New-York tribune., 1918-03-17
Rssianng American Credit and Currency Would Endanger Victory
Continue Deude Itself About lAahon and That We Must Sa
Not Follow Devious Methods of Emergency Finance

method OF taxation to tho payment
of as large a portion of the expense
of carrying on the war as has
seemed consistent with the full
of her industrial activ-
ity. The results achieved have been
noteworthy. Yet Great Britain has
been able to pay for only about Is
per cent of the wars cost by taxa
tion. In the case of the other Euro
pean belligerents the percentage is
much smaller. Most thoughtful men
agree that our own government
showed wisdom in adopting heavy
taxation as a method of paying
some reasonable part of the costs of
the war.
Must Face
The Facts
Some conception of the magnitude
of our financial task will be fur
nished by the statement that Great
Brltain's average daily expenditure
for the last three years has run
about $22, 100000, or not much more
than half of our present daily rate.
And the United States has been en-
gagged in the war for less than a
year. 1t will do no good to blind
ourselves to the facts and the prob
abilities. After the manner of our
best traditions, let us face them
cold, stark and naked. When we
know the size and the nature Of a
job we can put our shoulders to the
wheel and start something that will
keep moving. Concretely, our gov
ernment faces the necessity of bor-
rowing S10,000,OO0,0OO within a few
months, and from five to ten billion
dollars additional before the calen-
dar year 1918 is out. This will have
to be done through the sale of vari-
Gus forms of government obliga-
tions, principally bonds, although
comparatively small but increasing
amounts will be derived from the
sale of Thrift Stamps and War Saw
ings Certificates. The vital ques-
tion is: How can these loans be
foated?
The Russian
Spectacle
Let US turn to consideration of
some of the devious and indirect
ways by which the government,
were we complaisant, could draw on
our stores of capital. What would
happen were we to try to tunnel our
way laterally out of q deep hole in
a valley, instead of making real eff
forts to get out over the top of the
hole? We can tunnel laterally by
having the government print ire
deemable paper money and force it
into circulation. But the inevitable
effect would be to drive out of circu-
latlon good money, to depreciate the
purchasing power of currency and
to cause commodity prices to rise, as
measured by the dollar that would
be current. The issuance of green
backs during the Civil War and its
results is a pretty we'll known ex-
ample of this policy in our own his
tory. The recent spectacle of Rus
sia, printing paper rubles by the
billion, has shown again the disas-
trous consequences Of the stupid and
easy method. Nowadays, business
men generally recognize that the en-
forced circulation Of currency be-
yond immediate requirements, as a
medium of exchange, can lead to
only one result-a period of infla-
ton, the outstanding feature of
which is the declining purchasing
power of each unit of the medium of
exchange, or, stated differently, ris-
ing prices for goods and commodi-
ties.
Dangers of
Credit Initiation
A less obvious application of the
devious and indirect method of
drawing on our current or stored up
supplies of capital. e., goods and
services, not money--lies in an ex-
panslon of the loans of the banks.
In effect checks circulate as cur
rency. Any increase in the volume
and the velocity of the circulation
Of checks causes similar relative ef-
fects on the prices of goods and the
currency value of services as does an
increase in other forms of circula-
ton. Credit against which the gov
eminent can check may be created
in number of ways. The Secretary
OF the Treasury presently is doing
it by selling certificates of indebted
ness to the banks. So far the saw