Evening star., 1936-10-18
AVERAGE MAN WILL PAY
COST OF THE NEW DEAL
He Will Contribute Directly Most of
Taxes and Through h Process of ''Di.
luted" Currency, Says Observer.

the cost Of the commodity without
any addition in value.
President Roosevelt needs some
money. He needs it for w. P. A. or for
relief, or for regular Government ex-
penses or what-not. There Is not in
the Treasury as much money as he
needs. The President sends for Secre-
tary Of the Treasury MOrgenthau. Mr..
Morgenthau calls up the Bureau Of
Printing and Engraving. He tells the
bureau to print billion of Govern
ment bonds. The bureau prints them.
Mr.. Morgenthau takes, for example.
one Of these bonds to a bank. The
bank takes the bond.
Then the bank makes an entry in its
books. The bank credits" the Gov
ernment with 81 900. The Government
now has deposit" of 81 ,00O Against
this deposit the Government draws
checks just as the average citizen
draws checks against the money he
has actually deposited.
1t is the average man who will pay
the cost of the New Deal. He will pay,
directly, most of the taxes. And in
addition to paying the taxes, he will
pay for the New Deal in another way.
He will be made to pay-he is paying
right now-through device so in
tricate that I am confident not one
person in 10000 understands how 1t
works, have tried to explain it be-
fore; I repeat the explanation here
1t is needed by ell America as a pri-
mary lesson in Government finance.
The average person, any of us. earns
some money. He takes it to the bank.
The bank credits him with a deposit.
A depoSitor can get his money back
any time-there is no present doubt
about the safety Of the banks. That
is, the person who deposits sl00 in the
bank can at any time get back Sl00.
He can get 100 pieces of paper called
dollars. The pieces of paper he gets
back will be identical in all respects
with the pieces he put in. They are the
same size, they are the same kind Of
paper, they are printed with the same
colored inks, they bear the same words,
including the words, lone dollar"
But while those dollars have been
in the bank, something subtle has
been done to them. It has been
done by the Government. Let us see
what this is. We can envisage the
scene.
Made Dollars"
Now where did this thousand of
new dollars come from? Nobody
earned it. The money which the
average man deposits is the fruit of
working and trading and saving. The
average mans @money consists of
earned dollars" The Governments
money consists of made dollars"
Father Coughlin Is not far wrong
when he calls it money created by
the stroke of fountain pen"
(Though I think Father Coughlin is
incorrect when he applies the same
term to ordinary commercial credit
brought about by bank loans to busi-
nessmen)
What is the effect of adding 1000
new, Government-made dollars to
the earned dollars of citizens already
in the bank. The effect can be de-
scribed as so much air injected into
the average mans dollars-by that
figure of speech the process is prop
erly described as imitation" Or it
can be looked upon as adding so much
water to milk-by that figure of
speech the process is properly de-
scribed as "dilution."
Whatever it be called, the effect is
to thin" the average mans earned
dollar, to reduce the purchasing
power of each dollar. Every time the
Government gets dollar by the proc
ess here described. tiny fraction is
taken off the purchasing power of
every one of the dollars already in ex-
istence. The. aggregate Of these frac-
tions lin addition to taxes) Is what
meets the cost of government. The
average man should have little diff
fculty in understanding that in the
end it is he who pays the bill.
I should add that the process I
have described is not borrowing" as
the average man understands it.
Borrowing money which has already
been created by work and saving is a
different thing Some Of the money
the Government spends, it gets by
borrowing. But to a degree that
alarms many who have good judg-
ment in this field, the Government
gets its money and pays its bills by q
kind of manufacture of new money,
by the process have described.
(Copyrighted, 1936.)