Show How Hov Money Gets Down to Masses Under Inflation NEW YORK May 27 Govern P Govern Government ment inflation plans would put the resulting increased money supply into circulation in indirect ways generally gen speaking in theory as follows The first result of inflation is arise arise a rise ise in prices a rise in prices stimulates stimulates lates ates business Business hires more men and pays more wages It can pay more nore wages because business Is beter better bet bet- ter er and because one effect of inflation inflations is s to make it easy to borrow v money to push business business' ahead The government plans to increase the liquidity of the banks to such a point that they must start lending money noney in order to make profits that thatis is s government bonds held by the banks banks' cash and reserves which central banks thus increasing the banks bank's cash and reserves which would be lent again The banks would be more willing to lend also because virtually all their collateral may be used by them in federal reserve banks for loans to obtain cash This ease in obtaining cash would obviate the danger of or runs by excited depositors The government further plans to sp spend nd a billion or two on public works The government would obtain this his money by borrowing It would be e easy sy for the government to borrow borrow bor bor- row row be because ause the banks are arc more liquid as a result of federal reserve purchases of bonds from the banks and ard further because the government if necessary may retire bonds coming coming corning com corn ing due with a special issue of cur cur- rency This Increases the liquidity of the banks because such money is likely to go to the banks The money spent for public works it is hoped may give enough of a fillip to business generally to cause business men to borrow from the willing banks The business men would be stimulated both by th the rise in prices and by the actual business activity started by the Other more direct plans may result in I special loans to business The government has not received I the power to produce a great currency I Inflation as have other governments 1 Germany Hermany for tor example simply turned the printing presses loose to obtain currency to pay Its obligations It had to print currency because it could not get money through taxation This money would filter through the economic system and the recipients lents would hurry to spend it before It t became less valuable Present plans for inflation involve no reduction of taxation The government government government gov gov- however seeks to avoid increasing increasing in in- creasing taxation which is contrary to the usual course in a depression The business activity held likely to result from inflation should make it easier to Collect taxes and increase the amounts received especially from income taxes A reduction of taxes might follow although they might be kept high in order to pay government debt and to retire whatever special currency had been issued |