The Wilmington morning star., 1947-08-06
Currency Pretenses

lays oH me CounteT a piece OF green paper
~expertly engraved with the likeness Of George
worth Of bread, fifty cents worth of ham and
fifty cents worth Of cheese"
You tell the customer that calls for another
fifty cents. 1T is evident to me- he replies,
that you have not kept up with things. There
is a law that says this which was a dollar
is a dollar and a halt. Furthermore, don't
try to jack up the price because there is a
law about that, too"
Let us say Immediately that we are not
suggesting anyone is seriously thinking Of do
ing any such thing about the dollar.
The sole reason for conjuring up such a
nightm arish situation is to try to illustrate
the absurdity of what is going on all over
the world in relation to other currencies. And
the reason we think it ought to be illustrated
is that the American people have been sub
sidizing such absurdities and they are being
asked to continue.
All over the world governments are pre-
tending that their currencies are worth more
than they are worth. And all over the world
people are acting just as they always have
acted in such a Situation.
How people do act under such circun-
stances is so practicable that it has been re-
duced to a formula. The formula is called
Gresham's law. The short description of the
law / tl1oI i3OASJ 0AANSo NNS 6NON'
less briefly, people flee from money they
distrust into things of permanent value.
There is more than one strange thing about
Gresham's law.
In the first place, it Sir Thomas Gresham
returned to this life, he would be surprised to
find its discovery imputed to him. 1t was not
so imputed until three centuries after he died
and the law was stated at least another CEN
fury before Gresham lived by Copernlcus, VINO
was an economist besides being an aStrono-
mer. Probably it was known long before that;
very likely some cave man seeing an over
supply of bad shells or inferior ivory took
his good shells or ivory into hiding.
Another strange thing is that while nobody
has denied the validity of GreS1am's law
not even the most modern, free-Wheellng econ
omist-there has hardly been a time in his
tory when someone was not trying 10 run
counter to it. This is done merely by assert
ing that what is obviously bad money is good
money or by asserting that what people think
is good money is really a lot OF trash.
How people act according to Gresham's
law can be shown by returning to the fancitul
case of the dollar that was decreed to be
worth a dollar and a half.
You would be pretty sure that the first Gus
toner would be followed by others anxious
to take advantage Of the enforced bargain
sale. You would face a loss on Jour stock.
You would fear that would cot be the eno
of the matter either; the authority which SAID
a dollar Was worth $3.50 might decide that
it was worth $1.75-the authority would as a
matter Of fact almost certainly do that-and
SO you would cease to be anxious TO change
goods for money. To escape dong This you
would hide your goods and exchange them
secretly only for things that you wanted. Be
fore there could be any exchange you would
have to find someone who wanted your goods
and had something which you wanted. The
exchanges would be few and, OF course, COM
merce, production, and employment would
suffer.
The government would observe all this and
it would then try to remedy the situation by
further phenagling the money. Your distrust
of the money would increase. SO would your
eagerness to exchange it for anything Of per-
manent value.
Gold is. something in which people have
faith. 1t is easily handled and easily hidden
and so people are eager to nave It. American
dollars are valued nearly as highly as gold
and so people are eager to get those and
hoard them. At the same time a great deal
is said about a dollar shortage and loans
to remedy it. But the fact is that the dollars
already loaned are being kept out of circu-
lation.
The British government says the pound
sterling is worth 81. You can go to a New
York bank and buy pound notes Tor a Httl1
more than So and, Of course, the bank has
bought them at a slightly lower price. There
is a similar p%retense as to the real worth Of
other currencies.
The people Of France and Great Britain
arc aware of this artificial situation and they
act accordingly.
A well informed gentleman who recently
visited. France. said he had heard estimates
that there was boarded in that country 81
billion in gold and similar amount in Amer
lean currency. By the nature OF Things that
was a guess. The figures might be high, but
even if they were very much lower the gold
and currency, il put into circulation, would
eliminate any necessity for a loan to France.
The British live up to government DEGREES
better than others. Also. they are less open
about violations. However, the British author
tiles recently have very polntedly prosecuted
some highly placed and prominent people for