xt7wwp9t2q46_14 https://exploreuk.uky.edu/dips/xt7wwp9t2q46/data/mets.xml https://exploreuk.uky.edu/dips/xt7wwp9t2q46/data/59m61.dao.xml American Liberty League 37 linear feet archival material English University of Kentucky This digital resource may be freely searched and displayed.  Permission must be received for subsequent distribution in print or electronically.  Physical rights are retained by the owning repository.  Copyright is retained in accordance with U. S. copyright laws.  For information about permissions to reproduce or publish, contact the Special Collections Research Center. Jouett Shouse Collection (American Liberty League Pamphlets), No. 17 "Inflation: Possibilities Involved in Existing and Proposed Legislation," February, 1935 text No. 17 "Inflation: Possibilities Involved in Existing and Proposed Legislation," February, 1935 2013 https://exploreuk.uky.edu/dips/xt7wwp9t2q46/data/59m61/59m61_17/Am_Lib_Lg_17_001/Am_Lib_Lg_17_001.pdf section false xt7wwp9t2q46_14 xt7wwp9t2q46 * ir
Pamphlets Available
Copies of the following pamphlets may be   Al I  
obtained upon application to the League’s na-
tional headquarters:
American Liberty League—Speech by Jouett
Shouse
The Tenth Commandment
Why, The American Liberty League?
Statement of Principles and Purposes * * *
Progress vs. Change—Speech by Jouett
Shouse
Recovery, Relief and the Constitution—
Speech by Jouett Shouse
American Liberty League——Its Platform . . . . .
An Analysis of the President’s Budget Mes- Possibljhtlcs Involved In
Sage Existing and Proposed
N. R. A.——Its Past, and Recommendations Legislation
for the Future _
Analysis of the $4,880,000,000 Emergency
Relief Appropriation Act
Economic Security—A Study of Proposed
Legislation
Democracy or Bureaucracy?—+Speech by
J ouett Shouse QER, C
The Bonus—An Analysis of Legislative Pro- Y  44*
posals ;   M
The Constitution Still Stands--Speech by    cob
Jouett Shouse { 'Y W
  4
Write to
. AMERICAN LIBERTY LEAGUE
NATIONAL PRESS BUILDING AMERICAN LIBERTY LEAGUE
WASHINGTON, D_ C_ National Headquarters
NATIONAL PRESS BUH.DING
WASHINGTON, D. C.
* p *
Document N0. 17
February, 1935

 l Inflation
  ir
i Less than a dozen years ago the world was
  aghast at the ravages of inflation in Germany.
4 A The entire mortgage indebtedness of the German
people, estimated at about ten billion dollars in
. 1913, could have been paid off in November,
` 1923, with one American cent, but this boon to
y debtors did not compensate for the wiping out
  of endowments of hospitals and colleges, pen-
` . sions and annuities and fixed incomes of the
small salaried classes.
, Today in the United States there are three
  avenues through which inflation of a devastating
§ character may come. These are:
_ { 1. Treasury deficits which unless ended speed-
; ‘ ily will lead inevitably to unsound financing
· i methods. »
j 2. Printing press currency proposed to be
I issued to finance specific projects or general
q expenditures.
l 3. Credit expansion policies under recent and
3 proposed monetary and banking laws permitting
. a concentration of political control and offering
a foundation for disastrous inflation.
@#1 I
s Historical Examples
. The record of history is convincing as to the
~ perils of inflation. l
The most notable examples in recent times
have been in Germany, Russia and France. In
· each case post-war budgetary difiiculties were
chiefly responsible.
Fiscal needs induced our own country to em-
bark upon its greenback experiment in the Civil
War period.
- In earlier history the French assignats form
an outstanding instance of deliberate inflation
q of the currency. Like some of the present—day
schemes it was intended to be controlled in-
flation.
Whether the result of governmental necessities
` or deliberately planned, the consequences of ex-
cessive inflaticn have been equally ruinous.
Comparisons with what has taken place in
various countries appear fantastic. Nevertheless,
it is impossible to ignore events of history.
