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The Executives' C lub o f C hicago stands unalterably fo r the Constitution o f the United States as handed down to us by our forefathers and
under which we have lived fo r the past 160 years; and affirms th a t the fundamental principles it asserts form the basis o f true Americanism.

E x e c u t i v e s ’c l u b t e
Volume 25, No. 2

C H IC A G O 2, U. S. A.

September 24, 1948

Warning on Inflation’s Spread Sounded by
Veteran Member of the Federal Reserve Board

Marriner S. Eccles discusses "inflation and the Dangers to
O ur Economic System" at meeting o f Friday, Sept. 17, 1948
P r esid e n t


seldom is

it physically possible to secure the
cxact timing o f a national issue and
a national figure so thoroughly identi­
fied with that issue at the exact m o­
ment of one of our meetings as we have
succeeded in achieving today.
Inflation is the great American head­
ache o f the moment. In all sections of
our land from the Chairman of the
Hoard o f our largest corporation down
to the housewife with her market bas­
ket, inflation is tightening its clammy
hand on our econom y in a firm, strang­
ling grip.
W e arc not panicky—we are not
overly fearful— hut we arc searching
diligently and hopefully for an infla­
tion cure.
Mr. Marriner Eccles was for twelve
years Chairman o f the Hoard o f the
Federal Reserve System and during
that period instituted and directed a
large part o f the monetary policy of
the nation.
Mr. Eccles has managed to keep a
remarkable sense o f balance through
one of the dizziest rides on the W ash­
ington M erry-Go-Round that any pub­
lic servant ever endured. This par­
ticular mariner indeed has had a rough
voyage on the Potomac. (Laughter)
On several occasions, Mr. Eccles has
shown a rare type of political courage
by publicly attacking anti-inflation pro­
grams proposed by President Truman.
This, o f course, is not the way to win
friends and influence people inside of
any administration.
As a result, President Truman re­
placed Mr. Eccles with Thomas M c­
Cabe as Chairman o f the Federal Re­
serve Board. Hut Marriner Eccles, in
a move that only a really big man
could have made, agreed to stay on as
Vice Chairman.
Mr. Eccles hails from Utah where
instead o f having 28 wives, he owned
28 banks and a whole string o f sugar,

lumber and construction


Marriner Eccles is a rare public serv­
ant; he owes no allegiance to anyone—
he only wants to serve. He sticks to
his own sincere beliefs and lets the
chips fall where they may.
Few men are more acutely aware of
our economic danger signals than our
speaker today. Gentlemen— Mr. Marriner S. Eccles. (Applause)

MR. ECCLES: Chairman Corbett,
Distinguished Guests and Members of
The Executives’ Club of Chicago: This
is, indeed, a privilege and a pleasure
for me ^ to meet with the business
leadership of this great city. I never
appear before a group to talk but that
I am reminded o f what happened to
me one evening when I was invited to
speak to the editors o f the McGrawHill Publishing Company. There were
about thirty or forty o f them and as
we were haying dinner I turned to one
of my associates, who was an assistant
while I was Chairman, and said to him,
‘‘ Elliott, as I look around I know a
great many o f these men and I am just
wondering if I have spoken to this
group before.”
He said very seriously, “ I am sure
that you have not, because if you had
you w o u l d n ’ t be h e re tonight.”
So it is quite apparent that I have
not spoken to this group before on the
basis o f that reputation!

