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My personal view of the Board's decision to increase margin requirements to 100 per oent xaay be summed up as follows:
This exhausts the Board's authority to prevent any more borrowed
money from being used to buy listed stocks. In addition, if anyone who now
has an account margined at less than 100 percent wishes to trade further in
the aooount, he must apply the proceeds of any sales to bringing his account
up to the 100 per oent margin.

To whatever extent these requirements tend

to dampen speculative activity, they are desirable, as preventive steps, at
this tine of strong inflationary pressures and until such time as inflationary
dangers are passed.
While the authority to stop new credit from flowing into the stock
market and to prevent existing oredit from being used further in stock transactions has thus been exhausted, the Board has not at this time taken the
only possible remaining step; namely, that of eliminating oredit altogether,
by requiring all existing margin acoounts to be put on a cash basis.
As I have repeatedly emphasised in the past, the primary source
of the inflation danger which overhangs the domestic economy on all fronts
is the vast accumulation of cash or its equivalent at the disposal of the
public as a result of the way in which the war has been financed.


for stook market as well as other purposes has been ourbed all along, but
it is a minor and not the major factor in the inflation picture. While
credit curbs are justified for such restraint as they may impose on speculative activities in a time of inflationary danger, they cannot reach the
real source of danger, which is the huge amount of currency and bank
deposits. Neither can price controls, rationing, allocations, etc., vital
as they are and will continue to be in holding the line until the danger

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is past, stop thia money hoard from flowing into the still unprotected
sector of capital assets, such as homes, farms, business properties, as
well as stocks.
The most effective way that I know of to ourb speculation, based
on oash, in capital assets is to increase the capital gains tax substantially.

For more than a year 1 have urged this as a temporary pro*

tective measure applicable to all future purchases*

This would not deter

the selling of assets held at the time the measure was introduced in
Congress, but it would greatly deter the buying for the rise after that

It would not affect the purchase of capital assets for strictly

long-term investment*
In addition, it is important to point out that so long as the
publio debt continues to be monetised through the purchase of Government
securities by the banking system, the long-term interest rate will tend
downward and the supply of money will continue to increase.

The resultant

pressure of lower interest rates and an increasing supply of money are
bound to have a further inflationary effect upon all capital assets. It
is, therefore, imperative that the long-term interest rate be stabilised*
Only by a vigorous, comprehensive attack along the entire economic front oan the battle be successfully waged against inflationary

Credit curbs are at best supplementary and not basic measures

for reaching the underlying causes of these pressures*