Rock Island Argus. (Rock Island, Ill.) 1893-1920, 1919-10-24
HAVE WE TOO MUCH MONEY?
nv FpEnEpTC HAQVTN
BY FREDERIC J.

Washington, D. C., Oct. ESQ far as you
personally are concerned\you probably return
an unhesitating negative; but concerning us
ALL as q nation, the question is an important
one. Some people believe that we have too
much money IN circulation and that this abun-
dance Of the circulating medium is one Of chief
causes Of high prices.
The argument is a plausible one and It has
! impressed many persons They invoke the
good old law OF supply and demand. II there
| Is a great deal of money in circulation in pro-
portion to the amount OF other commodities in
circulation, then, they argue, the value of the
other commodities as expressed in money will
rise and the value OF money as expressed in
these commodities Will fall.
There IL also q suspicion abroad that our
currency IL actually infated-that the proper
ton of the circulating medium to the gold that
| secures 1t is too large. This last suspicion is
put promptly to rest by treasury officials. They
point out that every dollar IN federal reserve
notes issued by a district bank to a member
bank must be secured by the deposit OF 40
cents in gold and so cents in negotiable Sc
curities, All of our Issues Of currency are
therefore adequately secured. The idea that
our currency Is inflated in the sense of being
uLsound is a mere popular bugaboo and one
which should be laid forever to rest.
But the idea that our currency Is inflated in
eize-that 1t is too big for the volume Of bust
ness and thereby raises prices-deserves a de-
tailed answer. There is certainly no denying
that the purchasing power of the dollar, in
things we need, has decreased by half IN a
few years. II you have fixed income Of $50
a week it will only buy you half as much to
eat and to wear now as 1t would in 1913. The
goods have gone up, or the dollar has gone
down. Put it either way you please, the re-
suits are the same to you.
Is this diminished value of your dollar due
to the fact that there are too many dollars in
circulation?
A question along this line was recently ad-
dressed by Senator George P. Mclean Of the
senate committee on banking and currency to
the treasury department.
The treasury department states uneQuivo-
cally that there is no such thing in the United
States currency imitation either in size or
in value It goes even further and states that
under our present system Of issuing coin and
paper money. there can be no such thing as
To get the facts definitely in mind it may
be said that money in circulation means money
in existence in the United States outside the
treasury and the federal reserve banks This
is the money in the possession OF the people
and used for the transaction OF business.
On the first of July. 1914. just before the
war broke there was $3,419,203,610 working
in this way. On April 1, 1917, on the eve of
our entrance into the conflict, there was S4-
100 1856 900 in circulation, increase of more
than half a billion. On Dec. !. 1918, which
may be taken a date near the termination
of hostilities, there was $5,119,985,OO0 in cir
culation-a cold increase of a billion dollars
for the war period. Eight months later the
amount had shrunk to S4,790, $3.50, 900. So, as a
matter Of fact there is about one-third more
currency in circulation today than there was
in 1914, and one-sxth more than there was
in 1917.
The first point that the treasury makes is
that these increased amounts of currency, I'M
der existing circumstances are not infations
The United States is going concern and an
increase should be expected Added to the
normal increase is the logical increase neces-
sary in carrying on greatly increased amSunt
=
sary should be greater each year, and especially
in active years.
Furthermore, if prices and wages rise. from
whatever cause, the amount Of currency, IN |
der the present system, has got to rise to keep
up with them If a man were operating a |
paint shop and working 10 employees in 1916, |
and paying them an average of $40 week, |
he would have required 5000 on a Saturday |
night. Today. he pays those men $50 week |
and requires $500 in cash
The housewife must now take along a big |
ger roll when she goes to market. The mar
ketman must keep more money in his till to |
conduct his business. Whoever you and |
wherever you live, the bulk of money that it
Is necessary for you to use is greater than it |
used to be. This means that the mass Of money /
IN the nation must be greater than it used to |
De. The amount of currency, say treasury Of |
fcials, has not increased to a greater extent |
han is necessary to take Of changed |
conditions.
Having presented these facts to controvert I
ne cldlm IudL Inc currency is minated, treas
Try officials step boldly forth with the second /
claim. They state that there will never be !
any imitation Of currency in this country that
he United States has finally worked out and |
demonstrated the effectiveness of a currency
system which is truly flexible They state
hat this is a goal toward which this nation
las been struggling since the day Of George
n Washington. We have had it only two years.
tut treasury officials hold that its effectiveness
las been positively demonstrated Under it
here can be no imitation OF the currency.
All that we need now is a system whereby
he purchasing power of this currency will be
made as stable its circulation is flexible.