SIR: Generations of British Chancellors of the Exchequer have made calls for growth in the national economy. Yet at the very first signs of economic growth, these same chancellors have given to undertaking punitive measures aimed at retarding growth, which they claim will act as an impetus to inflation.

So are these chancellors correct in their various versions of yo-yo economic policy? Does economic growth inevitably result in inflation? I think not. For properly understood money is a mere representation of any goods and services available. Money is merely a medium of exchange, a system of barter by proxy.

So consequently any amount of economic growth which leads to the creation of new goods and services will require an additional amount of money in circulation to represent these new goods and services.

In other words, any economic growth will necessitate an expansion of the money supply. But this is not inflation. For inflation only occurs when two factors come into being. Firstly, when a wave of cost-push pressure occurs, as in the cost of interest being written into the final price of goods and services. And, secondly, when the amount of new money entering circulation outpaces, that is over-represents, the amount of new goods and services created. Economic growth itself is not a precursor to inflation.

Economic growth can be expanded to infinity, provided that cost-push pressures and monetary over-representation are avoided. This is a fundamental economic truth and one that all would-be chancellors must understand.

Anthony Makara,

Broadwalk, Westhoughton.

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