1、Reflation and StabilizationIrving FisherAnnals of the American Academy of Political and Social Science, Vol. 171, Banking andTransportation Problems. (Jan., 1934), pp. 127-131.Stable URL:http:/links.jstor.org/sici?sici=0002-7162%28193401%29171%3C127%3ARAS%3E2.0.CO%3B2-AAnnals of the American Academy
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6、chnology. For more information regarding JSTOR, please contact supportjstor.org.http:/www.jstor.orgTue Oct 23 18:35:55 2007Reflation and Stabilization1 PRESIDENT ROOSEVELT stated on July 3: The United States of America seeks the kind of dollar which a generation hence will have the same purchasing p
7、olver and debt paying power as the dollar n-e hope to attain in the near future. That is the subject of debate today among all who are interested in the so- called money question. valuating the dollar (since there is no other immediate way of doing it) so as to multiply the number of gold dollars at
8、 the base of our credit structure. we shall have this same catastrophe re-peated; because the depression, be-ginning with the stock market crash, was very largely due to the insufficiency of the metallic base. Professor James Harvey Rogers, of Yale, who is another of the Presidents advisers, has wri
9、tten PREIDENTGUIDEDBY AUTHORITATIVEa book called America Weighs Her OPINION I think I am right in saying that practically all the monetary economists who have made a long and thorough study of this subject agreed with J. Maynard Keynes when he said the day after this utterance of the President, “The
10、 President is magnificently right.“ And yet, perhaps the majority of the people of the United States are not convinced of that fact. It is danger- ous to leave a technical subject to majority vote. I should consider the advice and opinion of J. Maynard Keynes superior to that of the layman, even if
11、duplicated one hundred million times. The President has at his elbow two of the ablest monetary economists in the world. One is Professor TT7arren of Cornell, whose book on Prices I think will convince 99 per cent of the people who read it that he is “magnificently right“ in concluding that we canno
12、t permanently maintain the price level that we had in 1926 with the gold that we had at that time, and that if we do not increase the metallic base by de- Paper read at a meeting of the American Academy of Political and Social Science on “Monetary Policy of the United States,“ November 22, 1933. Gol
13、d. I think the layman, unversed in monetary economics, before he assumes to have a voting opinion on this sub- ject, and before he assumes to rush through resolutions in chambers of commerce, owes it to the President to read at least one of these books, or those of other authors on the subiect. Ther
14、e are only a score of such men in the world today-a half dozen in this country, a half dozen in England, and the rest scattered through the world- who are entitled to an authoritative opinion which these two advisers of the President have. The average econo-mist is not entitled to such authority, fo
15、r he is not a monetarv eonomit. This branch of economics is just as special within the field of economics as patent law is in the field of law. and it would be no more absurd for the ordi- nary lawyer to pronounce upon apatent case (and he will not do so) than for the ordinary economist to count on
16、equal voting strength with the monetary economist. An even smaller percentage of the bankers have made a study of this sub- ject. Among those who have, I would mention Reginald McKenna, the presi- dent of the largest bank in the world or it was until the Chase claimed to be the largest. He was Chanc
17、ellor of the British Exchequer. In 191212, when I was in London, he invited me to come to see him. He said, “I feel lonely among the bankers“; and added, jok- ingly, “You know, Professor Fisher, you and I are the only two people in the world that understand this subject!“ Professor Sprague is a sinc
18、ere and able authority on the technique of banking; but he does not have the au- thority of Professors Karren and Rogers on the price level. When speaking tonight of the Presi- dents problem, I am not including all of the policies. I am not speaking from the political angle. I am not of his party. I
19、 did not vote for him. I do not agree with him on manv sub- u jects. But on this monetary policy I believe he is “magnificently right.“ I am confining myself entirely to the monetary policy as contained in the words which I quoted. If you analyze those words, YOU mill see that this monetary policy i
20、s tnrofold. It con-sists of reflation, or raising the price level, and of stabilization, or fixing the price level. In regard to reflation, the President said on May 7: The Administration has the definite objective of raising commodity prices to such an extent that those n-ho have borrowed money wil
21、l, on the average, he able to repay that money in the kind of a dollar which they borrowed. Re do not seek to let them get such a cheap dollar that they will be able to pay back a great deal less than they borrowed; in other words, we seek to correct a wrong and not to create another nrong in the op
22、pcsite direction. There has been a great deal of mis- understanding and misrepresentation not only of the President but also of those who have supported him. I, for one, resent being called an inflationist, and 1think the healthy complex that we have in this country against infla- tion as a social w
23、rong is the outgrowth of the writings of us economists who have tried so long to get people to ap- preciate the evils of inflation. I could cite at least a half dozen of my books in which I have preached against infia- tion. But I am equally opposed to defla- tion, and I have a keen realization, as
24、nost people do not, that deflation is practically 75 per cent of the explana- tion of the present depression. It is a debt-deflation depression, and debt and deflation act upon each other. There mas too much debt to start with. That caused distress selling and shrink- age of bank deposits as loans m
25、ere liquidated. This shrinkage or con-traction of the circulating medium, and the distress selling reduced the price level, or magnified the dollar and in- creased it to 81 per cent of what it had been in purchasing power, which meant that every thousand-dollar debt be-came the equivalent of $1810,
26、and was that milch harder to pay. The very effort, therefore, to pay debt, which reduced these bank de-posits, resulted in increasing debts; and the more the American people tried to get out of debt, the more they really got in. when the debts are measured in real commodities, which is the only prop
27、er measure of debt or of any other value. That is the “mystery“ of the depression. We seem to have liqui- dated 20 per cent, but we have really magnified our debts 40 per cent in four years in terms of real things. I resent for others that they should be called indefinite inflationists. The Senator
