The sun., 1919-10-02

Limit of Consumer.
y. In the long run the people In tho
sssresate cannot consume, or enjoy, or
nave more than the combined produce
OF their labor. No increase Of money
incomes and no reapportionment OF the
produce OF labor can enable the people
In the aggregate to consume and enjoy
more than the aggregate amount of
accessories of life and luxuries that are
produced by them, or that are imported
from abroad in exchange for other
things produced by them.
Inc apportionment among all the
people Of the aggregate produce of their
laoor Is effected through the medium of
money transactions. that is to say,
W the wages or salaries paid for hired
,apor, CD the earnings Of farmers, shop
keepers. professional men and others
w "a work for their own account, and
ls) the profits of capital. The share
or the aggregate produce received by
each individual Is the amount of things
which his money income can buy. The,
OF course. depends upon the prices of
commodities as well as upon the money
income received.
Unless production is increased, en-
increase OF money wages, earnings and
profits In the aggregate results IN an
increase or the prices of commodities
ana a corresponding lessening of the
purchasing power of the money wages,
earnings and profits A change of any
one or these items in relation to tire
otners results In a change in the APP
portionment among the people of the
aggregate produce of the community.
=. Inc extraordinary rise of the
prices OF commodities since the begin
ming OF the great war has been due
mainly to the following causes: During
the war the demand for labor to pro-
duce ships, munitions and other war
materials was superadded to the demand
Tor labor to produce commodities of all
kinds for the ordinary uses of the COM
munity, while at the same time the
supply OF available labor was diminished
by the draft of the man power of the
warning nations The consequence was
large increase Of wages and of the
cost OF producing commodities. TIE
worlds production Of foodstuffs and Ct
other commodities for the ordinary use.
OF the community was largely dimin-
ished and in the United States the de-
mand for foodstuffs and of various
other commodities was largely increased
by the pressing needs of our allies. The
urgent demand throughout the world
for the reduced supply of foodstuffs and
and In some cases spectators, to charge
prices which yielded not only the in
creased costs of production but also
large profits In addition.
Production Fails I'm Gains.
"Since the end of the war prices have
not fallen because production through
out the world has failed to overtake
the increased demand for commodities.
Slow progress has been made In re-
organizing the dislocated processes OF
production In Europe and the unit OF
output for each laboring man in the
United States as well as in Europe has
been reduced by strikes, shorter hours
and diminished diligence of laborers On
the other hand, the high money wages
of laborers and large earnings OF farm
ers have prevented a lessening of the
demand for commodities. We have
moved in vicious circle, because high
prices have caused an insistent demand
for increased wages and the increased
wages have caused still higher prices
partly by reason OF the increased cost
of production and partly by reason OF
the increased expenditures of the la
borers.
"5. While accepting the quantitative
theory of money with its necessar y
(WHICH NI1
overlooked). II is submitted that the i'm
port of gold. the increase Of Federal
reserve notes and the expansion Of bank
credits have not been an important fac
tor in bringing about the large increase
of prices in the United States since the
beginning Of the war, and that a re-
ducton of prices and of the cost Ct
living cannot be effected by interfering
with the operation of our financial sys-
tenn
Bulk of Exchanges.
THE imported gold did not constitute
relatively large increase Of the volume
of the media of. exchange, taken in the
aggregate. The great bulk OF exchang Is
or business transactions is effected
through the use of bank loans and de-
posts and other korms of credit. The
imported gold was deposited In the
banks. thereby increasing bank deposits
bank reserves and the power of thu
banks to extend additional credit t
borrowers but It did not of itself cause
the expansion of bank loans and dc
posts or the increase of the volume o.
credit currency which subsequently tool
place.
THE volume of bank loans and de
posits and of credit currency was in
creased only Wnen neeueu Dy the people
and the Government to carry on tn,
enlarged volume of their financ'a
transactions, and this increase of tn,
volume of financial transactions was du,
largely to the increase of wages anC
prices resulting from the causes abov,
pointed out Wages and other costs O.
production and the prices Of com
modities increased owing to the urgen
demand therefor In relation to the sup
ply; the expansion Of the media of ex
change was q necessary consequence.
THE standard of value In the Unitet
States has not been lowered by tn,
issue Of irredeemable credit currency n
In most of the countries in Europe. blu
alk our credit currency has remained
at a parity with gold and gold has con
tinued to be our standard of value. Tn,
supply Of gold In the United States
not in excess of the amount required
to support the volume Of our barl
cradita and credit clIrrencv while th,