The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1934-09-20

easy cure" he
always finds
ready audience.
For example,
. widely known ~
professor of Lewis Haney
economics is now out for what
he calls the 100 per cent Sys-
tenn" for money and banking.
All he claims for his medicine
is that it will cure depressions,
end bank runs, and wipe out the
national debt!
The scheme is just one of the
numerous varieties of fiat money
or greenbacks. Briefly, what the
professor proposes is this:
1. The political party in power
goes into debt for whatever pur-
poses it considers expedient and
issues bonds.
2. These bonds are then held
by the Cover nment itself
through another alphabetical de-
partment to be known as the
FEC.
3. On the basis of these bonds,
the Government that is,
the politicians in power at the
mOment) will then issue what
the professor calls "b e rer
money" in the shape of green
backs, or nOn-intereSt bearing
notes.
4. These greenbackS will be
transferred to the banks in
amounts exactly equal to the de-
posts in the banks, which is the
100 per cent feature.
s. The banks loan and deposit
functions will be restricted to
these greenbacks, and they will
be compensated by being forced
to take more of the Govern
ment'S debt.
This is a beautiful inflationary
Setup which would make our
money 100 per cent fiat and vir-
tually nationalize our commercial
banks.
When asked if his panacea is
not fiat money, the professor did
not deny, but argued as follows:
There would be behind my new
kind of greenbacks exactly what
is now behind the old check-book
money"
His answer is not true, because
under the old system checks in
practice called for payment in
real money that was convertible
into gold and whose value was
the same as gold.
He attacks the old check
system and attributes business
booms and depressions to it.
How, then. is his money better?
The fact is that checks and his
greenbacks are both just credit,
and their circulation depends
upon the credit standing of the
issuer. Neither can be real
money"
This is just another credit
juggling scheme. In essence,
it is putting the government
into a false double dealing, by
making it both borrower and
lender at the same time. 1t
is the old shell game of swap
ping one kind of government
debt for another. The govern.
ment is to borrow by issuing
bonds; and at the same time,
it is to lend land Spend) by
issuing notes.
1t is thus to pay its long
term Understanding debt with
its own short term non-interest-
bearing debt. 1t is to borrow
itself out of debt!
All these schemes for national
izing credit" head up in some cen
trail Federal organization which
takes Government bonds, turns
them into smaller pieces of green
paper, and forces them upon us
as money.
This means that you and I as
citizens and taxpayers are made
debtors when our Government
issues it's bonds. (They are our
bonds.) Then we are to pay our
Government debts by further
debts in the shape of 3reenback
notes.
A fatal economic weakness Of
the professors scheme is that it
provides no relationship between
the supply of his money and the
demand for it. The need for
money varies widely with business
conditions, yet he glories IN the
assumption that his money would
not change in quantity.
This would mean an ''inelastic
currency" and that always means
initiation, sooner or later,
Furthermore, there is every
probability that in actual practice
this Government credit currency,
with it's two-faced swapping of
bonds for notes, would continually
be increased in quantity BY the
spending politicians who would be
in control. What would stop
them?
Shades of John Law!