A Government can live for a long time, even the German Government or the Russian Government, by printing paper money. That is to say, it can by this means secure the command over real resources,--resources just as real as those obtained by taxation. The method is condemned, but its efficacy, up to a point, must be admitted. A Government can live by this means when it can live by no other. It is the form of taxation which the public find hardest to evade and even the weakest Government can enforce, when it can enforce nothing else. Of this character have been the progressive and catastrophic inflations practised in Central and Eastern Europe, as distinguished from the limited and oscillatory inflations, experienced for example in Great Britain and the United States, which have been examined in the preceding chapter. The Quantity Theory of Money states that the amount of cash which the community requires, _assuming certain habits of business and of banking to be established_, and assuming also a given level and distribution of wealth, depends on the level of prices. If the consumption and production of actual goods are unaltered but prices and wages are doubled, then twice as much cash as before is required to do the business. The truth of this, properly explained and qualified, it is foolish to deny. The Theory infers from this that the _aggregate real value_ of all the paper money in circulation remains more or less the same, irrespective of the _number of units_ of it in circulation, provided the habits and prosperity of the people are not changed,--_i.e._ the community retains in the shape of cash the command over a more or less constant amount of real wealth, which is the same thing as to say that the total quantity of money in circulation has a more or less fixed purchasing power.[9] [9] See also Chapter III., Section I. Let us suppose that there are in circulation 9,000,000 currency notes, and that they have altogether a value equivalent to 36,000,000 gold dollars.[10] Suppose that the Government prints a further 3,000,000 notes, so that the amount of currency is now 12,000,000; then, in accordance with the above theory, the 12,000,000 notes are still only equivalent to $36,000,000. In the first state of affairs, therefore, each note = $4, and in the second state of affairs each note = $3. Consequently the 9,000,000 notes originally held by the public are now worth $27,000,000 instead of $36,000,000, and the 3,000,000 notes newly issued by the Government are worth $9,000,000. Thus by the process of printing the additional notes the Government has transferred from the public to itself an amount of resources equal to $9,000,000, just as successfully as if it had raised this sum in taxation.