Financial Legislation and its Limitations. 



73 



take the consequences along with the rest. Such a rate of in- 

 terest, therefore, is not unfair, because it is the result of normal 

 competition, just the same as the price of potatoes. 



§ 9. The existing level of prices, on the hypothesis of an entire 

 absence of government money and government financiering of 

 the circulation, is a " natural " matter, the consequence of com- 

 petition. It is mainly the effect exerted by the creation of credit 

 upon the amount of the deposits in the banks, and, through a 

 tardy process, of the supplies of gold from the mines. In view 

 of all the circumstances, is the level created in this way unfair? 

 Is there anything inequitable in the leaving of individual busi- 

 ness men to their own devices in those eminently natural situa- 

 tions which may accrue to them from variable readings of the 

 price-gauge which are the results of the manifold influences the 

 description of which has been attempted in a different con- 

 nection ?°^ Is there any more reason why a deus ex machina 

 should intervene to relieve the debtor from the evil effects of 

 miscalculation, whether wholly his own or partly that of his 

 competitors, than why the same providence should make good 

 to the housewife for the high price of potatoes, or to the creditor 

 for the low rate of interest? Happily, in modern times, admin- 

 istrative interference in these directions is less common than it 

 was in earlier ages. The inappropriateness of the attempt of 

 government to act in a sweeping manner upon an economic cate- 

 gory like rent, interest, wages, or prices, is well shown by a 

 reductio ad ahsurdum; any change of price-level, made at a 

 given moment, will exactly compensate for losses, if at all, only 

 to those debtors or creditors who entered into their contracts at 

 a given date; for those of an earlier or later date, somebody will 

 gain and somebody will lose more than the law intended. 



§ 10. It is not surprising that general schemes for financial 

 regeneration should appear from time to time. The chief 

 school of the human race, as found in the checks with experience. 



"Vilfredo Pareto, Cours d' economic politique, II, 297, cited with ap- 

 proval by Maurice Patron, The Bank of France, 115 (Publications of the 

 U. S. Monetary Commission), to the effect that the idea of suppressing 

 crises, the concomitant of fall of prices, is unscientific. 



187 



The level of 

 prices, like the 

 rate of inter- 

 est, is an or- 

 ganic phenom- 

 enon, and can- 

 not possibly 

 be altered, or 

 affected, ex- 

 cept by way 

 of protection 

 against the 

 " friendly " 

 legislation. 



