The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1933-02-08


that it won't initiate, or raise commt
controlled; three, that it will take us
The plans all involve an increase
in the amount Of money in cir
culation,' which now is around
$1,000 900 900 part Of it boarded. If
an increase is accomplished merely
by making the money available in
the banks-as was done by the Re-
construction Finance loans-there is
danger that the banks will not lend
it out. There then would be no
imitation
No Shortage Of Money
If the money should be forced out
into the publics hand-as proposed
by the currency inflationists, in the
form of a cash soldier bonus, pay
ment of part of the public debt, or
some such scheme-it might 60 right
back into the banks.
There is no shortage of money or
bank credit now. The volume Of
money in "circulation" is more than
a half-mi,lion dollars above the
peak figures of 1929
Total amounts of federal reserve
credit and federal reserve member
bank balances is high.
The billion dollars loaned by the
government in 1881 on soldier bonus
certificates went directly to con-
sumers, and therefore should have
inflated to some extent, stimulat-
ing purchases and stopping the fall
Of prices But it didn't.
There was a slight increase in new
and used automobile sales, but for
the most part the eX-soldiers seem
to have used the money to pay of
accrued grocery bills, rents and back
loans. The money went into debts |
and was not used for purchase Of |
goods. There was no stimulus for
business.
Not Enough, They Cry
The imitation reply is that the |
billion dollars wasn't enough. Their
programs call for three billions to
ten billions of new money.
Difficulty of control, however. is |
the principal objection to infla-
ton. If the government prints more
money not fully backed by gold, its
obligations and expenses will in
crease rapidly, To meet enlarged
expenses of government, it will be
necessary to print more money.
Anti-inflationiStS claim this pro-
cess will continue indefinitely, as
it did in Germany after the war.
1t is impossible, furthermore, to
keep gold behind part of the money
while issuing billions of paper
money, because of the economic law
that bad money drives out good
money"
That is, the holders Of the new
paper money guaranteed even
though it is by the government, will
trade it for the gold-backed money.
or gold itself, and hoard this. This
removes the gold money from cir
culation.
France went off the gold stand
ard and the franc dropped from 10
cents to about 5, where it was
pegged by the national bank of
France.
Back on Gold Standard
Then, having wiped out three
tourthS OF her internal debts, both
private and governmental, France
went back on the gold standard.
Germany was not able to control
her postwar imitation All internal
debts were wiped out and money
became worth nothing. Then a new
gold mark was adopted, and debt
orS and creditors started from
scratch.
Most of the currency imitation
plans involve going off the gold
standard. The gold standard means .
that a government guarantees to
meet its debts, and pay out gold in
return for paper currency, at the
accepted world price of gold This |
is about $40 an ounce.
Currency initiation means that the |
amount of gold behind each dollar
bill will be reduced-making the
price of gold $50 or $40 an ounce /
Or that the government will pay
either partially or wholly in silver
If it desireS.s Adoption of currency
inflation-or even serious discussion |
of it in CongreSS-immediat would |
begin a run on the treasury. it is
believed, with capitalists here and /
abroad both demanding gold.
If carried out to the logical ex-
IRENE. this would deplete our treas I
ury-federal reserve store of none |
tary gold The treasury would be
compelled to forestall this by go
ing off the gold standard refusing
to pay and forbidding export of the
yellow metal
Can Credit Stand Strain?
This would depreciate the govern |
mentS credit and securities. The !
question is, Can the governments |
credit stand the strain? And the |
anti-inflationistS answer no. But in /
flationiSts point to Great Britain
and say it can, if the people are
aroused patrioUicaly to support Of .
the government.
Many of our debts, including real /
estate and farm mortgages and /
government bonds, call for payment /
in gold at the present standard, /
and anti-infiationiStS assert that /
creditors would have the constitu- /
tional right to collect at this rate
even if the currency were inflated. I
But the inlationists declare the /
Constitution gives congress the /
power to regulate the value of I
money, a power superior even to
the sanctity of contracts.
The next story will tell what in. (
flation would mean to most of us.