Evening star., 1933-10-03
Controlled Initiation Theory
Provides No Control Factor
Philosophy Seen as Leading to Gambling
Orgy Succeeded by Sharp Reaction
in Stock and Commodity Markets.

plete misunderstanding Of the philos-
ophy Of the orthodox school of money
and a complete failure to understand
the mechanics Of the price system.
Far from being without program,
as frequently alleged. the anti-infla-
tionistS have very definite ideas what
should be done to halt q business de-
preston. The fact that it promises no
miracles and requires patience and for
titude, makes it no less a program.
Essentially, the anti-inf1ationist believes
themselves out, because he knows that
in any depression the important thing
is not SO much the general level Of
prices, but the relationships Of the
thousands Of prices In the economy,
one to another.
But he insists that this process is not
long one when everything Is done to
assure the integrity of the Govern
ment's finances. Of the banking struc-
ture and Of the currency. These are
the bases Of financial and business
confidence.
The anti-inflationist cannot, of
course. prove that his program would
have had the country back on q pros
porous basis by now; but he certainly
insists that, due to a persistent failure
, to balance the Federal budget, to such
currency proposals as that represented
by the Patman bill, to the sabotage Of
the r. F. C.'s work by the insistence of
Congress on publicity for bank loans
and, above all, due to the progressive
strangulation Of trade by rising tariffs
and other trade barriers, orthodox
methods have at no time been genuinely
tested.
Markets Provide Check.
AS for the breaking of the deflation
spiral, no imitation Is needed for that
The financial markets provide all the
mechanism required. When the security
and commodity markets indicate the
turn has come. through rising prices,
they do two things. They arouse the
dormant capital markets from their
lethargy. putting money to work in
that way and they put purchasing
power inB the hands Of security own
ers and commodity producers. These
are the primers" that have always put
business on its feet in the past; they
can be depended on to do so again,
given the necessary confidence in the
Governments finances In the banks
and in the currency.
AS prices are forced up by imitation
just as they are by what is known as
the orthodox processes" it may be
asked, what is the difference which
course we choose? Passing over its So
clal lnJusticeS and the impairment of
confidence involved in imitation, there
are two main reasons why this method
of inducing price recovery should be
avoided at all costs.
Speculation Is Danger.
The first reason Is that. whereas
sound money promotes production, un-
sound money creates speculation. The
prudent merchant, studying his local
market and his sources Of supply, has
no chance under imitation. Reckless
and unscrupulous men, borrowing all
they can borrow, sometimes go bank
rupt IN the fluctuations Of the market,
but those who are successful are the
ones who profit in such a period.
The second reason is that, despite
the easy optimism of the managed
currency advocates, there exists no
financial airbrake which can bring a
movement Of this sort to stop without
jolt. AS one economist has observed,
those who are thinking seriously in
terms Of control must surely recognize
that If unorthodox currency and credit
methods are used, and start q vigorous
boom, they must be braced for the use
OF very drastic and unpopular methods
when they undertake to put on the
brakes. They must be prepared to see
sharp reaction in speculation, and
even industry, as result Of the drastic
control that must later be applied.
(The tenth article in this series will
appear in The Star tomorrow