Washington telegraph., 1923-08-31
Who INFLATED
The CURRENCY?
George E. Roberts Gives Corr
mon Sense Explanation for
Currency Increase and
Decrease.
GOVERNMENT TOOK NO PART
Due to Changes In Supply, Demand
and Prices Of Commodities
Caused by War-Federal
Reserve Not 10 Blame.


rency is inflated and debated by the
government in the United States from
motives beyond the understanding OF
average people is effectually set at
rest by George f. Roberts, noted
banker and exponent Of sound money
in an article in the Journal OF the
American Bankers Association.
There has been imitation by the
governments OF Germany and other
European countries. which have Is.
sued money for the purpose of paying
their expenses" Mr. Roberts says.
"The United States Government has
done nothing OF this kind since the
Civil War
There Is a genuine need for elias
ticlty in the volume OF currency, and
for machinery to adjust It to the leglt-
innate needs OF the country. The
means provided are the Federal Re-
serve Banks, authorized to issue cur
rency to their member banks, either
in payment OF deposits or for loans.
Side. Tracked Like Freight Cars
"More currency Is needed in Sep
tember October. November and De-
cember than in January and February.
As business slackens. currency nat
urally retlres from circulation. Money
accumulates in the member banks
and they send II in TO the Reserve
banks, which in effect retires 1t, as
freight cars are retired when traffic
falls off.
What caused the great imitation OF
credit and currency? 1t was due pri-
marily to the war, which made ex-
traordinary demands upon the indus
tries and caused a great rise OF wages
and prices. 1t was inevitable that
more credit and money would be
called for to carry on business.
"The boom year OF business that fol
lowed the armistice was likewise abb
normal. The end of the war released
a great many demands that had been
held in check. The foreign demands
upon us at first increased. There was
a temporary stimulus, but the volume
OF business was abnormal and could
not be sustained. Agricultural pro
ductlon in Europe revived, the prices
of agricultural products moved back
toward normal. importatlons from the
United States fell off, prices declined,
"deAation" began.
some say imitation should not be
permitted, but II war occurs imitation
is unavoidable. Recruiting armies
makes a labor scarcity. Contractors
bid above going wages to attract men.
The war Industries did the same and
the peace industries raised wages to
hold their men. Governments of Eu-
rope sent representatives to this coun-
try to buy food and they bid up prices
on the grain exchanges. Higher levels
OF wages and nrices meant that mere
credit and money was required to
handle business.
More Business, More Money
"The increased issues OF currency
was a result of allowing business to
go ahead. upon the rising level OF
wages and prices. When factory
payroll doubled, twice as much cur.
rency had TO be furnished for IT,.
When cotton rose from 10 cents a
pound to 80 and 40, more currency
was required to handle the crop, and
so all around the circle.
"De1ation did not come by an act
of the government or the Federal Re-
serve authorities in suddenly with
drawing money from circulation. De
hation came naturally when business
fell off and prices declined. Just as
an increasing volume of business at
higher prices called more currency
into use, so a decreasing volume OF
business at lower prices released cur
rency from use and caused ii to re-
turn to the Reserve banks.
There has been absolutely nothing
new or strange in these price move.
ments related TO the war. Imitation
and deflation have been Just as al
ways when wars have occurred. The
only new factor has been the popula.
tion. That is always being renewed.
and most people do not learn by the
experince of others. When hard times
come It is always the thing to lay the
blamed on somebody. and this time
the Federal Reserve System has taken
most OF IT,"