The Coolidge examiner., 1935-07-26
SEES INITIATION
A SLOW PROCESS
A Real Danger for the Future,
Col. Ayres Tells Banking
Groups.

NEW BRUNSWICK. n. Pres
eni prospects do not indicate that
lnaation severe enough 10 cause fur
ther dollar doyaluation viii com,
soon ia this country. but as an ulii
mate Development IL seems 10 be
very real danger. Leonard p. Ayres
Vice President Cleveland Trus
Company. said here tonight in a.
address before The Graduate Sehoo
oi Banking. lie believed this state
meni 10 be true unless the govern
meni enters frankly upon policy o.
Issuing aat money Sith which q
meet its expenses" AZ present that
does not seem to be In sight. he said
The Graduate School is operated
jointly by the American Institute OF
Banking Section oi the American
Bankers Association and Rutgers
University 10 offer advanced studies
Tor bank officers.
I'VE have so enormously Ia
creased the capacity Of our banking
system ,or credit expansion that II
Is dineuli 20 see how we could have
a vigorous business revival without
having 4, develop into a credit inha
tion." Colonel AyrcE declared.
Imitation q Sloa Process
II inastlon does come IL will be a
slow process. he said. pointing out
that In Germany. France. Belgium
and Italy IL took about Eve year.
TO develop from the time when The
governments entered upon policie'
% financing large peaceilme dsnciu
BY bank credit up 10 the time when
the public generally began 70 spend
money rapidly because o, fear thar
II would stiil further deprsciaie.
III we arc TO 60 through such .
period here II would seem likely
that Il might last rather longer than
the corresponding periods did
abroad" be said "lts beginning
would daio from the spring OF is3.
when we loft the old gold basis for
our money and entered upon the
policy oi anAnclnE large govern
mental deficits by the sale OF Fed
cral securities mainly 10 banks raih
or than 10 private investors.
The method that we are follow
inE Il the one that proved disastrous
in Europe for IN all those countries
including Germany. the increasing
issues OF money that caused the IN
Nations were not mere printing
press issues oi Dat currency. bur
were secured BY government bonds
and notes discounted at the banks
Among the clearest lessons taught
by the European experience. Colo
mel Ayres asserted. is that there are
mo good hedges against imitation
lie added
Did Not Lighien Debt Burden,
zone o. the strange facts about
these lnhailons is that while they
destroyed the values Of most exist
Ing debts. they did not succeed 10
Tightening the debt burdens OF either
the people as whole. or OF the cor
poraiious.
~inna'iou destroys the value OF
bonds and mortgages and so con
nscates the property OF these hold
ers Of obligations and hands II over
10 the shareholders aud the equity
owners. However. II introduces &C
many new economic dlficulties that
these share and equity holders are
at once forced 10 incur new indeb,
edness so that when stablllEation
comes The problems OF debt are
about as troublesome as they were
before. or even more so"
The 1--WE requisites OF imitation
were listed by Colonel Ayres as
arsi. a period Of sustained active
business. second. a rising stock
market. third. real credit erpan
sion: fourth. greater outflow OF
gold than we can tolerate which
would force US TO cut our currency
entirely tree from gold: and nfth.
continued large budget deficits in
government operation.