Evening star., 1935-11-18
ECONOMISTS FIGHT |
GREENBACK BONUS|
Fiat Currency Likened to
Drug Habit, Which Can't
Be Stopped.
BY DAVID LAWRENCE.

For two years now economists have
dreaded the possibility that the Gov
ernment would turn on the printing
presses and issue its own money to
pay debts President Roosevelt has
opposed it publicly and privately. Con-
gress has insisted on giving him dis
cretionary power to issue such money.
Now the concrete question may have
to be faced if Congress makes the
issuance of fiat or printing press"
money by the Treasury a mandate
OF law.
Eighty economists, seventy-two of
whom are connected with universities
and colleges from coast to coast, have
issued warning as follows:
There is very real possibility that
the Congress which convenes in jan
uary will provide for the issue Of
approximately $4,000, 100000 of in
convertible paper money as a means
of paying the soldiers bonus. II the
soldiers bonus bill should be passed.
payments might be made in any one
of various ways, but the most dan
gerous means which could be employed
would be the issue of inconvertible
paper money in the form of greenbacks
(such as the inconvertible and unse-
cured United States notes Of Civil War
days.. The probabilities that Con-
gress may resort to the issue Of such
money are too great to be ignored by
the people of this country"
Public Response Expected.
The purpose Of the announcement
by the economists National Commit
tee on Monetary Policy. which issued
it, is to develop an effective opposi-
ton to such a proposal while there
Is yet time" 1t is carefully pointed
out by the committee that Mr.. Roose-
velt has already taken a position in
opposition to the issue of such money
and that the public should let the
President know he is being given their
support as against the bloc in Con-
gress which may seek to tie his hands
with a mandatory law.
The statement from the economists
will be somewhat of a surprise in the
sense that there has been no inkling
that the congressional paper money
bloc is strong enough to pass such a
law. But unfortunately the paper
money question has been tied I'D with
the soldier bonus. and the parliament
tary situation may develop in such a
way that a member who wants to
vote for the soldier bonus will find it
necessary to vote for the issuance of
paper money to pay it.
Fiat money has wrecked many a
government because, if money can be
issued without a definite holding of
silver or gold back of it, there is no
limit to which governments can 20
in issuing such currency. 1t is like
the individual who has a blank check
book and can write as many checks
as ne pleases without worrying
whether the people who receive the
checks will ask if he has an equivalent
amount in the bank. Since a gov
ernment can compel acceptance of its
currency by the public for money pur-
poses, there is for the average man
no alternative. What happens then
is that confidence in the paper money
breaks down, not only in the new
issue, but in al lother issues.
Wage Farmers Suffer.
When that occurs, prices rise to
fantastic heights. In Germany. dur
ing the 1923 imitation. they climbed
SO fast that people could not translate
their tntn n,,roho hat
skyrocketing prices ate up their pay
envelopes. Such a situation can be
fatal to country. because wages and
salaries never go up fast enough to
keep pace with the rise in prices.
The people of moderate means and the
persons in the lower brackets Of in
come suffer the most
In view Of this picture, 1t might be
asked why any sensible group of legis-
lators would ven entertain such a pro-
posal. The answer is that, ever since
the famous imitation in France in the
eighteenth century. the proponents of
nat money have insisted that the sup
posed dangers never will arise because
the amount Of paper money issued can
be controlled. But history shows that,
once the step is taken and govern
ments issue their own money to pay
current expenses, there is no stopping.
1t has been likened to the person who
takes drugs, believing a little will not
hurt and then finding that a habit
develops which Is difficult to break.
l.
The bonus probably will be paid
next year. There's two-thirdS vote
in both houses to pass a bonus bill
over the Presidents veto. But the
right way to handle the matter, If the
Congress insists on paying the bonus
now. is to issue Government bonds
carrying interest and adding the obli-
CATION to the public debt along with
the other borrowings which have to
be paid for some day out of taxes or
customs receipts or the sale of assets
held by the Government in the form
Of loans.
The soldier bonus debt comes due
in l945. 1t should always have been
carried on Uncle Sans books as a
direct obligation. because the money is
owed. There is a dispute as to the
total amount, depending on whether
past loans will be forgiven or whether
the interest will be permitted to ac-
cumulate to the maturity date, even
though the Government pays the
bonus nine years before that maturity
date is at hand, namely, in 1886.
But whatever the amount, 1t be-
comes a direct obligation of Gov
ernment and as such can be treated
as an item of expense and borrow
ings made for that purpose. The issu-
ance of fiat money would only intro
duce the printing press as an instru-
ment of ultimate reputation of the
public debt, a circumstance that would
cost the country in broken confidence,
rising prices, depreciation in Govern
ment bonds and consequent disaster
to our banks far more than is in
volved in simply adding $4,000. .000, 900