WHEN Professor Sprague cut loose from the Roosevelt Administration last November, it was with the announced intention of leading a national movement against monetary policies which he believed meant "a drift into unrestrained inflation." This book, a reprint of a series of articles appearing in the New York times, was apparently designed as the first step in that movement.
Professor Sprague is concerned with showing the effects of the government's policies and with presenting his own suggestions for the cure of the depression. On the first score he has no difficulty in demonstrating that the Warren gold-buying plan, while it might succeed admirably in depreciating the exchange value of the dollar, could have no automatic effect on the general level of internal prices. The point is important, since the Administration at one time undoubtedly entertained false hopes for the crude Warren scheme, but it is difficult to see how it is of vital consequence. When he comes to demonstrating the positive dangers in the policy, Professor Sprague beats around any number of bushes without ever coming to the point. He apparently felt, in writing the articles, that when the effort to raise internal prices by exchange depreciation was seen to be unsuccessful, the Administration would resort to the issue of paper currency. Or if not this, at least that the fear of such inflationary measures, leading to distrust of the currency, would be sufficient to cause business men to delay commitments, banks to fear withdrawals, and the public generally to steer clear of bonds, especially government bonds. The whole question of whether paper currency inflation, once started, could be controlled, has been returned to the realm of theory by the realization that the government did not intend to start it. In retrospect, it is difficult to see what positive dangers existed of sufficient magnitude to lead the Treasury's chief adviser to resign in such spectacular fashion.
In putting forth his own suggestions, Professor Sprague is entitled to more attention. The two things required to stimulate trade, he says, are that the banks should be in a secure enough position to lend and that there should arise a sufficient demand from borrowers. Barring an extensive program of public works, this is true. He goes on to point out that one of the chief reasons for the failure of demand for industrial loans is that potential consumer demand has been stifled by unreasonably high prices, as for steel and building materials. His complaint here, and it is a very real one, should be directed against the NRA. He may be quite right that a potential boom lurks around the corner in the form of a low-cost housing.