Paper money in time of war, the new notes will first go into the pockets of the war contractors. 'As a result, these persons' demands for certain articles will increase and so also the price and the sale of these articles, but especially in so far as they are luxury articles. Thus the position of the producers of these articles will be improved, their demand for other commodities will also increase, and thus the increase of prices and sales will go on, distributing itself over a constantly augmented number of articles, until at last it has reached them all. Ludwig Von Mises
About This Quote

These are the words of Adam Smith, who has been described by The Economist as the most influential thinker in the history of economics. Smith’s theories are often referred to by economists today to explain why retail prices rise or fall. The theory goes like this. When money is printed, it first goes to people who are already wealthy.

Then, it goes to people who make a living through lending money. Finally, it goes to people who make their money through selling things at a profit. As a result, these persons’ demands for certain articles will increase and so also the price and the sale of these articles, but especially in so far as they are luxury articles.

Thus the position of the producers of these articles will be improved, their demand for other commodities will also increase, and thus the increase of prices and sales will go on, distributing itself over a constantly augmented number of articles, until at last it has reached them all.

Source: The Theory Of Money And Credit

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