change, but also, so far as old loans are con-cerned, when prices have settled down at theirnew and higher level. For example, thefarmers throughout Europe, who had raisedby mortgage the funds to purchase the landthey farmed, now find themselves almost freedfrom the burden at the expense of the mort-gagees.

But during the period of change, while pricesare rising month by month, the business manhas a further and greater source of windfall.Whether he is a merchant or a manufacturer, hewill generally buy before he sells, and on atleast a part of his stock he will run the riskof price changes. If, therefore, month aftermonth his stock appreciates on his hands, he isalways selling at a better price than he expectedand securing a windfall profit upon which hehad not calculated. In such a period thebusiness of trade becomes unduly easy. Anyone who can borrow money and is not excep-tionally unlucky must make a profit, which hemay have done little to deserve. Thus, whenprices are rising, the business man who borrowsmoney is able to repay the lender with what, interms of real value, not only represents nointerest, but is even less than the capital origin-ally advanced.

But if the depreciation of money is a source ofgain to the business man, it is also the occasionof opprobrium. To the consumer the businessman’s exceptional profits appear as the cause(instead of the consequence) of the hated rise