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February 6, 1951. Dear M:*. Neville; I have read with interest the statement in your paper* LABOR, of February 3 entitled "Secies Would Take Cost of War Out of Workers1 Hides®* You further state-that I have been considered a liberal and imply that my statement before the Joint Committee on the Economic Report on January 25 takesme out of that classification* I believe if you will read carefully my entire statement and not portions taken out of the context you will not be able to conie to that conclusion* I am, therefore, enclosing herewith a copy of my statement, which I hope you, or some of your economists, may find time to read carefully and objectively* I have no axes to grind with any group and there is no special group which I am interested in protecting. I am not a partisan. I have always tried, in accordance with my best judgment, to do what in the longer run would be in the best interest of the country as a whole. I am as anxious as anyone to preserve our capitalistic democracy. To do this, the defense of the dollar is as important as the defense of the country. You may be interested in an article, entitled *The Defense of the Dollar11, which I prepared last September for HORTUHB, which appeared in the November issue of that magazine. Whether they may be adverse or favorable, I am glad to have your reactions to my views and I appreciate the interest you take in them. It is only by disagreement and debate that the essentials of democracy is preserved* Sincerely yours, M* 8. Eccles. Mr. William P. Neville, Secretary-Trea surer, LABOR, 10 Independence Avenue, Washington, D. C* Refer to File covering Testimony Before Joint Committee on Jan* 25, 195 for Mr. Eccles1 letter of Feb, 6 and Mr. Keating's reply of Feb. 19. Fobrwry 2% » % Edward Keating, 14omger, LABOR* 10 Independence Avenue, Washington lu D* Cm Sear Mr. Keating! I appraesi&io your letter of February 19* and hops that a reading of m? statesaeats in full will clarify any xaieooneeptions as to where I stcwd on this vitally iiaportent issue of preserving the purchasing power of the dollar* In one paragraph you nation the fact that you have been greatly perturbed over the possibility that seocrthlng might bo done to disturb the stability of the bond market, smd of the workersf oonoorn that there m y be eotae repetition of the post World War I expert** 8&O0* Stoet tsorfcers* I believe, have invested their savings in Series S bonds, rather than the mrketable bonds which are held by banks and insurance eompsmies* Uo mttor ishat m y finally be done about isiaintalning or lowering the support price for marketable bonds, the Series E bonds will not be affected-*their value at any tiaae prior to maturity is predetorsiined and set forth in tables of redemption values. Even in the event mrkstable bond© dropped below par* any sharker who holds a Series 1 bond e&n claim the predetermined redemption value at any ttm, or the full face value upon mturity* <*here is no possibility, therefore, that a Series 2 bondholder oould suffer uny lees because the value of marketable long-term bonds ^ere allowed to decline* What 1$ and should be of serious concern to each end every worker is the decline in the purohasing power of the dollar in his pay envelope and the dollars invested in Series S bond a* Whea you eon&lder that today's dollar is worth only i?6 cents in terns of what it would buy 10 years ago, you realise how serious the inflationary threat to the workers* standard of living has beoosae* For responsible people to argue about the increased cost of servicing the public debt resulting from a drop in the prise of sa&rkat&ble Goverax&mt bonds that might serve to halt this inflationary eredlt expansion is to fiddle while Rose burns* X think nw, m nsvor befor©, th© tiw* has ooms for ail those feeliOTD in sound jaonat&ry* credit* fiscal $»olioies directed to* ward defending the value of the dollar, to stand together and to present the really basic issue® fairly* clearly objectively to the public• Sincerely, M* I^oclos. February 27, 1951 The Editor, Labor, 10 Independence Avenue, Washington, D. C. Dear Sir: I have read with interest the article on Government security prices which appeared in the February 10 issue of Labor* I vas particularly pleased to 3ee your clear statement that Series E bonds do not enter the support picture, for this is a point which appears not to be generally recognized. Also, I agree with you that, depending on whether the Federal Reserve follows a flexible or a rigid support policy, the "people will pay, either in taxes or price boosts .w I should like to point out, however, that the cost of higher interest