New-York tribune., 1918-04-30
Mr.. Paul NJ. Warburg's Call to
Sanity

began there has been no more telling and
notable utterance upon war finance and
the disastrous effects of imitation than
that which we print this morning from
! the pen of Mr.. Paul NJ. Warburg.
On the Federal Reserve Board,
Mr.. Warburg occupies peculiar po-
sition He is equally we'll known among
bankers and economists as a banker Of
ability and an economist of reputation.
! His abilities are highly regarded by the
Administration. The paper he has pre-
pared for the War Loan organization of
the Treasury is of the greater weight be-
cause it was feared by some, and SO
held by others, that in giving his sup
! port to the formation Of the War FL
nance Corporation Mr.. Warburg had cast
! his lot with those who would like, more
or less. to finance the war by printing
| paper dollars.
We hope our readers will weigh we'll
his present words:
at is our solemn duty to set our teeth
in the determination that, no matter how
long the war may last, no matter how
have to appeal to patriotism, the
money will not only be forthcoming, but
it will be raised in the only manner
which will preserve our strength for the
long fight to come-through the savings
of the people If the people do not save
the alternative must be imitation, with all
its disastrous consequences.
"There are" says Mr.. Warburg, "those
. who are so haunted with the fear of in
Ahation that they shrink from every new
and courageous step in financing the
war" This is a trife cryptic, and we
Eake it as a gentle reproof to The
Tribune and its like. We shall not quar-
rel over that, for Mr.. Warburg goes
ia to say incisively:
"There are those, on the other hand,
who believe that we must make efforts
artifcially to stimulate imitation in order
to enable successfully to deal with
task. But those who welded
to this latter school of thought overlook
the fact that initiation under oil and any
circumstances IS q Ie17,1c1Oats eUll.
"Its we'll known consequences are a
rapid increase in prices and correspond
ing decrease in the purchasing power Of
the dollar.
GAS the increase in prices progresses
the amount that the government must
borrow grows correspondingly. 1t be-
comes neck and neck race between a
fictitious wealth and reduced value of
what this wealth can sjuy in labor and
in goods"
This is the law and the prophets 1t
could not have been more admirably
said. Already the war will cost prac-
.ically double what it would have cost
# it could have been financed on the
oasis of prices in 1915, before the influx
# billion of new gold became the basis
1 the immediate occasion of a tre-
4lendous increase in bank credits, which
sent prices soaring.
If the John Shelton Williams policy
IF cheap and unlimited credit is con.
tinued this needless rise in prices will
continue, the cost of living will double
again, the cost of the war will be doubled
again and the nation will be saddleo
with tens of billions of additional ane
unnecessary debt. That, in plain terms
is what initiation means.
But Mr.. Warburg does not stop a
pointing out the evils of this perniciou
practice. He goes on to state the mod
ern or now orthodox view of the rela
tions of money and prices in the cleares
and most explicit way. He says:
"To sum it up in its simplest form, o.
the side of the balance sheet of tn
world corporation are all the things un
consumed; on the other side are tn
dollars
III the dollars increase rapidly and tn
things do not increase OR decrease ther
must ensue imitation of prices The mean
to counteract imitation are, on the on
hand, increased production and decrease
consumption Of things and, on the other
slowing down in speed and volume i
creating new dollars by the issue O
neao securities or currency or credits.
'The more we save the more we in
crease the amount of things on the on
side of the ledger, thereby keeping thei
price down, and consequently decreasin
the amount of new dollars. to be issue
in payment"
Not since we entered the war has ther
come such reassuring word from an
member Of the Administration as to tn
governments financial policy as thi.
DR.. A. c. Miller, also member of tn
Federal Reserve Board, has likewis
spoken strongly upon the subject, and S
has Governor Benjamin Strong of tn
Federal Reserve Bank Of New York.
have the members of the committee @
the American Economic Associations on
OF whose reports we printed the othe