New-York tribune., 1922-11-26
Corresponding Reduction

No discussion of money can be COM
plete without Professor Irving Fishers
quantity theory. The proponent of this
theory was very much in evidence at
the aeademy's sessions. His ideas for
stabiiizing the currency are embodied
in bill that will come up for discus
sion before the House Committee on
Banking and Currency next month.
Congressman T. Alan Goldsborough, a
member of that committee, appeared
at one Of the academy sessions and ex-
planned In simple terms just what the
bill contemplates, and in his explana-
tion he set forth the Fiaher theory.
This measure" said Mr. Goldsbor-
ough, provides for the retirement of
gold coin by the payment OF 3 small
premium. leaving the gold certificates
Wholesale commodity price level rise /
per cent in two months, the amount of
gold In the gold dollar would be in.
creased arithmetically per cent, leav-
ing per cent fewer gold dollars in the
Treasury, which would necessitate che
retirement of per cent OF gold notes,
which in turn contracts the total VOL
ume Of potential money and credits by
l per cent. This process is followed
every two months until the price level
is down to normal.
Should the price level fall per
cent below normal the amount Of gold
in the gold dollars would be reduced /
per cent, increasing the supply Of gold
dollars in the Treasury by / per cent,
which would permit the issuance of 1
per cent more gold certificates, which
in turn would increase the potential
money and credit throughout the coun-
try by l per cent"
II is scarcely to be expected that this
measure will be allowed TO get far in
the House of Representatives before
it is subjected to vigorous attacks
from all sides and especially from the
proponents Of strictly fallaeious ideas.
1t is quite possible that economists
ranking high in South American circles
are claiming that the United States is
nos much nearer to gold basis than
are a few of the more fortunately
situated Latin republics, such as
Venezuela, for instance. Professor E.
w. Kemmerer, of Princeton University,
has just returned from a tour Of South
America, where he made o close ranAs
study of monetary conditions in TIE
more important republics. He says
that South America is as truly psper
money continent as is Europe.
These republics yielded go easily to
the temptation to abandon the gold
standard at the outset of the war, be-
cause that standard had not been In
force long enough TO establish public
confidence In it. The people had sad
experience with paper money previous
to the war and IL is not surprising,
Professor Kemmerer says, thah the
shock Of war should have threatened
gold reserves and led to suspension
of specie payments in 1914.
The crux ef the whole monetary and
banking situation in South America,
Professor Kemmerer believes, Is the
dependence OF each republic on one
or two elemental articles of foreign
trade and the fact that Latin American
governments rely almost entirely ON
export and import duties gor their
revenue. Those governments did not
make the most Of their wartime op-
portunities, but allowed expenses to
outstrip income. The huge increases
in revenues from the war boom did
not result in the amortization of any
considerable part OF the public debt
nor in the building up of strong re-
serves.