Washington telegraph., 1923-08-17
A GU0D Vs-r ~
UPSET PRICES
Further Exposures Of How Edl-
son-Ford Money Plan Would
Fall to Aid Farmer.

The way the Edison-Ford common
fly money" scheme. aimed TO stabilize
monetary values, would have exactly
the opposite effect. is discussed In the
present article, which is the 5eeond In
a series prepared by the American
Bankers Association, reviewing the ex'
posure OF the weaknesses OF the plan
as presented by William T. Foster, Di'
rector Of the Pollack Foundation for
Economic Research.
Briefly stated. the Edlson-Ford plan
provides for Government warehousins
OF basic ooPlmodlties, against which
currency would be loaned TO the pro
ducer without interest. up to half the
average value OF the products for the
previous twenty-five years. This
currency would be cancelled as the
commodities were withdrawn and
passed lnto trade. On the other half OF
the value the producer would receive
equity certificates" which he could
sell or use for bank loans. On these
points Mr.. Foster says:
Upsettlnp Price Equilibrium
STEADY price levels depend mainly
on the balance between the volume
OF goods on the market and the vol
ume Of money offered for goods.
The Edison plan is designed express
ly to upset the balance. A farmer de-
livers, say, two thousand bushels OF
wheat to the Government warehouse
and the Government delivers one
thousand dollars in new money to the
farmer. When the farmer sells the
wheat he repays the loan and the Gov
ernment destroys the money. ThuH
the volume OF money is increased
precisely when goods are stored; and
the volume OF money is decreased pre-
cisely when these goods are marketed.
In other words, each transaction be-
gins by placing in circulation goods
without money TO match the goods
Dollar demand is created as the sup
ply OF goods is withdrawn; the sup
ply OF goods is created as dollar de-
mand is withdrawn.
Would It enable the farmer TO bor-
row more money on his products
than he can now borrowI When Mr..
Edison contends that farmers would
obtain larger loans on their crops
than they can now obtain from banks,
he is confronted by this dilemma:
Either the banks are now refusing
TO make sound loans, or, under the
Edison plan, the Government would
make unsound loans.
Neither Mr.. Edison nor Mr.. Ford
can consistently contend that banks
now refuse to make sound loans, fer
that is the way banks make most OF
their profits, and Mr.. Edison and Mr..
Ford have no doubt that banks are
conducted for profit. 1t follows that
the plan would yield larger loans to
farmers only II the Government met
the risks OF unsound banking. In that
case all that insolvent borrowers
gained. would be paid by the rest OF
the population, which, to say the least,
is not fair deal
Cutting Down Farm Credit
Apparently. however, the Govern
ment is not expected to run many
risks, for the farmer is allowed to
borrow an amount no greater than
one-half the average value OF his
product for the previous twenty-five
years But prices have risen so high
since 1896 that the farmer could Dor
row on most products much less than
half the present value OF the products.
II would be much less. therefore.
thaa the farmer could borrow directly
from the banks on graded products;
on products not graded no Govern
ment loans would be made, for there
would be no way OF determining the
twenty-five-year price average.
However, the farmer, having OBJ
tanned the stipulated Government
loan on his goods, could then offer his
equity certificate to bank for an ad-
ditional loan. But the equity certif-
cate is virtually a second mortgage,
and no bank would prefer a second
mortgage to a first mortgage.
Suppose the Old National Bank
was willing to lend a farmer eight
hundred dollars on one thousand
bushels Of wheat Suppose, however,
the farmer deposited the wheat in a
Federal warehouse and obtained eve
hundred dollars from the Government.
Certainly the bank would not lend
the farmer three hundred dollars on
the equity certificate. The protec-
;ion OF the bank would be greater II
the farmer relied on the bank for the
entirA Loan for in that case the bank
could realize on its security without
being obliged to pay FIVE hundred dol
lars 10 get the wheat out OF Govern
ment storage. The farmer can now
borrc, more money from a bank on
stanGa died farm products than
under The Edison plan"