Page:Stabilizing the dollar, Fisher, 1920.djvu/86

32 the Spanish people and, through the high cost of living, makes them pay for Bolshevist propaganda! This is a specially interesting case and illustrates the close similarity between counterfeiting and inflation, either of which mulcts the public.

Germany allowed the people, when a new loan was asked, to deposit the bonds of the previous loans at certain banks which were authorized to issue paper money to the depositor who then lent this paper money to the Government. In the United States also, Liberty Bonds were to some extent used as collateral at banks which, in turn, deposited them with Federal Reserve Banks and received their notes.

During the war the neutral countries were flooded with gold. This gold did not add to real wealth. When, directly or indirectly, it found its way into the hands of an American munition maker, food producer, or other seller of goods, it acted simply as a requisition for goods by one American on another American. It was merely a yellow token, like a brass check, redeemable in our own goods. Such an increase in the number of such tokens, or counters, could only cause them to depreciate.

War finance brought us still another, the most modern, kind of inflation, due not to the increase of money proper but to the increased volume of bank deposits subject to check. Banks sometimes subscribed to Liberty Loans simply by writing deposits on their books to the credit of the Government, and individuals often lent to the Government by borrowing of the banks, the sums so borrowed being likewise created by the banks as deposits on their books. Deposits subject to check have increased greatly, and until the