Evening star. [volume] (Washington, D.C.) 1854-1972, 1933-11-19
Price Levels and Debts.

Price Levels and Debts.
One of the administration detectives
being ito make possible the payment
of public and private debts more nearly
at the price level at which they were
incurred" it is important to know al
what level most public and private in
debtedness was incurred. II all indebt-
edness dated from the period between
1921 and 1929, inclusive, when the aver
age wholesale price level was es.4. the
matter would be relatively simple. But
a large part of private and public in
debtedness was incurred before 1921,
and another large part after 1929.
A large portion of the national public
debt is represented in the war loans,
raised through the four Liberty and one
Victory loans Of 1917-1919, when the
price level was much higher than 1925.
The farm mortgage debt upon which
the greatest amount of emphasis is laid
today in speaking Of debtor relief, rep
rese1ts possible tenth Of the total
long-serm private Indebtedness of the
country. Most Of the farm debt was
incurred between 1910 and 1920, when
the increase in farm debt was 1876 per
cent, and especially during the war
years, when there was much speculation
IN inflated land values.
At what price level did the farm
debtor Of today borrow? Between 1910
Is. inclusive. the average wholesale
price level was 7l.04, approximately
what 1t is today. Between 1850,
inclusive, the average was 1884.
In terms of dollar purchasing power
Of wholesale commodities, farm debtors
borrowed o l40-cent dollar In 1905
and an 82-cent dollar in 1860. If
1926 10o-cent dollar were restored,
those who borrowed between 1910 and
1915 would be benefited distinctly, but
those who borrowed between 1916 and
1920 would be forced, in the language
of the farm belt orators, to pay an g.
cent dollar debt with 100-cent dollar.
A portion of private indebtedness is
represented in urban home and farm
mortgages The average farm mort
gage loan has been estimated to run
about eight and half years, but most
Of these loans run about six years
Many home mortgages run for three
years. Such loans are renewed, and a
renewed loan is to all intents and pur-
poses new loan. The Governments
activity in renewing farm and home
mortgages on lenient terms now is part
of its recovery program. In addition,
commercial bank loans, which usually
run year, and an unestimated amount
Of other private loans have been made
within the past year. Since the begin
ming Of the depression the Federal Gov
eminent has sought to encourage lend
ing, or credit extension. That was
policy of the Hoover administration as
well as of the Roosevelt administration
The National Government expenditures,
of course, will increase the public debt
by an unestimated amount, and the Ma
tiO1al Government, through various new
agencies. is lending money by the hun
dreos OF millions Much new debt, as
well as renewed old debt, has been in
Cured since 1929.
Speaking again in terms Of whole
sale purchasing power OF the dollar,
debtors who borrowed in 1880 borrowed
ll5-cent dollar, these who borrowed
IN 1881 borrowed a 137-cent dollar,
those who borrowed in 1892 borrowed a
154-cent dollar, and those who Dor
rowed in 1898, II We use today's prices,
borrowed l42-cent dollar. Raising the
price level to 1925 to make possible the
payment OF public and private debt
more nearly at the price level at which
they were incurred" would make pay
ment Of post-ls29 debts of sl15, s1.37,
sl.54 and Sl.42 payable with 81. These
debts we're incurred at a lower. not a
higher. price level than 1925.
1t is almost as difficult to establish
price level at which most Indebtedness
was incurred, and seek to restore that
level in fairness to debtors, as it is to
divide into opposing classes those who
are debtors and those who are creditors.
Most people are both debtors and cred
itors. and the debtors gain is offset by
the creditors loss.
Debt payment, Of course, would be IA
cilitated by rising prices. if by rising
prices there is denoted the business
Improvement usually accompanying a
price rise. Improved business would
help both debtor and creditor.
But 1t is to be remembered that prac.
tically all Indebtedness, regardless OF
the rise and fall Of commodity values
was incurred In terms Of gold, or ir
dollars measured In a fixed quantity Of
gold AS pointed out in an article dis
cussing the SPECIALIZED Commodity dol.
@r" which appears In this section o.
today's Star, when the effort to rais'
prices is exerted by dollar devaluatior
PRODUCTION Of gold content), the propo
sition narrows down to paying dollal
debts in fraction of the dollar-per'
haps fifty cents. That is debt repudia
ton. But as 1t defrauds the creditor
1t IL erroneous to speak Of it In term
Of Justice to debtors. AS 1t is dim
cult II not impossible, 10 select a pric'
level representing tbs origin OF deb