“Yes, two things are bothering me. I don’t understand the economic reforms under Holmes, and I don’t see what this New Crusade was all about. It sounds screwy.”
Cathcart grinned. “It’s a good thing my professional research gives me some knowledge of the idiom of your period. It was screwy. But let’s take ’em in order. We discussed before the cause of economic depressions and I asked you to take on faith the idea that the only thing that caused depressions was a financial system that automatically caused a spread between goods to be bought and money to buy them, or ‘over-production’ as it was euphemistically called. I’m not going into the mathematical theory even now. You can take it up later with an economist or in several books I can recommend. But President Holmes was one of the few men to occupy the White House who had sufficient insight and mathematical ability to see the trouble, the reasons behind it, and to devise a cure. He had a powerful weapon to work with, the Bank of the United States, and he had the free intellect necessary to do what needed to be done without clouding the issue with a lot of moralistic tape. In fact he helped to formulate a realistic social ethic that justified his new departure. To begin with he saw the ‘over-production’ or, as he looked at it, under-consumption or shortage of purchasing power. He directed a staff of actuaries to supply him with approximate figures showing the percentage of under-consumption and its dollar value for the past year. Then he undertook to make up the missing purchasing power by literally giving away through the Bank of the United States the necessary amount of money. He was aware that to do so without some control over prices would result in inflated prices and a new spread between production and consumption. So he held back about half of the newly created purchasing power and used it to control prices in the following manner: All of the retailers of consumption goods in the country were invited to join in the New Economic Cycle. If a dealer joined he agreed not to raise his prices over what they were when the new regime started. On the contrary he was to sell all his goods at a ten per cent discount, and the Bank of the United States would hand him the difference on presentation of his sales records. Then Holmes proceeded to give away through the Bank twenty-five dollars per month to anybody who would take it. Naturally business boomed. Prices didn’t go up because all of the business went to the merchants who had joined the agreement.
Presently all the other merchants joined, too, in order to get in on the rush of business. Factories re-opened, labor was needed and unemployment disappeared like snow in July. The country hummed. And that is a thumbnail sketch of the present situation, Perry. No unemployment, plenty of well paid work for anybody that wants a job, and enough credit issued every month to anybody that wants it to keep body and soul together in decency.”
Perry looked bewildered. “Wait a minute. It looks fine at first glance, but where did he get the money? Not from taxes, surely, with the country already broke. And not from the private bankers. They were ruined in the war.”*
[*For the benefit of the reader who is arithmetically inclined:
(A) Value (Price) of consumption goods produced in 2010 $540,000,000,000.00
Average income per person $2,413.33
(B) Total of personal income (Wages, dividends, insurance, pensions, etc.) $434,400,000,000.00
(C) Difference or under-consumption $105,600,000,000.00
Practical check:
(D) Value of estimated excess in inventories (under-consumption) $110,400,000,000.00 Error $4,800,000,000 or ±4.45%
(E) Empirical control figure (C±D) $108,000,000,000.00
Divide by population of 180,000,000 to obtain under-consumption per person per year of 2010 $600.00
Divide by 12 to obtain under-consumption per person per month $50.00 Issue one-half of this directly $25 per month per person Ratio to (A) all consumption goods produced of (E) unconsumed consumption goods is one to five or 20%. Discount is to handle one-half of this. Therefore discount is 20%.
Q.E.D.
I have taken the liberty of using round numbers. The exact figures from the Washington Archives show $27.813 per month and discount of 11.87%.
Page: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106