Evening star. [volume] (Washington, D.C.) 1854-1972, 1933-07-23
Price Levels and Imitation.

Price Levels and Imitation.
It is the fashion to illustrate some OF
our economic troubles today by REFER
ence to one of the several price indexes
translated in the form of purchasing
mower of the dollar. Thus in speak
ing of wholesale prices, based ON an
average price of some 784 commodl-
ties, it is said that the dollar which IN
1926 was worth 100 cents is now Tor
IN 1882 worth 81 "a cents or more, and
that In Justice to the debtor who Dor
rowed the 1926 dollar today's dollar
must be reduced to its level OF 1876.
It should be understood that tive
dollar values are mere relative SYM
bols of the value Of the dollar IN terms
of commodities. The value OF the
American dollar Is measured in terms
of gold-although not redeemsble, Tor
the time being. in gold. When one
seeks to express the value OF the dollar
In terms of commodities the value de-
ponds upon the commodities that are
chosen for discussion. The purchasing
power of the wholesale dollar. for in
stance. differs from the purchasing
power of the retail dollar, or the dollar
used to purchase at retail the COM
modities that 60 into the cost OF hv-
ing. The cost Of living dollar for the
wage Garner Is different from the cost
of living dollar for the farmer. And
the farm dollar, expressing the varia-
lions in price Of farm products, Is
different dollar from the wholesale
dollar, which includes farm commodities
along with hundreds Of other COM
modities. These are all statistical SYM
bols denoting variance In prices OF COM
modities, and are not correctly used as
absolute measurements Of dollar values.
Any year may be chosen as the stand
ard for measuring relative values and
in any year the value of the dollar
may be placed at 100 cents. In Its
latest index Of wholesale prices tbs De-
partment OF Labor uses I8ae IS the
base year, prices being gwen the num-
Der 100 for that year. In its series OF
retail prices, or cost Of living prices.
the base year Is 1918. The Department
Of Agriculture uses the Department of
Labor figures, but bases its various in
dexes of farm prices on a four-year
average, 191O-19l4.
Some of the economic thinkers Of
the day are inclined to view the falling
price level as the cause OF the de-
preston (rather than the effecD and
in turn blame the falling price level
on gold as a standard Of measurement.
To remedy the distress they would
reduce the standard Of measurement
by some currency-debasing expedient,
such as reducing the gold content OF
the dollar, issuing cheap silver dollars
in competition with gold dollars, or
printing paper money without metallic
backing or redemption. OF course, If
the standard OF measurement Is re-
duced, the things measured increase in
size. Prices, by this device, would rise.
Prices must rise, Of course. II there
Is to be recovery. But sound money
men, as opposed to the inf1ationist
school. believe that prices will 60 up as
they have gone up and come down
before, by influencing the production of
commodities, by recreating confidence
and by rebuilding purchasing power
through making employment available
all of these things being possible
without tampering with the standard
of measurement. History Is full Of the
calamitous results Of currency debase-
ment and imitation. and although
there have been experiments in the
past in managing currency that did
not end in disaster, they were not able
to bring the experimenting authorities
any nearer to the millennium of stable
prices. pegged at desirable level fair
to everybody, than we are today.
In a series of articles, the first of
which appears elsewhere in today's Star,
there are discussed some Of the diff
culties confronting us as a Nation If
we choose some arbitrary price level
as desirable and work toward 1t by
manipulating the currency, and do this
with the object, in part. Of giving debt
ors the same sort of dollars they Dor
rowed. What is the desirable level? In
what commodities is it measured? 1t
is impossible to give all debtors the
same kind Of dollar they borrowed.
Which ones are to be chosen?
q II Is an act o honesty to the debtor
whose debt was contracted In 1925 and
is now payable to cheaper the dollar
by currency manipulation until 1t has
only the purchasing power In the whole
sale market Of 784 commodities that
1t had in 1926, wiz 1t not be an act Of
dishonesty. either 10 creditors or debtors,
~nose debts, NOW payable, were con-
tracted in any ether year than 1926?
In no other yea. in the period covered
by our table Is the purchasing power Of
the dollar in the wholesale market Of
784 commodities the same As In 1926.
Whether the 1926 dollar is dearer or
cheaper than the dollar Of the year
selected for comparison will 1t not be
Of necessity = dishonest dollar, either
to debtors or creditors, not only In the
specific RaEt contracting select
Cd f~ ~&A ut in every other
ysar thaO 1926 covered by CIT table?
For specific example: If it II dis
honest to make q debtor who borrowed