The nonpartisan leader. [volume], September 05, 1921, Image 7

About The nonpartisan leader. [volume] (Fargo, N.D.) 1915-1921

Image provided by: State Historical Society of North Dakota

                
terial of which it was made. They contended that
such money would be elastic, that is to say, that the
government could issue and retire currency in ac
cordance with needs to move crops, expand indus
try, etc. They argued that the Constitution requir
ed that the government thus issue money and regu
late its value. They insisted that the government
was, the only power or agency which could be just
and fair where so vital a thing as money and credit
was concerned.
The Greenbackers proposed that the government
base its paper money on the property of the nation.
The great apostle of this doctrine was Peter Cooper.
A monument is erected to his memory in New York
City in a public square and on which stands that
famous building known as "Cooper- Union." The
Greenbackers were ridiculed by the bankers as one
might expect they would be. The Greenbackers
were characterized as "wild-eyed visionaries,"
"dangerous radicals," etc., just as the Populists
were also ridiculed later in the early 90s when they
put forth the proposal that the government should
issue money against warehouse receipts of grain
and cotton in order to supply currency and credit
at reasonable rates to the farmers who were then
paying as high as 30 per cent for money in Kansas,
Nebraska, the Dakotas and in the cotton states.
Now, after all these years, we have reached the
point where the only money we have that circulates
is paper money. This paper money was printed so
rapidly and in such volume during the late war that
every time we went into a bank to cash a check
we were handed out some bright, crisp, new bills
that would ratjle in our fingers as evidence of -the
fact that the money was fresh from the printing
press. You could almost smell the ink
on it. But this paper money is not
based directly on property. Actually
it is based on debt. The debt, how
ever, is based on property and it is
this property and the guarantee of
the government which assures the
value of the reserve bank notes.
Money issued by the government
may be paid out for services per
formed to the government and thu3
bear no interest penalty. Money is
sued by the reserve banks, however,
is paid out only when somebody goes
into debt, which means that every dol
lar of money thus issued and circu
lated is carrying an interest burden
on its back, which interest must be
taken out of the toil and energy of
the people.
HOW THEY INFLATED
THE NATION'S MONEY
The federal reserve banks began to
issue currency in November, 1914,
the amount issued that month being
$2,700,000. The following month,
December, 1914, the issue of notes was
increased to $10,600,000, and there
was an increase each succeeding
mqnth, so that by December, 1915, the
issue of reserve notes amounted to
$189,000,000. By December, 1916, the
note issues had increased to $367,000,
000. In December, 1917, federal re
serve notes in circulation had passed
the billion point, the exact figures be
ing $1,246,000,000. In December, 1918,
the notes had passed the two billion
point, the figures being $2,580,000,000.
In Pecember, 1919, the figures of note
circulation were $2,880,000,000. In
December, 1920, federal reserve note
circulation had passed the three billion
point, exact figures being $3,344,000,
000.
But the figures for December, 1920,
do not represent the maximum. The
peak of note circulation was reached
Why were the big financiers able to enforce a deflation policy which has ruined farmers while it
has let Wall street and the big banks play safe? Simply because of a gigantic monopoly of money
and credit given to private bankers through the federal reserve system Who gave them that
monopoly? Congress did. How can this monopoly be curbed or abolished? By the farmers or
ganizing politically and bringing their organized power to bear in electing men to congress
who are not tools of big financiers. THERE IS NO OTHER WAY. Read John
Lord's analysis of the banker monopoly on this and the preceding page!
in October, 1920, when the amount in circulation
was $3,351,000,000. October, 1920, was one of the
months when the farmers were being deflated. The
deflation of the price of farm products began in
August, 1920. In that month the federal reserve
note circulation amounted to $3,203,000,000. In
September the note circulation was increased to
$3,279,000,000 and then in October to $3,351,000,
000. In other words, while the federal reserve
board was refusing money and loans to farmers,
they were actually expanding the currency to the
