Evening star., 1933-05-07

ton?
A. An arbitrary enlargement Of the
currency without corresponding In
crease in the security, such as gold. for
example, upon which 1t is based.
@. How Is imitation accomplished?
| A. 1t can be done by an overissue
of Government notes or green backs, "
by an overissue OF bank notes, by an
increase of the silver money in circula-
ton, or by simply reducing the amount
Of gold contained In the standard dollar
and proportionately increasing the
i amount of currency based thereon. All
these methods are under consideration
| in the present program. There are other
methods of imitation, such as that of
bank credits, large increases in the gold
supply, ETC.. but that Of currency is the
most common.
! Q. What is the practical effect Of in
| fation?
| A. Its immediate effect Is to lower
the value of the dollar as established
under the gold standard; to devaluate
it, as the expression is.
@. What good would 1t do to de-
valuate the dollar?
| A. Initiation proponents say that rails
| ing prices from their present abnor-
mally low levels will remove a recog-
nized cause of business and industrial
stagnation, stimulate business, thaw Out
frozen assets. revive real estate anc
other commodity markets, create a new
demand for stocks, lure idle money back
into useful circulation, and make II
easier for the hard pressed to pay Their
/ debts.
@. How is it supposed to do all this?
A. The idea is that cheap money viii
! raise prices, because more Of 1t will be
| needed to do the same work, and that
people will buy on a rising market Ir
, addition, when people begin to doubt
the value Of their money, they get riC
of it, exchanging 1t, usually. for real
estate or common stocks, thus Great
ing a demand that tends to raise prices
theoretically it will be easier for 9
debtor to pay his obligations with dol
lars worth, say only three-fourths as
much as those he originally borrowed
| than II he had to return full value.
The Creditor Loses.
| @. In that case, then, does not the
creditor lose?
A. He does. and by just as much a
the debtor gains.
! Q. Will all debtors gain in this pro-
! portion?
A. Not unless their incomes rise Just
as much as the value of money falls
| The debtor with a fixed income OBJ
| viously will get no benefit, because what
! he gains on one hand he loses on the
| other. He may actually lose heavily
! II his mortgage or other evidence ol
debt includes an enforceable gold
clause" requiring that the debt be re-
paid In dollars of the same value as
those borrowed. Most people. more
over, are in some sense both debtors and
creditors. A business man. for example
might gain by buying of a mortgage
in devaluated dollars, but he would lose
on the money he had in the bank and
| on the credit accounts of his customers
Unless he put his prices up he woulC
similarly lose on his future sales.
/ @. Will increasing the amount Of
money actually raise prices and keeI
them up?
A. Not necessarily, because the bulk
| Of business is done without money any
| way; that Is, by the use of checks anC
the like. There Is more coin in circu-
| lation now than there was a few year.
ago, when prices were much higher
When England devaluated the pound
prices rose temporarily, as they are ris.
ing in the United States now, but they
have since fallen again to levels moi
! far above the old ones. The supposed
relation between currency and price.
| holds good only when the whole vol
ume Of money plus bank credits is in
cluded, and when the velocity" or speed
| with which money circulates is con-
stant. When velocity is high, small
amount of money does q great deal ol
work because 1t changes hands rapidly
and vice versa.
Effect on Investment.
O. Does imitation really encourage
investment?
A. No, the contrary; except as In.
vestors. foreseeing still lower values
| for money. may wish to exchange theirs
| for something Of more stable value
As Bernard Baruch remarked: "Busi-
ness moves on faith in promises, ano
money itself is a promise" II the prom
ise or present value Of money IS moi
| to be kept, business generally will not
take risks on it. The very uncer-
tainty over what may be done will tend
to discourage the making Of long-ternl
| commitments. to raise interest rates
and to destroy confidence. The ten
/ dency will be to force the country more
nearly on a cash basis so as to create
|
! by increase imitation.
@. If prices rise, what effect will that
| have upon wage earners?
| A. Unless wages rise simultaneously
and correspondingly, rise in prices will
| amount to cut in pay. In practice
wages and salaries never rise as fast
| as prices-aS they never fall as fast
| as prices.
Q. Who else would lose by imitation?
| A Eyyar txytfh
especially In savings accounts or in the
hand Of trust funds, beneficiaries OF
all kinds, and everybody with any form
Of investment making q fixed cash re-
turn, such as life insurance, annuities
bonds and mortgages without an en-
| forceable gold clause" and other SINH.
| lar evidences Of debt.
| @. Would the Government pay of
its bonds In devaluated dollars?
A. The intimation is that 1t WILL such
payment. of course, amounting to q re-
pudiation of substantial portion OF 1t!
debt Liberty bonds contain "gole
clause" which between individuals woulG
be an enforceable contract, but no ont
can enforce q contract with the Gov.
ernment, which cannot be sued.
O. Who, then, would gain dependably
| by imitation?
A. Only those debtors who, as seen
are in a position to take actual ad
vantage OF the devaluated money. II
addition to individuals, these would in.
clude large corporations with BIZ
bonded indebtedness If they could in
crease their incomes proportionately
heavily bonded cities, life insurance
companies. railroads and the like. Agil'
SPECTATORS and people who live by theil
wits also might profit.
@. The man who needs relief mos
win not necessarily get it. then?
A. He will not; the benefits Of In
flation, such as they are, will not b.
distributed according to needs. but &C
cording as an individual can work i
to his advantage.
Effect on Securities.
@. What will be Nfect Of imitation OF
securities?
1 ~ A%,<