Evening star., 1921-07-03


chasing power of the dollar seems to
be getting back somewhat to the nor
mal-the pre-war level.
1t is automatic that the more money
there is the more gold there is, the
less it Is worth. In other words, the
more money there is. the less 1t will
purchase per unit. A recent report
made by the American delegates at
the meeting of the international
Chamber of Commerce in London
made the startling assertion that the
money value of the total resources OF
the United States had shrunk about
S25.0O0, 100000 since the postwar de-
cline in prices started. This would
indicate that the money has become
scarcer and more valuable to con-
siderable extent. The purchasing
power of the dollar has advanced. On
the other hand. it may be argued that
the products of the country have be-
come more plentiful, that the supply
has exceeded the demand, and for that
reason the money value has shrunk.
why Prices Increased.
When Prof. Irving Fisher of Yale
University appeared recently before
Joint meeting of the civil service COM
mittees of the Senate and House. in
support of the payment of more ade-
Quate salaries to the government en-
ployes. he discussed in detail the
fiuctuation of price levels and OF the
purchasing power of the dollar. He
advanced the opinion that the tre-
mendous influx of gold into this coun-
try after the start of the European
war in 1914. amounting to more than
a billion of dollars from 1914 to 1917.
had been the principal cause of the
increase in prices and the decrease In
the purchasing power of the dollar
He also expressed the belief that be-
cause of this huge supply of gold
and the fact that the federal reserve
system has a higher proportion Of
gold TO it's liabilities than ever be-
fore, which will before long bring
about easier money and more credit.
the present depression in prices will
cease and there will be a rebound in
the other direction. with a consequent
loss in the purchasi power of the
dollar.
A year or two hence, Prof. Fisher
told the committee. he expected
slow decline to set in. due to the grad
ual defiation which will be going on
in Europe and the power of the Euro
pean nations to absorb some Of the
gold now held by this country.
But the Yale economist said that he
did not believe that the country
would ever get back to the pre-war
price levels-at least not in the pres
ent or even the next generation. And
for this he gave two reasons. The
first was that he had no thought the
European nations would be able to
bring about such a defation in their
paper money asito allow them to alb
sorb gold to the extent which they
lad IL before the war. The second
was that the federal reserve system
has much more capacity for expansion
than the old national bank system.
With a large supply of gold and
system which tends to imitation. it will
be impossible. he said. for price levels
10 go DaCk 10 where they "SiS o'ioic
the war and before the adoption of
the federal reserve system-which, it
will be remembered. saw its birth at
the outset of the great war in 1914.
Price levels in European countries
advanced very greatly, though those
countries were pouring out their sup
plies of gold to this country to OBJ
tain foodstuffs and all kinds of prod
ucts of the United States. But this
was due. 1t is explained. to the fact
that there was a tremendous initiation
Of credits and paper money.
Refunding Foreign Loans.
The situation is still further COM
plicated by the huge debts of the
European nations to this country, and
Germany's great war debt to the al
lied nations Secretary Mellon OF the
Treasury Department., appearing be-
fore the Senate finance committee in
suport of the administration bill
granting wide powers to the Presl-
dent and the Secretary OF the Treas
uary in the matter of refunding these
loans to European nations. said that
,hese loans. which at the time halt
was placed upon further loans
amounted to $4,000. 100000 In round
numbers. today amount to some slI
ooo 600. 900 because of the interest
that has accrued upon the original
debts.
He urged that the administration
he given the fullest powers in dealing
with these loans. and pointed out
that II the European nations were
nressed at this time and forced to
nav up these loans. It'll would mean
rutn for some of them. At the same
tir,Ait would mean that these nations
would not be able to purchase the
nroducts of the mine, the farm and
the factory of this country-which
would mean a further blow at busi-
ness here.
American Exportable Surplus.
In this connection, the report OF the
American delegates to the lnterna-
tional Chamber of Commerce, already
referred to, Is Of some interest. Thls
report SAYS that the United States
produces approximately one-fourth OF
tho worlds agricultural products. and
moro than one-third of its minerals.
OF these commodities, the report con-
tinues, there are exported about so
per cent Of the total production OF
cotton: so per cent of copper; 20 per
cent Of grain; 20 per cent of
petroleum. and very appreciable pro=