Your chairman spoke of the rough
ride that I had had on the Potomac.
I rather feel that it was somewhat of,
maybe, a fortunate ride. He spoke
o f the fact that my resignation had
been in the President’s desk. I think
I need to clarify that statement to this
extent. The members o f4 the Federal
Reserve Board are appointed by the
President and confirmed by the Senate
for terms o f fourteen years. I had ten
years o f my term to run. One o f the
members is designated as the Chair­
man o f the Board by the President to
serve for a term o f four years and the
same is true of the Vice Chairman.
Mr. Truman neither appointed me
as a member o f the Board nor did lie
designate me as Chairman. It always
has been my belief—and I so argued
before the committees o f Congress dur­
ing the hearings on the Banking A ct
o f 1935— that the Chairman should
serve at the pleasure of the President
because he is the liaison between the
Federal Reserve System and any ad­
ministration that may be in power at
any given time. I did not succeed in
getting that provision in the statute—
that the Chairman serve at the pleasure
o f the President. However, as far as
I was concerned, it seemed impractical
that I, as Chairman, should undertake
to be a liaison if I was persona non
grata with the President.
So I said to Mr. Truman, “ You did
not designate me and I want you to
know that I will make available the
chairmanship any time that you may
desire.” He assured me upon that o c ­
casion and others that he would not
hear o f it. But, when my term as
Chairman— the four years— did expire,
which was last January 31st, without
any previous notice, except about two
days, he had John Stcelman advise me

Since M r. Eccles’ speech was mad* off th t record, It is not for further publication although he
has authorized its printing in tha Executives' C lu b News for distribution to our membership.

Page 2


PR ESID ENT— Paul M. Corbett, Vice Presi­
dent, Youngberg-Carlson Co.
1st V IC E PR ESIDEN T— M. Glen Miller,
Owner, M. Glen Miller, Advertising
2nd V IC E PR ESID ENT— John J. McDon­
ough. Assistant Vice President, Harris Trust
& Savings Bank
SECRETARY— George L. Fairbairn, Secre­
tary, Marsh & Truman Lumber Co.
T REASURER— Elliot W . Frank, Vice Presi­
dent, La Salle National Bank
E X E C U T IV E DIRECTOR— A. T. Etcheson,
Suite 1949, 111 West Washington St., Chi­
cago 2. ANdover 3-3500

Frank G. Anger— Vice President, Chicago Na­
tional Bank
John W . Barriger— President, Chicago, Indian­
apolis & Louisville Ry. Co.
Reuben D. Beckett, Vice President and Trust
Officer, Mercantile National Bank of Chicago
James B. Blaine— Executive Vice President,
John F. Cuneo Co.
Harold L. Boyle— Vice President and Director,
Deere and Co*
John W . Carnrick— Atlas Film Corporation
Thomas H. Coulter— Booz, Allen and Hamilton
Frank D. King— Vice President, Secretary and
Treasurer, The Railways Ice Company
L. Duncan Lloyd— Partner, Lord, Bissel) &
Otis S. Mansell— President, The Celotex Corp.
A. King McCord— First Vice President, The
Oliver Corporation
Michael F. Mulcahy— Partner, Mulcahy, Murphy
and Dieringer
Frank E. Spencer— President, Spencer Petroleum
Co., Division of Socony Vacuum Oil Co.
James C. Thompson— President, The Wacker
Oliver S. Turner— Partner, Sudler and Company
Ferre C. Watkins— Attorney at Law

John D. Ames— Editor and Publisher, Chicago
Journal of Commerce, Inc.
Laurance Armour— Chairman, La Salle National
Sewell L. Avery— Chairman, Montgomery Ward
& Company
James B. Blaine— Executive Vice President,
John F. Cuneo Co.
Ralph Budd<— President, Chicago, Burlington &
Quincy R. R. Co.
John F. Cuneo— President, The Cuneo Press, Inc.
Gen. Charles G. Dawes— Chairman, City Na­
tional Bank & Trust Company of Chicago
Marshall Field— Publisher, The Sun-Times Co.
Stanley G. Harris— Chairman of Executive Com­
mittee, Harris Trust & Savings Bank
James S. Kemper— Chairman, Lumbermens Mu­
tual Casualty Co.
James L. Kraft— Chairman, Kraft Foods Co.
Nathaniel Leverone— Chairman, Automatic Can­
teen Company of America
Chauncey McCormick— President, Art Institute
of Chicago
Max McGraw— President, McGraw Electric Co.
James F. Oates, Jr.— Chairman, Peoples Gas
Light & Coke Co.
Frank C. Rathje— President and Chairman, Chi­
cago City Bank & Trust Company
Arch W . Shaw— President, Shaw and Co., Inc.
Dr. Franklyn Bliss Snyder— President, Northwestern University