{ Assume that ten loaves of bread cost $1 in
F the United States. In the Civil War greenback
I experience the cost would have mounted to $2.85.
. Under depreciations similar to the French post- V
war inflation, the earlier French assignats and
i the Russian and German post-war inflations, the
l

 cost would have become respectively $10, $288, 7 - . . . . .
fifty billion dollars and one trillion dollars. i Innsglonllwotgss m te tmrtftactllaily lmsldlgus
The value of a thousand-dollar savings de- 7 Easy' .Su& Y 1 li ee llm   1 lj] {mh ats that
posit or insurance policy would shrink to $350 7 b eee IS a genera see es les 3 arm as
- . - · . . een done. Just as in the case of a drug, the
in the Civil War greenback situation, to $100 in Earl ff ,6 to 1 ,0. Wh th d .
the French post-war inflation, to $3.47 at the [ rs sytedgg S al; S lg? a msigc . den B1. PSS IS
time of the French assignats and to an innni- . Pr}? G Oi? O ttm . tglrglsu. ES tlI51°r&,£Z1%g· .7;
tesimal fraction of one cent in the Russian and { that Eh mos at? Ws fins-a mms; W1 nt 8 ml
German pOS.0_WaI_ inoations. is ey are or in a ion as t e term 1S under-
7 stood_ in its opprobrious sense. They talk of
Whee nensees Is i £Zt?ne°‘nni2§epn%€£E€nlBe¥Z"ntethZ.eFd§°§?n% °§“$t
The term "inilation" ordinarily is used rather   commences. Granting good intentions, past ex-
loosely to mean an increase in currency or credit Q Perlenee ju8tiii€8 doubt as to their ability to
tending toward an advance in prices. As defined g control an inflationary movement, once it gains
by most of the authorities, inflation exists when { momentum.
currency or credit increases more rapidly than ? _
business transactions in such a way that the Debtors and C1‘cd1t0rS
. geist?ldtllninntsnsnntetnsny nn Edwin W. Kem-   8};; Igggvegggeggsgegu deggegste messes, rggs
merer of Princeton University in Kemmerer on   gh. ht Of a gicultum   Y mason bo be
Mnney, pnbiiened in 1934 by the John o. win- ~ fsssms theg me of rhs mj n‘;}”P°ss dest ‘§;"“th°
see eemeeew Phnerse1sne» is ss feneWs= level existinpg when they e$t‘EnZelZetei’ei1d°eil·ni’enee°
"Inflation exists in a country whenever 7 Inasmuch as farmers pay their debts with the
the supply of money and of bank deposits 7 return from wheat or corn or other agricultural
circulating through checks, so-called deposit   products, an increase in prices obviously mak_es
currency, increases relatively to the de- 1 . it easier to pay fixed obligations for land or i
mand for media of exchange in such a way , implements.
as to,br1ng about a rise in the general price l The claim is made that inflation would benent
level.   the farmers. That statement is challenged.
