"I believe you are right, Perry. Of course there is one objection to the referendum plan that was made by a number of people."
"To wit?"
"It appeared in many different forms, but it always boiled down to the same thing. A contention that the people didn't know what was good for them and were too stupid to be trusted with so much power. It amounts to a total disbelief in the democratic form of government. Strangely enough it came from the very groups who are loudest in their protests of affection for the American form of government, and 'Americanism' whatever that is, if it is not democracy. The people who made this objection were schoolteachers, preachers, officers of veterans and patriotic organizations, professional demagogues et cetera. Interestingly enough the army and navy did not oppose the scheme, even though they were denied the right to vote in the referendum."
"I'm pleased to hear that but not surprised. The professional military man is the last to believe any romantic nonsense about war, even though he may be calloused to it."
Diana took advantage of a momentary lull to put in a word. "I don't want to interrupt this conversation but I'm getting sleepy. Master, do you have to go back tonight?"
"No, but I want to get away first thing in the morning. Will you put me up over night?"
"Of course. Happy to have you any time. You men can stay up as long as you like and fight all the battles you wish. I've fixed a pot of coffee and you'll find a tray of sandwiches by it. Nighty-night." She patted Perry's cheek, blew a kiss to Cathcart and glided off into the shadows at the far end of the room. Perry followed her with his eyes. Cathcart noted his gaze and spoke:
"That's a fine girl there."
"Hunh?—Oh! Yes, yes."
"I suggest we emulate her example shortly. However as I must go back in the morning, let's trot over the past eighty years as quickly as we can and bring you up to date. Give me a quick sketch of the salient features of the history of the country from the turn of the century."
"Well, the war was over in 2004. We have just been talking about the results. Hard times commenced to settle on the country about 2006, but it took several years for it to develop into a full sized depression, partially because the Bank of the United States didn't fold up and partially because of the premature retirement of war bonds and payment of a war bonus. But unemployment mounted steadily each year. In 2010 Wendell Holmes was elected president. Between 2011 and 2015 he instituted the economic reforms that are now the current practice. Business picked up and things ran along pretty smoothly until the late twenties, when a movement started that was known as the New Crusade, or Neo-Puritanism. It seems to have been some sort of a religious revival that eventually caused a lot of trouble. It reached its height in the middle thirties and then for about a year there were riots all over the country. President Michele straightened out that mess and some constitutional reforms grew out of it. From then until the present time I don't recall any outstanding event. Lots of little ones of course and a lot of new inventions but nothing that appeared to change the course of history."
"Yes, that is true. The past half century has been a period of steady development with no spectacular changes but rather a slow growth and steady social progress. We appear to have reached a period of dynamic equilibrium in which mankind can develop his arts and perfect his sciences in reasonable comfort and safety. It might surprise you to see all the change since the end of the New Crusade, but it would be impossible for me to put my finger on any one thing and say 'Here the change occurred'. However, it is not necessary. You will gradually see for yourself now that you have the general framework. Do you have any questions about this period?"
"Yes, two things are bothering me. I don't understand the economic reforms under Holmes, and I don't see what this New Crusade was all about. It sounds screwy."
Cathcart grinned. "It's a good thing my professional research gives me some knowledge of the idiom of your period. It was screwy. But let's take 'em in order. We discussed before the cause of economic depressions and I asked you to take on faith the idea that the only thing that caused depressions was a financial system that automatically caused a spread between goods to be bought and money to buy them, or 'over-production' as it was euphemistically called. I'm not going into the mathematical theory even now. You can take it up later with an economist or in several books I can recommend. But President Holmes was one of the few men to occupy the White House who had sufficient insight and mathematical ability to see the trouble, the reasons behind it, and to devise a cure. He had a powerful weapon to work with, the Bank of the United States, and he had the free intellect necessary to do what needed to be done without clouding the issue with a lot of moralistic tape. In fact he helped to formulate a realistic social ethic that justified his new departure. To begin with he saw the 'over-production' or, as he looked at it, under-consumption or shortage of purchasing power. He directed a staff of actuaries to supply him with approximate figures showing the percentage of under-consumption and its dollar value for the past year. Then he undertook to make up the missing purchasing power by literally giving away through the Bank of the United States the necessary amount of money. He was aware that to do so without some control over prices would result in inflated prices and a new spread between production and consumption. So he held back about half of the newly created purchasing power and used it to control prices in the following manner: All of the retailers of consumption goods in the country were invited to join in the New Economic Cycle. If a dealer joined he agreed not to raise his prices over what they were when the new regime started. On the contrary he was to sell all his goods at a ten per cent discount, and the Bank of the United States would hand him the difference on presentation of his sales records. Then Holmes proceeded to give away through the Bank twenty-five dollars per month to anybody who would take it. Naturally business boomed. Prices didn't go up because all of the business went to the merchants who had joined the agreement.
Presently all the other merchants joined, too, in order to get in on the rush of business. Factories re-opened, labor was needed and unemployment disappeared like snow in July. The country hummed. And that is a thumbnail sketch of the present situation, Perry. No unemployment, plenty of well paid work for anybody that wants a job, and enough credit issued every month to anybody that wants it to keep body and soul together in decency."
Perry looked bewildered. "Wait a minute. It looks fine at first glance, but where did he get the money? Not from taxes, surely, with the country already broke. And not from the private bankers. They were ruined in the war."*
[*For the benefit of the reader who is arithmetically inclined:
(A) Value (Price) of consumption goods produced in 2010 $540,000,000,000.00
Average income per person $2,413.33
(B) Total of personal income (Wages, dividends, insurance, pensions, etc.) $434,400,000,000.00
(C) Difference or under-consumption $105,600,000,000.00
Practical check:
(D) Value of estimated excess in inventories (under-consumption) $110,400,000,000.00 Error $4,800,000,000 or ±4.45%
(E) Empirical control figure (C±D) $108,000,000,000.00
Divide by population of 180,000,000 to obtain under-consumption per person per year of 2010 $600.00
Divide by 12 to obtain under-consumption per person per month $50.00 Issue one-half of this directly $25 per month per person Ratio to (A) all consumption goods produced of (E) unconsumed consumption goods is one to five or 20%. Discount is to handle one-half of this. Therefore discount is 20%.
Q.E.D.
I have taken the liberty of using round numbers. The exact figures from the Washington Archives show $27.813 per month and discount of 11.87%.