Boom and Bust
Robert D. Benton
[Reprinted in the Henry George News, January,
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
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
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.