Dr_ Jernes Hervey Rogers ef Yale University i There are farmers who are creditors as well as
in The Preeess gf Injiemjen in France) published   farmers who are debtors. Moreover the increased
in 1929 by the Celurnbie, University Press, New 7 costs which would characterize inflation would
° York, defined inflation for the purpose of that n fell as heavily OH the farmer 38 On any other
particular study as: l 01388-
~nn increase an the general level of prices i Whe seethe debeers ef the eesservr A elssslt-
growing out of an ioorooso in oxpondisuros 0 cation by Evans Qlark in his book The lnternal
Whilo goods available for porohoso oro not - Debts of the Umted States, published _1n 1933
correspondingly ioorossod in amount.,-’ by tliie Macmislolo Companyi]New York, is recog-
When intense arse ,seVe1ei>s it gives se is- eeifmnteettneti eiiinttetnsneiuieigtetfiittiiteitnntittrnt
eenttve te the eenvetsten ef nneney Inte sem' including 1ong—time debts short-time business
measles beessse ef s fese ef deereeieaee ef debts nerednei and neneeteid debts and bank
Purehasing power- The speentattve tnsttnet enters debts, totaled $285 000 000 000 Of this sum
in- The preeess tends te stimulate business sed $134 000 000 000 consist ef ldn -time debts $126 -
market aettVttY and te ineresse the veieeity ef ¢ 800 000 000 bf this amount gbein covered in
currency and bank deposits. This in turn gives i o13_S’siHo’d Statistics g
en impetus tp inflation- The spite] ef eveses ne' T In the tabulation of items making u the
eelerrstee resipidlg in mgmenlguntthtt the tnnkstten $126,800,000,000 the smallest is farm mortgages,
}s_en_Y me era e In e ems et ere may s se the total being given as $8,500,000,000, or 6.7
injurious effects. The trouble is that once ps,. com
started, it is difficult te eenttet- If it gets Out ef Otheriitems are· owners of real estat ` `t`
bounds, there is a loss of confidence in the value $27 500 000 000 ol. 21 7 sr cont. H B T in 1€S’
fthe currency. Beyond this point complete col- ’ · ’ t ’ · `- p · ’ nanma cel"
s f th ,0 t . 1 t porations, including life insurance companies
spss O G mont my sys sm IS tm Y a S sp· (paid-up value of life insurance), investment
5

 _ eral billions greater than the entire pub·lic debt
trusts 0110 10011 0g0110108, $21,1101),000,11111), 01217-3 at the beginning of the depression. The Congress
per Gent; 010108, 001101108, 011108 0110 11111111011001' recently has enacted a law under which it will
ities, $18,700,000,000, or 14.7 per cent; railroads, be possible to oontinue to borrow meney until
$1€1,000,000,000, 01 118 P01 00111*9 the Fede1¤»1 the total debt, which is now more than $28,500,-
Government, $14,200,0Q0,000, 01 11-2 per 00111; 000,000, mounts to s45,000,000,000.
public 1111111Y 001`P010110118, $11,300,0_00,000> 01 The Administration deserves commendation
8.9 P01` 001113 0110 111011811101 001P01`0110110» $1-0»' A for its refusal thus far to utilize the power given
€100,000,000, 01 8-2 P01 00111- in the Thomas Inflation Amendment in May,
1110-1V101101 0111Z0118 W110 010 1011l10Ye18 010 the 1933. Under that Act there is permissive author-
reel debtors 111 the 0080011110 0111180110118 01 g0V' ity to the executive branch of the government
ernmental bodies, while individuals who are ,;_ to resert to the same type of nnanejng that
stockholders are the real debtors 1n the case of Franee, Germany and Russia did When they
the V01‘1011s 0108808 of 001`I1010110118· M011Y_101`111" were unable to meet their obligations by ordi-
ers come W1t11111 these 0108808- Except 111 111" nary borrowing. In each of these nations infla-
S1l&HC€S such ES a»gI°lCu11`:uI°€ where the pI`Odu9€I° tion was byought on   governmental borrowing
of raw materials benefits very greatly from in- {rem the eentra] bank_ O
CI`€3SGCl pI°]lC€S,   pI`1C€S 3»I`€ apt to 1IICI'€B·S€ The Thomas Amendment makes possible al
rather than lessen 1110 10111`0011 ef 001118- _ greater use of the Federal Reserve banks in
The creditor classes include 1nd1v1cluals, bus1- gevernmental Hnancing The Amendment pI.e_
ness concerns 0110 111811111110118 011111118 001108, vides for direct purchases by the Reserve banks
11101‘1g0g08 0110 110108- F111108 01 the 1110 1118111" from the Treasury of government obligations
01100 00111P011108 010 111Y08100 111 1101108 0110 111011‘ up to $3,000,000,000 besides giving the President
g0g08· T11080 00111l1011108 110110 11010 110011Y 011e' a voice in the initiation of ordinary open market
fourth of all 0111810110111S 101111 11101`180808 0110 operations in which these banks buy government
110011Y 0110·111111 of 011 01118101101118 urban 111011* securities already on the market. Currency is-
g0g08- T110 0011111118 111011111110118 have 111108100 sued in connection with the transactions would
deposits of 1110 0111Z0118 111 001108 0110 11101180800 not be subject to the usual requirements with
The bu110111g 0110 10011 0880010110118 010 10180 respect to gold backing. It would be fiat money
mortgage holders. The endowed universities, hos- just as Would the $3,()()(),()()(),()()() of greenbaeke
pitals, libraries and welfare foundations have Which the Treasury may iesue under the Thomas
extensive investments in bonds and mortgages. Amendments
As the value of the dollar becomes less through Tbus far, the Treasury has been eble to {bor-
inf10t1011, 111010 18_ 0 00011110 111 1110_V01110 01 5111 row all the money it needs. No one can tell when
savings deposits, 11fG IHSUYBHCB pO1].CI€S, B,HnuI1l1€S   may become   to do So_   Such al point
‘ and endowments. The 011001101 001101 1110Y 110111 is reached, there will be a temptation to turn to
one rel0t1V01Y 8111011 $10011 ef 00111018, but 011 the authority under the Thomas Amendment.
