Chapter II
The Necessity of Measurement
(a) Lack of certainty as to the true value of savings and of the wisdom of attempting to save. We all know that the demand power of the so-called “gold” dollar has diminished from a rated effectiveness of 100 per cent in 1913 to a rated effectiveness of about 41 per cent in 1920, in terms of certain essential goods.[1]
Now if this had been due to an arbitrary issue of “fiat” money instead of the conversion of credit into so-called gold obligations, the political party in power during such a period would be blamed without mercy by the defenders of our present system; but because it was due to our ignorant worship of the gold-standard and to consequences arising from an attempt to procure low-interest loans for the Government from both high and lowly, in the name of patriotism,[2] it was regarded complacently by the orthodox, who could look forward, later on, to picking up these jointly-endorsed promises to pay in gold at a very tempting discount.
The general result of this policy, which was more foolish- ↑ This statement is based upon the fact that the index number of whole sale prices, if taken at 100 in 1913 must be shown as 243 in 1920, according to the statement of the United States Bureau of Labor Statistics. To look at this from another angle, the savings made in 1913 would in 1920 be worth less than half their initial value, and the citizen who denied his wants in the name of thrift might well regard himself as something of a simpleton. “Wholesale Prices 1890 to 1919,” page 15. U. S. Department of Labor, Bureau of Labor Statistics. Washington, D. C., 1921.
Compare also footnote, page 320.
- ↑ “The immense credit resources of the federal reserve system were thus availed of by the Treasury during this period to make and maintain an artificial money market.”
“Federal Reserve Policy,” A. C. Miller. Federal Reserve Board, Washington, D. C., Vol. XI, No. 2, June, 1921. American Economic Review.
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