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A. W I L L I S ROBERTSON COMMITTEES: W A Y S AND M E A N S CHAIRMAN, SELECT CONSERVATION COMMITTEE SEVENTH VIRGINIA DISTRICT Congr m of tie U r n t e b S t a t e s * Hottat of ftepre&ntatfteg ©aosfjuigton, 30. C. July 28, 194-2 Honorable Marriner S. Eccles, Chairman, Federal Reserve Board, Washington, D. C. My dear Governor: Last fall, when I was preparing a speech for delivery before the Virginia Manufacturers Association, you were good enough to offer some helpful suggestions on the subject of inflation, etc. Next month I plan to address the Virginia O Bankers Association in Charlottesville, and am again asking your kind assistance in the preparation of that speech. I would particularly welcome your suggestions on the best ways of preventing currency inflation* And I would appreciate your comment on the ways bankers can promote the war effortIf your reply reaches me by August 20th, it will be in ample time for my purposes. August 17, 19112 Honorable A. Willis Robertson, House of Representatives, Washington, D. 0. Bear Mr. Robertson® This is in reply to your letter of July 28, in which you request suggestions on the best ways of preventing "currency inflation" and on the ways bankers can proigote the war effort. The problem isasiediately 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, and 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 and of itself is not the principal part of the inflation problem since the bulk of payments are made by checks drawn upon bank deposits. In fact, the withdrawal of currency from banks reduces bank reserves and thus curtails the potential expansion of bank credit* The effect is deflationary rather than inflationary, Tou may be interested in reading the article on "Recent Changes in the Demand for Currency*1 which was published in the April 151*2 issue of the Federal Eeserve Bulletin, a copy of which is enclosed. In his message to Congress on April 27, the President outlined a seven-point national progrem for preventing an undue rise in the cost of living. My own position on these Batters has been stated on several occasions. Rather than burden you with a repetition of the references forwarded to you on October 21, I9I4JL, when you were preparIng your address to tine Virginia Manufacturers' Association, of Eoanoke, I shall mention only a few later sources. The statement before the Banking and Currency Committee of the House of Representatives on September 29, l^til* with reference to the Price Control Bill, gives my general views an the efficacy of functional and selective controls of inflation, respectively, and their interrelationship. The talk before America's Town Meeting of the Air on February 12, is concerned with the means of financing the war without inflation* The address before the District of Coltaabia Bankers Association on May 25 relates the present effort to prevent inflation to the FILE COPY August 17, 19U2 Honorable A* Willis Robertson eventual attainment of poat~war security and prosperity. The radio address of June 2k explains how the discouragement of credit and in* staljaent buying and the encouragement of the liquidation of existing debts (the seventh point in the President's prograia) aid in preventing inflation. X am glad to be able to enclose copies of these statements and to mark parts that my be of special interest to you* Bankers con pronote the war effort in so many ways that it is difficult to generalize. In their respective coimaunities they can strengthen the whole war program by supporting it themselves end encouraging others to do so. The success of the seventh point in the President's program to prevent runaway prices, stated above, depends a great deal on the active cooperation of bankers* likewise, the fifth point (encourageauant of citizens to purchase War 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 amounts during recent months, bankers may earn a reasonable return on temporarily idle funds and at the same tiiae facilitate the financing of the war. Participation by bankers In th# 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 Reserve Banks have been auth«* oriaed to act as agents for the War and Havy 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 soiae of the enclosed material will be of service to you in preparing your address and I should appreciate receiving a copy of it. Ihank you very much for the opportunity to offer suggestions* Sincerely yours. M. S. Eccles, Chai Enclosures m EAQ dr FIL A. W I L L I S ROBERTSON COMMITTEES: W A Y S AND M E A N S CHAIRMAN, SELECT CONSERVATION COMMITTEE SEVENTH VIRGINIA DISTRICT C o n g r e s s o f tfje Winittb States $)ou$t of 5Repre£entattoess JHBag&mgton, 30* €• August 18, 1942 Hon. U. S. Eccles, Chairman, Board of Governors of the Federal Reserve System, Washington, D. C. Dear Governor Eccles: Yotit letter of the 17th is greatly appreciated.* The material vshieh you have furnished will be very helpful to me in preparing the speech to be delivered to the Virginia Bankers Association. With best vdshes, I am
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