The Caldwell tribune. [volume] (Caldwell, Idaho Territory [Idaho]) 1883-1928, 1923-07-31
A GOOD WAY TO
UPSET PRICES
Further Exposures OF How Edl-
son-Ford Money Plan Would
Fail TO Aid Farmer.

The way the Edison-Ford "commod-
fly money" scheme. aimed to stabilize
monetary values. would have exactly
the opposite effect. is discussed in the
present article. which is the second in
] series prepared by the American
Bankers Association. reviewing the ex-
posture OF the weaknesses OF the plan
as presented by William T. Foster. Di-
rector OF the Pollock Foundation for
Economic Research.
Briefly stated. the Edlson-Ford plan
provides for Government warehousing
OF basic commodities. against which
currency would be loaned TO the pro
Queer 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commodities were withdrawn and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 into 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:
Upsettina 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
eminent destroys the money. Thus
the volume OF money Is increased
precisely when goods are stored: and
the volume OF money is decreased pre-
ciseiy 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ply OF goods is withdrawn: the sup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mand is withdrawn.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 II enable the farmer to bor-
row more money on his products
than he can now borrow? 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 tho
Edison plan, the Government would
make unsound loans.
Neither Mr.. Edison nor MT. Ford
can consistently contend that banks
now refuse to make sound loans. for
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
ease all that insolvent borrowers
gained would be paid by the rest OF
he population, which. to say the least,
. not fair deal
Cutting Down Farm Credit
Apparently, however, the Govern
nent IL not expected to run many
'isks, for the farmer Is allowed to
borrow an amount no greater than
,ne-half the average value OF his
product for the previous twenty-five
ears. But prices have risen so high
ince 1896 that the farmer could Dor
ow on most products much less than
ALI the present value of the products.
[ would be much less, therefore.
han the farmer could borrow directly
rom the banks on graded products;
n products not graded no Govern
,ent loans would be made. for there
fould be no way of determining the
price average.
However, the farmer, having OBJ
aimed the stipulated Government
ban on his goods. could then offer his
guilty certificate to a bank for an ad-
itional loan. But the equity certn-
ate is virtually = second mortgage.
nd no bank would prefer second
lortgage to q first mortgage.
Suppose the Old National Bank
as willing to lend a farmer eight
undred dollars on one thousand
ushels Of wheat. Suppose. however,
he farmer deposited the wheat in
ederal warehouse and obtained FIVE
undred dollars from the Government.
ertainly the bank would not lend
le farmer three hundred dollars on
lie equity certificate. The protec-
on OF the bank would be greater II
le farmer relied on the bank for the
,tire loan; for In that case the bank
,uld realize on its security without
ling Obliged to pay five hundred dol
RS to get the wheat out of Govern
emit storage. The farmer can now
PROV more money from bank on
farm products than
lder the Edison plan"