Evening star., 1936-02-04
IMITATION VIEWS
HELD FALLAC|0US
Monetary Gold in Treasury
Declared Pledged and Not
Free for New Issue.
BY DAVID LAWRENCE

The battle OF money is on. pressure
In the House of Representatives to
isue printing press money to pay on
Government debts and obligations is
growing.
Because the movement will be re-
sisted by President Roosevelt and
vetoed if necessary should an act of
Congress come before him, does not
subtract from the fact that consider
able sentiment is being developed for
the proposal.
The argument that there is only
about IS, 100000 of currency out
standing and that the Treasury has
more than S10.000,000.0 1000 in none
tary gold in its possession is being used
to influence members of Congress who
think there are good and bad kinds
Of currency expansion and that this
method of printing money as against
gold may not be Objectionable.
Pledged for Seized Gold.
AS has been pointed out in these
dispatches, the monetary gold in TIE
Treasury is already pledged as COL
lateral to the banks from which it
was acquired by the Treasury when all
gold was seized. To issue any more
gold certificates against the monetary
gold is to change the terms of the
contract between the Government and
the banks who represent the Nations
depositors.
But the infiationists have all along
confused the quantity of currency with
the velocity of transactions or demand
that causes currency to be expanded
or contracted in amount. There are,
for instance, plenty Of check books in
the country and the supply is limited
only by the printing presses that can
turn them out.
Nobody wants any more checks,
however, than he can possibly use
And certainly checks aren't issued un-
less there are funds to back them up.
Currency is outstanding to the amount
of only SIS 700 900 900 because America
has learned how to use check books
and clearing houses in every city are
available to make clearings of hal
ances from day to day so actual cash
currency Is less needed than it used
to be.
The banks of the Nation show de-
posits of around S45 100000 900 and
the bank checks used every year will
be many times that sum because
America does business by check and
money changes hands several times.
The need for currency rises when
there is less faith in banks. Today,
kay ctr
actual cash is less important than in
O time of financial stringency.
FaIlacy Is As Old As Money.
What the infiationists want is to
create purchasing power by issuing
printing press money. This fallacy is
as old as money itself. For centuries
men have insisted that governments
can issue "say-so" money and hence
avoid the need for borrowing to pay
current bills with all the attendant
burden OF interest charges.
What is overlooked, however, is that
printing press money become less and
less valuable as public opinion makes
up its mind that some day more and
more amounts will be issued. For the
problem has always been how to stop
the cycle of currency imitation. once
1t gets started. If $4,000, 100000 can
be issued now to pay off farm mort
cages, then why not issue $4,000, ,000,-
900 to pay off city mortgages and
finally why not issue $4,000, 900 900
in paper money and pay off the banks
which hold Government bonds?
These are the absurdities to which
imitation discussions always lead but
nevertheless there are men in Con-
gress who insist upon the printing
press theory, and they make con-
verts because they usually have some
plausible explanation as in this case
issuance Of greenback money
against gold in the Treasury.
The credit Of the United States
Government is still excellent and
money can be borrowed at low rates
Of interest by the Treasury to meet
the obligations of the Government
that are coming due as well as cur
rent Government expenses. The atti-
tude Of investors who lend their
money by putting it in Government
bonds may some day change. espe-
cially II the New Deal doesn't soon
put its financial house in order and
stop the growing deficits, but for the
moment the bonus and the money
needed for A. A. A. can be raised by
borrowing.
Slip-shod Bookkeeping.
Incidentally, the crisis created by
the bonus payment authorized by
Congress illustrates the slip-shod way
in which the legislative body for years
has kept books. As soon as the origi-
nal bonus promise was made several
years ago the item should have gone
into the national debt as a deferred
obligation. It has never been so in
cluded.
Also Congress was supposed to set
aside about 500 O00. 600 a wear as a