Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1922-08-24

ncbe.n" Monev q DeIusIon

To the Editor OF the Evening FuVNc be"oe,
Sir--It was a pleasure to read Mf.
Duryea's we'll written article that ia
yors the stabilized dollar. The view
point presented by him was virtually
n universal appeal. Analysis, however,
shows that 1t is both superficial anu
idealistic.
Mr.. Duryea Is right in that the study
of money is not hard subject. "A clear
understanding of a few fundamentals is
the starting point. The first is that
money must be limited in quantity !;
otherwise IL would be easier to hnd or
make money than to produce. gooSs 10
sell for money. The second Is that
money must be uniform in quality anu
possess the same value In any OF tne ne,
worlds markets. Very simple, you Will
say, and you are quite right. 1et de-
spite this the history Of mans prog
ress shows that numerous attempts 70
issue paper money In unlimited quant-
ties have all ended in failure and the
experiments today in Europe certalniy
are not calculated to make any tnlnklns
individual desire to risk similar al,
tempt in the United States. Dozens ana
dozens of books and many articles nave
.cbeap" money The schemes range
from the one of simply running blank
paper through the printing press TO
| those of more elaborate and compii-
Gated character such as advocated by
Ford and Edison.
Cheap" money itself is n delusion.
| What does cheap money do! 1t stln-
ulatcs trade and commerce well enough
and good if 1t should stop there. but his
! tory covering centuries shows that II
never does. 1t encourages our manu- :
facturers to over expand their plants
our wholesalers and retailers to over
stock our consuming public to buy far
ahead of actual needs. 1t encourages
canital. labor and management to cx-
pand themselves lavishly and without
regard for economy. 1t increases waste
I'm the home and boosts the expendi-
lures for luxuries.
| Money is always scarce when every
where waste is going on without re.
straint. People in such times think
more of getting than giving service, and
as a result seek excesses Of all kinds.
The drift away from the church and
the substantial moorings OF clean lie
are particularly noticeable.
Such n period we had taste of In
1910. and in the following two years
we suffered the inevitable consequences
in the form of the most extreme defia :
tion in the price of everything that thi:
country has ever seen. There must bt
a brake on the development of such con
ditionF, and the most effective one ye
found is the interest rate. 1t operate!
automatically and impartially. And i
gives ample warning for the far -sceint
person to get out from under. Th'
1919 initiation was the result of papeI
money put into circulation through th'
medium of the Federal Reserve system
The official board should have raised th
rediscount rate before November Of tina
year this fact. it is reported, they rec
ognized at the time but their hand
were tied by the need for cheap
money to insure the successful 1oatatiol
of Victory bonds Ford and Edison ant
other Cheap" money proponents woul'
bring about a recurrence of these con
ditions at frequent intervals by widen
, ing the limits upon the issue of pape
money and by restricting the application
of the needed brake. higher interes
rate.
Mr.. Duryea and I differ upon tn
subject of speculation. Wall Street per
forms as clear and as definite a func
, tion in our economic life as our pro
! ducers. 1t is not a case of which
; the more lInpOTldnt, loT Sltiei NOuiu ito
; progress far without the other. Th
|; function of Wall Street is TO direct tn
! flow of money into industries, the prod
ucts of which are most greatly needed
In this way Wall Street reduces tiuctu
ations: it is such things as the tariff
soldiers bonus and strikes that throN
our economic conditions temporar
; ily out of kilter. The process mean
; discounting the future, and the eflcienc
with which Wall Street performs il
purpose is clearly shown by review G
its history. OF course. its record
no more free from the sensational tha
is the progress of any of our indus
tries. The Wall Street Of the popula
imagination. however, represents but Il
intinitesimal part Of the Wall Street q
-; fact.
. As long as It is human nature 70
: most people to 60 TO financial excesse
: whenever opportunity offers. and as Ion
as mankind progresses industrially, Ia
r commercial development and progres
Of the world will have It's ups an
; downs. and there will be recurren
periods of Cheap" and dear" money
!; Some day man may devise better an
: more effective method Of exchange tina
} our present money, but first Of all h
: must change himself-and say this nc
i in derogatory sense but simply I
show how fundamental are the founda
? tions of our present economic life.
; JOHN A. SMITH.