creditor classes are injured. Such a course would be highly dangerous. The
_ best policy to pursue is to terminate the period
Treasury D€f1G1tS · of Treasury deficitsh at as ecsrly a date as pos-
The United States today is the fifth year S1b1.e· Therea tel? 1 ere nee, be 110 1001 01 111‘
Of Treasury deficits. Ng smtiog Eve; Islas gee;} flation from unsound financing devices.
able to continue an un la ance u ge 1n e - ·
nitely without resorting to currency inflation. Currency Inflatlon
The greatest present danger lies in the budget I Throughout the depression there has been
situation. A year ago in his budget message the agitation for deliberate inflation of the currency
President expressed the belief that there should I by those who believe that commodity prices will
be no further increase in the public debt after be advanced by such action and that such a
June 30, 1935. This year he said that we have , method of Hnancing is both easy and legitimate.
not yet reached a point at which a complete It has been proposed that all sorts of projects,
balance of the budget can be obtained. There including the four billion dollar work-relief pro-
is no assurance that the budget will be balanced gram and the two billion dollar soldiers’ bonus
in 1937 or even in 1938. The aggregate deficit payment, be Hnanced by the issuance of cur-
of the six fiscal years from 1931 to 1936, in- rency. Also certain inflationary proposals have
elusive, will exceed $20,500,000,000, a sum sev- 7
6

 been designed to promote a greater circulation pressure upon the Congress for additional
of silver with consequent benefit to silver pro- amounts for other purposes would be irresistible.
ducers. The only safe course is to avoid anything of the
The Administration properly has rejected all sort.
currency inflation schemes. The agitation for _ _
them] nevertheless has continuedbl h h C1‘6d1t EXp&I1S10n
T e issuance of a government o igation w ic . . . . . .
b€3·—I`S D0 1I1lDGI‘€Sl3 is alluring, The idea, ef keeping __   a·dml1"}lS}0T&JQi[J(i1H 1S - puI‘5u1I1gt.a iiogey 0;
such obligations in circulation, thus avoiding the 1 @3 1 eexpaélsufn W1 9* VIEW 3.3 S mm a' 10,31 O
ultimate reckoning day, makes the plan doubly · m ellsfyil O Engle? new Cm 1. ng more ein
attractive. The method is given a false coating   an fipa ES ba ga'. ly £?(g1B&S€.1n usmcs? il
Ei 2$1l*11I}e(l1Il:?Sid)}de;1i;al;>li;Ory the “ ‘*"g€’ "°‘“’“° I Eilieiieargeeiiiiy°%?b°ieb iee€§§ ti a’e§”‘X§e‘LeS§§e
Except as it tends to weaken confidence in the Of i>1€d11» ml13‘1°1°? .d%V°;l°pS‘ de . i h
YI10I1€l»8»I‘}’ system and thus to contribute to the S glnlongglo o in bo Kiel;} o1`o ltls  H Ugmzoi
ilnflatienairy igocess, an increase in curregcy can Inslxgrr u un Br Ou an g Sys Gm
ave itt e e ect upon prices or upon usiness ' · · · ·
activity. Currency now in circulation is greater -e-Aunoeglmg m mini hlgggryx hggiotglealggtggiltgggi
than at the peak of the speculative boom in EF; 3 ingelgillg geeglrio seg;) riihe reeeim me
1929. Less than 10 per cent of the business of the be immd in the menetgr ie mation eneeteg
country is transacted with currency, more than durin the eee two eerey Thi endin Bemk_
90 per cent being by bank checks' It is the in Ait of 11935 broadens the ovgers ofgadmin-
velocity of turnover of bank deposits which is the ieéetive authorities to mmotg an ex eneien ef
