| Show SEES P INFLATION A SLOW PROCESS A real danger for the future col ayres tells banking groups I 1 NEW BRUNSWICK N J present prospects do not indicate that lunation inflation i so severe vere enough to cause further dollar devaluation will come soon in this country but us as an ultimate develop ment it seems to be a very real dan ger leonard P ayres vice president f cleveland trust company said here i tonight in an address before the grad aate school ot of banking ile he believed this statement to be true unless the government enters rankly frankly upon a pol icy of issuing flat cat money with which to meet its expenses at present that thai does not seem to lo be in sight tie be said the graduate school Is operated jointly by the american institute or of banking section of the american bankers association and rutgers uni hersity to otter offer advanced studies for or bank officers we have so enormously increased the capacity of our banking system for or credit expansion that it Is difficult to see how we could have a vigorous business revival without having it develop into a credit inflation colonel ayres declared inflation a slow process it if inflation does come it will be a slow groces ho he said pointing out that in germany france belgium and italy it took about five years to develop from the time when the governments en upon policies of financing large peacetime peace time deficits by bank credit up to the time when the public generally began to spend money rapidly because of fear ear that it would still further de pre predate clato in purchasing power if we are to go through such a period here it would seem likely that it might last rather longer than the corresponding periods did abroad lie he said its beginning would date from rom the spring of 1933 when we left the old gold basis tor for our money and en upon the policy ot of financing large governmental deficits by the sale of 0 federal securities mainly to banks rather than to private investors the method that we are following is the one that proved disastrous in europe tor for in all those countries in clouding germany the increasing issues of money that caused the lations were not mere printing press issues of flat currency but were secured by government bonds and notes discount ed at the banks nevertheless the process is inherently a slow one among the clearest lessons taught by the european experience colonel ayres asserted Is that there are no good hedges against inflation ile he added did not lighten debt burdens one of the strange facts about these lations is that while they destroyed the values ot of most existing debts they did not succeed in lightening the debt burdens ot of either the people as a whole or ot of the corporations altion IL inflation tIon destroys the value ot of bonds and mortgages and so confiscates the property of these holders of obliga eions and hands it over to the shareholders and the equity owners how ever it introduces so many new eco difficulties that these thes share shar and id acif equity holders are at once on c forced tore to incur new indebtedness so that when a stabilization comes the problems of debt are about as troublesome as they were before or even more so the 4 five ave requisites of inflation were teed I 1 listed I 1 s by colonel ayres as first a period of sustained active business sec ond a rising stock market third real credit expansion fourth greater outflow of gold than we can tolerate which would force us to cut our currency entirely tree free from gold and fifth continued large budget deficits in government operation |
