Panel Session II, Understanding Inflation: Lessons of the Past for the Future

This chapter presents remarks by Harold James of Princeton University. James had discussed the nonmonetary aspects of great inflations in the past--of inflation as a way to buy social peace in a politically precarious environment. Viewing inflation as a monetary phenomenon was the key to its resolution both in Germany in the 1920s and in the Great Inflation of the 1970s. The development of inflation targeting is the culmination of this process. James warned of the difficulties of measuring inflation, especially of the role of asset price booms.