factor Of greatest impOr}°9‘n°°‘ · credit and by the same tldken increases 1t)he danger
The soundness of the currency system is based Of inflation
upon conudonco Thom is no exact fomnulo to The Gold Reserve Act, the Silver Purchase
goyorn tho amount of Pano? money which can be Act and the Thomas Inflation Amendment make
1SSuoo· Po? umt of molioulo 1°oSo1`VoS· The Pooplo possible a tremendous credit expansion under the
of this country became accustomed to the mone- control of the President and the Secretary of
tary system as it existed prior to 1933 and grew the Treasury. Expansion under the Gold Re-
to have confidence in it. The new monetary laws serve Act and the Silver Purchase Act is brought
contain changes which have disturbed some about through the use of gold and silver certifi-
authorities, but there has been as yet no loss of cates. The Thomas Inflation Amendment gives
confidence in the euI·I·ei·iey_ I1; has been the ex- 3 II1€3»SL1I`t of COI1liI'Ol•OV€1' F€Cl€I`8»l R€S€I'V€ CI‘€dIl'».
perience of nations over a period of centuries The Proloooou Bonkmg not of 1935 ebbeeeebeee
that the issuance ei printing press eineieeney is the control of the President and the Secretary
the surest way to break down public confidence. ‘ ofrnno Treasury oyor Fouornl Roooryo orouui by
If confidence is undermined, currency will de- I Shlftmg powers now Vostou ln tho Fouornl Ro'
preciate, a larger quantity of currency will be i fewe banks to 1°h€.F€d€m1 .R€S€rV€ Band which
neeeeeery and imeietien will reeuitl    iilnlageemore definitely subject to administration
Such a depreciation would be different from ‘ ‘ . .
what has taken place in the devaluation of the What has been taking Place may be mahzed
dollar While bbe dollar has been depreciated by from a gl““°"’ at nudes In the Dnuy T‘”°nS“’>’
more ibm] 40 per cent from its former level in Statement and Federal Reserve reports. Gold
t f f . h d ,0. , assets of the Treasury liave increased to nearly
Grms O, Orelgn exc angev Omes 10 PHCBS are $8,500,000,000 from a little more than $7,000,-
¤¤1y ¤·11‘~11¤ h1gh<·>r thm 111 1931 and M1 S¤ high ccc,ccc immediately renewing the devaluation
o·S_1n 1930- A11_f0r¤;S of our ou1`1°onoy oro main- of the dollar and the accompanying increase in
18111611 at 3 P9·1‘1”¤Y WN11 19116 11€W gold donor- The the price of gold. The gold certificates in the
new dollar- looks no different from the old to the hands gf the n Fedeye] Regerve banks he-Ve in-
0I‘d1I18»1‘Y G1@1Z€11- _ _ _ creased by nearly $1,900,000,000. As a basis for
Our monetary system might survive the issu- the issuance of currency at the statutory gold
ance of a moderate amount of printing press minimum of 40 per cent this amount can be in-
currency, but if the process were commenced, the creased two and one—half times. The currency
8 9

 or credit can be pyramided in the form of bank _ , .
credit approximately ten times. Silver assets of reason ef er lnoroaso ln ono VolooloY_ ef eurrerey
the Treasury have increased by about $225,000,- and bark deboeros dee re one rnddenoe er
000 and silver certificates in circulation by about degiolobmonoo hm )NfiaSlnngoon· The odbooohnono
the same amount. The silver certificates can be oo abao ef o o ln aolonary boom teede te
pyramided eee times in me rem of bank credit.    asigrlgigrlelaggfggge ef are early ereeee
Excess reserve balances of the member banks . . · .