lie was not going to redesignate me
after I had served for so many years.
Well, I didn't feel too happy about the
way the matter was handled.
I have been away from Washington
nearly a month, during which time I
have been up in Canada— Banff, Lake
Louise, and Jasper— and out to my
home in Utah.
Therefore, I did not
have either the inclination or the oppor­
tunity to prepare a written spccch and
I am going to have to ask that what
I say today be off the record. I do feel
that it is one thing to speak on the
record before the committees of Con­
gress when you have no choice as to
whether or not you will go up there,
but it is quite another thing to speak
on the record under these circum­
stances and during these critical times
without preparing a statement. A c ­
cordingly, if the press will be good
enough to treat what I may say off the
record, I will be glad to meet them in
a press conference after the meeting.
I have nothing to say, but if they have
some questions 1 can indicate whether
or not I can answer them on the

The Inflationary Situation
Now, getting down to some o f the
serious problems I know you expect
and you want me to discuss, that is,
the development o f the inflationary
situation with which we all are con­
fronted and some of the causes and the
effects of the situation, I am going to
read just briefly from a statement I
made before the Joint Committee on
the Economic Report, which is known
as the Taft Committee, on April 13th.
This is the statement I made on be­
half o f the Board. I just want to give
you this excerpt from it:
“ Never in our memories has the
world been pervaded by greater fears,
confusion and discouragement arising
chiefly because of the disappointments
of the past and the uncertainties of the
future. The great hopes we had dur­
ing the war for achieving a lasting
peace in a prosperous world have been
steadily diminished because a few
ruthless and despotic men hold a
sword of Damocles over the heads of
free peoples throughout the world.
It is difficult, if not impossible, to plan
for a rational economic future either at
home or abroad while that sword hangs
over us. W e think that the prospect of
removing the threat by peaceful means
will be immeasurably enhanced the
sooner we assert our moral and our
physical power to establish the founda­
tions for peace before we are engulfed
by the economic and social problems
which grow more menacing the longer
the establishment of a firm basis for
a permanent peace is delayed.”

E X E C U T IV E — James B. Blaine
PROGRAM— Thcmas H. Coulter
M EM B ER SH IP— Michael F. Mulcahy
FIN AN CE— Elliot W . Frank
SPEAK ER ’S TABLE— John J. McDonough
—James C. Thompson
RECEPTION— Frank D. King
A T TEN D AN C E— L. Duncan Lloyd
SPORTS— Thurston R, Lundeberg
M USIC DIRECTOR— Frank L. Bennett



: Commodities

231 S. LaSalle St.
Phone CEntral 6-5775



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n it
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Members New York Stock Exchange and
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W hen the defense program was
started in 1940, we had a great cushion
of unemployment, of excess food, of
idle productive facilities. It was not
long, however, until the excess capacity
of men, material and plants had been
utilized. That was brought about by
war defense and soon thereafter by
war financing. The war financing would
not have brought about the inflationary
situation had it all been financed cur­
rently out o f taxes.
But that was not done. It possibly
could not have been done. It never
has been done in any country and we
financed during the entire war only
about 44 per cent of its cost, which
was over $400 billion, out o f taxes.
The balance of it was financed out of
borrowing and the public debt went
up from something around $45 billion
to $270 billion in the short space of
five years. A very substantial part
of that public debt was financed by the
banking system, which was the process
of creating money. Money comes from
bank credit— and I w on’t go into the
mechanism o f how that is brought
about except that it is a fact.
At the end o f the war, the expansion
o f bank deposits and currency had in­
creased about three times. In addition
to that, the public held large quantities
of government securities which were
the equivalent of cash.
W e wanted to prevent inflation dur­
ing the wrar when 45 per cent of our
entire productive capacity and goods
were being devoted to the sustaining
o f the war and the balance was left for
the civilian population. The money sup­
ply in the hands of the civilian popu­
lation equalled 100 per cent because
the goods available for war were not
available for purchase by the civilian

