socc. 26, 1973 INFLATION AND MONEY SUPPLY THE GERMAN SUPPLY PROBLEM For many years only economists and bankers took an active interest in cur- It becomes increasingly clear that the Russian campaign has strained rency problems. Yet monetary changes INDUSTRIAL "EMPIRES" Germany's manpower and material re- have very powerful effects on every- When Edsel Ford died and Henry sources to the utmost. In the earlier d body's life, Today inflation is a ques- stages of the war, when they were ad- tion second in importance only to the Ford had to reorganize his company's vancing, the German armies were task of winning the war. Voters should board of directors there was a good forced to repair the roads and rail- y know as much as possible about the deal of discussion of changes in "the roads, with all of their bridges, de- problems involved, as the final decision Ford Empire." Metaphors comparing stroyed by the retreating Russians. 1 rests with them. a business man with a monarch have They had to transform the wider Rus- In some respects currency questions become common. But the business man sian railroad gauge into the narrower are much more complicated in this is not sovereign. On the market SOV- European gauge. They had to build, in country than they were or are in other ereignty rests finally with the con- addition, thousands of miles of new countries. In the continental countries sumers. Whether a business man has highways and railroads to be able to of Europe the main vehicle of inflation got his wealth through inheritance or provide all parts of the far-flung front was the issue of additional banknotes through his own activities, he or his with the supplies needed. Immense on the part of the central banks. All agents must ultimately obey the orders quantities of German material-iron that the public had to do in order to of the buying public. He squanders and steel, lumber, cement, electrical discover whether an inflation was be- his "realm" if he does not know how equipment-are embedded in the vast to satisfy in the best and cheapest way sandy steppes and swamps of Russia. ing built up was to look at the figures the needs of his fellow-citizens. Con- In spite of this huge effort the Ger- concerning the notes in circulation. man transportation service in Russia This is not so simple in England and sumers quickly "dethrone" him by pre- never quite achieved its task. On large the United States, particularly here. ferring other products. He can pre- parts of the front German soldiers We have developed a highly efficient serve his eminent position only by serv- froze and starved in the winters of 1941 banking system. With us banknotes ing the people better and cheaper than and 1942. play only a minor role in the increase other men do. He is forced to strive Such facts are usually wrapped in in the circulating medium. The increase every day anew for the favor of his secrecy. But small parts of the situa- in bank deposits-in the "deposit cur- clientele. They are his patrons and not tion are revealed from time to time rency," as some economists call it-is his subjects. His task is service, not which give us clues regarding what the of much greater importance in bring- rule. over-all picture must be. The Berliner ing about inflationary effects than the The discretion which the entre- Boersen Zeitung, for example, some increase in banknotes. The man who preneur enjoys in the management of time ago published some facts about wants to know whether inflation is his plants is strictly limited by this the construction of one of these trans- really going on and to what extent supremacy of the market. Consumers, portation lines, a road from Lwow via must read the reports of the Federal in the end, control all essential meas- Krivoi Rog and Dniepropetrovsk to Reserve authorities concerning bank ures. They indirectly determine the Stalino, about 650 miles as the crow deposits. level of wages. This fact is clear to flies. For the first 250 miles it was 1 In the calendar year 1942 money in nearly every one in the case of the merely necessary to broaden an already 1 circulation in this country increased salaries granted to opera singers or existing road, paved with cobblestones, from $11,160,000,000 to $15,410,000,000. from a width of three and a half meters movie stars. But it is equally true This was an increase of $4,250,000,000, with regard to other kinds of labor. to six meters. The rest of the highway I or 38 per cent. There has been a fur- had to be built completely; there was It is impossible to raise wage rates ther increase to $17,237,000,000 up to nothing but a road worn into the steppe substantially if the public is not pre- by carriage treads. June 9. The increase of deposits with pared to pay more for the products or In August, 1942, no fewer than 250,- all commercial banks, however, has services. The managers even of enter- 000 hands were employed on this proj- been far greater in amount. These prises owned and operated by the Gov- ect. Half of them were forced labor deposits amounted to $65,021,000,000 ernment or by municipalities are recruited in Russia; 80 per cent of these at the end of 1940; to $70,792,000,000 eventually forced to learn this lesson. slaves were women. For the transpor- at the end of 1941, and to $88,437,- tation of the necessary materials 25,000 000,000 at the end of 1942. This was WART horses were needed. The "Organiza- an increase of $17,645,000,000, or 25 tion Todt" set up a special plant for per cent, in 1942, and an increase of the construction of carriages suited to $23,416,000,000, or 36 per cent, for these conditions. the two years 1941 and 1942. Since When we realize that this project the end of June, 1940, when our arma. represented only a very small part of ment program got under way, the in- the total building problem of the Ger- crease in "deposit currency" has man armies, we can understand why amounted to $27,855,000,000, or 46 per the technical experts of the general cent. staff are reported to have warned Hit- ler against a Russian campaign.