with the Reserve banks recently mounted to at . The Qrrrl Wer ereeebeela. which were ara
new record haha] Oi mais than $2,300,000,000' 1SS11€d·11'1 1862 to aid 1n financing the G1v1l War,
This meant that this much credit which has been derreerered re ebeet ro oenoS,on,one dollar dur'
forced into the banks has remained unused be- hriggrhriao I};1ag`édTbn€a¥;€;?n§3a;1;r&dg%a2e€d1;Yd¥§`;§§;
cause of a lack of confidence either on the part .
of the banks or the borrowers. If confidence is rooo and rn Marorn 1864, drobbod te a loW of
restored and if a speculative fever develops, the SllgnolY moro ther ee oonoo_on the dollar- In
unused _ reserves will be quickly drawn upon. rooo the sreerbeeke rooo ee lngll ee 73 eeere, and
With a hugs suhhiy Of Ciadih at hahd tha hahd_ . 1n the period between 1870 and 1875 their value
ency toward inflation will be strong. ranged from 85 to 90 cents. They were restored
The excess reserves now existing, if expanded re Par ln_l878 Wllon rodombolon m gold Was
ten times, would mean credit amounting to as made PoSSlblo· On a beers of loo for the yeer
much as $23,000,000,000. It would be possible rood Wnoleealo oommodloy Prlooo roaollod a
theoretically to expand credit by twice that mexrmum ef ooo ln ono Yoar 1865- _
amount on the basis of gold and silver certiii- 1_kTneh dobroolaolon ef groonbaoks Was nool1111g
cates actually issued during the past year. The 1% e o aléwnlon merkeal ono Po§o‘Vl;’ar_Porlod an
total expansion possibilities on the basis of exist- r ence, ormany and eeere er o o olmo ef o o
ing law are far in excelss ofh$100,000,000,000. d Fronon eeererete a Century end a helf ago-
It is to be hoped t at t e powers over cre it .
which are being concentrated in the hands of French Peet-Wer rnrraoron
eerermreer eaeiele will be reed erlr ir e wer The eeueee of ieaeeiee in France in the peer-
that will a1d recovery and W1_ll 110o plunge ono war period was checked before it reached 31 stage
nation 1nto uncontrolled 1nflat1on. Retention of di Such complete disastsi. as iii Germany and
sreeter authority in nombolroloal agonoloo Weuld Russia. France was involved in budget difficulties
be reassuring. As matters now_ stand the menace iusii as tha United staias is today. Faiiiiig id
ln the event ef a ooo rabld bnornooo boom lo Very balance its budget when the war was over, France
great. resorted to various expedients to finance con-
. . . tinued deficits. After- borrowing all it could else-
Irrrraoron rn Umted sreree vshheriea th; govehnment fell back upon loansffrom
The United States has had various periods of dv o o en ef Yanos- A00§>1‘d111g ’¤0_ P1“0 esS01‘
inflation during which there has been an increase l-°~ogo1`s, _ol1€ 1110so P0W€1‘f}1l lnllnsnos 1n aeS
tion with the greenbacks during the Civil War. Playod a P1fodon1111anl1 rele 111 the P1‘0G€sS of 111-
Somewhat earlier an the nrtiee we had an anna- newer gieeprte the feetthetthey represented only
tion from an increase in the world’s production a rolao1VolY Smell P1'oP01”o10n of one oooal b01‘-
Oi gOid_ At the bsgimiiiig Oi the pmssnt century rowmgs. Inasmuch as the loans from the central
