New-York tribune., 1918-02-01

pnlioSophy. lt mas undoubtedly done
considerable harm here. Overtaking it's
evil effects is an exceedingly difficult bus-
ness Now that The Tribune has over
taken the actual perpetrators of the svs-
tenn there ought at least to be no delay
IN stopping the further dissemination of
this poison among defenceless minds.
The Reserve Board and the Inf1ationists
In reading the report of the Federal
Reserve Board we are irresistbly re-
minded of George Eliot's famous essay on
Lecky, wherein she describes the type of
mind which always claims ''the utmost
right of private haziness." "Say that
black may at times and under given cir
cumstances be not so very black, and such
a man will reply, Exactly But if you
assert that the angles of triangle ara
equal to two right angles he will vehement
~ urge that the spirit Of geometry may be
carried too far."
The Reserve Board has been hearing
from the country on the subject of inf1a-
ton and high prices. Here and there has
been a voice to suggest that the Reserve
Board might, if it possessed the courage
and decision, do something to curb the
uneXampled expansion of bank loans and
therefore the soaring prices which this
produces There may have been even
stray housewife now and then to protest
against the steadily rising cost of every
thing she has to buy. SO the board is
moved to say:
"Great as is the admitted power of the
Federal Reserve system, supported by the
greater part of the banking reserve of the
country, there are nevertheless limits &c
it's capacity. During the last year there
have been very naturally some expressions
OF anxiety on the part Of the financial
community as to the expansion of credits
The board has fully recognized the dan
gers of overeXpansion and has endeavored
in every way not hurtful to war financing
to prevent such condition"
We should like to ask in plain terms
what the board has done toward this end
1t points out that the increase in bills dis
counted and bought for the year has peen
1872 Millions This increase was in the
prices from the beginning Of the war up to
the first of last year was nearly SO per
cent. Now, in the modern theory of money
and prices such rise in the general level
is prima facie evidence Of too much money.
1t is initiation pure and simple. There can
never be any general rise in real values.
The whole progress Of invention and dis
: o,-J
human labor.
There is one way and only one way that
YOU can have a general rise in prices, and
that is to pour in more money. And the
Federal Reserve system last year poured
in nearly 800 millions more money. And
prices rose, according to the boards nst1
mate, another "a per cent bringing the
average rise since July, 1914, up to over
80 per cent. Cause and effect. No other
reason. Yet the board goes on to say:
"The board would not, however. convey
the impression that it does not appreciate
10 its full Importance the effect on recen,
price movements Of the rapid ard abror-
NAL growth Of the volume of credit creotct,
by all the warning nations. Indeed, so
alive ID VIC DOdlO W ClIt UstlSCio CllttC az
tend this phenomenon that it regards it as
one of it's most important duties to prevent
SO far as practicable expansion of banking
credit from running an uncontrolled
course
Why, we may ask, if this is the board s
real feeling, should it continue to foster
cheap money and cheap credit by adding
to an already overeXpanded bank currency
800 millions Of rediscounts? There is one
vital way in which the board can fight this
overexpansion, and that is by raising the
rates of interest. 1t cannot say to one man
or one industry or one section: "You
shall have credit" or "Y ou shall not" That
would be an intolerable power. All it can
90 is to make credit as dear as possible
That is what it ought to be in war times.
War and cheap money ought not to be
synonymous The only result is heavy
imitation OF prices, the consequent an
orecedented rise in wages, extravaganza
IN every form and a heavy decrease IN
the Industrial efficiency of the nation. And
all this is exactly what we have got.
War industry can afford to pay wartime
rates for capital. LuXuries and relative
non essentials can afford this far less
Here is the simplest and almost automatic
means of turning the vast tide of the ma
IONS business as rapidly as possible into
war-purpose channels. We do not believe
that cheap money is in any wise Eocdfu
for the success of government loans, The