International Aspects of U.S. Inflation

Inflation and Business Cycles is a collected policy-economics volume organized around Gottfried Haberler’s essays on monetary instability, cyclical fluctuation, and the international transmission of inflation. The chapter named in the file, “International Aspects of U.S. Inflation,” is one contribution within that broader volume. The book’s chapters move from business-cycle theory and stabilization policy to the policy failures of the 1960s and 1970s, with Haberler as the central contributor and the editorial framing placing his earlier and later writings into a single monetary argument.

The volume’s recurring claim is that inflation and cyclical disorder cannot be explained by one mechanism alone. Haberler’s chapters connect money, expectations, wage rigidity, productivity change, and international adjustment. The domestic chapters treat business cycles as cumulative disturbances intensified by bad policy, while the later international chapters show how fixed exchange rates turned national inflation into a world problem. The book therefore links older cycle theory to the collapse of Bretton Woods.

This confirms the now widely accepted view that the basic defect of the present monetary system is the malfunctioning of the balance-of-payments adjustment mechanism, the "adjustable peg" system.

In the international chapters, especially the 1973 essay, Haberler argues that U.S. inflation mattered because the dollar functioned as the reserve and intervention currency. Yet the volume does not present the crisis simply as American mismanagement. It also stresses Europe’s and Japan’s postwar recovery, altered competitiveness, speculative capital flows, and the unwillingness of governments to adjust parities before crises forced them to do so.

But let me repeat, the compulsion to submit to imported inflation arises only under a regime of fixed exchanges and convertibility.

The contributors’ combined effect is to make the volume a sustained critique of policy regimes that promise stability while suppressing necessary adjustment. Chapters on controls, indexation, and stabilization policy reject cosmetic anti-inflation measures; chapters on the international monetary system defend flexibility not as a cure-all but as a way to prevent one-way speculative bets and forced reserve accumulation.

The conclusion is that floating is the only way to effect parity changes without setting in motion increasingly massive and disruptive capital flows.

The volume’s scholarly importance lies in its synthesis of business-cycle theory and international monetary analysis. Haberler’s essays argue that floating exchange rates can reduce the international spread of bad national policy, but only credible domestic monetary restraint can end inflation itself.