
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, March 22, 1992                   TAG: 9203230185
SECTION: EDITORIAL                    PAGE: B-2   EDITION: METRO 
SOURCE: 
DATELINE:                                 LENGTH: Medium

WINNERS, LOSERS

HOW MUCH silver to coin? In the decades after the Civil War, that seemingly arcane question - so quaint, even trivial, to Americans of the late 20th century - fired hot oratory, inspired the rise of political parties, fueled presidential campaigns.

It did so because the debate wasn't really about silver. It was really about the availability of capital and the cost of obtaining it - a creditor-debtor clash as old as the republic and as new as this morning's paper.

Not just mining interests but also all manner of debtors and would-be debtors, especially in the credit-starved agrarian South and West, favored the unlimited coinage of silver. It would put more money into circulation, and thus make capital easier to come by and cheaper to borrow.

Opposing them were conservative creditors, concentrated in the urban East. They wanted no dilution of their gold-backed money; keep cash in short supply, to bolster interest yields and to avert inflation that could cut the real value of their hard-money holdings.

Today, the talk is of interest rates rather than silver. The line between creditors and debtors is defined more by demography, especially age, than by geography.

But the basic conflict remains, and is resurfacing in the wake of the Federal Reserve-fostered deep drop in interest rates. For homeowners who've refinanced their way out of high-cost mortgates, the interest-rate plummet is a boon. For retirees who've seen income from interest-bearing investments cut in half, it can be a threat.

In retrospect, it's easy to sympathize with the "free silver" advocates of the 19th century, to see their foes as greedily shortsighted. Growth of the nation's monetary supply was not keeping pace with growth of the economy; no wonder the have-nots were feeling a first-class squeeze.

With the 20th-century version of the conflict, choosing sides may be harder. The use and abuse of debt and credit have changed. But the re-emergence of one of history's classic conflicts offers a lesson worth remembering: Virtually any economic policy will have both winners and losers.

The monumental federal debt amassed under President Reagan during the '80s had plenty of losers, including the working class and future generations, but also some winners: those in a position to lend money to the government at a nice rate of return that was taxed less than it otherwise would have had to be. Conversely, the current low interest rates have plenty of winners, but also losers: those who've come to depend on high rates for their income.

Any economic policy, in short, is in one way or another redistributive. History's judgment ultimately may turn on how well the Fed's low-interest policy (a) helps lower-income Americans seeking a boost onto the bottom rung of the home-ownership ladder, and (b) proves beneficial to the economy in general, redistributive effects aside. There's room for hope on both counts - but so far, the returns are out.

by CNB