28、who is to speak to you today has been unjustly treated, as has his colleague, Senator Smith. I know, because I was present at a recent con- ference in Washington at which they both subscribed their names to a state- ment that went to the President of the United States urging reflation only up to the
29、 level of 1926 and no farther. There are at least ten misunderstznd- ings on this very puzzling subject. I wish to enumerate these and speak briefly of each. The opposition to the President is circulating these ten mis- understandings. UNCONTROLLEDIXFLATION First, it is stated that the objective of
30、the inflationists is an indefinite, un- controlled inflation. It is not. I know of no responsible man in Washington or outside who is advocating any such thing. They merely want reflation enough to offset the deflation, but no inflation beyond that point. Second, it is stated that even if there be a
31、n intention to have the reflation controlled, it will become uncontrol-lable. There is no evidence for that as- sertion except that Gernlay, when she could not balance her budget, got into a vicious spiral of inflation which ended in disaster, and some other countries under like conditions met the s
32、ame fate. Third, it is said that this uncontrol- lability is especially true of inflation through government paper money. -4s a matter of fact, me have had at least two instances in this country when we stopped it without any trouble. IT-e stopped the greenback inflation, which was paper money infla
33、tion, in 1865, after several years of very rapid and in- jurious inflation. We stopped the in- flation that began before the World War and lasted until tn70 years after the mar, by the deliberate action of the Federal Reserve System after the meet- ing of its Board on May 20, 1920, on the challenge
34、of Senator 3lcCormick that it should produce some deflation. The Reserve Banks not only had no difficulty whatever in stopping the in- flation, but prodcced an unfortunate deflation for a year. Fourth, it is declared that history shows that all currency inflation be- comes uncontrollable. History, a
35、s 1 have indicated, shons the contrary. Fifth, any raising of the price level by monetary means is asserted to be artificial, and so wrong. That grows out of one of the great money illusions that all prices are determined by supply and demand of the things priced. That is not true. The supply and de
36、- mand of cotton are not the only things that affect the price of cotton. The supply and demand of money are equally important. If you should ex- change cotton for silver, and the price of cotton in terms of silver went up, no one would think of ascribing that rise -in prices exclusively to causes c
37、on-nected with cotton. You would want to ask what happened to silver; because cotton going up relatively to silver is silver going don relatively to cotton, and the supply and demand of both are equally important. So the supply and demand of money comes into the price of every commodity. In fact, th
38、e sup- ply and demand of cotton cannot be expressed in money without reference to the purchasing power of money. The purchasing power of money lurks in every price, in every bargain, in every act affecting supply or demand. Yet that is usually overlooked. So when we have a fall in the price of al- m
39、ost everything, as we have had in the last fen. years, people who do not under- stand that money enters in, can explain it only by saying that it must be that goods have been overproduced. The truth is, however, it is not too much goods but rather too little money that explains that fall of price. Y
40、et we assume that the dollar is still the dollar, and everything is priced in it so that it is a proper measure. We ascribe to the goods what belongs to the dollar. This money illusion is the fun- damental reason that so few people get anywhere on this subject. I spoke of it as a highly technical su
41、bject. As a matter of fact, it is easy for any layman to understand it if he will get the idea that the value of a dollar is not a fixed unit of measure, but is something that must itself be measured by the index number of commodities in general. Until a person has that idea he cannot think straight
42、 on this subject. The supply and demand of money affect the general level of prices, whereas supply and demand of goods affect the deviation from this level of the particular price. The supply and demand of wheat do not fix the price of wheat, but they merely fix the level of wheat relative to the g
43、eneral rise or fall of commodity prices. There is just as much difference between the general level and a particular price as there is between the level of a water reservoir and the height of a wave on its surface. And, paradoxically, it is a great deal easier to fix the general level of the water i
44、n a reservoir by controlling the inflow or outflow than it is to fix the height of any wave. It is, in the same way, easier to fix the general level of prices than it is to fix any particular price. STABILIZATION LEVELOF PRICE I think very seldom should me try to resort to price fixing. Many people
45、think that in this reflation, Mr. Roose- velt is trying to fix all prices. No such thing! Reflation merely fixes the gen- eral level of prices, and supply and de- mand should be left free, in my opinion, to fix the deviations from that level for any individual price. In regard to the artsciality of
46、this, the fixing of the general level of prices merely fixes the purchasingpower of the dollar. If we raise the general level of prices to that of 1926, it will mean that we have lowered the purchasing power of the dollar from its present expanded value to what it was in 1926. To fix the urchasing p
47、ower of a dollar in this way is merely to fix the unit of measure for debts and for the business mans operations, exactly as we fix the yard- stick, the pound, the kilowatt, or any other unit of measure. In other words, what the President is trying to do, after he has corrected the swollen dol- lar,
48、 is to make it thereafter a constant unit just as is the bushel basket or any other unit in commerce. Then it is said that even if there is expansion, it should properly be the re- sult of recovery, and not used as a means of recovery. I am sorry to say that I saw that fallacy in the statement of Pr
49、ofessor Sprague. As I understand it, and as I think all the monetary economists who have made a thorough study of it would agree, that is invert- ing the cause and effect in this depres- sion, because of a wrong diagnosis. If we must wait for recovery to raise the price level, then price-level-raising is not a therapeutic measure at all. Eighth, it is claimed that stabilizn- tion of the price level is impossible by any means, monetary or otherwise. That has been not only disbelieved by monetary economists for years, but recently disproved by the experience of Sweden, which h