America's Money Policy America's moderate inflation policy, while pretty certainly
a step in the right direction, is inevitably something of a gamble. To authorize the Federal Reserve Banks to expand their credit and currency issues means increasing the supply of money and starting a rise in prices which may put new heart into business. But everything obviously depends on how the new facilities are used. The fact that Wall Street has reacted favourably means little for the moment. A Stock Exchange boom, even if it is maintained, which the present minor boomlet may not be, is only a token of expectations: It does nothing in itself to stimulate the demand for or the production of goods or the conse- quent increase in employment. And even as a token it may be mistrusted, for Stock Exchange speculators arc not inspired prophets. It is reasonable to hope, all the same, that the new measures will result in solid benefit to American industry, and indirectly to inter- national trade. The gold cover of the notes in circula- tion is so greatly in excess of the legal minimum that there is plenty of margin for a large expansion of the note issue now that new types of commercial paper are eligible as fresh cover. Gold. indeed, will be released.
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