“. . . both men claimed, for whatever reason, that money should be issued on the basis of the nation’s productive capacity, as measured in estimated national wealth. The fatal flaw in this approach is that this estimate of the nation’s wealth is itself denominated in money. As soon as the money bureaucracy that these men want to establish issues money on the basis of this estimate, the result will be higher prices, and therefore a higher nominal value of the nation’s wealth. This higher figure will then be used to justify another infusion of money, and such theorists as these will be heard to complain of yet another “scarcity of money.” The process will repeat itself again and again, all the while debasing and destroying the currency. Unlike a 100-percent reserve system, in which banks cannot issue more in notes than they have specie in their vaults, there is no logical limit to the expansion of the unbacked paper money favored by Fathers Coughlin and Fahey. Paper, ink, and a printing press are all that is required.

“The inflationist approach of Frs. Coughlin and Fahey would have produced all the negative consequences of any inflationist scheme. All the injustice toward non-favored segments of the community (who get the new money last), all the confusion and chaos in business calculation, all the incentives to consume and spend rather than save and invest, all the impoverishment – these would remain. They did not object in principle to the counterfeiting and inflationism of the Federal Reserve; they simply wanted the government itself to engage in these practices directly rather than through what they considered the plutocratic intermediary of an institution like the Fed.”