extent of $148,000,000.
Who was getting the use of the additional
$148,000,000? Not the farmers. The farmers
were actually being called on to pay their loans.
If there is any other explanation of the use of
this increase in circulation than that the re
serve board was financing the exporters while
at the same time putting the "squeeze" on the
banks in the ruiral districts, let someone come
forward and explain. The farmers were being
forced to sell their crops at lower prices, which
lower prices had been brought about by selling
the market short on the grain, meat and cotton
exchanges. But somebody or some giroup was
being given the use of $148,000,000 of new
money fresh from the government printing
offices.
Governor Harding of the reserve board may-brand
all of his critics as liars, but the figures I have
quoted above do not lie. It is up to Governor Hard
ing to explain them.
Actual deflation of currency did not begin until
December, 1920, at which time, as we have stated,
the amount of the federal reserve notes in circula­
THE FARM TRAGEDY
THEN, MAMHA, 1LU SO
AWAY TO COLLtGC.
AND -I"* AY BE SOMt
DAY I*Ll» Bfc
pffesiotNT!
—Drawn expressly for the Leader by John M. Baer.
The money and credit monopoly of big private bankers, through their control of
the federal reserve system, explained in the John Lord article on this
and the previous page, is largely responsible for the condi
tions which Baer attempts to typify in this drawing.
PACK .SEVEN
tion was $3,344,000,000. Since that time deflation
of money has been steady and uniform. In July,
1921, federal reserve notes in circulation had fallen
to $2,680,000,000. The statement of the reserve
banks for August 1 shows a further decrease to
$2,536,000,000. In other words, since October, 1920,
the decrease in federal reserve notes in circulation
amounts to $81.5,000,000, which is a contraction in
volume of about 25 per cent.
Now, everybody who understands anything at all
about-money and its relation to the price of com
modities, knows that a contraction in the volume of
money has the direct effect of decreasing prices.
It also has the effect of increasing the purchasing
power of money.
HOW MONEY SCARCITY
AFFECTS THE BORROWER
The purchasing power of money is directly gov
erned by the relative scarceness or abundance of
money. Print and circulate a great quantity of
money and its purchasing power decreases. De
crease the quantity of money, on the other hand,
and the purchasing power of all the money remain
ing increases.
But there are some items which do not change.
Values which are controlled by contracts, such as
leases, mortgages, notes, bonds, etc., remain just
as they are .written in the contract. A lease, mort
gage, note or bond calls for the payment of a given
number of dollars. If you give a note at a time
when the currency has Been inflated, when wheat
measured in money is worth $2.50 a bushel, hogs
$20 a hundred, corn $1 a bushel, cotton 24 cents a
pound, you expect to pay that note with money of
the same purchasing power as that
which you borrowed.
If before the note becomes due the
value of the dollar is increased by de
stroying a large number of the dol
lars which were in circulation at the
time you contracted your debt, you
will then have to pay your debt in a
dearer dollar. Let us suppose you
bought a cow for $100 and gave
your note for one ye at. Unless the
cow dies you have made a good in
vestment, because the cow will give
milk and she will give increase so
that at the end of the year you will
have a cow and a calf. But suppose in
the meantime somebody destroys
a
large part of the money in circulation
and thus increases its purchasing
power to the point where the same
cow is now worth only $50. It then
transpires that in order to pay your
note you will have to pay back the
value of two cows instead of one.
The power to issue money and
regulate the value thereof is, in
essence, the power to 'pick your
pocket or to make you pay two
cows where you were only given
one, or to give up two bushels of
corn in return for one that you
purchased, or two bales of cotton
when your original debt called for
one. Every farmer who went in
debt prior to August, 1920, is now
having to pay nearly twice as
much in produce as he contracted
to pay at the time the debt was
made. This is the inevitable ef
fect of deflation. Deflation is rob
bery of the debtor to the direct
benefit of the creditor.
But to return To the federal reserve
system. The last statement of the re
serve banks—August 1, 1921—shows
that these banks hold gold or gold cer
tificates to the amount of $2,552,000,-.
000. This amount of gold now exceeds
(Continued on page 14)