Real  Estate   Record





AND BUILDERS' GUIDE.





Vol. XXII.





NEW YOEK, SATURDAY, NOVEMBER 9, 1878.





No. 556.





Published Weekly by

Che %ml (ÜDstatc %tcoxij ^ssodatbit.

TER3IS.

ONE YKAU. in advance___SlO.OO.

Comiuunicaiious should be addressed to

C.  \V.  SWEET,

Nos. 345 AND 347 Broadway





INFLATION—WHAT IS IT?

Iu the face of recent political eveuts, we may
safely disiui.ss from our minds all serious appre¬
hension of those calamities which u certain por¬
tion of the pre.ss preteuded to regard a.s threut-
oniug the business interests of the country. In
spite of assurauces piled mouutain high and reit¬
erated upou every formal utterauce of the public
voice, the partisan press of either party delights
iu coujuring up certain grave spectres lUs likel}'
to be exorcised or let loose upon the community
iu the event of the success of the opposite parties.

With the dis.sipatiou of the latest scare, we
may address oureelves to the cousideration
of what coustitutes iullation. Wheuce does
the ellect so deuomiuated derive its euergy or
priuial cause? In tbis cüuutry, we are apt
to work theories out iuto praetical Solutions,
whereas, iu other countries, uuder hui-sh autl des-
potic govemments, the people eau ouly theo-
rize and dream dreanis. If tho praetical experi¬
ment which has beeu made iu this country of
paper mouey expansion is not conclusive und
deteriuinativo to all vilally interested in the
tineatiou, we may well despair of ever attaining
auy positive resuits. The couuuou sense of tho
country has spoken so fretptently and so eniphat-
ieally upou this subject, that we am entertain
uo doubt that the large majority of its praetical
business eleiueuts are agreed with one luind in
favor of a stable aiul couvertible currency.
The discussioiis und agitations which have raged
about this question of late years, have familiar-
ized the public mind with many of its iutricacies.
We have learned well and thoroughly that there
ure two necessary elements of a good currency:
security and convertibility. Of course, metallic
currency, whether of gold or silver, presents
automatically both of these conditions, being in-
triiisically valuable und of recognized commer¬
cial value throughout the world. In the abseuce
of suflicieut metallic currency aud through iu-
conveuience of handling, the necessity for paper
money is created. The lack of one or the other
of these mediums of exchange would be as keen a
want as could be feit iu the minor transactions
of life. Modem civilization has simpliSed and
facilitated ordinary dealings by the use of bank
checks and bills of exchange. Yet for the
gi-eat masses of the people, those who are inno¬
cent of bank accouuts, aud ignorant of tha
luethods of attaining thom, reliance must be had
upou an authorized currency. To say that gold
and silver afford indisputable and indispensable
measures of value ls to assert the simplest prin¬





ciple of political econom}% aud the one most
readily recognized by business men throughout
the world. In the abseuce of a sufUcieucj^ of
precious metals for the purposes of trade, inodem
fiuancial ingenuity has devised the paper tokeu,
worthless in itself though posse.ssing an aciiuired
value through the corporate or governmental
guarantee %vhich accompanies it. fo render it as
serviceable as the metal, of which it should be the
representative, the paper tokeu must be readily
couvertible iuto coin. The que.stion then arises:
what limit shall be placed upon this paper cur¬
rency, and how maj' its prompt convertibilitj- be
assured.' An Obligation to redeem it in coin is of
itself a restraint upon its volume. The exact
balanciug of paper dollars with coin dollars
would be a mere Substitution of one for the nther,
a degree of restraint which is unnecessarj- and
impractiaible. In practice, large amounts of
colli tokeus or currency .ire stored awaj' and
withheld from circulation; and, according to tho
experieuce of tlie whole civilized \vorld, of the
amount kept in aetive circulation oulj' a lixed
aud definable proportion is ever likelj' tc> be pre¬
sented for actual conversion iuto coin. Hence,
sound tinaucial practice Warrants the creatiou of
apaper currency equal to four times thu amount
of gold coin held iu reserve for redemption.
That i.s, experience teaches that out of a given
volume of paper currencj-, uot more thau oue-
quarter of it is ever likelj' to be presented for
rödemptiou und uot all of this at oue time. In
coutradistinction to this secured, couvertible aud
restricted currency, the experiment was made
duriug the war of issuing paper tokeus detlcient
iu all but oue of these qualities. Then, the neces¬
sities of the Goverument, owing to a state of war,
facilitated the issue aud reissuo of these tokeus,
whose acceptance bj- the people was uudei-stood
to be un expres.sioii of patriotic devotion to the
needs of the Government. The Government theu
suddenly becume not oulj- the largest consumer of
almost all lu-oducts and manufaetures, but for a
time at least became the steadj-, prompt-paj-iug
and cash paj-ing custoiner. Theso conditions
combined to infuse iuto the business of the coun¬
try a Stimulus and resulting activitj- such as it had
never before experienced nor is likelj' to soon again
experience. The talk of further inflation which
may be indulged in at the present time, so far as
predicated upon hopes of a repetition of former
experiences, is utterlj' groundless and delusive,
because even if such measures were enacted by
Congress, were approved bj' the Executive aud
were re-affirmed bj' tbe Supreme Court, ordeals
through which we maj' hardly suppose thej- would
successfuUy pass, they would still eiicounter an
iusuperable obstacle through a lack of distributing
power. Even tho embarkation of the general
government iu extended public works would af¬
ford onlj' limited and local distribution, and while
beiieätiug certain trades and seetions, would se-
riouslj- embarrass the majoritj' of the people.
The superadded inflation, which was practised by
the Government and tolerated by the people dur¬
ing the J'eai'S immediately following the clo.se of
the war was like the addition of fuel to a fire al¬
ready raging. The Stimulation of Government
purchases duriug tbe war was supplemented and
intensifled by the enormous projection of rail¬
roads and public works which took place during





