Evening star., 1933-07-23
Debts, Dollars and Currency Debasement
Price Ratio Changes Ef.
fected in Past Without
= Changing Standard of
Value-Some Difficult.
ties Faced in Pursuit of
the ssHonest Dollar"
Mote: This Is the first OF three spe-
cial articles discussing proposals. to aid
debtors BY cheGpening dollars.)

ci1l articles discussing proposals. to aid
debtors BY chedpening dollars)
~ OST of the Governments ef-
| nu forts toward recovery are
! IIv aimed at restoring prices. for
rising prices normally result
in employment gains, renewed business
activity and prosperity.
Prices might be broadly defined as
the exchange ratio between the money
standard the standard adopted for
the measurement of value, the Ameri-
can dollar-and commodities. It Is
a ratio that Is seldom fixed or stable
for any length of time and its violent
Quotations. one way or the other, bring
various forms Of distress.
It may be agreed by everybody that
higher prices are desirable. But there
is widely divergent opinion over methods
chosen to produce higher prices.
The inflationists would change the
price ratio by manipulating the standard
of measurement and cutting down this
STANDARD by debasing its unit of meas
urement, the dollar If the yard
stick of value measurement-the dollar
is cut down from 3 feet to feet or
| foot, the apparent value of the things
measured would be correspondinsly in
| creased.
! In general. changes in commodity
prices over relatively short periods are
due to changes In value Of goods that
are based on changes In the relation Of
production Supply to demand, rather
than to changes in the value Of gold,
although it Is claimed that the discov-
| cry of new sources of supply and the
resultant increase in production Of gold
have in the past stimulated rises in
! prices.
! Currency .Debasement Fought.
The hope of millions of Americana
sound money mems that the admin
istration will raise the prices of COM
modities, not by manipulating the
| money standard element of the price
ratio, but by the scientific control and
direction Of American production, and
by reciprocal arrangements with foreign
| nations which will enlarge the market
! devices to the same ends which the
President Is empowered to use without
resort to the artificial and delusive in
| crease of prices which comes from cut
! ting down the money standard Of meas
| urement.
In his address to the American peo-
pie by radio on Sunday night, May Z,
the President explained that "the ad-
ministration has the definite objective
of raising commodity prices to such an
! extent that those who have borrowed
money will, on the average. be able to
repay that money in the same kind Of
! dollar which they borrowed. We do not
seek to let them get such cheap dol
a great deal less than they borrowed
In other words. we seek to correct .
wrong and not to create another wrong
in the opposite direction. That Is why
powers are being given to the admins
tration to provide, If necessary, for an
enlargement Of credit, in order to cor
rect the existing wrong. These powers
will be used when, as, and II 1t may be
necessary to accomplish the purpose"
Higher Prices Desirable.
Now, it is of course desirable that
prices go up, and the efforts Of the ad-
ulnlSGTaClou are pcAAe uScu w AoAOe
prices by exerting various forces on
commodities. II these efforts are sue
cessful and prices are increased, say, to
the general level that prevailed before
the long g-drawn-out process OF depres-
sion and deflation began. the revival
of business and all the advantages that
flow to everybody from such q revival
would, in general, have been ac-
complished Both debtors and creditors
would have profited.
But If the National Government set
out deliberately to raise prices IN terms
of the dollar by debasing the value OF
the dollar, tampering with the standard
of measurement (as by taking from 1t
a considerable fraction Of Its gold con-
tent or by issuing q cheaper silver dol
lar in competition with the gold dol
lar), and did this for the purpose OF
enabling those who have borrowed
money to repay that money in the
same kind of dollar which they bor-
rowed." thereby attempting thus to cor
rect the difficulties resulting when
person borrows cheap" dollars and
must repay the debt in dear" dollars
if these things are done to reach the
objective stated, there are dimcult
obstacles ahead.
The Besetting Dif1cuities.
One Of these Is to determine the
standard by which Is to be measured
the correct value Of the honest dol
lar" that Is to be given debtors to al
low them to repay their debts IN the
same kind of dollar which they bor-
rowed.
If in some way it might be possible
/ to approximate the desirable or cor
rect value of the dollar In terms OF
purchasing power. the next step would
be to determine the identity Of the
average" debtor, and the year in which
he assumed his Indebtedness. Such
knowledge would, of course. have to be
available II the debtor "on the aver
age" is to be enabled to repay Dor.
rowed money with the same KIND OF
dollar which he borrowed.
The Standard of Value.
Gold, as a standard of measurement,
has been generally regarded As the
standard that through the years mas
shown the least tendency to nuctuate
and which is most stable In the con-
duct of international trade requiring
the exchange of currencies. Its pur-
chasing power, Of course, does 60 up
and down with changes IN condi-
tionS affecting the commodities whicn
are purchased One point on which
economists disagree, generally speaking,
is whether the rise and fan OF price
levels or averages Is due to . faulty
standard of measurement-goId-or u
due to factors affecting supply and de-
mand of commodities; whether the
blame is to be heaped on gold or on