Boom and Bust

Robert D. Benton

[Reprinted in the Henry George News, January, 1957]


I want, to point out a basic and long-range cause for inflation, and for the deflation or depression that always follows inflation. First I want to report some findings on how family income in the U. S. was shared in 1954. A graph by Bert Marsh, seen in Maritime Co-Operator, said that 10.25 million of our poorest families received $13.5 billions, while 2.6 million wealthy families received $56 billions two years ago:

Most people insist that a faulty money and banking system causes depressions. I agree it is a mistake to tie our money system to government debt, but I want to uncover a cause that will explain the uneven concentration of wealth quoted above which creates the need for Credit and inflation.

It is a mistake for a government to continually issue money; it is wrong for a government to sell its bonds to banks for what it costs to print them, and then pay interest on them to bankers; and then redeem them with our tax money. Banks should be competitive and not dependent on a central Santa Claus to bail them out of trouble with printing press money. This means we should immediately stop all new printing and coining of money forever, period! Changing the supply of money causes trouble. The money supply need not be any certain amount, but whatever it is, it should remain there always.

Credit is not a matter for government control. Sure, banks, stores and individuals often go under from granting too much credit. Do we want laws to make bankruptcies impossible? Let banks and stores ruin themselves if they want to. In the light of equal rights, people must still reap the harvest of their own folly.

It is no worse for a bank to extend credit than it is for Sears & Roebuck. If I buy a stove on credit from Sears I have money to play around with elsewhere, make a demand on other things, and as some people say, raise prices. It is here we must look deeper. We should ask, Why do I, and so many others, need credit? Why should I buy a stove on time or borrow from the bank if I'm loaded with dough? Instead, I ask for credit when I don't have enough to pay my bills. What is it that flattens my pocket-book? Why are so many of my neighbors in the same fix? We don't have millionaire tastes and foolishly demand luxuries and unnecessary comforts. We can't meet our legitimate bills; I say, credit is a result, not cause of, high prices and low wages.

The real trouble is that we have less buying power. This lowered buying power is caused primarily by lower wages. All of us common workers together have certainly been producing a lot of goods, but we don't get back all that we produce. We have to give up a lot of our production or buying power to non-producers. And chief of these non-producers is the man from whom we have to buy space (land) on which to live and work.

Workers, manual and mental, produce all the wealth there is. But workers cannot create the basic material out of which wealth is made. Workers need land and raw materials and with or without capital, they fashion this raw land into something that satisfies human needs. Whenever men are out of work; or not getting the full value of their work, they find access to land difficult or impossible.

Not that any owners of land deliberately decide that a given piece of land shall not be used. But the price asked for land is so high; that users cannot pay it and have ail adequate amount left for themselves. Rent, or payment for space to live and work, must always be paid first. As their wages and buying power dwindle, workers ask for credit. They borrow from banks and buy on installment. Finally, discouraged, they are unwilling to work on Saturday afternoons or put out another field of wheat. They can't pay back the money they borrowed, and the papers scream that credit was over-extended. A recession or depression is on.

Reason will tell any thoughtful person, and investigation confirms the fact, that for a depression to develop, first must come high land prices, then lowering wages, then credit expansion, then business stagnation. Before the 1929 crash, the Magazine of Wall Street said: "Every panic in our country has been proceeded by an orgy of land speculation. Every period of prosperity ends in a land boom. Then, the depression."

Depressions are still caused by men's inability to get land or space at an attractive figure. Depressions come when workers are left with a discouraging portion of their production after paying taxes and rent.