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THE II NEWS NEW YORK'S 22 0 PICTURE NEWSPAPER EAST FORTY S EC O N D STREET N e w Y o r k 17, N.Y. MURRAY HILL 2-1234- Sept. 24, 1 9 « Dear M r . Eccl es i On August 3» you told the House committee, "I do believe ifeat it is too late to avoid a serious deflationary adjustment at some point. The disequil ibrium and the distortions have already been created, I do believe that the inflation can go further if nothing is done and a budgetary deficit develops. It can be long postponed, a n d can be catastrophic in its effects.8 Later on, answering Dr, Smith, y o u said, "You cannot go batek to 1940, no matter what; and I do not think that now the economy could stand the deflation that could take you b a c k to 19*5. 1 not think that is possible now. If this t h i n g continues, and you get a further devaluation, the present levels could look low to you, a n d they may well be levels below which a deflation could not carry you because of the unemploy ment and the bankruptcy that deflations create." Last night, according to njy notes, you said, "At the present time we have this situation: The budgetary surplus, due to tax reduction, expansion in foreign aid a n d . , .military expenditures, has disappeared. At the top of inflation it is the w r o n g time to have the budget Juso i n balance. There should be a surplus. It is the most effective w e a p o n there is.’1 Later, "It seems we are in somewhat of a dilemma. There are a lot of soft spots developing in the economy." And in c o n clusion, ’I believe w e are approaching, unless further budgetary deficits appear"---and here a reference t o the cold w a r I did not g e t word for wor d ---"then we w i l l be facing the dilemma of deflation. That will fcive us con siderable troubLe. It w i l l give us less trouble the sooner it comes, ty reason of the remaining backlog of demand that can b e used to cushion deflation." In August y ou were unwilling t o predict ^hsi the adjustments would come about, but last ni^it I got from your words the notion that you thought that now, perhsps, we are on the v e r g e * Was my impression in any way justified? THE a NEWS N E W Y O R K ’S 2 2 0 PICTURE NEWSPAPER EAST FORTY S EC O N D STREET N e w Y o r k 17, N.Y. M URRAY HILL 2 -1 2 3 4 2 As I t ©Id you on the phone, I am trying to d o a lew pieces on inflation that will make t h e problem understandable to the man in the street. I think it is our dutty to unite him understard the seriousness of the situation. The b i g man having failed to do what needed t© b e done, perhaps the little man, if warned, can do something, something at least to protect himself. I recognize that y o u cannot give me quotations f o r ny exclusive use. Your advice, however, vould b e invaluable. Last night I got your program a s something like this i "It is desirable that inflation be stopped, that further bank credit b e stopped, that insurance companies hold governments for a definite period, that all govern ment units save a n d curb credit. It is desirable that farm support prices be reduced, that production to the fullest extent possible be maintained. We get at the causes of inflation if there is more production in the fields where there are shortages---control of credit by budgetary surpluses, prevent further expansion of credit." Is that about it, or is there mere to it? As I understand it, your views and the views of the banking community by and large eome into sharp collision on the matter of whether interest rates should be permitted to find their o w n level, and that you* are in opposition because ef the necessity of supporting government bonds. Will you explain this situation so that the little man will not be left in doubt? I realize fUlly your position, y e t I want again to ask you'r advice in the matter of seeking out the picture of profits in housing. A showing here needs to b e drama tized by actual instances. Can I get at tax returns? Is there any other way? A final question has to do wit h a later piece. I understand that the Mormon welfare program n ow urges a two-year supply of food. If you know of i t , do y o u think this program w o u l d make interesting reading for the g e n eral public? THE a NEWS N E W Y O R K ’S 2 2 0 P IC TU RE N E W S P A P E R EAST FORTY S EC O N D N ew Yo rk M U R R A Y HILL STREET 17, N.Y. 2 - 1 2 3 4 - 3 P.S.— Might I have a <©py of the statement you read last n i g h t ---from a speech you made before the Board in t h e F a l l of 1944? Also, do you have a copy of the s tatenen t whi dh. you made before the Taft committee? And I omitted one other question: The money supply shoe ed no significant change in June, according t o the Economic Indicators of the CEA. An economist fcr the Chamber of Commerce ef the U.S. told me that an unchanging money supply is the forerunner either of stability or collapse. How valid is that statement? f hw October *6, 1948, Mr. The ¿20 New Heizer feright, News, Hast Forty Second Street, York 17, i*ew York. Dear Mr. «right: I called you twice at your office in New York, but found you were *way on vacation. I did not want to »vrite a reply to your letter of September ¿4. I ft<& sending a copy of a speech which I am making tomorrow before the Iowa Bankers Association, which is on the record, and 1 am also enclosing copy of an extemporaneous speech before the Executives*s Club of Chicago which is woff the record**, I hope these may be of some assistance to you. Sincerely yours, M. S. Secies. Enclosures 2. filter&
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