The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1932-04-26

BY HARRY r. BARNES, Phi. d.
France faced financial crisis in
1925 due to: % Increase in in
terest on the national debt; 81
great expenditures necessary for re-
construction; 80 small proceeds
from reparations down to 1925;
a. inadequate taxation to balance
the budget.
Imitation was resorted to. As early
rs March, 1924, the franc, normally
worth 1873 cents, had dropped to
less than 5 cents. BY July, 1926,
the franc had fallen until it was
worth only a little more than 2
cents-forty-eight to the dollar.
The emergency government of
Poincare came into power in the
summer of 1926 The franc was
stabilized at 2519 TO the dollar in
December, 1926. This was approx
imately one-ffth of its pre-war
value.
Net result was to cut down greatly
the French public debt and hence
to reduce necessary taxation. But
this was accomplished at the cost
Of severe penalty to the creditor
class.
Shift Load to Wealthy
Bonds OF pre-war issue slumped
enormously in effective value and
even bonds of the 1914-1920 period
dropped greatly in value in terms
of the franc. The imitation was
justified on the ground that it was
the best way of transferring the
fiscal charge of war and recon-
struction to the Weather class of
citizens The French middle class
was hard hit, but not ruined as in
Germany.
In Russia the national currency
was inflated before the Bolsheviks
came into power. The paper ruble
had shrunk to third of its face
value by the late summer of 1917.
and to one-eighth by the time of
the Bolshevik revolution.
But the extensive initiation be-
gan at the time of Russia's con-
fiict with the White Intervention
Total amount of rubles in circula-
ton III July. 1921, has been etsimat-
ed at two quadrillons, 344 millions.
1t finally was stabilized at it's pre-
war value of a little less than two
TO the dollar. But this sterilization
is internal. The ruble is worth
only about half that amount out
side of Russia.
Riches Are Redistributed
Currency imitation arbitrarily re-
distributes wealth. All fixed in
comes, including salaries, are re.
duced in purchasing power. Debt
tors get off easily at the expense OF
creditors. Workers usually are
temporarily injured, as wages teno
to rise more slowly than prices.
Further, one must distinguish
between industrials and economic
initiation and delation, and the
technical imitation and deflations of
currency alone.
With no very marked changes in
our currency we went into a period
OF vast imitation from 1927 to 1929
due mainly to overoptimism and
overinyestment-great demand in
creases which shot up prices
Since 1929 we have been under
going an economic deflation as a re-
suit of falling demand for securities
commodities, buildings and services
This has been due to normal reac-
ton, lack of confidence, decreased
purchasing power of the unemployed
and partially employed and the like
Prices Go Up
Much of the supposed advantage
of imitation is illusory. Take debtors
and taxpayers, the two classes
usually singled out as the special
benefciaries of imitation. The
debtors are able to pay their
principal in money which has less
value in purchasing power than it
had when they borrowed it, To this
extent they gain.
But everything which they use in
daily life costs them more. since
prices have gone up. Hence, gains
in payments on debts are partially
or wholly eaten up in increased cost
of living
Likewise with taxes. The tax
payer can pay his levies in cheaper
money, but the government must
pay more for what it buys-aside
from fixed salaries-and therefore
the total amount of taxes rises. If
manufacturers get higher prices,
they also have to pay more for raw
materials and wages.
The most statesmanlike policy for
the long run is iudicious stabliza-
ton of the value of the dollar,
which would check excessive de-