Evening star., 1933-10-15


to all receivers Of fixed incomes, such
as bond holders and pensioners.
There are other incomes which.
though not fixed, generally lag behind
prices when prices are rising. These
include all salaries and most wages.
The general effect Of imitation is to re-
duce real wages. Imitation is rounda-
bout way Of cutting wages. It is no
accident that this period of mild infla-
ton is accompanied by more strikes
than we have had since the depression
began. All these classes, the holders of
insurance policies, depositors in savings
banks, holders Of bonds. receivers Of SAL
aries and wages, can probably be
counted on to resist any violent move
ment for imitation.
Would Relieve Debtors.
Except for the relief of debtors and
taxpayers, the same effects might be
secured by reducing wages and salaries
as by imitation. When prices rise faster
than wages and salaries, profits increase
This encourages business enterprise, and
enables old businesses to resume and
new ones to start up. But the same re-
suits could be secured by reducing costs
without changing the price level. Costs
could be reduced by lowering wages and
salaries. The chief value, one might say
the sole value, Of imitation Is temporarily
to relieve debtors and taxpayers. It is
noticeable, however, that a period Of
rising prices is not a period when in
6ebtedness decreases 1t Is period when
men go more heavily in debt. Having
gone In debt in expectation Of rising
prices. they are caught when prices stop
rising. They need another imitation to
help them out.
There are two ways of controlling IN
hation and preventing 1t from running
away with us. One is the so-called plan
for a managed currency. Assuming that
the reduction in the demand for paper
money has already taken place, and
that there Is to be no futher reduction,
the problem Is to control the supply.
theoretically, this can be done. Prac-
tically 1t 0epends on politics. We have
had inflationist parties in the past and
are likely to have them in the future.
ard. the general price level will depend
on the quantity of paper money issued.
Can we keep that question out Of poll
tics? If not, one party will be for
further imitation and the other will op-
pose it. The purchasing power of the
dollar will depend, from year to year,
upon the outcome Of the preceding con-
gressional election. That will introduce
q large element of uncertainty into bus1-
ness, which Is not good for business.
The other way of controlling imitation
is to return to a gold standard with
devaluated dollar In that case the pur-
chasing power of every paper dollar will
be that of the new gold dollar and this
Will vary with the demand for and the
supply of gold and not depend on the
outcome of elections This is probably
much safer than Q so-called managed
Commission Might Act.
Theoretically the management OF the
currency might be put into the hands
Of q commission, and Congress might
theoretically keep its hands of. The
control Of railway rates by the Inter-
state Commerce Commission may be
cited as an example. It may not have
done very well, but it has probably done
better than Congress could have done,
and, at any rate, Congress has kept
It's hands Of. The Tariff Commission
Is not so favorable an example. The
tariff simply cannot be kept out Of
politics, and Congress simply cannot
keep its hands of. Currency tinkering,
like tariff tinkering, may become the
rule.
The problem of the price level Is one
which affects everybody, and on which
every one feels competent to express an
opinion. It seems to fall in the class
with tariff making rather than with
rate making. It is doubtful,
therefore. If currency commission,
charged with the problem OF maintain
Ing stable price level. by controlling
the issues Of irredeemable paper money,
could be free from political interfer-
ence.
If there is to be currency commits
sion, 1t would seem that the Federal Re-
serve Board might logically constitute
that commission. It's manifest helpless
ness to prevent, control or allay the
severity Of the depression, or even to
shorten its duration, does not encourage
one to believe that it could manage a
currency system successfully even If let
alone.
The danger Is not that we shall have
an orgy Of printing press money as sew
eral European countries had at the
close Of the World War. There are too
many people who would lose heavily by
such a spree to make that politically
possible. The danger Is that the in
stability and uncertainty Of managed
currency may be greater than that Of a
redeemable in gold. Gold has
The merit, except In panicky times, of
changing very slowly in its purchasing
power. Over long periods Of time, these
changes may be considerable.
Must Know Value Of Dollar.
Most business transactions are for
short rather than for long periods. It
IS more important that the business
man and the average consumer should
know what a dollar will purchase in
the next few days. weeks or months
than that he should know what 1t will
purchase in the next few years or
decades. There are transactions, how
ever, that run for long periods. Mort
gage debts, bonds, insurance policies,
ETC., belong to this class. It is Of the
utmost importance that those who en-
gage In these transactions should know
what dollar will purchase few years
or decades hence. Gold does not fur
nish such people with very satisfac-
tory standard Of value. It serves ad-
nirably the needs Of those interested
n short-time transactions. It is not
certain, nor even probable, that man
aged currency would serve either class
Is well.
It seems certain that If there is addi-
.ional imitation it will take the form of
/ devaluated dollar Governments in
he past have not tnfrequently resorted
70 the policy Of melting down old coins
md recoining the metal in coins Of
mailer size or lower quality. It is called
the coinage. It is an easy
way out of financial difficulties.
Our Government, having repudiated
It's promise to redeem paper dollars in
yold dollars Of the old size and quality,
nay begin redeeming them In gold dol
ars Of smaller size. Instead Of defining
! dollar at 25.8 grains Of gold, nine
;enths flne. 1t would define 1t as con-
listing Of 20 grains. 1S grains, Is grains,
,r whatever number Of grains would
;reate the least dissatisfaction. The
mailer the number Of grains. the better
t would suit the infiationists, but the
worse Of it would be for the owners Of