New-York tribune., 1918-02-02

large share of its war expenses by
tho simple cNpcdicnt Of printing an
unlimited amount of fiat currency
there would be instant and over
whclminx protest. Bankers, business
men and economists the country over
would unite III opposition, for dcbase-
mcnt in that form would be too
naked to be countenanced. With in
tlaton through the creation Of new
bank credits, based on government
securities, it is another story, though
the same results are produced in that
way. When the government creates
credit, and utilizcs it, there is an inn
mediate increase in checkable depos-
its, and checkable deposits are the
real currency of business. That is
the first step in the vicious process of
bidding up prices without increas
ing the quantity of goods to be
bought, and it goes on endlessly. But,
unfortunately, war finance by intla-
ton is popular. 1t is indorsed in the
most unexpected places. Implied ap-
proval is expressed even by bankers,
who apparently fail to realize that
imitation is perhaps the most insid-
ious way Of conscripting wealth ever
devised. AS national policy it is
being effected almost by default, for
there is little active agitation against
it, while the clamor for "business as
usual'-disguised in other phrases
gains constantly in volume. There is
ono notable exception to the general
rule. however - the National City
Bank of New York. This institution
has persistently pointed out the evils
sure to result from credit imitation
ever since we entered the war. In
the current issue of it's monthly eco
nomic review the bank again gives
warning of the dangers inherent in
tho course we are pursuing. This
warning is particularly timely, be-
cause another great bond issue must
soon be foated and it is not impossi-
bic that the banks will have to take a
large share of it. What is the OBJ
lection to a pyramid of credit" the
bank asks, Chased upon government
bonds. and consisting, first, OF indl-
vidual credit; second, of member
bank credit, and, finally, Of reserve
bank credit, all backed by the taxing
power and the power to issue
money!" and it proceeds to answer
its own query in this way:
This pyramid Of credit cannot add
ono days work to the industrial re-
sources Of the country. The entire
programme upon which the govern
ment is proposing to spend about
S2O,0O0,0 100000 this year is all a mat
ter of days work. In times of
peace the labor of the country is
employed in private operations. The
production consists in part of neces
saries for immediate consumption, in
part of luXurics, and in part of addi-
tons to the productive equipment.
Now comes the war, and the govern
mcnt wants to take over great por-
ton of the working force, and also
asks the people to turn into the
treasury money enough to pay it.
The rational way Of complying with
this request would seem to be. first,
cut out the production Of luxuries
or n-essentials; second, cut down
tho additions to permanent improve
ments and equipment, restricting them
to such only as will aid in carrying
on the war and the essential indus
tries; third, keep enough people en-
ployed upon necessaries to support
the country and the army, ana put
all the others on war work; fourth,
turn into the Treasury through taxes
and loans the money which was pre-
viously paid to these people now re-
leased from private service to war
work; since we are no longer cxpend-
ing it in the old way we can let the
government have the use Of it. The
account balances. The country has
simply diverted purchasing power
from one class of work to another.
The other way of meeting the gov
crnments appeal for help is to say,
as considerably as possible, and with
all possible assurance of patriotism,
that we are sure that if allowed to
continue our industries and occupa-
tions as usual we will be able to do
great deal more for the government
than we possibly can if VIC are inter
fcred with; therefore, we offer to CO.
operate in getting up this pyramid
Of credit, and challenge the world
TO show wherein this credit is defec-
tive or insufficient. We, as indiyid-
uals, will give our notes to our bank
crs, the latter will lend us the credit
with which to buy government bonds,
and VIC Will deposit the bonds with
cur notes as collateral security; the
bankers can rediscount these notes
at the Federal Reserve banks, and thus
rccoup themselves for the advances
they have made; and, finally the Fed
cral Reserve Banks, on the strength
OF the government bonds in their pos
session, and by virtue Of the power