Evening star., 1932-04-03

AAiCSc CdCIlCS, he SdlU, nave Tie SlLBlt
result of promoting deflation and in
creasing the buying power of the dollar
Senator Thomas was asked how much
additional money would have to be
placed in circulation to restore COM
modify prices to a reasonable level
Il cannot say how much money
would be required" he replied. I'VE
could only tell by trying. and by in
creaslng the circulation by billion or
perhaps two billion.
This will restore commodity prices
and they must be restored. This de-
hatlon has lasted for IL years and de-
nation means depression. AS a result
OF the depression we see the farmers
unable to pay their interest and unable
to pay their taxes; and because the
farmers cannot pay, the residents OF
the cities cannot pay their obligations
II am only demanding that the dol
lar be reduced in buying power to the
value Of the dollar borrowed or long
overdue. In this way, and in this way
only, can the debts be paid"
senator Thomas said he was in no
sense In favor of putting so much
money IN circulation that the dollar
would go the route of the franc In
france, the Ira in Italy, the ruble
IN Russia or the mark in Germany.
The Dangers Of Initiation.
opposition to the bonus measure
is oased on objections to this particular
Dill more than on fear of imitation.
Generaly. speaking, all of those op-
| posed TO the bonus bill concede that
some form of limited and properly
controlled initiation might prove bene-
fetal at this time.
Inc big danger is, they say, that
imitation once started might run wild.
Even If controlled they contend, the
public fear of further imitation might
produce psychological consequences
more than offsetting any materal bene-
| fit.
AS one Of the Governments money
experts puts it:
Il am afraid that we, as Nation,
are tnoculated against imitation. The
experiment just wouldn't take. Infia-
tons never work in times of depression
and an attempt might start a panic
and result in still further depressed
| conditions"
The fear that imitation, once started,
can't be controlled, is based entirely
on human experience.
Obviously, there Is no physical rea-
son why the Congress should not deter
mine in advance a definite limit OF
imitation and then refuse to go beyond
! it, even though the expected benefits
fail to materialize But imitation is the
easy way out. It booms prices and
places no immediate noticeable burden
on the citizen.
But there is limit to the price rise
that can come from any given amount
of imitation. Prices may begin to drop
again. Then the temptation to initiate
! q fn fYtN ~
tie stronger boost, becomes strong.
Human nature being what it is, govern
ments in the past have followed this
primrose path to the end, and invarla-
| bly, the result has been financial dis
| aSter.
The immediate effect of imitation is
to increase the buying power OF ma
ton. This increase, however, is brought
about artif1cially.
Might Prove Stimulus.
Still, when it is considered that more
than $1,000, 5000 is now in boarding
through lack of confidence in the finan-
cial future and that credit business is
greatly curtailed, it can readily be seen
that moderate initiation might prove to
be the stimulus needed to set the
machinery of commerce in full motion
again, if there is possible such thing
as moderate imitation"
Assume, for example, that the $4,000
900, 900 Of bonus money should be used
in making the down payment on auto
mobiles and other commodities This,
counting the credit balance which would
be created, Immediately would result in
stimulating business to the extent of
approximately $4,000, 100000 and might
prove to be the push needed to restore
normal business conditions
The demand for new automobiles and
| other commodities would create de-
mand for all the raw materials going
into the finished products. More SAL
aries would be paid and more commod-
tiles sold. The purchasing power of
the people would be increased. The
price of commodities would rise and
the value of the dollar in terms of
commodities would decrease.
1t Is a beautiful theory. But 1t Is
only theory, and nobody knows how
it would work or what would be the
result.
One official took the view that the
proposed bonus bill is wrong in two
fundamentals.
The first is, he said, that 1t does not
call into play the proper machinery for
imitation.
The measure" he said, puts the
Government in the currency busirfeSs
and complicates it. The effect on the
Federal Reserve system would be bad,
for as the new money eventually found
it way back into the treasury vaults,
the credit of the system would be re-
tarded. This much new money, put out
in this fashion, would make it impos-
sible properly to control the banking
system"
The second objection. he said, is that
the new money, under the terms of the
bonus bill, would not be properly put
into circulation.
Il see no good reason why the vet
Grams, as a class, should be given this
money It would be much better If
the Government should borrow the
money and spend it on public works.
Then we could be sure that, in the
first instance at least, the money would
be expended to the best advantage.
Might Ge Hoarded.
"It given outright to any one class
large portion might be wasted or
boarded, either of which would nullify
the desired effect of imitation"
1t was pointed out that in the broad
sense there is now about $55 900, 900, 900
Of money in this country. OF this
sum, $50, 600 900 900 is in bank credits
and about $4,000 100000 in currency.
The effect of initiating the currency by
the relatively small amount of $1,000
600, 900 might be beneficial, if the
money was properly spent.
In this latter connection, however,
the experts explain that the velocity"
Of money circulation is as important as
volume, as far as prices are concerned.
In other words, an increase in the
volume of money will have no effect
on prices unless the money passes from
one person to another with reasonable
rapidity.
We might initiate our currency by
50 900 900, 900 and fix that as a limit
uyb{cI, VIC y1111ct MT on Gonna