The Washington times., 1936-01-04
PWAPR0L0NGS
PERIOD,
!; HANEY SAYS
BY LEWIS HANEY
Professor Of Economics, New York
University


With some Of the questions that
have come in during the past
week or two.
A reader in Long Island City
asks, "If . man Is able and
willing to work but can't find q
Job, how is he to provide for his
family II the Government does
mot spend money to give him
:WPA work."
If a man can't get real work,
society must care for him. That,
however, does not make the WPA
waste necessary.
In the first place, the relief
should be a local problem. Waste,
hefficiency, and even graft, are
the result Of having the Federal
Government attend to local prob
lens.
In the second place, the relief
should not take the form Of WPA.
TO provide for the needy that way,
costs US nearly twice as much as
to give them the relief directly!
It is also probably more democrat
1zing to make man part Of such
waste. Certainly 1t tends to pro-
long the relief period.
A reader in Los Angeles asks
about the Townsend Plan" and
its effect upon prices.
There Is much confusion and
misunderstanding about this mat
ter Some people think that it
is just sales tax. In a way, it
Is; but it is a tax on all sales
manufacturing, wholesale, retail,
commodities and services. All
transactions" Of all sorts would
be taxed.
The tax on the ore and coke Is
carried into the steel. The tax
on steel is carried into the auto
mobile production, and so on
through wholesale and retail
transactions. Thus it pyramids,
end we would pay taxes on taxes.
IT seems quite probable, in view of
the numerous transactions" of
Gil kinds that are required in order
to carry on business, that the
prices of products would be about
doubled.
: OF course, the tendency would
pc to resort to currency initiation.
d: A reader in New York city
asks, what shall do to pro-
tect myself against the pOSSibil-
ity Of inflatiOn?"
There seems to be no immedi.
ate danger Of an inflatiOnary
-up-ruSh in prices, because there
! Is too much uncertainty about
what the President will do next.
But If Federal finances 60 on
Is at present, initiation is in
evitabIe.
f; This means that money is not
o safe thing to hold, and that
fixed incomes are likely to de-
crease in purchasing power. The
logical course, therefore, is to
put ones money into cOmmOdi-
ties, property, or securities
which are likely to rise in price
saS the purchasing power Of
money goes down. For most peO-
pie, the better grade Of common
stocks of well established in
dustriaI corporations, seem to
afford the best recourse.
/. A Syracuse IN. " reader asks
:about the methods of banks in
buying Government bonds.
! The banks sometimes pay cash.
but. mostly they have paid for
gthe securities by giving the Gov
.ernment deposit credit, against
which the Treasury can draw
,checks. Such a deposit credit is
a liability of the bank.
I: The Government pays a very
low interest rate-a little over
ilh per cent on notes and less
:than per cent on certificates.
1T pays interest just as any other
borrower. The bank lends 1t a
deposit credit or cash, in either
case giving it the means Of max
ing payments.
= OF course, the Governments
notes or bonds which the bank
receives are evidences Of the
.Government's debt. It promises
to pay the bank a certain sum.
lust as it promises to pay any
sindividual who lends it money.
Certainly the issuance Of Gov
:ernment bond or note creates a
debt. Nobody would take it's
securities if they did not promise
Ito pay.
y, A part of our currency" con-
isists of the checks that are drawn
ION bank deposits. When the Gov
.ernment sends out farm bonus or
;:tWPA checks, it draws on the de-
sposits which the banks have lent
Ito it.
e To the extent that the Govern
.ment'S borrowing and spending Is
snot for productive enterprise, and
brings in no income, there IS moth
ling back of the whole operation
:abut Government debt. It is not
Like business credit. Thus it is
;5somewhat the same as the direct
Issuance Of notes, or greenbacks,
:,bv the Government. The chief
.iditferenco is that greenbacks cir
.culate. while Government checks
,iare redeoosited in the banks and
accumulate as unused bank bal
:iances.
90 CHICAGO Livestock