INVERTED ECONOMICS

The game of hide and seek which President Roosevelt is playing with the advocates of sound money and inflation is a grim one. The only inescapable fact in the situation is that the government can relieve material suffering, and at the same time stimulate Industrial activity by issuing flat money or "flat" deposits on a large scale, or by forgetting to balance the budget.

If, by issuing flat money or flat deposits, or by failing to balance the budget, the government would precipitate the country into a worse state than it is in now, then flat money should not be issued, and the budget should be balanced. But if, on the other hand, there is no such qualifying consideration, then the flat money should be issued and the budget should not be balanced. There appears to be no such definition of issues at Washington. The inflationists admit that they would resort to the strychnine of rising prices in order to keep the patient alive through an extraordinary crisis. And the advocates of sound money insist that rising prices will kill the patient. So President Roosevelt is administering the deadly herb in mild applications.

But the administration is putting theart before the horse. It has avoided as far as possible the expedients of paper money and an unbalanced budget which are in themselves harmless; and it has deliberately attempted to raise prices; to accomplish directly and without compensation that evil which is most to be avoided in all recovery schemes.

It was the rising prices which paper money brought with it, not the paper money itself, that precipitated industrial collapse in the inflation-ridden countries of post-war Europe. It is not necessary to have studied economics to discern that if flat money is issued only as fast as the industrial machine can produce then prices do not rise; and that if prices do not rise, no harm is done.

American industry is idle. In contrast to the condition of European industry after the war, its capacity to produce goods in exchange for money is almost unlimited. It is, therefore, to the problem of stimulating industry through the issue of as much money as is compatible with stable prices that the administration should devote the intellectual energy at its disposal.