The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1935-05-27
Liberal Viewpoint
by DIR. HARRY ELMER BARNES

THE bonus bill raised once more the funda-
Il mental question of the economic effects of
imitation. All immediate proposals are for what
is known as controlled inf1ation," though there
is always the danger that the control" will be
lost once the printing presses get into action.
The Importance of this issue makes it desir-
able that all Americans should possess at least
a clear understanding of the essentials involved
in the imitation problem What they need is not
propaganda for or against imitation. They will
be best served by fair statement of the facts
and principles involved.
In the first place, what do we mean by inf1a-
! ton? Simply and clearly, it implies some method
of cheapening the dollar increasing the none
tary stock of the country and bringing about
resulting rise of commodity prices It is held in
current economic theory that the greater the
volume of money or the lower the gold value of
the dollar the higher the prevailing price level
will be.
Who hopes to benefit by imitation? The
farmer and other debtors will be able to pay their
fixed charges-debts, taxes and the like-with
money little if any more valuable than it was
! when he contracted his debts. The prices of his
grain and other farm products will rise. This,
he believes, will far more than offset the higher
prices he will have to pay for what he buys.
! MANUFACTURERS hope that rising prices
1V1 will loosen credit make it profitable to
manufacture, start our factories in operation and
IB6b INDUSTRY TO nunlul1lR once again. Iney NAV
overlook the question of who is going to pay the
higher prices-and with what-but such are the
optimistic hopes associated with the imitation
drives.
! Who, on the other hand, are chiefly injured
! by imitation? The creditors suffer most for they
must accept payment in cheaper money than
! they lent-cheaper in the sense that it will
buy less. But, by and large and taking into &C
count even the many small creditors, the creditor
class is, however, the one best able to shoulder
financial loss in the interest of the mass of
citizens.
Those with fixed incomes derived from life in
Surance annuities, pensions, interest on bonds
and the like lose by imitation, since their fixed
incomes will not buy so much in a period of
higher prices.
This latter situation applies very markedly to
endowed colleges and universities whose earnings
come mainly from interest on bonds College
presidents and professors would be more than
human if they did not recognize that imitation
threatens to reduce the university income from
which salaries are paid.
IMAGE earners and the salaried classes are
w liable to suffer temporarily at least since
neither wages nor salaries are likely to rise as
rapidly as prices.
In order to be fair, it is very necessary how
ever. to note that not all the risks are involved
in imitation. There are many very sound and
able economists who contend to refrain from
imitation means greater risk to our economic
life than any plan yet seriously proposed by even
our present fiat money enthusiasts.
For example, leading experts on our banking
situation have pointed out that the bank fail
ures since 1929 have done far more to destroy
confidence and credit than would be the case if
Congressman PatmanS bill should have become
law. This consideration must not be overlooked
when the risks Of imitation are being emphasized
by those persons whose policies landed us in
the bank holiday"
The real danger lies in the resort to uncon-
troled fiat money schemes. AS Prof. Paul H.
Douglas points out:
The great merit of the gold standard has
been the fact that the supply of gold is more
limited than the potential supply of mans fool
ishness, and there are lnquestionably great risks
to run if We abandon that safeguard"