Evening star., 1932-04-03

an u1IldClOnaTy SCep anu IIley Say TIA
unless the currency Is inflated the eco
nomic depression in this country will be
prolonged indefinitely.
This country, they say, Is suffering
now from the most severe currency de-
fiation in many years. They mean
that the value of any given commodity
as measured in terms of money, has
shrunk to an abnormally low level.
Take the case of cotton. In 1926
l pound of cotton had a money value
of 40 cents. Today, however, the
planter finds that his product Is selling
for cents a pound and that 8 pounds
now have the same money value that
l pound had II years ago.
This, it is argued. is consequence OF
gradual dehation Of the currency
The remedy, they say, consists Of In
flating the currency back to its 1926
standard.
Every citizen is vaguely aware that
his individual business affairs are il
some way related to and affected by the
operations of the monetary system In
his country. Generally speaking how
ever, he has no clear conception of the
meanings of def1ation and imitation, no
understanding of the economic factors
underlying these conditions and no in
sight into the probable consequences
either.
Authorities at Variance.
1t is a problem concerning which
eminent authorities conscientlously diff
fer. There are, however, certain basic
principles that may be readily under
stood.
The so-called soldiers bonus bill, as
proposed by Representative Wright Pat
man of Texas, would provide for the
immediate payment by the Government
to World War veterans Of about $4,000
100000. The Treasury Department is
authorized to print this money and 1t Is
made fun legal tender.
This Is imitation in simple form.
Paper money of this character is moth
ing more than the Governments prom
issory note, secured by certain
amount of gold in the Treasury. There
fore, this measure would increase the
total outstanding volume of the Gov
ernment's promissory notes by $1,000
100000 without corresponding increase
in the amount of security behind the
notes.
Imitation such as this would be
utterly ruinous If carried too far. The
can be beneficial If properly controlled
authority has had this to say:
Currency imitation is perhaps the
most fatal disease from which a ma
ton can suffer. 1t destroys wealth and
redistributes what is left in an arbi-
trary and inequitable fashion. It
makes extravaganza q virtue and thrift
a vice. It will ruin one man and en-
rich his neighbor, and neither can
stop it, It is born of government, ex-
travagance and fosters that extrava-
gance as it grows. Profits and wages
look princely, but in real worth, sink
to penury"
But says Representative John Z.
Rankin of Mississippi, an ardent sup
porter Of the bonus bill, properly con-
trolled imitation, with conditions as
they now exist in this country, is the
only thing that can lead us back to
good times. While unlimited imitation
would prove harmful, the same policy,
properly controlled and applied, can
only prove beneficial.
=. "Infiation, Now Beneficial"
"a $4,000, 900, 900 imitation at this
time" he says, would prove beneficial
to the numerically dominant debtor
class. He (the poor mani would be
able to purchase more commodities,
thereby raising commodity prices in
general If the dollar value as meas
ured in commodities were restored by
imitation, the farmer who borrowed
$1,000 when wheat was selling for 81
a bushel would be able to repay the
loan with 1000 bushels of wheat, in
stead of 1000 bushels as would be the
case if wheat were selling for only so
cents bushel. It would wipe out the
unfair and inequitable advantage which
the so-called creditor class has gained
by the abnormal rise In the value Of
money"
Senator Elmer Thomas of Oklahoma,
another supporter Of the bonus bill,
recently said to his colleagues in the
Senate
Additional money added to circula-
ton makes money more plentiful; to
the extent that money becomes more
plentiful it becomes cheaper, and as
money becomes cheaper commodity
prices go up. I assert that as q prin-
ciple. and I challenge any one any
where to deny it."
In advocating reduction in the buy
ing power of the dollar, or imitation,
Senator Thomas pointed out that this
country now has a total amount of
debts public and private) of over $780,
600, 900, 900. These debts, for the most
part, were created years ago. when the
dollar would buy about one-third as
much as it will today. In other words,
when the farmer was paid as much for
one bushel Of wheat as he now gets for
three.
Debt Grows $450, 0,000, ,OOO, 900.
This means, he pointed out, that
based on the present purchasing power
of the dollar, our debt has grown to
$450, 900, 100000. Stated otherwise-if
the debt were paid today in commodi-
ties, three times as much wheat, corn.
cotton, etc, would be required as would
have been the case If the debt had been
retired Immediately after it was con-
tracted
Selecting cotton as a means Of H.
lustrating his point, Senator Thomas
declared:
In 1920 cotton was selling for 40
cents pound, or 5000 for a 500-pound
bale. The national debt then was
S26,000 900. In 1920 we could have
paid the entire national debt with
10000, 900 bales of cotton.
To-day, with cotton bringing 5 cents
pound. 680000.000 bales would be
required for that purpose, although the
national debt has been reduced to
$4,000 900, 600.
Obviously, therefore, If by putting
more money into circulation something
can be done to bring money down and
increase commodity prices and bring
cotton back to just 10 cents a pound, it
would decrease the national debt, meas
ured by cotton, just one-half
II am arguing In favor Of doing some
thing to bring down the high-priced
buying power of the dollar, and make
the assertion that imitation is the only
relief possible. Restore the price of
commodities, and the producers of the
country will be able to pay their share
of the debts"
Senator Thomas quoted Gov Har-
rison of the New York Federal Reserve
Bank as having said recently that the
gold reserves of the country would per-
init an expansion of some So, 500, 900 900
in reserve bank credit before reducing