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F o r Y o u r b u s in e s s



Page 3

out a terminal point. W e have had an
expanding European Aid Program and
there is no terminal point to that.
A world aid program would be better.
Right in the face of that, we cut taxes
about $5 billion. So the most important
anti-inflationary weapon we had in the
kit, which was budgetary surplus, has
practically disappeared.

Tragic Mistake

N a t io n a l B a n k

population who produced the goods,
Imt they had the money which they got
for the production. Therefore, you had
a very large supply of money and a
growing supply o f money without
a growing supply o f goods available to
the civilian population.
In order to prevent inflation during
the war, the harness o f controls was
put into effect— price control, rationing,
allocation of scarce materials, build­
ing permits, wage controls, export
licenses and excess profit taxes. It was
perfectly natural that when the war
ended there would not be a supply o f
goods and services available to meet
the demand and available purchasing

Causes of Inflation
Now, inflation is a condition where
the means of payment in the hands of
those who will spend it exceed the
supply o f goods and services available—
and you certainly had and still have
that condition. Y ou had a terrific po­
tential inflation. Y ou had a backlog
of demand that had accumulated for
many goods and services over a period
o f five years. In addtion to that, you
had what was the normal current de­
mand which you would have had had
there been no war. So immediately
there was what was the current de­
mand plus everybody’s desire to get
what was the backlog o f demand.
W hat we have had since the war
ended is an attempt on the part o f the
American people and American busi­
ness to not only satisfy their current
demands, but to satisfy this backlog
demand. It was not physically possible
to produce what would be the equiv­
alent o f seven years in housing, auto­
mobiles and many goods in a period
of two to three years. The miracle is
that we have not had far more infla­
tion. If it had not been for the great
faith o f the public in the government
and the purchasing power o f the dol­
lar— in which they have been deceived,
1 think, in many instances— we cer­
tainly could have had far more infla­
tion than we have had.

Now, to make this inflationary situa­
tion even worse, we have had recently
an expanding military program with­

The taking off of the controls was
a tragic mistake— and that mistake was
made, not last year, but in 1945. Prac­
tically every control was taken off be­
fore the end of 1945. Price control was
left on, but price control was complete­
ly useless without rationing, without
allocation, without wage control and
without the other harness of controls.
All it did was to play into the black
market—the racketeers, who were the
strongest advocates for a continuation
of price control. They were just like
the bootleggers during prohibition—
they wanted prohibition continued;
and just so did the black market opera­
tors want price control continued. It
was ineffective when you took the con­
trols off.
Mr. Vincent and Mr. Snyder strong­
ly advocated the taking off of the ex­
cess profits tax. Now, I am not saying
that the Republicans who were not in
control of Congress at that time raised
any objection to taking off these con­
trols. (Laughter)

Neither am I saying American busi­
ness and farmers and labor raised ob­
jection to it. Everybody wanted them
off, except; labor wanted wage con­
trols off, but wanted price controls
left on; business wanted wage controls
left on, but wanted excess profit taxes
taken off; the farmer wanted the ceil­
ing taken off of his farm products, but
wanted a floor kept on them; the bank­
er wanted higher interest rates as a
means of controlling credit, but wanted
no other means on the part o f the
Federal agencies to control his bank­
ing operations.
W ell, you know the story. The D em ­
ocratic Administration is largely re­
sponsible for the results. They were
supported to a great extent by the
Republicans and most o f the American

Vicious Circle
The longer inflation goes, the more
serious will be the adjustment. You
have already created a terrific dis­
equilibrium. Business as a whole and
the farmer and organized labor have
not suffered by inflation. The income
of business after taxes has more than
doubled. I am speaking nationally.
The income o f the farmer has gone up
more than two and a half times since
1941. The wages of organized labor—
not taking into account their inefficien­
cy, which in many cases is appalling—
has likewise doubled.


