The Key West citizen. [volume] (Key West, Fla.) 1879-current, 1936-03-02
Also Swirls About Trading
Posts OF Stock Exchange
And Various Other Bust
ness Centers
By CLAUDE A. JAEGER
CA. p. Financial Editor)


mystical word echoes through
panelled and tapestried offices
high in Wall streets skyscrapers,
rumbles in the halls of congress,
is heard in the dignified offices of
the federal treasury, and swirls
about the trading posts of the
Stock Exchange.
This word is Initiation" Prob
ably few who hear it and few who
use it understand just what it
means. Yet few words, if needed
any other word, so quickly stirs
emotions of political, financial
and business leaders these days.
1t starts arguments, destroys
friendships, stirs not only anger
but fear, and causes timid capital
lists to shift their millions into
fresh Ravens.
Though initiation may be little
understood, it is we'll known that
in its severest forms it can bring
ruin unequalled by any force per-
haps save war. The most terrible
experience with it in recent times
was in postwar Germany, where
the currency became valueless. a
market-basket full of money
would scarcely purchase loaf of
bread, the great middle class was
impoverished. said hunger and in
tense suffering swept over the
land. Initiation is not new.
Rome saw it. In the 1780's the
infant American Republic suffer-
ed from it. In Boston, Samuel
Adams found that a new hat and
a suit of clothes cost him $4,000.
Moneys Value Declines
Very broadly, the economists
say, initiation means a decline in
the value of money, and conse-
quent rise in the price level. 1t
occurred in Rome when Nero re-
duced the metallic content of the
coinage. That was easy to under
stand. With less precious metal
in each coin, the seller of a new
tunic naturally demanded more
COINS. But today. when we use
chiefly paper money, and more
important still, transact about 80
per cent of our business by use of
bank checks, initiation is more il
lnsory.
One of the most commonly ac-
copied theories of initiation is
that it occurs when the effective
volume of money and credit in
creases faster than the physical
volume of goods.
Mass Emotion
Thus, if the number of dollars
available to purchase a quantity
of goods doubles, but the guam
tity of goods remains unchanged,
the price of the quantity OF goods
doubles. This. of course, is an ex-
tremely simplified version. 1t
might seem from this that effec-
tive control of money and credit
could be accomplished, and prices
kept stable. Indeed, that is one
of the detectives of recent none
tary and banking legislation.
But vital factor which is be-
yond control. economists explain,
is mass emotion If confidence in
the effectiveness of the controls
should vanish. the result may be
a rush to spend money for fear
it may be worth less tomorrow.
Something of that nature happen
ed in Germany. Once such a move
ment starts, money is spent fast
er and faster, prices rise, the need
for more and more money to car
ry on the movement tends to
speed issuance of paper currency.
No one wants to hold fixed in
come security like a government
bond. Government treasures can
not finance themselves by selling
bonds, and are forced to to print
still more money. Such a move
ment soon becomes initiation in
its most virulent form.
WAGNER BEER is