Evening star. [volume] (Washington, D.C.) 1854-1972, 1933-03-09
Sound CURRENCY
|. HELD PRIMARY AIM
Question Of Twill There Be
InfIation7" Partly Answered
in Negative.
by MARK SULLIVAN.

All the steps taken by PRESIDENT
Roosevelt in anticipation Of the meet
ing Of Congress today, and all the &C
lions done about banking. point TO-
ward maintaining strictly what con-
servatives call sound currency"
There might be temporary increase
in the amount Of paper currency. 1t Is
to be borne in mind. however, that the
more than four billions Of gold now
held by the Treasury and the Federal
reserve System, and the energetic
steps to keep this gold and acquire
more. make It possible to increase the
amount Of paper currency by some
three billion dollars and still remain
within the legal requirement Of $40 in
gold for each 500 Of paper.
All the evidence In Washington re-
fleets q state Of mind on the part OF
the administration which aims toward
preserving sound currency. They admit
with a smile, what every one must adj
NIT, that the country Is for the moment
about half way of the gold standard.
The inference. however from every ac-
ton and utterance, and from the man
ner of the men most concerned. Is that
they intend in due course to get back
fully on the gold standard. To say the
same thing another way. there Is no
faintest evidence Of intention to initiate
the currency with paper or silver.
There Is no present evidence Of mten-
ton to reduce the quantity Of gold in
the standard dollar, though 1t should
be- added there are persons who predict
this must come.
Some Exists Already.
The sum Of all this would seem to
constitute an answer, so far as an
answer can be made on present appear
ances, to the question will there be
inflation?" 1t must be borne in mind,
however, that imitation Is to some ex-
tent an Intangible thing. 1t Is. In part.
. matter Of fact and in part . matter
of public psychology based on facts.
Persons ask will there be infiation?"
as II imitation came about only through
Congress on a given date enacting I'VE
hereby innate" Imitation does not
ordinarily happen that way. There is
q more common way. That way has
already happened in the United States
and the fact IS that at this moment
some imitation exists.
Imitation properly understood always
arises from one cause, the fact Of
government spending more than 1t takes
in. After q government has done that
for some time 1t usually yields to the
temptation to print fiat currency in
order to meet its deficit. That is the
direct type Of imitation understood by
everybody.
We have not done that, and every
body understands that under no cir
cumstances would we be willing to do
that. We have paid our deficits not by
printing dollar bills, but by printing
Government bonds which have been
sold to the public Printing and issuing
:, bond for Q thousand dollars can be,
Is respects imitation, much the same as
printing . thousand one-dollar bills.
The difference Is mainly one Of time.
When the Government last week issued
many thousand dollar bonds. each Of
those bonds was and Is convertible into
dollar bills in 81 days.
Baruch's Views Quoted.
As 1t was put by Bernard M. Baruch,
testifying before q Senate committee.
Il can see no fundamental difference
between what We have done and the
proposal to issue Federal Reserve notes
and other currency to pay for our def
icits which our inflationists now pro-
| pose"
The unacceptable fact Is that the Gov
eminent has issued SO many bonds that
large part Of the public, especially the
financial part Of 1t. came to doubt
whether under present conditions the
Government would pay them in gold
when due. Along with this arose doubt
whether the Government would be able
to redeem its dollar bills In gold That
this doubt existed there can be no ques-
ton. This doubt is a state Of mind
which Is in itself imitation. There can
be no questioning that imitation in this
sense QYigfg II e q dnsyhf uho he
dollar will continue to be worth what
1t now Is. Presently. unless 1t changes
or Is checked. 1t will express itself in a
disposition to sell dollars Selling dol
lars merely means exchanging dollars
into goods. That accounts for the rise
| in prices Of goods, which is an early
| state Of imitation.
Termed Financial Prophet.
The axiom running through all this
Is that, whenever a government con-
tinues for q suficient time to spend
more than it takes In the result is
imitation. Our own Government
: reached that point some weeks ago
1t was on February Is, the day before
the Michigan bank closing. that Mr..
, Baruch told the Senate Committee that
Il fear We have gone to the limits of
| prudence already in this method of
Federal financing Events since
that day have proved Mr.. Baruch .
prophet.
Those who now seek the answer about
whether imitation will 60 on or be ar
rested will find the answer solely in
what Congress does or fails to do to
bring Government expenses below Gov
! eminent income. Congress has failed
to do that for three years continu-
| ously. That failure has brought in
| flation. When Congress brings eXpendi-
lures below income we shall know that
! imitation Is arrested and averted
The answer will come, not when
Congress legislates about banking but
when 1t legislates about reducing ex-
penditures and otherwise keeping ex-
penditures below receipts Whether
! Congress will legislate on this point
! during its session the latter part of
this week remains to be seen. If 1t
does not it will act presumably when
| II. meets again some two weeks from
now