Vice President, Cur­

Mr. E. V. Zeddics,
tiss Candy Company.

Vice President

Mr. F. M. Knight,
, Con­
tinental Illinois National Bank &
Trust Company of Chicago.
Mr. Malcolm J. Boyle,
Boyle & Co.

President, M. J.

Former Director,

Mr. Percy Wilson,
Wilson Mortgage & Finance Corp.,
The Execu­
tives’ Club o f Chicago.


Mr. A. M. Jens,
, The Chi­
cago Federal Savings & Loan Asso­

President, The

Mr. Horace S. French,
Manufacturers National



Chairman of

Mr. Charles W. Scabury,
Marsh & McLennan, Inc.

the Board,

Partner of the

Mr. Richard A. Kebbon,
Kebbon, McCormick & Co.


Mr. Bernard P. Smith,

President, C. D.

Executive Vice
& Co.
Mr. Harold V. Amberg, Vice President,

.Mr. Willard W. Cole,
, Henry C. Lytton


The First National Bank o f Chicago.

Senior Partner of

Mr. Edwin G. Booz,
Booz, Alien & Hamilton.

the firm,

Vice President,
Treasurer, H a ls e y ,

Mr. Walter L. Darfler,
Stuart & Co., Inc.



Mr. Paul M. Corbett,
Executives’ Club of Chicago.


Mr. C. S. Young,
Reserve Bank o f Chicago.



President &

Mr. Frank C. Rathje,
, Chicago City
Trust Company.





Air. John M. Budd,
& Eastern Illinois Railroad.


Mr. John C. Wright,
Salle National Bank.




Mr. Mathew Keck,
Borg-Warner Corporation.


School of Busi­

Dean Garfield V. Cox,
The University o f Chicago.


First Vice Presi­

Mr. A. King McCord,
The Oliver Corporation, and,
The Executives' Club of


President, The

Mr. Solomon A. Smith,
Northern Trust Company.

Major General Carl F. Gray, Jr.,
V e te ra n s Affairs
Washington, D. C.



Senior Vice

Mr. Chester R. Davis,
Chicago Title & Trust Co.


President, The Chi­

Air. James E. Day,
cago Stock Exchange.

Vice President,

Mr. R. E. Pritchard,
Harris Trust & Savings Bank.

Page 4


On the other hand, you have the
great mass o f the unorganized groups,
the pensioners, people living on an­
nuities, the white collared groups and
the returned veterans— many of them
were not members o f unions. The
union members are about 14 million
out of 60 million people employed.
That group is hurt and in order to keep
up their standard along with the
groups that have been benefited, they
have used up some of their savings.
They have cashed in their "E ” bonds
and they have gone into debt.
Consumer crcdit since the war ended
lias practically doubled. Installment
consumer credit has more than doubled.
M ortgage debt on housing has almost
doubled in the past two years. W c
have been getting the little fellow in
debt to purchase inflated houses in the
last two years at the rate of around
$9 billion a year.





in C A L C U L A T I N G ,
T A B U L A T IN G and T Y P IN G

(including transcribing)
C a ll us. Use us f o r em ergencies, peaks,

tlie O V E R LO A D S w ith M U ST tags.
T hink o f us as yo u r branch office;
lean on us fo r the extra tasks beyond
the ca p a city o f y o u r ow n efficient o r­
gan iza tion . B uild lean, com petent,
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PHONE CApitol 7-0500

