America's Money Machine

15.
When to Reef Sail
DURING THE FINAL DAYS of debate in Congress on the Federal
Reserve Act, it will be recalled, the distinguished Senator from New
York, Elihu Root, rose to make one ofthe most brilliant, devastating, and
significant attacks on the bill that had been heard in the Senate. Speaking
on December 13, 1914, Root had declared that the bill was inflationary
and dangerous.
"It provides," he had said, "an expansive currency, but not an elastic
one. It provides a currency which may be increased, always increased, but
not a currency for which the bill contains any provision compelling reduction."
He had gone on to survey the historical experience of inflation in
Europe:
I can see in this bill itself, in the discharge of our duty, no influence
interposed by us against the occurrence ofone of those periods offalse and
delusive prosperity which inevitably end in ruin and suffering. For, Mr.
President, the most direful results of the awakening of people from such a
dream are not to be found in the banking houses-no, not even in the
business houses. They are to be found among the millions who have lost the
means of earning their daily bread. They are to be found in the dislocation
and paralyzing of the great machinery which gives the value to the product
of the toiler by transporting it from the place where it is produced, and is
worthless there because there is no one to use it, to a place where it can be
used and by finding some one to use it who will pay for iLl
108