The Inflationary Spiral
From the Preface: "The idea of writing this book came to me soon after my departure from China in May 1949. At that time, when nearly the entire Chinese mainland had already fallen under the rule of the Chinese Communists, the Chinese currency had completely collapsed as a result of galloping inflation, and the entire Chinese economic and political system had been laid waste. Thus the moment seemed opportune to put down my thoughts on the most important factors in the tragedy of Chinese inflation and to record its course of development for future historians; and the first draft of the manuscript saw the light of the day in Sydney, Australia, where I lived for nearly three years before I came to the United States."
This book has been written to lay bare the fundamental economic conditions behind the symptoms of inflation which embattled and finally engulfed Nationalist China. Yet Nationalist China's economic collapse cannot be attributed to economic causes alone. The author's approach emphasizes the economic causes which produced inflation as they appear in retrospect. The fundamental logic of the relationship between aggregate demands and aggregate supply seems to have escaped the grasp of China's leadership, but it is not so elusive as to evade scrutiny a decade after the fact. The first part of the book traces the process by which aggregate demand came to outstrip aggregate supply. Modern economic analysis directs attention to these variables, and by studying their behavior in Nationalist China we see clearly how government policy brought inevitable results which may not have been forseen by the leadership itself."