It is a rather puzzling historical coincidence that in many countries attention is being paid once more to inflationary tendencies at the very moment when the international situation suggests the possibility of relaxation of world political tension. If the East has, or ever does, come to the conclusion that the only way to keep the consequences of the Paris agreements under control is to act in time, the quickest form of diplomatic retreat reconcilable with exigencies of an inconspicuous negotiation-technique is the most probable. Correspondingly rapid demobilization in the West accompanied by inflexible pursuit of anti-inflation measures might produce a demobilization crisis that would fulfil Communist hopes for economic and social difficulties in the democratic world. Whether the immediate danger is inflation or deflation, an analysis of the recent history of savings, including periods of unemployment and overfull employment, should be enlightening.

The development of national savings is recorded by Canadian statistics for the last three decades in a very informative way. They offer historical examples of all the typical combinations of factors that are important for a balanced economic development: what is commonly accepted as normal or full employment is followed by years of high unemployment and then comes a period of over-employment during the war years. An examination of the survey in Table II can tell more than lengthy theoretical disputations.

Before discussing the details of the historical development in Canada, let us consider the essential components of the process in a simple arithmetical example.