gate the disasters due to politico-economic inefficiency. It is a politically operated governor, designed to facilitate a politically impeded flow. We have admitted, through the utilization of such a device as the Federal Reserve System, that gold is an inadequate basis for currency: we act on this reluctant admission by making certain favored credit a further basis for currency—and then blindly measure the credit in terms of gold. Our kites fly on a longer string and we congratulate ourselves, Yet the same politically irresponsible owners hold the end of the string which controls both credit and currency. It is only tradition or sheer madness? During the panics already mentioned, of 1893 and 1907, honored by the names of Cleveland and Roosevelt, which arose for no better reasons than that our unit of measurement is invalid and that the privately owned gold-meter was being, quite legally, utilized elsewhere for private ends, our great retaining dam overflowed; and the ample and never-failing stream of human effort spread out uselessly in stagnant pools, marking the climax of a tragic episode; which the economic ritualist calls “over-production” and “under-production” or “inflation” and “deflation”; which the simpler-minded victims view as “capitalistic control” and then wrongly attribute to a constitution designed to preserve our individual liberty; but which the engineer recognizes as a typical form of spasmodic flow or pulsation due to maladjustment. All that has to be done is to utilize the dam which was projected in 1776, the conception of which we celebrate, with the ritualists, every Fourth of July. If we can only directly connect our now overflowing reservoir of pent-up human energy with the waiting equipment which individual genius has since constructed, cutting out the
and $382,000,000, respectively, reported in those periods of stress, 1907 and 1893, the years of the so-called Roosevelt and Cleveland panics.
Nineteen-twenty-one, in addition to these record-breaking features, will also be remembered for its furnishing the heaviest total of large commercial failures ever recorded, and notwithstanding that, owing to the beneficent action of the Federal Reserve system, which enabled us to let off steam gradually instead of blowing up the boiler, we avoided the old-time bank panic, the second largest total of bank suspensions recorded since modern failure reporting was begun in the early eighties.”—Bradstreet’s Journal, New York, Feb. 4, 1922.