the five j-ears following the close of tho war.
These railroad projectors particularlj- were large
nnd liberal borrow-ers, aud as tbej' did not object
to accept the paper monej' of the countrj-, and
wero willing to pay handsomelj- for its use, the
lenders accepted usurious benefit, aiida füll meas¬
ure of the risk which was involved. The large
depreciation and extiuguishmeut of railroad
securities siuce the panic will serve to point the
moral of our tale. Borrowers at excessive inter¬
est ou loug credit are alwaj-s livelj- aud cheerful
fellows. aud do much w-hile their monej* lasts to
luako things aetive. For a w-hile the paj-inent of
interest may be made outbf the principal of the
loan, but when the monej- has exhausted itself,
the leuder is apt to learn a profitable lesson in the
science of Investment. We have no Intention of
traciuR the füll elfects of Inflation as presented in
tho different markets of the country. It will
auswer our purpose to studj- its eQ*ects upon our
own commoditj-.

We recently preseute»! to our reader.saconuuu-
uicatiou from u correspondent who undertook to
trace u coincidence between the rise of the gold
premium aud the inflation of real estate values.
In our comuieuts upon that commmiication, we
pointed out the fallacj- of an attempt to draw any
such parallel. In point of fact, real estate values
were at their lowest wheu the gold premium was
thu highest aud nice cer.iu, values of real estate
rose as the premium on gold declined ; aud these
values fuiallj- touched their greatest altitude at a
timo when the gold premium was below ten per
cent. Eveu uow, when the gold premium is but a
fracticn of oue per ceut., the values of Standard
real estate are uot below the values which pre¬
vaiied when the premium was raugiug between
ÖO aud 40 per ceut.

We have reason to belie\e that this sume aiiom-
ulj' has prevaiied in other great markets of the
couutrj'. For the Solution of the problem of the
rise in value of manj- of the leading commodities
aud staples of life, we mu.st look to some other
theorj' than the measuring effect of gold premium
or auj' mere eulargemeut of the volume of cur¬
rency.

The law of supplj' and demaud has more direct
connection with and energetic control over the
appreciation and depreciation of values than the
mere volume of currency and its gold value when
depreciated. We are strongly led to question the
power of iullation and contraction of currency to
influence prices at all times, and invariablj- for
good or for ill without the co-operation of other
causes. The gold premium is uot alwaj-s a fixed
measure of the excess of current values in a
country dealing with au acceptable paper cur¬
rencj-. Supply aud demand and other causes aro
the principal raotoi-s in elevating or depressing
these values. The gold premium is a faithful
index to the plethora or scarcity of the metal
itself, and dominates foreign exchanges, while the
prices demanded for goods which are to be paid
for in paper currency are the indices to the de¬
gree of confidence reposed by the public in the
soundness and circulating power of the currency.

Following the recent hisioi-y of real estate, we
flnd that the highest values of lots, inflated and
speculative of course, were attained independ-
eütly of the gold market, and in consequence ot
au unusually aetive demand.  But it may be easily