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Philadelphia Nov. 29, 1935

Mr Marriner Ecoles,
Care of Federal Reserve Bank Board,
Washington, D. 0.
Dear Sir:
I waa very much surprised to read your statement the other
day, in whioh you stated that the present sharp rise in the stock market
was not due to CREDIT, but that the buying was "being done for CASH.
Is this statement of yours just plain New Deal ballyhoo or is It sheer
ignorance on your part.
If the latter, yovi should resign the job you
hold, as oertainly you are not a fit man to hold any responsible position
in the Federal Reserve system.
Are you not aware that "pyramided equitlea"in securities,
largely written
up during the past two years, Is the REAL BASIS of the preent "buying wave?
Would you call that cash or or edit inflation?
Did not the same thing run the gigantic boom, which oulmlnate'd In 1929?
Was the Florida Real Estate boom of a few years ago run on a "basis of
cash, or was It run on a basis of inflated and constantly "wrltten-upM
equities, whioh changed hands by the many thousands daily, in the form
of contracts, transfered from one buyer to another, UNTIL?
Did this system of wild speculation, because it was largely run with
CREDIT, instead of cash, prevent the final ^ S T ?
NO.
You know it did
not.
While on the subject of cash and credit, what about the socalled G f S
htH
or rather a veiy large part of the sooalled CASH being used today or
being carried by our banks as RESERVES?
Isn't it largely CREDIT, with
nothing in back of it but huge public debts, as represented by our govern­
ment bonds, with which our banks today are saturated?
Where even this CREDIT cash is being used, would you oall it buying for
cash, strictly speaking, or would you oall it bvying with public debt
obligations?
Gaa you answer that?
You must admit that the public is PAYIHQ plenty in the form of Interest
and the enormous overhead of running this gigantic credit racket, whioh
sooner or later always wipes them out, as the Interest, compounding itself
sooner or later shows up thi fallacy of a medium of eatohange of this sort.
As an experienced banker, which I presume you are, you oertainly must
know that CRJSDIT should be a sacred thing; not a football of politics,
or a RACK3D of any political party. You certainly must also know, If you
have had any real experience with the human race, that CREDIT ruins a
big majority of people, just like it ruins nations, because mist people
cannot be safely trusted with credit. Those entitled to it, usually are




Mr Marriner Eccles N o »2

Nov 29, 1936

the last ones to aver ask for it.

You probably know that also.

Our banks, are supposed to better off today than they were several yeara
ago. May be they are, but God help them, if and when TAXATION to meet
their Public Debt MONblY ASSETS, fails, as it must sooner or later, notwith­
standing the philosophy of the New Deal,
No Government in history was ever able to manufacture money successfully;
all they ever were able t o do was to inflate their good money, end in that
was deliberately destroy the wealth and savings of their beat oitizens.
A nation ia no better economically than its masses.
n o t . I know that much and I am not a banker.

You can believe that or

In 1916, when the Federal Reserve Banking system was first out over on
the public, I wrote an article and PREDICTED then that within a decade,
the biggest paJiic in our history MUST FOLLOW.
WHY?
Because I even up
to that time, had
enough aaperienoe to know what
ELASTIC CREDIT was going
to mean to our country; a system that deliberately "hocked" the excess
credit of one section for the benefit of other sections, that might at
times run wild in speculation and gambling.
Was I rlgjit?
You know I
was.
And I am not a banker.
And in ita final effects, the whole nation, engulfed in this unsound
business of CREDIT abuse, wondered what it w^s all about} even our bankers
in marjy cases, net even up until now realizing it.
Yet when the Federal Reserve System was first out over, THE0R-3TICALLY, it
was going to make hard times, panics, etc., " thing of the past.
a
Re­
member the predictions Q'f the original Idealistic Brain Trusters?
Cer­
tainly you do.
And now what do wo find?
A government flying EEACL’IY in a national way,
with the credit of the nation, ex a otjty wfiafc the people themselves did
before the collapse In 1929.
¿rnd uBing th$.same system of finance to
do it.
Ye Giods, have we no clear headed men left in the nation?
And our president today, giving the people hell, for living in a sooalled
fool's paradise in 1929 , while in his ne^t breath, he triea to tell them
that they can speno their future and hook their ohlldrens future,
through the government , and GiiP AWAY WITH IT.
Show him this letter and tell him to wake up*




Yours very truly,

L C Sours
I

Fe d e r a l R e s e r
Chairman

ve

B oard

W ashington

o f f i c e o f th e gxdckbbqr

December 2, 1935.

Mr. M. C. Sours,
Philadelphia, Pennsylvania.
My dear Mr. Sours:
I acknowledge receipt of your letter of November
29th and am glad to have your views relative to the matter
of credit. In view of your interest in the subject, I am
enclosing a stenographic transcript of the address which I
made before the American Bankers Association in New Orleans
on November 14th, and also a copy of the statement to the
press of November 22d.
I suggest particularly that you obtain and read a
copy of a book recently published by David Cushman Coyle en­
titled "Brass Tacks". The cost of the book is twenty-five
cents. I feel sure you will find it not only very instructive
but intensely interesting as well, and it may tend to clarify
some of your views.

M. S. Eccles,
Chairman.

enclosures