245. M. Palyi to Harrod , 28 June 1932 [a]

[Replies to a letter not found]

Deutsche Bank und Disconto-Gesellschaft, Mauerstr. 25, Berlin #

28 June 1932

My dear Harrod,

Thanks for your letter. May be, you are right that this "deflation" will lead to worse,--although you can't prove it. Prices have to stop falling somewhere; they never can fall below zero. At any rate, the only thing I am sure of is the prospect that an inflation is either "controlled" and does not help against the crisis or it is not sufficiently controlled and then it brings out the very thing you are afraid of: economic, social and political breakdown with all their consequences.

By the way, I did not understand your answer to Robbins in the "Economist". [1] I understand that anybody loses his temper and turns to inflation. I also understand and I certainly agree with the free trade point of view. But I certainly do not understand that somebody with so strong logics as yourself should combine inflationist and free trade attitude: inflation means, as a matter of fact, an additional premium on export or hindrances on import, or both, i.e. the very thing which the protectionists want. [2]

These are of course naive questions; I am, however, most cordially

Yours old,

M Palyi.

Mr. R. F. Harrod, Christ Church, Oxford.

  1. 1. Palyi refers to Harrod, "Monetary Policy" ( 1932:2 , press item 1 ), written in response to L. Robbins, "Monetary Policy", letter to the editor of The Economist CXIV, 14 May, p. 1081.

    2. In his rejoinder to Harrod, Robbins also stressed that Harrod wanted the "benefits" of both inflation and of a high exchange (Robbins, "Monetary Policy", letter to the editor of The Economist CXIV, 11 June, p. 1295). Harrod further commented on 18 June 1932 ( 1932:3 , press item 2 ).

    1. a. TLS, one page, envelope addressed to Christ Church but forwarded to 51 Campden Hill Square, London W8, in HP IV-953.


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