there was an inflation from the same cause. Dur- bank Wire a§l1ei)1iaofp10(0B niaiaaantlng inniif Yggeee eegeeeeghageggg 133} Ogggm_gg2§n egg;
sale prices in the year 1913, the French price ee 11 da aliiyt mg P T asks de reciated more
level multiplied more than three times during Wmidls tf Oryéh gpa Hm ,0 1 p f th
the War and by nearly seven times by 1926. The gmc gr St ata .6 ROD ieee a culéggacydo G
franc, which had a par of 19.3 cents, had been thm B . etee EHF EVO u icnaiay th af were O;
pegged at about 18 cents during the War. Ex- G asslgna S O eeeee a S0 m G a. ee par
change rates 1011 to less than ata cents in 1920, gg lege eeeheeeeeh eeeeegr- cfggegegegeggegebgf
rose to nine cents in 1922, dropped to three and 1. 6 arman eeveeemee m .a mh 1921
one-half cents in 1924 and to a low of about eee meeke fora 6 ree? aadmg Meee 31’ ’
two Cents in Jul 1926 min Somewhat th€r€_ to more than e1ght tr1l11on marks two years later
after y’ ’ g and to 49 quadrillion marks the next year. It
rnanna was saved from complete disaster when Wee imeeeeible ee keep ee Wieh eaeeeeieeeee. by
in 1926 under Poincare it finally took steps to lavymg more eexee- Camlancy m Cimulaalom
balance the budget Loans from the Bank Of which amounted to 252 billion marks 1n August,
Frame to the government were discontinued 1922, increased to two trillion marks in January,
onnnnanta in tna franc nttnnnan erna franc was me eee ee 28 eeedemiee eeeeke ie Seeeemeee
pegggd at about 3.9 Cents in the latter part Of 1.923, and finally reached a total of 497 quintil-
1927 and stabilization took place at 3.92 cents hee meeke ee the and ef 1923‘
in the law Of June 25 1928 By November 20, 1923, one gold mark was
erna nnat asaat ofthe inflation may na easily eeeeeeed ee eeeel ee eee biuiee eeeee meeke-
Compmhendgd by using 3 th0uSand_dOHm, in_ New rentenbanknotes which were issued at about
surance policy or savings account as an illustra- aha,} time ee ee lgtarmgdlaitaclitap iawagd Stai}11"
tion. The stabilization of 1928 was at about 20 wa ma .W€r° exc anga a B ee G O Ona ee
per cent of the old par. A thousand dollars re- Om? bllhcm papal, markS‘.Suba€quanJ°1y* when aaa
ceived thereafter from an insurance company or Rawhsbank Wee eeeeeemeed m O°}°°b€r* a924* lt
bank were found to have shrunk in purchasing Q, issued new gold reichsmarks, one of which was
power to about tan hundred dollars. l eeeiveleee ee eee eeimee ele reeee melee-
By stabilizing at the level to which the franc fDl}§rmg aha mfieeeeeeey Parma aaa gold Value
had depreciated, France retained a high price t_ O t a mark ee qaaaad m foreign exeheeee
level. The index for wholesale prices stood at "’ gggglgagngrggifa(_;n‘;I`1i§n]%;C%?£`b;£ 213ég§ ‘;;;°SO;‘;
3 ` t b 1934 th ` . ` . ’ '
57 m Oc O Ga Nm ebasls Of 100 for 1913 hundredth of a cent 1n December, 1922, and
German Postfwar Inflation tvgggty-three-trillionthsy of a cent in December,
Like France Germany was involved in budget i _ _
difliculties aftsr the War. Its national expeniii— Russian P0st*W&Y IHf1&t10H
tures had increased Hve—fold during the War · · - _ -
eeeee eee eee ¤;~e;e¤e1,gle,g>e.eeX-feed, {ee eeleee anEt‘§Sti §aSa°nalla§na‘2l`a‘2ti§t€1ta‘1“‘21°Ln2l§al§?nn§i
money 1n 01rcu a 1on a increase rom ess . p .
