Perth Amboy evening news., 1922-04-08
PRINTING PRESS MONEY
IN EUROPEAN COUNTRIES
Daily Letter by Frederic j. Haskin

l LON APAA
dents of international finance and
Economics are aware of a new devel-
opment in connection with the de-
lpreciated c~urrencies 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
currency without relation to gold re-
serve. In normal times the paper
currency of a nation has a definite
gold reserve. generally about 40 per
cent. The emergency of war caused
the abandonment of this reserve by
Jail belligerent nations excepting the
United States, because the national
treasures of these nations lacked
adequate gold to maintain the re-
serve ratio. In the United States the
and Federal Reserve Banks
discouraged the use Of gold and gold
certificates for general circulation
and accumulated the greatest stock
OF gold ever assembled in the his
tory of the world. 1t was withdrawn
gradually from circulation and piled
I'D IN Iu6 Treasury anu tAc vaults
of the Federal Reserve Banks.
An inevitable result Of this policy
was that. during the war and fol-
lowing the armistice, the European
printing presses. being definitely cut
loose from the retarding element OF
"a gold reserve. kept on running at
high speed. turning out reams OF
paper money which went into cir
culation. 1t In a natural rule that
the increase OF the supply OF any
thing makes IL 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 a small guam
tity of the cheap money as of the
old fashioned money. backed by gold.
This meant that prices rose. The
United States experienced imitation
acter. The gold standard was not
abandoned here. Prices rose in this
country one or two hundred per
cent. in some cases. but in Europe
they rose thousands of per cent.
Exchange Hurts Europe
A further result vas that Euro
pean money being cheaper and more
plentiful than American money, for
eign exchange became unfavorable
to Europe. That is, European money
would not buy as much here as
American money would buy in Eu-
rope.
There Is a law of economics known
as Gresham's Law which lays down
the rule that where two kinds of
money are in circulation and n is
much inferior in value to the other,
the more valuable type will retire.
People who have 1t. believing 1t to
be of greater value and therefore
more worth keeping. will hoard 1t
away. This was done to a great ex-
tent all over Europe. As the infia-
ton progressed. people who had gold
pieces or silver money or paper
money Of nations in better financial
shape than their own hid this
wealth away and used the more
plentiful cheap paper currency.
The extent to which European
imitation has gone is notorious. The
European news cables every day say
something of the difficulties being
experienced Is a result OF the inna-
ton. The Russian ruble and n
German mark are favorite comic pic
lures and vaudeville theatre jokes
they nave pcCoihc ~ ChcaP.
1t now costs more than 100000
.rubles to buy q meal in Russia.
The German mark. which in nor
NAL times was worth. at what is
called the par of exchange. nearly a
quarter in American money now Is
90 cheapened that you a buy three
marks for an American penny. The
Austrian crown has been as cheap
as 5000 for 81. A $40 bill of Ameri
can money In Russia would ex-
change for enough rubles to make
what would have been a Russian for
tune before the a
Trade, especially international
trade. has become very difficult
under these conditions. The prob
lem of restoring these currencies to
something like their normal value
has ~psrplexed European fnanciers
and economists ever since the inha-
ton started. 1t is one of the big
Questions before the Genoa confer
once which has been called TO solve
European economic and political
|probiems. The United States de-
|ciined an invitation to this confer
|sncs partly because of the dangers
Of becoming involved in % unstable
1850 - Nix npkmfnd