You see, we are not dealing with the
economic facts of life— neither the gov­
ernment, nor business, nor the farmers,
nor labor. It is unfortunate that we
did not keep controls on. It is too late
to put them on now. First o f all, the
public would not accept them. It is
like humpty-dumpty on the wall. Y ou
just cannot put it together again and
one control without all o f the others
would be quite useless.
Y ou must have the entire harness
and I don’t think any such a regimen-






So we have been perfectly incon­
sistent. At one and the same time, the
Government talks about controlling in­
flation through various m eins while
doing the very thing that tends to
create and sustain it.
You have got what we call parity
payment in the case o f the farmer. The
Department of Agriculture talks about
the reduction of production so as to
be able to sustain prices. It appears
now that we are going to get some
surpluses and, with the Government
bound to maintain parity, they are g o­
ing to have to buy up the surpluses and
therefore there is a feeling that pro­
duction should be restricted so Govern­
ment will not have to buy up the sur­

Too Late for Controls







Sam Workman, Pres.

talion in peacetime is practicable or
possible without a greater degree of
education and understanding than the
public now has.
There arc some things that could be
done. I am going to just give you
what I said off the cuff the other day
before the Committee of Congress, if
I have it here. I am not sure that I do.
This was before the Committee and it
read fairly well, so I possibly could
not say it any better.

Proposed Remedies
“ What we are interested in this time,
o f course, is not so much recrimina­
tion. What we are interested in is
what can be done, at this late date, to
overcome as far as possible the mis­
takes o f the past. I do not believe it
practical to put back a complete har­
ness o f wartime inflationary controls.”
The press can get this because this
is what I said before the Committee
o f Congress.
“ I do not believe that to put back
some and leave off others would do
the job. I do believe that it is too late
to avoid a serious deflationary adjust­
ment at some point. The disequilib­
rium and the distortions have already
been created and the public are in debt.
I do believe that the inflation can go


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m odern w arehouse service a t con ven ­
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D irect ra il con n ection s w ith a ll rail*
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201 S. La Salle Street
Chicago 4
CEntral 6-4477

109 N . Wabash, CH ICA G O 2, RAndolph 6-8250

Now, true, you can have inflation as
long as you keep up the process of
getting the public living beyond their
incomes by the process o f consumer
credit, mortgage credit, or bank crcdit
that is not tied directly to the produc­
tion that would not be produced with­
out the bank credit. On top o f all o f
this inflationary effect, as I say, you
have had the Federal Government and
the states and municipalities carrying
out public works and public projects.
So what you should be holding today
for a cushion for a deflationary period
in public works and public roads, not
only on the part o f the Federal govern­
ment but on the part o f all the muni­
cipalities and states, is being spent.
In addition to that, state and local
governments have been passing soldier
bonuses and increasing the public’s pur­
chasing power. These measures have
been financed through debt and this
creation o f debt has helped to sustain
Y ou have had the Federal govern­
ment stimulate this housing program
on the one hand, particularly through
the mortgage which is known as Title
6, while they are talking about con­
trolling inflation on the other. W e
have had the veterans’ housing pro­
gram which has been another stimula­
tion. W e have the R F C to provide
credit where banks did not.


when you have



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further if nothing is done and if
budgetary deficits develop/’ that is, if
we don’t have the budgetary surplus,
“ it can be long postponed, and can be
catastrophic in its ultimate effect the
longer it is postponed. I do believe
that the sooner inflationary develop­
ment is stopped the less serious the
adjustment, or the deflationary de­
velopment, will be.
do believe it essential that credit
controls, sufficiently broad in power
and authority, both in consumer credit
and bank reserves field, be made avail­
able. That can be, at the present, the
most useful, the most practical and the
most effective/'
O f course, budgetary surpluses would
be more effective than anything, but
that is not something that you can
get quickly.
“ 1 do believe it essential that credit
the power o f the administration and
the Congress .should be.done to main­
tain or to secure a budgetary surplus.
I do believe that the Federal Govern­
ment should do everything within its
power to encourage the States and
cities to postpone every expenditure
that it is possible to postpone and to
set an example to the states by doing
likewise. I do believe that the Federal
Government should not, for what seems
to me political reasons, encourage a


