Evening star., 1933-10-10
(copyright. 1898. by North American News
paper Alliance, Inc)
Article No 16 (C0ncIusionl


paper Alliance. Inc.)
Article No. Is (Conclusion).
The series of articles on money, OF
which this Is the sixteenth and last: has
been an attempt, as was set forth in
the introduction, to discuss in terms
which the layman could understand
what mon-y is, what its place is in the
economic system, and what it can and
cannot do to promote recovery.
Under the complex civilization In
which we live today. it was shown,
money is a fundamental and necessary
mechanism. 1t is the mechanism which
makes our whole intricate system Of ex-
change Of goods and services possible
Without 1t civilization as we know 1t
would end
BY money. the world has come to
mean one thing-gold. Gold is not
simply a fetish, as We have seen. but
has come down to us through centuries
OF experimentation and by a process of
elimination involving the experiences of
tnnumerable civilizations. It has sur
vived the test of time because it has
proved itself far and away the most sat-
isfactory Of all monetary standards.
Gold Heart Of System.
circulateS as coin, but continues none
the less truly to be the heart Of the
monetary system. 1t constitutes the re-
serve behind the worlds circulating
money-bank notes and bank credit
represented by bank checks. AS such
1t serves as an automatic check on
monetary abuses, and the only effective
check that has yet been devised
So long as money is redeemable in
gold. confidence in the currency pre-
walls: when convertibility is suspended
monetary control Is thrown upon the
mercies Of politicians. confidence in the
currency is destroyed and chaos in
prices and exchanges ensues. In ad-
dition to its function as a regulator of
the volume Of currency and credit. as
We have seen. gold also constitutes the
only international money.
With all countries on gold. trade COM
mitments can be made as safely among
nations as within single country; with
countries off gold, international trade
is demoralized
When a trade depression comes and
prices fall, the cry is almost invariably
heard that there is something wrong
with the monetary system and that
more money" Is needed. The demand
Is based on an age-old fallacy-the fall
lacy that money is purchasing power.
Not Purchasing Power.
Money is not purchasing power. The
purchasing power of an individual re-
sides in the goods and service which
he controls. Money is simply con-
venient device by which such values are
exchanged one for another. No better
evidence of this can be asked than is to
be found in the discussion of repre-
sentative money and bank credit, con-
tanned in earlier articles OF this series
These show clearly that money is Gre
ated out of production and that 1t is
not in itself an active force in creating
trade
We have also seen from the examina-
ton Of the figures on gold, currency and
credit that there has not been the
slightest relation between the volume of
money available and the prices OF com
modities in the depression. These fig
ures abundantly demonstrate that there
has been no breakdown of the gold
standard"
On the contrary-and no one who
has gone through the last decade can
be unaware of the soundness Of this
conclusion from his own casual observa-
tions-the evidence Is conclusive that
the growth of debt and the rise of
prices were disproportionate to the
growth Of physical wealth.
The world and John Smith, to put 1t
simply, were living beyond their means
And the world Is no different from John
Smith in this respect. Each must pay
for its periods of lavish borrowing with
periods Of saving and bill-paying.
Velocity Increase Needed.
The argument of those who insist
that the United States needs more
money" is, it will be seen. one that
collapses at the touch. But the argu-