New-York tribune., 1918-12-22
Article ultimate Tendencies

""i eNpehSeS, mas Oy Tar the simplest
problem. But problem it still has--the
same in kind, but only smaller in de-
gree. The first of our problems, there
fore, having especial reference to the
probable trend of prices, will find it's
solution in the prospective credit and
monetary poicies--primarily in the
world as whole and therefore deriva-
lively in America in particular. World
policies and world prices will finally
control Americas policies and condi-
tions.
But our problem will be clearer with
short analysis of our possible alter
natives in war finance. On the face
it would appear possible to finance a
war through credit operations without
appealing to bankers, and consequently
without any increase in the volume of
circulating media, and therefore finally
without disturbance to general prices.
SO long as the increasing fund of pur-
chasing power in the hands of the gov
ernment is obtained through an offset
ting reduction in the volume of pur-
chasing power remaining with civilian
buyers no imitation takes place. Bor-
rowing out of individual incomes is for
this purpose interchangeable with tax
alton. The only difference refers to
the sort of paper, whether receipt or
contract, that the contributor receives,
and to the future rights and oblga-
tions.
But borrowing out of saved incomes
is impossible in the degree that is
necessary for great war, excepting
on terms Of an enormous rise in in
terest rates. Practically, therefore, it
is impossible on any terms. Greatly
investments and securities into lower
present values and therefore result in
countless insolvencies, ending ulti-
mately in hurricane of panic in the
method will not have furnished the
funds. Hardly any rate of interest can
be offered that would attract funds
diverting the war activities two-hfths of
the national production-an average
restriction of civil consumption to
three-fifths of the ordinary level; a
temporary fall of two-fifths in the
average standard Of living. Borrow
ing at reasonable rates will count for
something. But for the remaining
revenues the choice lies between taxa
tion and imitation.
We have compromised between the
two methods. But in the main we
have adopted the imitation method.
Still further than ourselves has Eu-
rope gone in this direction. High
world prices are the result-high
prices for US, still higher for Europe.
What now is to be done?
The penalties of inflated prices are
many and serious. Powerful interests
that have been grossly wronged in
these war years-credit in general,
inclusive of bondholders, insurance
policy holders, savings banks, receiv-
ers of fixed incomes and public utili-
ties companies-all will call shrillv
Tor restitution through the def1ation Of
prices. Both here and abroad the
millions of holders of tens of billions
OF the new war debts will urge that
their cheaply bought bonds be rein
stated INTO the purchasing power Of
the pre-war dollar. Both Justice and
injustice Will clamor for lower prices
ne common man also, war weary and
price ridden, will demand that the
cost of living" be reduced. ENGLAND
and France, with their conservative
traditions of gold redemption, will be
predlsposed toward the prompt aban-
donment Of their irredeemable uonev
the reestablishment of gold nav
ments.
Inc arguments are many, the inter
ests powerful, the demand insistent
There is danger that the thing NAV be
oone. On the whole, however. it ought
not. Even if we learn it over-late we
must nevertheless learn that eyerv now
! disturbance of general prices. whethor
d marklng up or marking down, is a
ne" error-not so much the righting
Oh old wrongs as the creating of now
IL rising prices are bad as an essential
VOCATION of the obligations of con-
''ac'' a tampering w h the standard
u agreements, falling prices are not
'esS oad-the same thing in the re-
verse direction But of tbe tu,o o,,;,,
iaii'hg prices are the worse. shall T
- 0'V' make this clearer in other con-
''ec''ons' 1t must suffice for the pres
eA' 70 urge that atonement for onr
pasV unwisdoms in price disturbance
IS impossible. The wise thing now
ana the sole wise thing, is to hold
prices stable against the urgency Of tho
10" price advocate equally with tbo
lu''her pressure of the infationists
"ha'ever is done Will, however. he do
eisiVe as TO most Of the further nrob-
iems. Discussion of these. therefore
Will nave to proceed on each one of tho
'nree possible assumptions: Cd fall
ing OF general prices, CD rising of gan
eral prices, (3) stable general prices.
believe, however, shat the actual
working out of the policies of the ma
tons will be diverse--that England and
france will attempt to retrace their