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housing program in excess of the ca­
pacity of labor and material available
and encourage further inflation there­
by. I do believe that the Federal Gov­
ernment should do everything in its
power to bring down food prices, to
take off floors if necessary and to en­
courage more and not less produc­
tion”— at least at this time.
“ I do believe that we should— and
I may sound naive in this regard— ad­
journ political considerations, and I
say that for both parties, and consider
honestly and openly in the interest o f
all the people the economic facts of
In the beginning o f my statement,
I quoted from a statement that I had
read on the 13th of April, which you
will observe, recognized that our do­
mestic inflationary situation could not
be dealt with, no matter what we did,
adequately as long as we did not have
a basis for peace in the world. So long
as we have a burden o f world aid to
prevent communism from engulfing the
world and so long as we feel it neces­
sary and urgent to spend the billions
we are for a preparedness program, it
is pretty difficult to deal with these
economic problems on the domestic
front. W e cannot and do not operate
in a vacuum.
Therefore, I think that we must be

Wright &Cnmpaiy
“Character Coeds f o r
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Page 5
realistic in dealing with this foreign
situation and I cannot help but feel
that the results o f the past three years
have not been very fruitful. It is ap­
parent to all of us that the world situa­
tion has been rapidly deteriorating. W e
have not kept pace with the develop­
ments, at least sufficiently, to even
maintain a status quo which was en­
tirely unsatisfactory. But it seems that
we may have lost ground.
W e must have a basis for world peace
and we must have it soon. If we must
risk war while we have the atom bomb
and the enemy does not have it, then
we had better risk it now rather than
be forced into it at a time when, with
all of our preparation—and preparation
is relative— we may be less well pre­
pared than the enemy.
A program o f preparedness is all
right if it is preparedness for offense.
But a preparedness program for de­
fense does not seem to me to make too
much logic. If a preparedness pro­
gram of defense means anything in the
present situation, it means an arma­
ment race and an armament race
ultimately leads to war—and in this
instance it would be an atomic war.
W e may not be the ones to choose
the time. Democracies seldom, if ever,
do. The British and the French were
sufficiently prepared to stop the Ger­
mans and enforce the conditions o f the
Versailles Treaty in 1934 and ’35 and
’36, even though they were less pre­
pared than they were in ’39 when they
were entirely unprepared to deal with
W e were well prepared to stop the
Japs from going into Manchukuo when
they broke the Nine-Power Pact. But
even though we were possibly much
better prepared at the time of Pearl
Harbor, relatively we were less pre­

Difficult Alternatives
It seems to me that we are con­
fronted with these very difficult alter­
natives. W e carry on a preparedness
program of an expanding amount o f
money— $15 billion this year, eleven
last and eighteen or twenty next. W h o
knows? The more inflation you get,
the more money it .takes. A world aid
program to hold our position! All of

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BEN KALLIS, Fr*sfd#nf

228 S. Wabash Avenue
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W A bash 2 -1 8 9 6

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Page 6


the following donors fo r the fine
prizes they provided fo r our golf
James B. Blaine
Paul M. C o rb e tt
Bennett H. C rofford
J. Philip David
George L. Fairbairn
Jerry Glynn
Ben Kallis
E. W . K ettlety
Dana C . Lambert
Rube Metz
M . Glen M iller
Robert C. Munnecke
Ray L. Odman
Chester E. Rieck
Thur L. Schmidt
John A . Stolp
Charles T. W ilt, Jr.
They also wish to thank M r. and
Mrs. Frank Bennett fo r the splendid
entertainment they provided at all
o f our season's golf dinners.

