When Congress convenes tomorrow morning, it will undoubtedly be greeted with a long and portentous bill dealing with the banking situation. What that bill will contain, is, of course, only a matter of conjecture, even for the experts who so thickly infest Washington. But there are scores of economists all over the country who are praying that it will endorse a program of careful inflation. To many of them such a plan a mouth ago seemed dangerous and unnecessary. But now it appears that almost any sort of inflation would be preferable to drifting, while a moderate monetary expansion would do wonders for the country.
The word "inflation" has a horrid sound in most conservative ears, and there is some basis for this dislike. Germany, Japan, and Russia have had very bad luck when handling it, allowing money to depreciate until it was more useful for lighting fires than for exchange. But in these cases the situation was handled with complete lack of common-sense, and under the pressure of conditions not present with us. On the positive side, economists advocate inflation, through the printing of irredeemable scrip by the government, for the very simple reason that more money must be put into circulation or the United States is headed for a thorough-going collapse. Bank assets were frozen solid even before the recent official blizzard. The bottom dropped out of the bond market last week. Security exchanges would have caved in completely if they had been left open. Everywhere it is evident that the country faces the issue of either drifting to respectable suicide muttering "sound money forever," or by moderate inflation, putting enough oil in the economic system to let it run once again.
It may be that tomorrow the bill handed to Congress will provide for this essential step of inflation. A pessimistic view, however, is that Mr. Woodin will continue to tie himself in knots to prove that we are still on the gold standard, even though dollar bills cannot now be redeemed at the Treasury. He and President Roosevelt may refuse to expand the scrip issue unless secured by bank paper, thus leaving the money-circulation at a near-zero rate. If they take this attitude, and it is all too likely that they will, business activity will falter, slow down, and come increasingly to a dead stop. The logs are in a jam on the river; tinkering with them has failed; dynamite is the only resort left to us. Dynamite and inflation are dangerous to handle, but there are times when an appalling necessity demands their use.