There can be no truer index of the value of money than the general range
of prices. Price is the mercury by the rise and fall of which the heat
and struggle of industrial and business life are daily measured and made
plain. Where the tendency of this indicator continues downward, there is
no more certain sign that money is increasing in value.
During a period of falling prices the fear of impending calamity hangs
like a pall over the business of the country. Notwithstanding
unremitting efforts, men feel themselves constantly on the edge of
disaster. Gloomy foreboding and timidity take the place of confidence
and courage.
A shrinking volume of money is the most insidious foe with which
civilization has to contend.
It is my firm conviction that the inexpressible miseries inflicted upon
mankind by war, pestilence, and famine have been less cruel, unpitying,
and unrelenting than the persistent and remorseless exactions which this
inexorable enemy has made upon society. As the volume of money contracts
prices decline, and with the decline of prices comes stagnation of
industry, and the relegation to idleness of thousands of willing
workmen. Capitalists become unwilling to invest their money in
enterprises that employ labor while the products of that labor are
constantly decreasing in price. During all periods of falling prices
therefore money capital is withdrawn from active industry and seeks
investment in bonds and other forms of money-futures yielding fixed
incomes. For although the rate of interest in many such cases may be
low, the capitalist is compensated for this by the enhancement in the
purchasing power of each dollar of the principal and by the necessarily
greater command it secures over the products of labor.
Avoiding the very purpose for which it was devised, money at such times
seeks seclusion and declines to circulate. Its owner finds that he can
better afford to leave it idle in a vault or bury it in the earth, than
subject it to the probability of diminution by investing it in business
on a constantly falling market. Thus, contrary to all principles of
progress and of natural justice, the man who keeps his money idle, and
deprives society of its use, is rewarded by an unearned increment, while
he who puts his money into active business, where industry and labor may
profit by it is punished by unmerited loss.
Under such conditions it is impossible for a community to reach that
degree of material progress which, under proper circumstances, it would
readily attain. At every turn distress and discouragement stare the
people in the face. In every town and village men, willing to work,
stand idle. Even their misfortune does not end with themselves, for not
only are they a tax upon their friends, lessening to some extent the
meager income of those who give them temporary assistance, but their
necessary and eager competition for the little work that offers, tends
to reduce the compensation of those to whom they are thus indebted.
Stores, workshops, and factories, unoccupied and unused, are found in
every direction. Crime increases, bankruptcies multiply, and even though
the aggregate of wealth augments, it is unjustly distributed, and
consequently barren of beneficent results.