The Washington times., 1934-07-09

rise n IN ~
prices of many ~
stocks and COM "
modities. 1t is S|,u 1.~,G -
thought that
fear of a lower purchasing power
for the dollar will develop. Then,
as we have no gold to hoard, we
will buy commodities and stocks.
This would incidentally bring 6
speculative squirt in business.
What might cause such a de.
velopment? Cd In the first place,
the New Dealers may decide to
"devalue" the gold dollar further.
The worse business gets, the more
they will be tempted to do so.
~ They may push the sill
yer program so enthusiastically
that sO.called metallic reserve"
will be seriously diluted as a
"baCking" per dollar. And they
may issue large quantities OF
Overvalued silver certificates.
This might even lead to hoard
ing Of other kinds of currency,
although it is not now clear why
anyone would want to- do so.
90 Government lending and
spending may become so large as
to put in calculation" enough
overvalued credit currency to turn
the trick.
"a Government credit may be-
come so strained by continued
huge spending and lending, and
the resulting public debt, tnat
fear as to the solvency of the
Treasury may arise. Then cur
rency backed by Government
credit would depreciate. The
Government would find it hard
to borrow, and be strongly
tempted to issue greenbacks in
stead of bonds.
(5) This would be apt to cause
renewed mistrust of banks. since
the chief assets of the banks are
directly or indirectly Government
paper. In that event, depositorS
would seek to withdraw currency.
CD Repercussions of Germany'S
financial debacle, and the poSsi-
BILE breakdown of the gold bloc"
in Europe, might start the thing,
as by causing a temporary fear
Of gold and a heavy movement
Of foreign balances.
I do not predict any of these
things, but merely say that they
are not impossible, and that any
one or all of them might touch
off our initiation magazine.
One sure thing is that to pro.
duce soon q further effective
initiation here, something dras-
tic must be done. We have al
ready had three waves Of "an-
ticpatOry infIation," and are
partially inflated now. The
thing is held back by large
commodity stocks, price malad-
justmentS, consumer resistance,
and New Deal restrictions on
business. Frozen debts and
heavy taxes, also hamper in
flati0n. For example, the Gov
ernment bOrrows and taxes with
one hand, while spending with
the other, and the two offset
one another.
Then, too, the vague confidence
in government credit and cur
rency persists, aided by govern
ment manipulation of the market
for its own bonds.
Under these circumstances, I
think that initiation must come
through fear-either we will
await the eventual results of gov
ernment spending and debt, or
the Administration will make
some spectacular move in the
shape of devaluation or green
backs"
The latter course seems un-
likely at the moment, as the
New Dealers still fear the curse
which it would eventually bring.
This suggests delay, with prices
held down by conditions already
mentioned and business" held
up by government lending and
spending until finally the Treas
ury is exhausted and initiation
inevitable"
So don't be too sure of "infla.
ton" this fall. Remember that
as everybody comes to anticipate
it, everybody will buy in advance.
Then the wolf will not come
when expected. Probably the
present general anticipation of
initiation will keep prices up for
a while, but If so, the final wave
of initiation will be much less
likely to come this year.
Eventually, commodity prices
are bound to be higher lin
''dOlIarS"), but our utter un-
certainty and lack Of definite
policies under the New Deal,
make it impossible to say when.
CITIZENS To Meet