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c 0 p I CONGRESS OF THE UNITED STATES House of Representatives Washington, D.C. July 28, 1942 Honorable Marriner S. Eccles, Chairman, Federal Reserve Board, Washington, D. C. Hjr dear Governor; Last fall, when Z was preparing a speech for delivery before the Virginia Manufacturers Association, you were good enough to offer seme helpful suggestions on the subject of inflation, ete# Next month X plan to address the Virginia Bankers Association in Charlottesville, and am again asking your kind assistance in the preparation of that speech* I would particularly w&lcosae your suggestions on the best ways of preventing currency inflation. And I would appreciate your comment on the ways bankers can promote the war effort* If your reply reaches me by August 20th, it will be in ample time for ay purposes. Sincerely yours, (Signed) A. Willis Robertson A* Willis Robertson August 17, 1942 Memorable A* lillis Jiobertson, Mouse of Representatives, Washington, D. C* Dear Mr* Kobertsom This la in reply to your letter of July 28, 1942, In i&ich you request suggestion® m the beat ways of preventing *currency inflation* and on the mays bankers can promote the war effort. The problem immediately before us in regard to inflation is to prevent the increasing flow of income arising out of the war effort from bidding up prices of the diminishing supply of civilian goods* Personal incomes, both profits and payrolls, have greatly increased, reflecting war expenditures by the Government, m d the manufacture of goods available for civilian purchases has seriously declined as the result of the diversion of plant, labor and materials to war purposes* Currency in Mid of itself is not the principal part of t&e inflation problem since the bulk of payments are m d e by checks drawn upon bank deposits„ In fact, the withdrawal of currency fro» banks reduces bank reserves and thus curtails the potential expansion of bank credit* Thm effect is deflationary rather tr-an inflationary* You may be interested in reading toe article on ^Recent Changes in the Demand for Currency* which was published in the April 1942 issue of the Federal Eeserve Bulletin, a copy of #ilch is enclosed* In his message to Congress cm April 27, the President outlined a seven-point national program for preventing an undue rise in the cost of living. My om position on these matters has been stated cm several occasions* Rather than burden you with a repetition of the references forwarded to you on October 21, 1941* when you were preparing your address to the Virginia Manufacturers* Association, of Koanoke, I shall mention only a few later sources* The statement before the Banking and Currency Cossmittee of toe House offiepresentstiveson September 29* 1941* with reference to the Price Control BiH, gives my general views on the efficacy of functional and selective controls of inflation, respectively, and their interrelationship* The Talk before America1s Town Meeting of the Air cm February 12, 1942, is concerned with the means of financing the war without inflation. The address before the District of Columbia Bankers Association on May 25 relates the present effort to prevent inflation to the eventual attainment of postwar security and prosperity* The radio address of June 24 explains how the discouragement of credit and instalment buying and the encouragement of the liquidation of existing debts (the seventh point in the President's program) aid in preventing inflation* I aa glad to be able to enclose copies of these statements and to mark parts that may be of special interest to you* Honorable Ju Hills Robertson -2- august 17, 194^ Bankers can promote the war effort In so many ways that it is difficult to generalize* In their respective communities they can strengthen tiie m o l e war program by supporting it themselves **nd encouraging others to do so. The success of the seventh point in the Presidents program to prevent runaway prices, stated above, depends a great deal on the active cooperation of bankers} likewise, the fifth point (encouragement of citizens to purchase iar Bonds with their earnings instead of using those earnings to buy non-essentials). By investing in the short-term securities which the United States treasury has offered in increasing amount a during recant months, bankers may earn a reasunable return on temporarily idle funds and at the same tiae facilitate the financing of the war* Participation by bankers in the financing of war industries, either independently or through guaranteed loans under Regulation V of the Board of Governors of the Federal Reserve System, will make it possible for local industries to participate more extensively in war production, the Federal iieserve Banks have been authorized to act as agents for the har and Uavy Departments and the Maritime Commission and will be glad to furnish advice and information on war financing to all bankers in their respective districts. I hope sotae of the enclosed material will be of service to you in preparing your address and I should appreciate receiving a copy of it. Thank you very much for the opportunity to offer suggestions. Sincerely yours, II. S. Iccles, Chairman. Enclosure© c 0 p I CONGRESS OF THE IWITED STATES House of Representatives Washington, B.C. August 18, 1942 Hon. M« S. Eeeles, Chairman, Board of Governors of the Federal Reserve Systea, Washington, S, C. Dear Governor Ecclesi Your letter of the 17th is greatly appreciated. The material which you have furnished will be veiy helpful to ae in preparing the speech to be delivered to the Virginia Bankers Association. With best wishes, 1 «a Cordially yours. (Signed) A. Willis Bobertson A. Willis Robertson.
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