PAPER CURRENCY AND HIGH TRICES.

Evening Star, Issue 17313, 29 March 1920, Page 3

PAPER CURRENCY AND HIGH TRICES.

1 Regarding crabs, etc., getting into the race,, I aak this question j

TO THE EDITOH. Sir, —The Cost of Living is the greatest problem for ns at the present time. The following article, from ‘ The British Trade Review,’ deals very ably with a phase of the subject not always remembered. As far as the Dominion is concerned we seem to have a pandemic ”of paper mnnev, while gold is almost stamped out.—l am. etc M W. WiUGiix. The last few years have seen an enormous increase in the issues of paper currency—so great, in fact, has been the output the currency printing presses that the face value of the paper currency emitted during lour years of war exceeds the total value ol gold and silver produced in tho whole world since the discovery of America by Columbus. The evii is” aggravated, too, by the fact that barely one-fifteenth of the paper notes put into circulation by the various Governments lias any sort of metallic hacking at all, and yet we get the perpetrators of this ' g lasomcnt of the currency pointing to the prosperity of the countries in which, paper circulates. . . . Ihe real evil iu paper money is tho emission of inconvertible notes, the effect of which, or, indeed, of any excess issue of paper currency, is to drive gold out of circulation.. But the currency does not depreciate, or, to put it another way, prices of commodities do not begin_to rise until the paper exceeds the quantity of metallic currency which has been superseded. That is the position wo arc in to-day; gold, and, lately, silver too, has been displaced by vast quantities oj paper money, and so fast has this addition to the world's currency been made that it has taken hut a few years to exceed the amount of all the gold and silver known to have been produced since the American continent was brought into communication with the West. Then, to take only the principal countries, wo find that against an increase of £7,659.960,000 in the face value of the notes in circulation, there has been an increase of only £493,000,000 in the gold hold as cover fo~ the notes. 'the natural result is that prices have been forced up in the various countries to undreamed-of levels, or, in other words, the currency has depreciated, and tlie value printed on the notes is only a chimera. In the circumstances it is hardly necessary to 'remind our readers of one of tho most elementary economic truths—that money declines iu value as it advances in quantity, just in the same way as money may bo said to advance in value as it declines in quantity. The position is this : If tho currency he contracted, or a country lias a limited supply in circulation, the value of the money is high—that is, tho amount of commodities and goods which it will purchase will be large. On the other 'hand, if the currency bo expanded—that is, its volume increased—the value ol the mnnev will he relatively low, since the quantity of goods or services it will purchasn will be'relatively small It is this increasing volume of currency which is the principal source of the trouble, with which wo are faced to-day from the world-wide rise in prices. Before tho war a limited amount of gold was doing money’s work, and its exchange value was high and fairly stable ; but during the war, and after, tho precious metals have been withdrawn and larger and larger quantities of notes issued ; consequently, down goes the purchasing power of the pound sterling, the franc, the lira, tho mark, and many other monetary units. In our own country wo see the result in the increase in retail prices. On December 1 last tho average increase in the price of tho principal articles of food, as compared with July. 1914, was 134 per cent. In soma of the other European countries the position is still worse, and until all of them make a really honest effort to purge, their currencies of a great deal of the paper notes now circulating, wo shall not go very far towards bringing back prices to their pre-war level. It is useless for people to state that society as a whole is stimulated by this apparent acquisition of wealth to the accomplishment of great things; the trend of recent events shows only too clearly that the world to-day is given over to idleness and self-indulgence. . . Everywhere we hear the cry of more money for less work; depreciated paper money purchases le=s labor. So we go round in this vicious circle, and it is to I this pass that a redundant currency has brought us. Not till tho paper currency of to-day is contracted and placed on a sound metallic basis will there be any betterment of the position.