Books and Writers
LERNER, ABBA P.
Books and Writers How to Get Full Employment By ABBA P. LERNER New Schawl far Social Koaaarch WHSKM IS THS MONEY COMING FROUt By Stumrt Ckatj^Twentieth Century Fund. 11.00. I 0OKLNG over the...
...An economist's tendency to concentrate his emphasis on such weaknesses may easily give the impression of disagreement with the main thesis of the book...
...T'HE simpler formulation would require the govern* merit to undertake the whole responsibility for maintaining adequate money demand and not merely that of preventing some self-regulating but fragile "circuit flow" from being ruptured...
...Thia is the measured opinion ef Swedish feamaHat Arvid Fredbarg who left Berlin in Mey, 1*41...
...it may be borrowed by the bank* wh* create it by making book entries...
...But one source of Mr...
...Such an excess of total income over expenditure on consumption is what we mean by aaving, so that by definition it cannot be different from the amount of investment...
...The government would then tax just as much a* is necessary to keep total spending down to the required level so as to prevent the excessive demand which would bring inflation, and would reduce taxation whenever it wished to increase the amount of money in the hand* of potential spenders...
...But having indicated by these criticism* that I like my own prescription better, I must again say that on all the really important things Mr...
...base is absolutely right and that his book will probably do as much as any other volume to release our society from its most dangerous thought...
...It would borrow when it wished the public to hold more government bonds and les* caah, and it would repay loan* when, it wiahed to bring about .the opposite effect...
...Chase takes this a* a readiness to attack the problem frontalis, but more recently the Timet," in sn indirect repudiation of Mr...
...This feeling seem* to show an incompleteness of emancipation from the monetary superstitions that threaten to engulf our civilization by purauading ua that we "cannot afford" to set our productive forces to work...
...ANOTHER inelegance ia the statement, taken from the Brooking* publicationa, that depreasion* are brought about by an exceac of saving over investment...
...The fear of printing money also leads Mr...
...It would print money (or create credit money by borrowing from the banks) wheneyer it needed the money to meet its expenditures or payment of loan* aa determined by the criteria just indicated...
...Although taxing hoards is certainly much better than suffering unemployment, it can be listed among the more desirable methods of promoting adequate money demand only by those who fail to see the function of the rate of interest in a capital using economy and the wastefulness of encouraging investment by a negative rate of interest (for that is what a successful tax on hoarding amounts to...
...I am rather ** surprized to find that they consist mostly of objections...
...They can be met by changing the form of the argument and none of the really important conclusions need be given up...
...But perhaps it would have been better to give the essential theorem about spending in the much simpler form that i* po»sible if this sentiment is ignored...
...KMR- CHASE does not quite say thi* explicitly, al**' though he often come* very clo»e to it...
...Although the great obstacle here i* not vested interest but vested ignorance, much remains to be done...
...Where the money comes from doe* not matter...
...Thi* simplified formulation of the problem (which I have elsewhere put forward as "Functional Finance") seems to me to be safer as well as simpler because it i* not open to logical objections of the kind indicated in the three example* here examined...
...Only if we create a money demand for more than all the gooda we are able to produce are we faced with the evila of inflation...
...The maintenance of adequate money demand for the products of industry can then be put squarely on the shoulder* of the monetary authority with no reliance or even blame placed on an automatic adjustment that is out of order most of the time...
...No matter how the necessary money demand is brought about, no harm can arise so long a* the creation of money demand is not overdone...
...Chase is moderately optimistic about the lesson being learned in time and I tend to be about equally optimistic...
...The more complicated an argument the greater the number of points where opponent* can And something to object to...
...Chase's excellent prescriptions to find adoption...
...is the assumption that because wc can 'afford' to spend for w«r, w* can 'afford' to spend equally for peace...
...Printing money thua seems dangerous because it does more than merely prevent some money from falling out of the "circuit flow...
...The implicit anawer ia that if we have the manpower and the equipment to produce say $150 billion worth of goods a year, the important thing is that the $150 billion money demand should be there ready to buy the roods because without this money demand the good* will net be produced...
...This is very far from any intention...
...Actually this sitaatioa and Germany's enemies are whipping Germane together under the Swastika...
...It would apend more, on public works or otherwise, when it wished to increase the volume of spending and it would curtail its spending when it wished to reduce aVtal spending...
...The fear of printing money does not lead to any grave error* in the policy »dvocated because there are many other ways of creating money demand and there frequently are good reasons for preferring them to printing money...
...it may simply be printed...
...Will Germany Crack...
...Say* observer Fredborg ia conclusion: "The Allies have, aa a matter of fact, given the German people no alternative except unconditional surrender It ia dtrti cult to make a people accept each an outcome before a military catastrophe...
...A LLIED political and pre...
...Chase attributes to an excess of money some of the evils that arise only from an excess of spending, the difference between "hard" money (like gold) and token money (like bills or bank balances) is not clearly distinguished from the difference between the tlock of money (hard or token) and the flow of spending...
...Chase'* optimiim, it should be noted, has dried up...
...agenda peMey has ealy resalted ta tying the German people mere securely Into tho Nazi war machine...
...The money may be taxed or it may be borrowed from people who do not apend it...
...Every dollar spent on consumption creates a dollar of income earned by the producera of the consumption goods...
...The importance of the faults at which these criticisms sre directed lies in their making the basic argument unnecessarily complicated...
...I object to certain formulations of the problem and of its solution, to certain inelegancies of economic analysis, to some remnants of the very same superstition about money that the book so bravely battles...
...Chase's proposals seem leas outrageous to the powers that be...
...Chase's lesaons, declares that "one of the most dangerous of all fallacies...
...It ignores any self-regulating tendency, if such should exist, just aa the automobile driver ignores the possible tendency of an automobile to go in almost a straight line if the ateering wheel is left free...
...Although what ia intended by thi* it correct, namely that the propenaity to save may be too great, thi* way of putting the matter leavea the argument open, quit* unnecessarily, to the disturbing objection that it i* logically impossible for saving to be greater (or lens) than investment...
...Chase to put great emphasis on measures, like the use of dated money or the taxation of cash hoards, for increasing the rate of turnover of the existing stock of money...
...Because Mr...
...Indeed, the inclusion of this mite of superstition may even help the cause of sanity in monetary affairs if it makes Mr...
...Most of the fault* originate in a feeling that the free enterprise system is essentially self regulating and would work satisfactorily if only the "circuit flow" of money were not interrupted...
...The book asks where the money is coming from to provide the demand for good* and services, necessary if we are to have full employment without the government spending a $100 billion a year on the war...
...I believe this book to incut nn...
...Any excess of total income over this part of it must be created by expenditure other than on consumption, that is by investment...
...ke one of the moat effective exposition* of the rational attitade to our most important post war problem...
...and whose "Behind the Steel Wall" has jaat been published...
...These measures are just as prone to bring inflation if they are carried too far as is the printing of money if that is carried too far, while they have the special disadvantage that they make socially wasteful investments profitable to the private investor by enabling him to escape the tax on hoards...
...I 0OKLNG over the notes I made while reading Where is the Money Conine Front...
...This sentiment fits in with the prevailing faahions of thought and may, because of this, help Mr...
...In a rense theae criticism*, and there are a number of other similar criticisms that can be made, are abstract and pedantic...
...The New York Timee declsred editorially that "the future world must be a world of full employment and production...
...He feel* that printing money it dangerous and so he favors other ways of providing the money demand that i* essential for prosperity...
Vol. 27 • February 1944 • No. 6
