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doubt be held to be "other representatives of value” * * * "which have been or may be issued under any act of Congress.'

If this is a correct interpretation of that law, and it seems to be, it is a startling discovery. The law is printed in full in "Document No. 580, Laws of the United States Concerning Money, Banking and Loans, 1778-1909," issued by the Monetary Commission.

Some if not all of the members of the Commission must have known of this law. Probably all of them did, for they have been receiving $7,500 per year for about three years, and presumably have read the documents and data they have prepared and issued. If they knew that this law obligated the Government for all currency issued by the Reserve Association and concealed the fact or even failed to make Congress and the people aware of that condition, they were false to their oaths of office and should be driven from public life in disgrace.

It is significant, the fact that nowhere in the pending bill is there any provision expressly stating that the Government in no way shall be obligated or made liable by the acts of this private corporation. Why did not these sworn and paid public servants discuss this important matter in their report? Why did they not include in their bill a provision that would protect the Government they pretend to be serving against a possible and probable liability of more than a billion dollars? Congressman Vreeland's letter shows that he thinks the Government might be liable. It is impossible to believe that a matter so important was not discussed by the entire commission, yet their report is silent on the subject, and their bill contains nothing to protect the Government and the people for fifty years against a possible liability that may amount even to five billion dollars, .and from which there will be no way of escape after Congress passes the pending Aldrich bill that then will be a contract, a "vested right." Was the Commission working for the Government, the People, or for the Banks and Wall Street?

These conditions, if as here stated, tend to stamp the whole scheme as a colossal fraud on Congress and the people. The National City Bank and the National Bank of Commerce of New York and the Continental and Commercial National Bank of Chicago, should now explain their letters, printed in another chapter, wherein they say that in no way will the Government be obligated if the Aldrich

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plan becomes law. Mr. Reynolds of the latter bank, a former president of the American Bankers' Association, and Mr. Vanderlip, president of the National City Bank, are said to be in the confidence of Aldrich and are alleged to have been most active in originating and promoting the Aldrich private central bank plan.

It is also up to the Monetary Commission to explain!

CHAPTER V.

INFLATION AND CONTRACTION.

Cost of Living and Prices Go Up. Why?

The chief purpose of government is to establish and maintain conditions that will confer the highest good on the greatest number of its inhabitants. Every executive act, law of Congress and court decision should be with that end in view. With such conditions prevailing, the road to success will be open to every man and the general welfare conserved and advanced. "Life, liberty and the pursuit of happiness" then will be easily attainable by everybody. But these priceless blessings are available in the highest degree only when all who desire can obtain steady employment at good wages and the products of labor and the farm find ready market at profitable prices. When everybody is prosperous all are happy and contented. This tends to increase the stability and permanence of government. It causes civilization to advance and the human race to take a step nearer to its divine goal.

Business prosperity, however, depends for its very existence largely upon the supply of money and bank credit being always adequate in quantity and reasonable in price. By bank credit is meant bank loans. Ninety per cent of all business is done with bank credit and less than 10 per cent with cash. Therefore the volume of general business very much depends upon the quantity of credit that the 24,392 banks can loan to borrowers. And the volume of this credit directly and absolutely depends upon the amount of lawful money available for bank reserves; the banks on the average by law being allowed to loan about ten times as much "credit" as they have "lawful money" in their reserves.

Therefore, the prime question, the very basic foundation on which rests all bank credit, business prosperity, individual happiness and the general welfare, is an adequate supply of sound government money. An excessive inflation of the volume of money breeds certain evils and an excessive con

traction of the supply of money causes still greater evils. Increase of the quantity of money tends immediately to stimulate business activity and increase prices. It increases the cash reserves of banks and puts each bank at work to find profitable chances to loan its resulting ten-fold increase of available bank credit. With more cash and credit among the people with which to buy, under the law of supply and demand prices must advance. As prices increase, profits multiply and tend to stimulate production. This increases the demand for labor and in time will advance wages, under the same law of supply and demand. But it is history that while the prices of commodities quickly advance with any material increase in the supply of money or bank credit, the wages of workmen respond slowly and usually only when the men combine 1. nions and demand increase. During the interim, before wages are advanced, everybody on a fixed salary or wage loses, because the fixed income will buy less at the higher prices. Those with their wealth invested in securities bearing a fixed income interest also lose because their fixed incomes will buy less property and labor at the higher prices. But farmers, manufacturers and other producers are immediately and directly benefited by an increase in the quantity of money, because the resulting increase of prices gives them greater profit from the same output of products. In fact, the general increase in the purchasing power of the people due to increase in their supply of money and credit tends to improve the demand and consumption of products. This still further increases the profits of farm and factory. It also helps those in debt, because it takes less products at the higher price to pay a debt.

For the same reasons, expansion of the currency operates to increase the prices of stocks and securities other than fixed-income notes, mortgages and bonds-and stimulates speculation. But it lowers the prices or value of investments bearing a fixed rate of interest, such as bonds.

Inflation, therefore, enhances the prices of things and cheapens the value of money. It also lowers the price of money and credit, the interest rate. It decreases the purchasing power, the value, of the dollar as measured in property or labor. If the quantity of money and bank credit was doubled without any increase in the amount of property or available labor the price of all property and labor practically would be doubled. It would take two dollars to buy the same amount of property and labor that could be obtained

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