New-York tribune., 1918-02-25
The Shrinking Value Of the Dollar


Suppose the matter were put in this
form
For the purpose Of war the Federal Re
serve Board and the managers Of the
twelve Federal Reserve banks are hereby
authorized
G) To make the common stock of the
United States Steel Corporation and of all
other steel companies and other manufact-
uring concerns worth double, or triple
what they were.
(2) All the farm lands in the United
States and all other real estate in the
nation to be doubled in value
(3) All bonds, mortgages and other
fixed term obligations to be scaled down
cne-half.
(4) The wages of government and state
employees of all kinds to be reduced one
half.
And SO on.
If any member Of Congress were to in
troduce such a measure it would not be
thought that he had gone mad, but that it
was merely jest. But look at it from
another angle
In space of a little over twenty months
the average Of all food and other COM
modify prices including steel, copper and
every other imaginable staple, rose on the
average about so per cent. This average is
still rising. The rate Of rise for last month,
we believe, has only been exceeded in one
month since the war began.
Consider the effect:
Down in Southern New Jersey there is,
for example, q wonderfully successful
truck farm. The gross value of its prod
uct for 1917 was around %3O0,O0O. Two
years and half ago identcally the same
quantity Of product would have sold for
around $4,000. The simple rise in prices
had added about $4,000 to the selling
value
f, Now, supposng that all the costs had
risen in just the same way Then the
average profit on the food sold would be
just so per cent more than it was before.
And not a dollar added to the investment.
This means that in a rough sort of way
the selling value of the property was raised
so per cent
Identically the same thing happened
with United States Steel and practically
every large producing corporation in the
United States. The selling value Of their
products was just about doubled, without
the investment Of any new capital or the
employment Of any more labor Even if
we suppose that wages went up bv the
same amount, then again profits were lust
about doubled, and therefore roughly dou-
bled the selling vafle Of the property.
But note toe further effect Only one
third Of the capital of the United States
Steel Corporation, for example, was COM
mon Stock the rest was in fixed interest
securities. Therefore all the gain went to
the common stock. And what is true Of
this one company was true of tens of thou
sands of others.
Now the reverse side of the picture
Because they wish to be secure in their
savings the great bulk of capital invested
from the outside is in the form of bonds
or preferred stock. These bear fixed rate
Of interest. Supposing an investor has an
income from these of 81, 900. AT the end
OF 1917 this 81 1000 would buy something
like 40 per cent less in food and clothing
and otner things than in October. 1915.
when the rise began.
What is true of people who have their
savings invested in such securities is
equally true Of, for example, the half
million OF more school teachers in the
United States, and the 100000 or 400. 900
government and state employees, and hun
dreds OF thousands of other persons whose
salaries or incomes are more or less fixed.
All of these people had the buying power
Of their incomes cut down 40 or 40 per
cent
Most Of these people, and apparently
most bankers and members of Congress-
and others VINO ought to know, believe that
in some mysterious way this is an ines
capable effect of war Therefore it is of
very great Importance that a committee
representing some of the ablest minds
which have studied this question should
prepare a report which should tell the
people exactly why all this disturbance of
incomes and values has taken place: and
that the Treasury Department should issue