Evening star., 1948-02-15
.oneySpiiral
Tops Prices
Growth of Per Capita
Wealth Has Been
Phenomenal
By Froneis P. DouoIos

Mo6g people, Wnetner Gney nave
to struggle with the high cost OF
living or not, are familiar with the
relationship between money In the
hands of consumers and prices. But
what is not generally realized is that
the increase in the amount Of money
in circulation has been . more
extraordinary ,phenomenon In re-
cent years than the increase In
prices.
The upsurse Of prices in the
period of World War II and its
aftermath had its counterpart In
the period of the First World War.
But the tremendous increase in
money in circulation has far out
stripped the increase which came
with World War I.
Prices High, Money Low
In the period Of 1915 to 1920.
inclusive, the wholesale price index
went up 122 per cent. In the same
period the amount of money in cir
culation per capita increased only
55 per cent.
In the 1940-l947 period the price
index advanced 90 per cent. But
the per capita circulation Of money
went up 23l per cent.
The Treasury figures that for
every man, woman and child in the
United States there is almost 5000
in circulation. This is the back
ground for the incidents Of buyers
paying for washing machines and
radios with 500 bills peeled of fat
roll and Of debts being settled with
other hundreds or even with $500
bills instead OF by check.
Economists refer to the quantity
theory of money in relation to prices.
Other things being equal, they say,
changes in the value of money
that is, prices-are dependent on
changes in the quantity of money.
The first great price rise in mod
ern history began in Spain and was
occasioned by the tremendous
amount of gold and silver brought
back in the galleons from America.
Then Came the Crash
| The amount of bullion Sir Francis
Drake seized from the Spaniards
and brought home from only one
voyage was said to be SUFFICIENT to
send prices in England up.
But getting down to our own
times, let us see what has been the
relationship between money In cir
culation and prices.
In 1915 the wholesale price index
stood at SOS on the scale in which
the 1926 prices equal 100. In that
year the per capita circulation OF
money was 1926.
Both figures rose steadily-and,
in the case Of prices, steeply-to
1920. In that year the price index
was 1544 and the money in circu-
lation was $5l.38.
Then there was q recession OF
readjustment. Prices went down tt
s6.7 in 1922 and money in circula.
tion dropped to s4o.e1 in that year
so far the graphs on a char
have moved in unison in direction
There followed a few years wher
they did not move together, but the
changes were relatively slight.
Then came the collapse Of 1929
Prices went down, but money in cir
culation went up. "Other things
decidedly were not equal What
happened was there were bank
failures and people put their money
into safe deposit boxes, under mat
tresses and into their wallets. It
took about three years for this to
run its course.
Climb Started In 1888
With 1888, prices began to climb
again. Both prices and money in
circulation reached modest peaks In
1887 and receded. With the start
of the war in Europe in 1889 both
began to climb again.
Here in tabular form is what
happened: