New-York tribune., 1918-06-23

NFLATION is that which makes {
five~cent loaf of bread cost ter
cents. 1t is condition which af
fects the plain man, not merely an OBJ
scure subject for economists and So
cial philosophers. Imitation comes
when the volume Of money--or cur
reney--in the country increases more
rapidly than the goods which money
can buy.
In times Of imitation there is an over
supply Of money, though the man with
fixed income would hardly be willing
to concede the fact. Money as a result
is cheap. The dollar is worth 60 cents
.r less. And conversely commodities
..-e dear. Prices are high.
The setting free of economic forces
in war times makes nation more sus-
ceptible to imitation than it is in nor
NAL times. The evil results of unregu-
lated credit expansion are now coming
to be understood. The uncompromising
condemnation of imitation by President
Wilson and Secretary McAdoo marked
a.
Americans toward the. subject. The
apologists for imitation already seem
hopelessly out of date and out of touch
with the facts.
Those writer's, bankers and others
who have done so much to set the ma
ton right about war finance have dealt
with imitation to large extent in the
abstract. There has been a need Of
stating the results Of imitation in con-
crete formulas, of visualizing the prob
lem in terms of things familiar to all.
This Professor E. w. Kemmerer, of the
economics. department Of Princeton
University, has done in paper in the
June number of "The American Eco
nomic Review"
Professor Kemmerer bases his dis
cussion on statistical comparison Of
the growth Of trade in the United
States from 1914 to 1917 with the ex-
period. He shows that currency ex-
panded more rapidly than trade needs,
and the result he calls imitation.
THE Inevitable Evils
Of Credit Initiation
In order to show what imitation leads
to Professor KNmmerer catalogues the
bad effects ~ is placing an un-
due proportion of the vars finan-
cial burden upon those least able
to bear it" he writes. "The gen.
orally accepted principle of justice in
taxation is that taxes should be i'm
posed in accordance with ability to
pay. Imitation is distributing the
financial burden of the war all too
often in a manner directly in conflict
with this principle. 1t is blind and
often cruel in the distribution of the
war finance burden. 1t hits hardest
those with fixed or comparatively fixed
incomes-many wage earners, a large
part of the small salaried class, also
widows, orphans and educational and
charitable institutions whose incomes
are largely funded incomes which do
not rise as the cost of living advances.
In all too many cases it takes from the
thrifty wage Garner and gives to the
extravagant profiteer. To millions Of
people throughout the United States
the increase in the cost of living dur
ing the last two or three years has
been cruelty unjust.
at is giving the government for its
of
purchasing power, which the govern
ment will be called upon to pay back
later, interest and principal, when pre-
sumably the price level will have
fallen and the dollar will have a larger
command over goods than at present
The bond buyer, in other words, is Civ
ing the government cheap money and
will presumably be paid back in dearer
money. To the extent that the present
bondholder and his heirs are the same
persons who will be called upon to pay
the taxes whose proceeds will be used
by the government in the future to pay
the principal and interest of the bonds
there may be no harm; but to the ex-
tent that the taxpayers Of the next
generation are different persons from
the bondholders grave injustice will
result.
Imitation creates dangerous op-
timism in the financing of the war, for
it lulls the public, and often the au-
thorities themselves, into the belief
that it is getting the necessary where
withal for financing the way more fully
and more easily than it really is. If
we initiate our circulating media enough
we can doubtless float any loan we un-
dertake. We can secure any sum of
money we set out to secure, but that
does not mean we shall secure the mu-
nitions, supplies and labor the obtain
ing of which is the only purpose of the
governments securing the money. The
money, Of course, is only q means to
an end. If we fail to secure the end
itself it avails little that we have Sc
cured what we originally thought
would be the means"
Against this impressive array Of
".