than ttnaa billion marks at tna beginning of gge geeeeee sg eee meeer ,§ee1§,;e ejge Wee
the War to 29 billion at the end of November . B ussmn maaury was a CWB O lscmmt
1918 Wholesale NCES in German Sli h,d’ 1ts short—term obligations at the State bank to
more than doubledpduring the War gericdg Ig any extent desired, previous restrictions being
view of the large expansion of currency, the ad- removed. The currencyg was on an 1nconvert1ble
12

 , ` in a ear the discount on assig-
rarer nests As rar1y es 1919 tnere Wes only ngtlsnnvcesdfrovrnrlrlln to 2r0 per cent, and within two
rarer money in en`enletlon· The government on' s years it amounted to 44 per cent. At about that
telned enormous emonnts from tne bark- Be' time there was a temporary rise in their value,
rarer J auuary 1, 1917, and January 1, 1923, the pdr in 1795 a rapid depreciation eemmeaeed. By
quantity of money in circulation increased two February 1796, it required 288 paper francs to
hundred thcusand times While prices increased equal gne gold franc. Prices of various neces-
ten million times. The depreciation was more Sitics seared, that oi sugar rising 69 times and
rapid than the rate of issuance of currency. A ‘ Solap 44 times Finally the populace joined in a
new Soviet State bank issued notes to meet de- public burning of the machinery with which the
ficirs cf the Treasury durins 1922 and 1923, assignats had been made.
Flnenv in 1924 er nevv rnole Wes issued in eX‘ — Despite the disaster due to the assignats the
enenge ror nttv bnllon er tne eld depreciated monetary enthusiasts of the day caused a new
rubles. form of paper money, designated as mandats, to
. be issued. The mandats were described as fully
French Aeelgnnts secured and as good as gold, but there was little
The French assignats   Were issued be- Cllff€I`€I1C€ bGl3W€QI1   3i1'1d   8,SS1g1'13,l`rSa1·Tl1QY
J tween 1790 and 1796 form an outstanding in- promptly deprecrated tc so Per eent· Wlt In arr
stance of deliberate inflation. The French Re- montlre they Were d0W_11_ te crly three per ee)?
volutionary government was confronted with the of thelf face value- The lnrletlon Wes regpgnslt e
problem of both raising revenue and overcom- f01` e P€1`10d Qt be»nkrnPteY Wnlen lestlre ar far
ing a condition of business depression. Just as Yeefe and Whrch retarded Progress ln rarrra ur
has been true of present-day inflation advocates, many years thereafter-
the radicals of that period thought that the issu- * * * * _
aura ef rarer rneney Wenld etlmdlete Prices end The experiences of various nations, including
revlve trede Ja response rc tne dernaads ef the ' our own, provide a yardstick by which to meas-
inflationists, the Constituent Assembly in April, ure what might happen if inflationary eXpe1‘1-
1790, authorized the issuance of assignats to the ments get beyond control, In the light of sound
amount of four hundred million livres, to be legal meuetary polioies supported by the evidenee
tender and to bear interest at three per cent. The Offered in history, the Congress should pledge
uurrarry Wes ra be seenred by ennren lende re‘ its best efforts toward a balanced budget and
cantly selZed· against measures which might lead to a ruinous
At rrr beginning tne starr Wes rc relieve ; inilation of currency or credit. Advocates of
tne Treasury ef some ef lts burdens end ru 1 legislative proposals for inflation have sought to
stimulate trade. As soon as the assignats be- gud juetiueatiou in the ruling of the Supreme
gen tu elrenletev novveverr tnev depreeleted re Court of the United States in the gold clause
the extent of about five per cent. The four hun- eaeee The impetus thus given to agitation f01‘
drar rrrllrura ur rarer were aan arrausrea, and J extreme rrererary measures emphasizes die need
there was ar nnmedlete asrtarrar fur the issu- for caution. While the Court upheld the exermse
ance of additional currency. It was even claimed 4 by the Congress uf broad pgweys under its con-
that the first issue had been a success. Mirabeau, l Stitutional authority to coin money and regulate
rr leedlng lnnetlonlst ef tne day, edvoeeted tnet the value thereof, the decision offers no warrant
currency be lssned eolnel ra tne emonnt cf tne or excuse for resort to schemes heretofore proved
whole national debt and insisted that such action dangerous and uuWise_
would bring prosperity to the nation. The As- · _
sembly in September, 1790, by a vote of 508 to
42 approved the issuance of assignats up to a `
total of one billion two hundred million livres,
This issue bore no interest and was payable to
bearer but provided that as fast as the assignats
were paid in for land they should be burned. r p
In the latter stages of the issuance of assignats .
the printing presses were run at the will of the
executive authority, blanket authorization being
given for the issuance of such amounts as might 15
14