and his men. Unable to take command of the country, Kappretreated and ultimately gave up his attempt. However, the German economy, never very sound, was further disruptedby the conflict surrounding Kapp's putsch and by the strike against it; andproduction fell and prices rose. The rise in prices destroyed the purchasingpower of wages and government revenues, and the government respondedto this by printing money to replace the lost revenues. This was thebeginning of a vicious circle. Each increase in the quantity of money incirculation brought about a further inflation of prices, reducing thepurchasing power of incomes and revenues, and leading to more printingof money. In the extreme, the monetary system simply collapses. InGermany, people would rush out to spend the day's wages as fast aspossible, knowing that only a few hours' inflation would deprive today'swages of most of their purchasing power. One source says that peoplemight buy a bottle of wine in the expectation that on the following morning,the empty bottle could be sold for more than it had cost when full. Thosewith goods to barter resorted to barter to get food; those with nothing tobarter suffered. This is the way that hyperinflations happen: by a self-reinforcing viciouscycle of printing money, leading to inflation, leading to printing money, andso on. This is one reason why inflation is feared. There is always theconcern that even a little inflation this year will lead to more next year, andso on. But some countries have experienced very great inflations -- 50 to100% per year -- without ever falling into the cycle of hyperinflation, andthere has never been a hyperinflation that could not have been avoided bya simple government determination to stop the expansion of the moneysupply. The key point is this: the monetary system can function reasonably well aslong as the value of the monetary unit is reasonably stable and predictable,and the high standards of living of modern ...
