Atlanta tri-weekly journal. [volume] (Atlanta, Ga.) 1920-19??, 1922-04-11

WASHINGTON, D. c., April 5.-Students
M of international finance and eco
W Monies are aware of a new develop
ment in connection with the deprecated cur
rencies of Europe These currencies have
constituted one of the most vexed problems
brought on by the war.
The need for greatly increased sums OF
money brought about by the war cost, was
met by most of the nations by the issue OF
paper currency without relation to gold re-
serve. In normal times the paper currency
of a nation has definite gold reserve, gen
orally about 40 per cent. The emergency OF
war caused the abandonment OF this reserve
by all belligerent nations excepting the
United States, because the national treas
uries of these nations lacked adequate gold
to maintain the reserve ratio. In the United
States the treasury and the Federal reserve
banks discouraged use OF gold ana golo GER
tificates for general circulation and accu-
mulated the greatest stock OF gold ever as
sembled in the history of the world 1t was
withdrawn gradually from circulation and
piled up in the treasury and the vaults OIL
the Federal Reserve banks.
An inevitable result of this policy was
that during the war and following the arms
tice, the European printing presses, Delng
definitely cut loose from the retardlng ele-
ment of gold reserve, kept on running at
high speed, turning out reams of paper mon
ey which went into circulation. 1t IS natural
rule that the increase of the supply OF any
thing makes it cheaper. This is as true OF
money as of coal or potatoes The result was
that this plentiful supply of paper money
made money cheap. In other words, people
who had consumable goods to sell would
not exchange them for as small quantity
of the cheap money as or the old-IaSnloneu
money, backed by gold. This meant that
prices rose. The United States experienced
initiation of currency but OF mllder cnar
acter. The gold standard was not abandoned
here. Prices rose in this country one or. two
hundred per cent in some cases, but IN Eu-
rope, they rose thousands of per cent.
Exchange Hurts Europe
further result was that European mon
ey being cheaper and more plentiful. imam
American money, foreign exchange became
unfayorable to Europe. That u.s. European
money would not buy as much here as Amer
lean money would buy in Europe.
There is a law of economics, known as
Gresham's law, which lays down the rule
that where two kinds of money are IN cir
cuIation and one is much inferior IN value
to the other, the more valuable type Will
retire People who have it, believing it to be
of greater value and therefore more worth
keeping, will hoard it away. This was done
to great extent all over Europe. AS the IN
flation progressed, people who mad goIo
pieces or silver money or paper money OF
nations in better financial shape than thelr
own hid this wealth away and USED the
more plentiful cheap paper currency.
The extent to which European initiation
has gone is notorious. The European news
cables every day say something OF the dill
fculties being experienced as result or the
initiation The Russian ruble and the Ger
man mark are favorite comic picture ana
vaudeville theater jokes because they nave
become so cheap. 1t now costs more than
100000 rubles to buy meal in Russia.
The German mark, which in normal times
was worth, at what is called the par of ex-
change, nearly quarter in American money,
now is so cheapened that you can buy three
marks for an American penny The Austrian
crown has been as cheap as 5000 for III.
A SO bill of American money in Russia
would exchange for enough rubles to make
what would have been a Russian fortune be-
fore the war.
Trade, especially international trade, mas
become very difficult under these conditions.
The problem of restoring these currenc1es to
something like their normal value has per-
picked European financiers and economists
ever since the initiation started. 1t is one of
the big questions before the Genoa confer
ence which has been called to solve Euro
pean economic and political problems The
United States declined an invitation to this
conference partly because of the dangers OF
becoming involved in so unstable condl-
ton of affairs as that created by the cheap
currencies.
Development Surprises Experts
Now the new development which has sur
prised economists in connection with this
situation is the discovery that there is a