that means that we are getting weaker
in a sense. W e are getting weaker in
an economic sense on the home front
while our enemy is getting stronger.
It seems to me, then, that we are
confronted with either wrecking our­
selves ultimately on the rocks of in­
flation, or destroying the very system
that we are preparing to save by the
adoption of such rigid controls that
we would be, in essence, a totalitarian
econom y ourselves to control the do­
mestic situation, or the third alterna­
tive is to find ways and means very
shortly o f forcing a basis o f peace in
order that we can avoid the catas­

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trophe that we will be ultimately con­
fronted with if wc do not face up to
these very unpleasant alternatives.
In that connection, I would like to
give you some quotation from a book
written by none other than M ajor Gen­
eral Dean who headed the United
States Military Mission in M oscow
throughout the Period o f Our W ar
Alliance with the Soviets. Nobody
could know better than he the situation.
What does he say? “ If the record
up until the end of the war was not
sufficient to clarify Soviet intentions,
certainly all doubts should have been
dispelled by February 9, 1946, when
Stalin reaffirmed the doctrine of Marx
and Lenin in exhorting his people to
extraordinary efforts in the preparation
for the inevitable wars which must be
expected so long as the capitalistic sys­
tem exists.
“ In a sense, we are fortunate that
the issue is so clearly drawn. Never
before in our history have we had so
much advance warning of the peril
which confronts us. Never has it been
more important to take preventive
measures to avoid the dangers which
lie ahead and to prepare to overcome
them if they prove to be unavoidable.
This is going to require American
leadership which is crystal clear as to
our own objectives and which is sup­
ported in pursuit of them by a unified
public opinion. Most important, we
must adopt a program which is de­
signed not to defend our American
way o f life passively, but offensively,
to counteract constructively th o s e
forces which threaten it.
“ Again, Soviet leaders would prob­
ably have used the threat of the Red
Army with much greater abandon were
it not that they know that we still have
a strategic air force whereas they have
none that is comparable to it, that we
still have naval supremacy despite the
number of our ships that are inactive
and above all that we alone have the
atom bomb. Until the Soviet Union
has atom bombs o f her own, she will
be restrained from crossing swords
with those who have and the chances
o f obtaining our objective by peaceful
means will be enhanced immeasurably
if we are prepared to defend our posi­

tion by force at any point where it is
“ Nothing induces greater restraint
on the part o f the Soviet leaders than
a display of strength by their ad­
I have just one more quotation—
Winston Churchill, that great British
wartime leader, in an address before
the Parliament on February 23rd of
this year said: “ The best chance o f pre­
venting war is to bring matters to a
head, to come to a settlement with the
Soviet government before it is too late.
This would imply that the western
democracies would take the initiative
in asking the Soviet for a settlement.
It is idle to reason or to argue with the
communists. It is, however, possible
to deal with them on a realistic basis
and in my experience they will keep
their bargains only as long as it is in
their interest to do so, which might, in
this grave matter, be a long time once
things are settled.
“ I said that the possession of the
atom bomb would give three to four
years’ breathing space, perhaps it may
be more than that. But more than two
years o f these years have already gone.
I cannot think that any serious dis­
cussion which it may be necessary to
have with the Soviet government would
be more likely to reach a favorable
conclusion if we wait until they have
got it, too. W e may be absolutely sure
that the present favorable situation
cannot last.”
W hat I have said on this last sub­
ject is entirely out of my field o f mon­
etary banking and credit control. But
I cannot think in terms o f a domestic
economic social problem when every
problem you look at, whether it is
taxes, whether it is appropriations for
the military or foreign aid, or whether
it is inflation, goes back to Russia.
That is the controlling factor at the
present time, not only of the foreign
situation, but o f our domestic situation.
You have been very patient and I pos­
sibly have talked too long. What I
have said has been off the record and
I appreciate very much your attention.
I thank you! (The audience arose
and applauded)


S, me.