Nor does the interest rate rise in proportion to the inflation. The loaning class is less shrewd and apt in sensing conditions and is usually content for a time to loan at, say, 3 per cent to borrowers who would be willing, if necessary, to pay 5 per cent. The enterprisers enjoy, therefore, the further advantage of borrowing money at the former low rates. This encourages borrowing, and thereby the creation of more deposits; and these in turn swell prices still higher and make borrowing still more advantageous.

Periods of rising prices are therefore boom times for the manufacturer; he buys material at today's prices, and by the time they are manufactured he finds their prices have risen with the general price level. He hires labor at former or slightly advanced rates and he borrows capital at former or lethargically rising rates. The market for his product is steady and waiting, at good prices, and profits are high,

Meantime the wage-earner is victimized by a progressive depreciation of his earning power. The salaried man suffers likewise, as does anyone whose money income is a fixed sum. The bondholder, for example, finds that his interest will buy less and less and that the purchasing power of his principal when repaid has decreased. The real value of fixed rentals likewise declines. The thrifty saver finds his life's accumulations shrinking in worth to him. The income from endowments of educational and charitable institutions decrease in purchasing power, making it impossible to continue the former scale of operations. On the other hand, the debtor class are enabled to extricate themselves from debt by the repayment of a sum much less in its purchasing power than the sum borrowed.