charges on the public debt would be far less than the cost of further inflation. As a matter of fact, the cost of higher interest charges would be quite moderate. For one thing, the higher interest rate would apply only to new debt or to refunding of present debt, for another, corporate income and excess profits taxes would return to the Treasury a large part of the increased interest paid on new and refunding issues* Finally, although the current controversy over Federal Reserve open market policy is often stated in terms of higher interest rates, they are not really the heart of the problem. Our primary goal is to substitute a flexible open market policy for the present rigid one, to let the market set the price for longterm Government securities and thus stop, or greatly reduce, sales of such securities to the Federal Reserve* Very truly yours, M. S. Eccles POLE COPY A'National Weekly Newspaper Owned and Edited by the Railroad Workers of America Board of Directors: G. E. LEIGHTY J. P. SHIELDS A. J. GLOVER IRVIN BARNEY CHAS. J. MacGOWAN GEO. M. HARRISON LABOR LABOR BUILDING. 10 I N D E P E N D E N C E WASHINGTON 4. D. C. KOT PUBLISHED FOB PROFIT ACCEPTS NO ADVERTISING AVENUE EDWARD KEATING, Manager W. P. NEVILLE, Treasurer March 7, 1951 Hon. M. S. Eccles, Federal Reserve System, Washington 25, D. C. PERSONAL My dear Mr. Eccles: Official Washington Weekly Paper of the following Recognized Standard Railroad Labor Organizations: Brotherhood of Locomotive Engineers, J. P. Shields, Grand Chief Engineer. Brotherhood of Locomotive Firemen and Enginemen, D. B. Robertson, President. Order of Railway Conductors, R. O. Hughes, President. International Brotherhood of Blacksmiths, Drop Forgers and Helpers, John Pelkofer. General President. The papers announce that the Federal Reserve Board and the Treasury Department have declared an armistice. The terms are not given. I am still apprehensive ahout the effect on the price of bonds. I am afraid if the masses of the people became uneasy, it will be difficult for the Treasury Department to do the necessary financing. Of course, I may be wrong. I hope I am. With a world of good wishes, I remain International Association of Machinists, A. J. Hayes, International President. International Brotherhood of Boilermakers, Iron Shipbuilders and Helpers of America, Chas. J. MacGowan, President. Sheet Metal Workers' International Association, Robert Byron, President. Manager. Intprnational Brotherhood of Electrical Workers. D. W. Tracy, International President. Brotherhood Railway Carmen of America. Irvin Barney, General President. Switchmen's Union of North America, A. J. Glover, President. Brotherhood of Railway and Steamship Clerks, Freight Handlers, Express and Station Employes, Geo. M. Harrison, Grand President. The Order of Railroad Telegraphers, G. E. Leighty, President. Brotherhood of Maintenance of Way Employes, T. C. Carroll, President. Brotherhood of Railroad Signalmen of America. Jesse Clark, President. International Brotherhood of Firemen and Oilers, Anthony Matz, President. Railway Employes' Department. American Federation of Labor, Michael Fox, Acting President. XT Or > February 27, 1951. The Editor, Labor, 10 Independence Avenue, Washington, D. C. Dear Sir: I have read with interest the article on Government security prices which appeared in the February 10 issue of Labor, I was particularly pleased to see your clear statement that Series E bonds do not enter the support picture, for this is a point which appears not to be generally recognized. Also, I agree with you that, depending on whether the Federal Reserve follows a flexible or a rigid support policy, the "people will pay, either in taxes or price boosts." I should like to point out, however, that the cost of higher interest charges on the public debt would be far less than the cost of further inflation* As a matter of fact, the cost of higher interest charges would be quite moderate. For one thing, the higher interest rate would apply only to new debt or to refunding of present debt. For another, corporate income and excess profits taxes would return to the Treasury a large part of the increased interest paid on new and refunding issues. Finally, although the current controversy over Federal Reserve open market policy is often stated in terms of higher interest rates, they are not really the heart of the problem. Our primary goal is to substitute a flexible open market policy for the present, rigid one, to let the market set the price for longterm Government securities and thus stop, or greatly reduce, sales of such securities to the Federal Reserve. Very truly yours, M. S. Eccles
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