, 1924-02-06
A GOOD WAY TO
UPSET PRICES
Further Exposures of How Edi-
son-Ford Money Plan Would
Fail to Aid Farmer.

NV AA. HN wv T|||T AL.#.- u 4 AMNaN
The way the -Edison-Ford -"commod.
lty money" scheme, aimed to stabilize
monetary values, would have exactly
the opposite effect, Is discussed In the
present article, which Is the second in
q series prepared by the American
Bankers Association. reviewing the ex-
| posture OF the weaknesses Of the plan
as presented by William T. Foster, d.
rector OF the Pollack Foundation for
Economic Research. s-
Briefly stated, the Edison-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commodities were withdrawn and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: nI
Upsetting Price Equilibrium W
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-
iivers, say, two thousand bushels Of
wheat to the Government warehouse
and the Government delivers n
thousand dollars in new money to the
farmer. When the farmer sells the
wheat he repays the a n 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-
cisely when these goods are marketed.
In other words, zach transaction be-
gina 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ply OF goods is withdrawn: the sup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mand is withdrawn. 2 -
Would 1t enable the farmer to Dor
row more money on his products
than he can o 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 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. for
that is the way banks make most Of
: kAo,r -,oGtaH ,rls M Edtunn and M
| Ford have no doubt that banks are
conducted for profit. 1t follows that
the plan would yield larger loans to
farmers only IL 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 a fair deal. 1f4ih -1L eds li
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.
1t would be much less, therefore.
than 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-fve-year price average.
However, the farmer, having OBJ
tanned the stipulated Government
loan on his goods, could then offer his
equity certificate to a 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 q
Federal warehouse and obtained 1--WE
hundred dollars from the Government
CERTAINLY the bank would not lend
the farmer three hundred dollars on
the equity certificate. The protec.
ton OF the bank would be greater II
the farmer relied on the bank for the
entire loan; for in hat case the bank
could realize on Its security without
being Obliged to pay Ave hundred dol.
lars to get the wheat out OF Govern
ment storage. The farmer can 10Y
borrow more money from a bank or
standardized farm products than
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