Worcester Democrat and the ledger-enterprise. (Pocomoke City, Md.) 1921-1953, 1924-05-24
CONGRESSMAN 7. ALAN COLDSBOROUCH
MAKES FORCEFUL FINANCIAL ADDRESS
Speaks Before Maryland Bankers Association At Atlantic
Cty.-Argues For Stability Of Prices. Emphasizes
Necessity Of Reducing Business To PreWar Basis
Continued from last week

Continued from last week.
How can we keep this index mum
Der constant? How can we proven
periods of initiation succeeding per
iods Of business expansion, culminat
ing in periods Of speculation and end
ing periods of collapse? The guam
tity of theory of money has been rec
ognized as essentially sound by prac
tically al economists for more than &
century. Illustrating by reducing the
theory to it's simplest form; if the
total volume of commodities consists
of 20 bushels of wheat and wheat is
only traded in by the use of money
and the total volume Of money is 500
as long as all that wheat is being
traded in and all that money is in cir.
culation wheat will be worth dollar
a bushel. If under the same condi-
tions there are $40 in circulation
wheat will be worth So a bushel; if,
with 20 bushels of wheat and $50 ir
money, 10 of that money is withheld
from circulation and all other condi
tions are as stated in the first pre-
vious illustration, wheat will be worth
so cents bushel; if on the othe,
hand, one half of that wheat is being
withheld from the market and ther
is only turnover in 10 bushels o.
the wheat, other conditions remaining
as in the first illustration, wheat will
be worth 50 a bushel. Or, expressed
in the generalization mentioned here
to fore in these remarks, there is
constant ratio between the volume o.
production and turnover and the vol
ume OF money and credits and their
circulation. So that if your index
number Of general price levels re-
mains constant you are assured that
your volume of money and credits are
expanding only in proportion as pro-
duction and turnover expands, that is
only in proportion to the legitimate
needs of business, and you can be as.
sured that when you restrain the rise
Of the index number you are restrain.
ing credits beyond the legitimate ne.
cessities of business, you are restrain.
ing unhealthy and abnormal produc.
ton and you are restraining bust
ness expansion within wholesome linn.
it's and stopping in it's inception over.
production, waste, speculation anc
collapse.
The basis of our monetary system
is gold, our entire credit structure is
based on gold. Now let's assume tina,
all the gold is withdrawn from circu.
lation, gold certificates being substi.
tuted and let's assume that we star,
with a reserve of a million dollars in
gold at the present number of grains
of pure gold in the dollar, and that
the index number goes up per cent
indicating that our money and credit
structure is expanding more rapidly
than reproduction and turnover. Il
we then increase the theoretical golt
content in dollar by per cent W.
have reduced our gold reserve from {
million dollars to 100000 and thu
possibilities of our credit structure
by l per cent, which in turn tends tt
reestablish the normal ratio between
production and turnover on one side
and money and credit in circulation
on the other.
Without going into the details o:
the proposed legislation, the above il
Illustrations will serve to indicate it,
theory. Now, the question arises, il
such legislation possible at this time
The law requires us to maintain ou
gold reserve at 40 per cent. We nov
have about 81 per cent and in orde
to make this plan feasible withou
unduly weighing the dollar it will b.
necessary to legislate for require,
gold reserve of about 70. It is, there
fore difficult to have passed such leg
'slation at this time, but in the vari
GUS discussions concerning stabilza
ton caused by this proposed legisla
ton various alternatives have beel
suggested, such as q legislative direc
ton by Congress to the Federal Re
serve Board to have raised rediscoun
rates in the Federal Reserve Bank
when the index number is rising an,
reduce them when the index humble
is falling and in that way tend on tn
one hand to discourage unhealthy ex
pansion and on the other hand t.
make money easy when business i
not so good and thus tend to stimu
late it. Another proposal is legisla
ton requiring the Federal Reserv
Board to have the Reserve Banks pu
securities on the market and thu
tend to draw money from active cir
culation when the index number i
H. II II