The Skyland post. [volume] (West Jefferson, N.C.) 193?-1988, 1935-10-03
SEES IMITATION
A SLOW PROCESS
A Real DANGER for the Future, Col.
AYes Tells Banking
GrOuDS.

NEW BRUNSWICK, N. J.-Present
prospects do not indicate that imitation
severe enough to cause further dollar
devaluation will come soon in this
country, but as an ultimate develop
ment It seems to be very real dan.
ger, Leonard P. Ayres. Vice President
Cleveland Trust COMPANY, said here
tonight in an address before the Grad
uate School of Banking. He believed
this statement to be true sunless the
government enters frankly upon a pol
icy 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 Sectio OF the American
Bankers Association and Rutgers Uni
yersity to offer advanced studies for
bank officers.
1--WE have so enormously increased
the capacity of our banking system for
credit expansion that it Is difficult to
see how we could have vigorous
bu3iness revival without having it de-
velop into a credit imitation" Colonel
Ayres declared.
Imitation Slow Process
II imitation does come 1t will be
slow process. he said, pointing out that
: in Germany. France. Belgium and Italy
1t took about five years to develop from
the time when the governments en-.
tered upon policies Of financing large
peace-time deficits by bank credit W
to the time when the public generally
began to spend money rapidly because
OF fear that It would still further de.
preciate In purchasing power.
IF we are to go through such a
period here 1t 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 en-.
tered upon the policy Of financing large
governmental deficits by the sale Of
Federal securities mainly to banks
rather than TO private investors.
1.-THE method that we are following
is the one that proved disastrous In
Europe for in all those countries in.
Guiding Germany. the increasing issues
of money that caused the mutations
were not mere printing press issues
II fat currency. but were secured by
government bonds and notes discount
ed at the banks. Nevertheless, the
process is inherently slow one."
Among the clearest lessons taught
by the European experience. Colonel
Ayres asserted. is that there are mo
good hedges against imitation" He
added:
Did Not Tighten Debt yBurdens
Zone Of the strange facts about these
inflations is that while they destroyed
the values of most existing debts. they
did not succeed in tightening the debt
burdens Of either the people as q
whole. or OF the corporations.
Imitation destroys the value OF bonds
and mortgages and so cOnfiscates the
property OF these holders Of obfisa
lions and hands 1t over to the share
holders and the equity owners. How
ever. 1t introduces so many new eco
nomic difficulties that these share and
equity holders are at once forced tC
incur new Indebtedness so that wher
sterilization comes the problems o.
iebt are about as troublesome az they
were before. or even more So"
The Eve requisites OF imitation were
listed by Colonel Ayres as flrst, a pc
Rod of sustained active business: sec
Ond. a rising stock market: third. rea
credit expansion: fourth, greater out
Aow of gold than we can tolerate
which would force US to cut our cur
rency entirely free from gold: ant
ffth. continued large budget deficits IL
government operation.