The Wallace miner. [volume] (Wallace, Idaho) 1907-current, 1919-05-22


paper read by Irwin G. Fisher, pro-
lessor Of political economy in Yale
university. before the conference of
governors in the White House on
March 8. Events since that date
seem to bear out his contention that
prices will become fixed upon a new
level and that the business Of the
country must adjust itself to it. The
paper is especially interesting at
this time when the lead, zinc and
copper producers are confronted with
surplus stocks of the metals because
large consumers refuse to buy until
level. DR.. Fisher says pre-war prices
win never return, and advises busi-
ness men to face the condition and
adjust themselves to it. DR.. Fisher
said:
The New Price Level.
1t is interesting to observe that
many manufacturers think that prices
must come down, including the price
Of labor; but they are ready to dem
onstrate to you that their own prices
can not come down, nor can they pay
lower wages. Almost everything
they buy somehow costs twice as
much as before the war, and theii
labor Is twice as dear. They can not
pay their labor less If labor Is to meet
the increased cost of living. Now, as
a matter of fact, when we investigate
almost any individual one of the So
called high prices for industrial pro-
ducts we are likely to find that indi-
vidually it is not high; that is, it Is
not high relatively to the rest. Our
quarrel is with the general level of
prices.
Variations in the general price
level may be compared to the tides
of the sea, and the individual prices
may be compared to waves. Individ-
ual prices may vary from this general
level of prices for specific reasons
as the height and depth of waves
vary from the general level estab
lished by the tide The causes con-
trolling the general price level are
as distinct from those controlling in
dividual Prices as the causes con-
trolling the tides are distinct from
those controlling individual waves.
rhe general level of prices is de-
pendent upon the volume and rapid
ity of turnover of the circulating me-
dunn in relation to the business to be
transacted thereby. If the number of
dollars circulated by cash and by
check doubles, while the number of
goods and services exchanged there
by remains constant, prices will about
double.
The great price changes in history
have come about in just ffiis man.
ner, The price revolution" of the
sixteenth century came upon Europe
as a result of the great influx of gold
and silver IRON the mines of the new
world, Europe was flooded with new
money. More counters were used
than before in effecting exchanges,
and prices became high People
talked then of temporary Initiation
just as they talk of it now. But it
was not temporary it was new
price level.
A similar increase in prices all over
the world occurred between 1896 and
1914, following the discovery of the
rich gold fields of South Africa, Grip
Pile Creek and Alaska, the invention
of the cyanide process, and the vast
of the use of bank credit.
Circulating credit-that is. bank
deposits subject to check, and bank
notes-is multiple of the banking
reserve behind these deposits and |
notes; and the essence of this reserve |
Is gold. Our present monetary sys-
tenn is an inverted pyramid, gold be-
ing the small base and bank notes |
and deposits being the large super
structure. The superstructure grows |
even faster than the base. The de-
posits are the important elements.
They are transferred by check from
one individual to another; that is, the
circulation of checks is really the cir
'ulation of deposits
Thus any increase in the country's
gold supply has a multiplied effect.
rhe possible extent of that effect is
dependent upon % the amount of
gold available, and CD the gold re-
'erve requirements, determining the
'olume of credit that can be put into
circulation based upon the gold. over
/ billion dollars in gold has come into
his country from abroad since 1914,
md a large amount has disappeared
rom domestic circulation. The gold
rom both these sources has found its
way into the United States treasury
nd into bank reserves.
On June 80. 1915 the portion of the
old reserve of the federal reserve
system which supported ma
ional bank deposits and federal re-
erve notes was more than three
ines as large as the gold reserves
nder the old national banking sys-
EN- on June 80, 1914-$1. 7S6, 900, 900, h
ompared to $592,OO0,O00 During the a
anne period credit instruments ode G
,and deposits and notes) increased q
bout -fold-from $6,100,000,000 liz