Evening star., 1941-09-12
BY CLAUDE A. JAEGER.

we are told will gobble Up our in
come and savings?
Virtually every expert in WASH
ington and in Wall Street will as
sure you that it is no myth, that you
can feel the hot breath from its
noStrils right now, you feel it every
time you pay for your groceries.
1t is the much talked about, long
viewed with alarm initiation.
1t is a vague and shadowy word,
but when initiation comes, it is
definite and real, as real as hunger.
Doubtless it has come to seem
remote or unreal because we have
heard about it so long. Ever since
the spring of 1888. bankers and
economists have been warning OF
imitation. So perhaps it is not sur
prising that these later cries of
'Wolf, wolf" fail to arouse us.
The very word imitation, unfortun-
ately, is a rather abstruSe economic
term. Economists argue as to proper
definitions.
Money Buys Less.
ouU NllCll AZ lOlllCOy ~ 10 NCL y
simple, brutally simple. Your money
buys less. Most simply stated, prices
rise. But there is more to it than
that, much more. Only a few years
ago the Nation was striving to get
out of depression by boosting prices.
Rising prices are not uncomnonly
associated with prosperity.
But when initiation comes, prices
rise because something is happen
ing to our money.
Reduced to its essentials, imitation
occurs when we are creating spend
able purchasing poWer-regardless
of whether we use coin, bills or bank
Checks-faster than we can manu-
facture goods to meet the demand.
In the early days of the New Deal,
we cut the gold content of the
dollar by about 40 per cent, and
initiation warning signals went up.
But it didn't happen There was
vast unused productive capacity in
the country. We could produce all
the goods we had money to buy, ard
more. Later on, heavy Government
spending brought more warnings,
but still nothing much happened, for
the same reason.
Now drastic change has occurred.
The initiation warnings of a few
years ago mostly originated in con-
servative financial quarters, and
were promptly pooh-poohed in
Washington. Now Treasury Secre-
tary Morgenthau leads the parade
of viewers with alarm.
Millions Go to Work.
What has happened is that our
productive machinery mas had a
S5O,00000O 1000 defense plan saddled
upon it. Just starting to spend this
money has put millions of unem-
ployed to work, has given us sharp
boost in wage rates and in farm in
come. But vital machinery is work.
ing at capacity on defense. 1t can
not produce all the things that the
purchasing power we are creating
can buy.
Billions of spending power, thrown
into a limited market, inevitably
bring skyrocketing prices, unless
something is done about it. Rising
prices bring imperative demands for
higher wages. The bigger labor costs
push prices still higher and wages
must be boosted again-and that
can 60 on and on, unless something
Is done about it.
Now if it merely meant that prices
and incomes were going up in the
same ratio, it wouldn't matter so
much. But that can't be accom-
plished. If experience means any
thing, wages can't keep up with
prices. Also, the savings of the Ma
ton are in fixed numbers of dollars.
What those dollars will buy becomes
smaller and smaller as prices rise.
If the process were unchecked,
your old age pension, your savings
bank account, your life insurance
would become worthless.
That actually happened in Ger
many after the World War, and it al
most happened in France. The fact
that middle class savings were wiped
out in Germany, in the opinion OF
many analysts, left the normally
stable element Of the people so des-
perate and cynical as to pave the
way for Hitlerism.
Goods Are Rationed.
Probably almost no one thinks
that anything as severe as that can
happen here. 1t isn't happening
in Europe now. Limited supplies Of
goods are being rationed and prices
controlled. Much has been learned
of imitation control since World War
days.
We are only developing our con-
trolls in the United States. There
are, basically, three steps that can
be taken:
Goods may be rationed. Al
though you have money to buy, you
can only get as much as your ration
card calls for, so you can't bid up
the price. This. of course, requires
enormously complex machinery and
Is almost impossible to apply to ev-
erything.
2. The Government may fix prices
This. too. is a Job OF staggering
complexity. if We attempt to apply
It to the whole economic structure
3. The Government may tax away
your spending power in excess OF
what the Nations productive capac-
ity can supply.
European governments are apply
ing all three, and we are making
beginnings in the three directions
There has been no ratlonlnS o.
what you can buy over the counter
but priorities are. in effect, ration
ing vital raw materials to manufac'
turers. and merchants and dealers
are beginning to feel the pincn II
getting deliveries. Congress has be-
fore it a measure boosting take
and the Treasury already is study
ing new and more drastic proposals
for Congress to work on next year.
Congress Undecided.
But we haven't gone very far. w
have a price administrator in Wash
ington-Leon Henderson-but Con