INFLATION IN AMERICA

Dominion, Volume 26, Issue 308, 23 September 1933, Page 6

INFLATION IN AMERICA

Pressure upon the Administration to apply measures of direct and active inflation seems to be increasing daily in the United States. So far President Roosevelt, although Congress has granted him the necessary powers, has resisted the temptation to use this dangerous stimulant. His programme has had inflationary effects and he has probably hoped these would be sufficient. $o long as his policy of raising prices proceeded unchecked, the cry for inflation was stilled. The debtor class saw their equity being renewed and the creditors regained hope of seeing their money again. But since the sharp reverses on exchanges and markets in July, there has been more hesitation. The march has been resumed, but haltingly. And many voices are raised for direct inflation as the means of restoring the original rapid pace. Behind this agitation, apart from the producers and the traders looking for an immediate turnover, there is the- immense influence of the debtor class. President Roosevelt has. already stated his objective as being so to raise prices as to permit debtors to repay in the same sort of dollar as they borrowed. The debtors are insistent that this undertaking should be carried out. Normally, opposition might be expected from the creditors, but they cannot realise on their security as it is, or collect interest, and generally they are reported as welcoming any scheme that will tend to liquidate their investments. When it comes to estimating indebtedness in the United States, recourse must be had to astronomical figures which are almost meaningless. Thus the total for the nation is set down at 200,000 million dollars. Farm loans amount to 11,500 million dollars; rail road obligations, 12,459 million dollars; public debt, 15,742 million dollars; and so on. Much of this money was borrowed on the basis of prices two, three or four times higher than those current. To repay at present values is simply impossible. • For a time many of the old debts were carried by new ’loans. That merely sunk debtors deeper in the financial morass. Where fresh borrowing failed, there began a process of bankruptcy in detail. But it came to be Realised that this method helped neither borrower nor lender,' and, moreover, bred dangerous political reactions. So by a process of elimination a large section of opinion has swung toward inflation as the alternative to general bankruptcy.. These are the forces bearing on the President to-day. He concedes the argument but obviously is doubtful of how to apply it, how to control the monetary mechanism so that inflation does not go too far.