Life — September 23, 1915 — page 30: what you’re looking at

Machine-transcribed from the original scan — historical spelling and the odd misread are preserved.

570 Harold and His Pa “T SEI said Harold's Pa, looking up sagely from his morning paper, “that the stock of gold in the United States Treasury is over two billions— larger than ever before in the history of the world.” Harold, who had just completed his first year in the high school and was deeply interested in politics and his- tory, was immediately impaled by his father’s remark. “Oh, father,” he exclaimed, “I am so glad you spoke of that, because it is something my teacher doesn’t make clear; but you know all about banks and banking, don’t you?” Harold's father smiled. “Well, my boy,” he said, “I ought to. I've been an American business man for the past thirty years—fairly successful, too.” “That's splendid, father. Tell me how the money gets there and what happens when they spend it, and all about it.” Harold’s father twisted about in his chair until he got into an easy position. “Of course, Harold,” he said, “ you will appreciate the fact that it requires a long experience and a superbly trained mind, such as I hope I have, to grasp our financial system.” “Well, then, pa, how did we get all that gold? Two billions, I think you said.” 7 “That is easy. It was the balance of trade in our favor.” “And what is a balance of trade?” “Why, Harold, it’s what the other countries have to pay us. They can’t pay us in goods, because, on account of the war, they are not making any, so they have to pay us in gold.” “Oh, of course, father. How stupid of me! But I heard you talking the other day about a deficit in the treas- ury. What is a deficit?” “T’'m surprised, Harold, that you don’t know that. A deficit occurs, of course, when you are short of money.” “And, pa, you said that they had tried to make it up by some kind of things you called revenues, and that the income tax, which you didn’t like, was not what it ought to be.” “Yes, yes, my boy, that’s true. So T did.” “Then, father, if there are two bil- LIFE: lions in gold in the treasury, what is a deficit doing there? I should think a deficit wouldn’t want to be hanging around there, and——" “Wait, wait, Harold! Your young untrained mind is going too fast. That's the other end. That's our ex- pense account. The two billions is the reserve, and the deficit is what we run behind in case our revenues don’t meet the expense.” “Oh, yes, pa, now I see. But isn’t there a Federal Board?” “A Federal Reserve Board, Harold. Always be particular in your use of words to get them exact, especially in financial matters.” “Well, then, pa, why doesn’t the Federal Reserve Board take away enough of the reserve and put it in the other place where the deficit is and scare it away, and then maybe you wouldn’t have to pay any income tax? And does Congress have anything to do with it? Do you know, father, I don’t understand why, if there is all this money, we can't use some of it. We have to fight for our country to keep it, and there’s two whole billions in gold, and Willie Jones’s mother in the house FOOTBALL TERM BOXING THE TACKLE back of us told Willie they couldn't pay the rent this month, and I want a Ford the worst way, and there are lots cof others who need things, and I don’t think it’s fair.” Harold’s father shook his head. “I'm afraid, my son,” he said, “that you are too young to grasp the idea.” But you are a wonderful man, pa, and you've been in business for thirty years, and I've heard you telling other men about our financial system and banks and loans and deposits, and think out of your vast knowledge you might try to tell me about why we haven't any more money, and the Federal Re- serve, and gold and silver, and all about it. My! That two billions makes my mouth water!” Harold’s father’s face set with a grim determination. “T will,” he said. “Listen to every word I say and don’t ask me to repeat it. I will explain it all in a few telling, simple sentences, and if you don’t understand it when I get through it won't be your fault, Harold. The circulation of all banks, my boy, is protected by the gold reserve which is carried to protect the medium of exchange and is thereby enhanced when the balance of trade is in our favor. Now, the Federal Reserve Board has been appointed for the purpose of cre- ating emergency money in place of gold when necessary, and this great body works independently of the Ways. and Means Com- mittee, Also the loans and dis- counts are determined by the crops, which move once a year, and inasmuch as labor determines the price of gold, it therefore fol- lows that any division of labor based upon discrimination would result in repudiation, this being the cause of vital disorders and social chaos. Have I said enough?” Harold's eyes filled with tears. “Thank you, pa,” he said. “I never understood about it before. It is all wonderful, and I am so proud to have such a father. Will you excuse me, as, before I forget it, I want to run over and tell Willie Jones's mother all that you have said?” comicbooks.com