The Washington times., 1935-06-05

ment of busi-
ness goes logi-
Lewis Haney cally with gov.
ernment management of currency.
The same men who believe that
government can fix commodity
prices and regulate the values Of
wheat and Gotten, also believe
that a government can fix the
price of money and regulate the
value of the dollar.
These men are logically ma
tionalistS" and do not want to
develop foreign trade. They see
that in international trade we
have to use some definite and un-
regulated money. such as gold.
Foreigners would have no con-
fidence in a managed paper cur
rency.) But it would be impracti-
cable to carry on domestic business
with one kind of money, and for
eign business with another. So
they are prepared to give up for
eign business.
There are three basic and i'm.
portant mistakes which these
managed currency" folks always
make:
(I They assume that the
government can fix values.
(2) They assume that the
value of money can be con-
trolIed by merely changing the
size of gold dollars.
g They assume that prices
can be stabilized by using an
average of prices, or "price in
dex," as base.
These all boil down to the two
ideas, that government price fix
ing can work, and that certain
devices are effective means.
AS to the first point. most econ
omists hold that there is no way
to know what the value of a thing
is. except to find out what people
will give for it.
When a government "fixes" a
price. it is arbitrary and never in
agreement with buyers ideas.
Government price fixing always
fails, as it is now failing in cot
ton.
Why. then, should one suppose
that it would work with money?
Like everything else. money gets
its value from individual desires
for it, coupled with scarcity. A
government can no more legislate
value into money than it can into
cotton or wheat. History is full
of the failures of fiat money
schemes.
As to controlling the value of
money by changing dollar sizes.
that was what Mr.. Roosevelt
tried in vain when he was fol-
lowing Professor Warren. We
find that a "devaIuation" of 40
per cent is followed by rise In
prices of only 20 per cent. The
whole scheme leaves the de.
mand for money out of the pic
ture. Furthermore, there is not
the slightest reason to suppose
that changing the gold dollar
would have much effect on the
value of money unless our
money were actually cOnverti-
BILE into gold.
But the most illogical assump-
ton of all is that about the use
of price indexes"
A price index is an average
of many prices of particular COM
modities, but necessarily leaves
out many prices. 1t is unreal.
It corresponds to no actual price.
Nobody buys all the commodities
included in the index. Everybody
buys things that are not included.
Above all, note that a price
index" being an average, may
remain unchanged while all the
particular commodities covered
by it are changing. Some may
go up, and others go down. Thus
it is impossible to regulate the
price of any commodity by work
ing on price average or index.
In some recent weeks, the price
index has gone up, while wheat
prices have gone down. Under
managed currency" the money
changers at Washington would
try to put the average down, but
what would wheat farmers say?
The scheme is utterly futile.
Finally, it is probably uncOn-
StitutiOnal Thera iS not a word
in the Constitution which
authorizes the Government to
manage currency, or to attempt
to control the business of the
nation by manipulating a paper
currency. 1t would certainly i'm
pair contract obligations.
New York Phones