Nogales international., 1935-07-27
Sees Initiation
A SLOW PROCESS
A Real Danger for the Future,
Col. Ayres Tells Banking
Groups.


~----~----v--.-~
NEW BRUNSWICK, N. J.--Pces.
ent prospects do not indicate that |
imitation severe enough to cause fur /
ther dollar devaluation will come
soon In this country, but as an ulti'
mate development it seems to be a |
very real danger, Leonard P. Ayres, |
Vice President G ola L d Trust
Company, said here tonight i'll an
address before the Graduate School |
Of Banking. He believed this state.
ment to be true unless the govern |
ment enters frankly upon policy OF |
issuing fat money with which to |
meet its expenses" At present that |
does not seem to be in sight, he said. |
The Graduate School is operated
Jointly by the American Institute OF |
Banking Section of the American
Bankers Association and Rutgers
University to offer advanced studies
for bank officers.
1--WE have so orm Ou 8 Y in !
creased the capacity Of our banking
system for credit expansion that it
is difficult to see how we could have
a vigorous business revival without
having it develop into credit infla-
tion," Colonel Ayres declared.
Initiation a Slow Process
II imitation does come it will be a
slow process, he said, pointing out
that in Germany, France, Belgium
and italy it took about five years
to develop from the time when the
governments entered upon policies
Of financing large peace-time deficits
By bank credit up to the time when
the public generally began to spend
money rapidly because Of fear that
it would still further depreciate.
''If we are to go through such
period here it would seem likely
that 1t might last rather longer than
the corresponding periods did
abroad" he said. 'Its beginning
would date from the spring of 1888
when we left the old gold basis for
our money and entered upon the
policy Of financing large govern
mental deficits by the sale of Fed
eral securities mainly to banks rath-
er than to private Investors.
"The method that we are follow
ing Is the one that proved disastrous
in Europe for in all those countries
including Germany, the increasing
issues Of money that caused the in
hations were not mere printing
press issues of fat currency. but
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
"no good hedges against imitation"
He added:
Did Not Tighten Debt Burdens
"One Of the strange facts about
these mutations is that while they
destroyed the values Of most exist
ing debts, they did not succeed in
tightening the debt burdens of either
the people as a whole, or Of the cor
porations.
Imitation destroys the value OF
bonds and mortgages and so con-
fscates the property Of these hold
ers Of obligations and hands it over
to the shareholders and the equity
owners. However. it introduces 80
many new economic difficulties that
these share and equity holders are
at once forced to incur new indebt-
edness so that when stabilization
comes the problems Of debt are
about as troublesome as they were
before, or even more SO"
The five requisites OF imitation
were listed by Colonel Ayres as
first, a period Of sustained active
business; second. a rising stock
market; third. real credit expan-
sion; fourth. greater outflow of
gold "than we can tolerate which
would force us to cut our currency
entirely free from gold"; and fifth
continued large budget deficits in
government operation.