Evening star., 1933-02-05
What Is ''Inflation'?,
Writer Points Out Significance of Term as Used in
Connection With Cnrrency-Predicts Eventual
Defeat of Such Proposals.

j., SoVc1lAOI VI II1c CcueTdl ftcocIVe
Board, knows and wants to initiate the
quantity of credit-money. So does
Secretary of the Treasury Ogden L.
Mills. For just about a year the fiscal
agencies of the Government have been
following policies designed to increase
the quantity of credit-money. Their
effort has not been materially sue
cessful however. All they can do Is
to increase the quantity of possible
credit, of material for credit, In the
banks. This does not become actual
credit-money until people borrow it
and use it. People. SO far, have not
done this much. Consequently. we
may say that the effort to initiate
credit-money has not been successful.
(Though it may begin to be success
full any time, and imitation Of credit
money may get under way)
In the absence of increase of credit
money-and speaking generally as a
result of the depreSsion-there is in
Congress, and elsewhere, a great de-
mand for increase of currency-mcney.
This proposed increase of currency
money is what is meant by imitation"
as the word is commonly used.
To say why people do not borrow
this credit from the banks and use
it. and thereby create credit-money.
would be to get involved in the vicious
circle which this depression is. Peo-
pile do not borrow credit and put 1t to
work because there is a depression.
And there is depression because peo-
pie do not borrow credit and put it to
work. 1t is vicious circle of fear.
The type cf attempted imitation here
described, imitation of credit-money,
figures in Congress hardly at ALL What
imitation" means in Congress Is in
hation Of currency-money.
What Imitation" Means.
What imitation means, as the word
is used in Congress, Is. mainly. increase
in the quantity Of currency-actual
printing Of more dollar bills. or minting
of more silver dollars. To increase
the quantity of dollar bills, or to mint
more silver dollars is the object Of most
of the more than 60 imitation measures
in Congress.
For some reason those Representa-
tives who get sufficiently interested In
imitation to introduce bills aimed to
bring it about, do not think in terms
of imitation of credit-money at all.
Yet the fact is that increase Of credit
money (Which the conservatives do
not oppose-which, indeed, hardly any
body opposes-which indeed the Fed
eral Reserve System is trying to bring
about is very much easier and very
much more important. The bulk of
the country's business is done with
credit-money. This is shown by the
fact that there is in existence about
forty-Six billion dollars of credit money
and only about six billions of currency
The imitation bills pending in Con-
gresS can be divided into roughly
three classes. What is said about these
bilis must be loose and inexact, be-
cause each varies somewhat from the
others end all are complex.
One group CT measures proposes that
the Government shall merely print
more dollar bills. These dollar bills
IN the spirit of most of the proposals.
would be used by the Government to
pay its daily expenses At present the
Government IS spending approximately
S3,000,0O0 a day more than it receives
in taxes Or other revenues To meet
this deficit the Governments practice
is to borrow money by issuing bonds
upon which the Government pays In
terest. This group CT imitation meas
ures would have the Government get
the money by simply printing it.
Another group of imitation measures
would have the Government mint sill
yer dollars. Some would have the Gov
errment buy the output of silver mines
IN America, mint it into dollars. and
'ay out these dollars. Other meas
ures would have the Government set
tie the debts due us from Europe by ac-
ceptmg silver and then mint the silver
and pay it out
third ~ voooe,roz 4
imitation in another way. These meas
ures would reduce the quantity of gold
In the gold standard dollar from a
present 25.s grains to 16.5 grains In
c1dentally, I suspect that if imitation
comes at all-which I do not think it
Whl-this is the form it would more
probably take. Reducing the quantity
OF geld In the standard dollar would
nave enormously complex results. be-
cause there are in America mortgages
and other contracts amounting to bill
lions of dollars which call for payment
in gold dollars of the present weight" f"
Gold Basis AssaiIed.
But there is considerable school in
Congress which thinks the weight of
gold In the standard dollar should be
reduced. The idea of going off the
gold standard" as it is called, is in the
air. Practically every country in the
world except France and the United
States have done So There will be
much agitation about it, in Congress
and out, but I do not believe that
either this or any other form of infla-
tion-that is. imitation of currency
will actually be enacted.
What is said here is obviously for
brief. All that is attempted is merely
a clarification of the subject. During
the coming few months, billions OF
argumentative words will be spoken
and written on this subject.