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Culbertson, Dec.£ Mont. iqu py 1 ' t ( Mr.Marriner S.Eccles, l h a i r m a n Board Of G o v e r n o r s , F e d e r a l Reserve Board, Washington, D.C. Dear S i r : On page 2 3 , F i r s t Column, o f TIME f o r Dec.8, appears the folowing. I quote 11 The t r o u b l e s a i d E c c l e s was s i m p l e . T h e r e was t o o much money i n c i r c u l a t i o n l t h a d been pumped o u t b y t h e G o v e r n m e n t ' s war t i m e b o r r o w i n g ( a n d such e a s y p o s t war c r e d i t s a s G . I l o a n s f o r houses a t i n f l a t e d p r i c e s . ) Between 1940 a n d 1 9 4 6 t h e h a r d c a s h i n t h e n a t i o n s pocket had increased from $40 to flO€ billion. I n t h e same p e r i o d p r o d u c t i o n h a d l e v e l l e d o f f a t o n l y 186^ o f t h e 1 9 3 5 - 1 9 3 9 aarwage. The r e s u l t when c o n t r o l s came o f f , was a tremendous new demand, w h i c h s e n t p r i c e s s o a r i n g 1 1 . I t a k e e x c e p t i o n t o y o u r base y e a r s 1 9 3 6 - 1 9 3 9 . The F e d e r a l R e s e r v e S y s t e n b r o u g h t on a r e c e s s i o n i n 1 9 3 8 . T h a t i s i t r e a c h e d us h e r e i n e a s t e r n Montana i n O c t o b e r t h a t y e a r . C a t t l e went down t o f 3 . 5 0 . I n a y g u s t 1&e q u o t e d s a l e s p r i c e was $ 7 . 0 0 I n d u s t r y was on a s t r i k e . I n s t e a d o f a b s o r b i n g t h e 1 , 4 0 0 , 0 0 0 . WPA w o r k e r , t h e s e men w e r e l e f t i d l e . Our n e w s p a p e r s h e r e b e g a n a l o t o f t a l k a b o u t P r e s i d e n t R o o s e v e l t ' s l e n d i n g and s p e n d i n g was a f a i l u r e . Wheat i n 1 9 3 8 h e r e i n our m a r k e t town was 56 c e n t s . Cost t o g r o w , w i t h o u t f i g u r e i h g d e p r e c a l t i o n on m a c h i n e r y , r e p a i r s , r e p k e c e ments a n d a p r o f i t o f 6%, was $ 1 . 0 4 a bushel* I sold f i v e head o f c a t t l e at $ 4 . 0 0 a hundred. I should have s o l d t h e bunch f o r a t l e a s t $ 7 . 0 0 a hundred. I got something l i k e $ 1 2 0 . I s h o u l d h a v e g o t t e n t w i c e t h a t sum. As a r e s u l t I c o u l d n ' t buy a n y t h i n g . A demand s e t p r i c e s s o a r i n g . Where t h a t was i s n o t v i s i b l e h e r e . A g r o c e r w o u l d h a v e a m i g h t y s m a l l s a l e o f s u g a r i f because one man bought l o o pounds f o b $ 7 . 0 0 . he c a r g e d t h e n e ^ t b u y e r $8.00 f o r t h e same a m o u n t . News l i k e t h a t w o u l d t r a v e l so faferhe w o u l d n ' t sell t e n pounds t h e ne-s/t six. m o n t h s . Then t h e same a r t i c l e goes on: "Reduce t h e money i n c i r c u l a t i o n " . I was b o r n i n 1 8 6 6 . I n 1 8 7 3 - 4 I had t o w e a r a p a i r o f wooden shoes t h a t f a t h e r made f r o m baswood b b l o c k s , c u t i n h i s own woods. T h i s was i n C a r v e r c o u n t y M i n n . 2 4 m i l e s f r o m M i n n e a p o l i s . He s a i d t h a t i t t o o k so much w h e a t t o b u y a p a i r o f b o o t s , t h a t h e ( d be r e duced t o p a u p e r i s m i f he s h o u l d h a v e b o u g h t l e a t h e r f o o t w e a r f o r t h e boys. Two boys o l d e r t h a n I . I n 1901, s t u d y i n g Finance i n the U n i v e r s i t y of Minnesota, I l o o k e d up l a w s , and speeches i n t h e C o n g r e s s i o n a l G l o b e . Hugjh M c C u l l o u g h , t h e S e c r e t a r y o f The T r e a s u r y s a i d i n e f f e c t T h e r e was t o o much moeny i n c i r c u l a t i o n , i t s h o i l d b e t h e p o l i c y o f Congress t o r e d u c e t h e volume o f t h e c u r e e n c y . i foukd t h a t carping request i n several copies. Congress h e e d e d t h e a d v i c e . The r e s u l t . The 6 - 3 0 paper money- n o t e s - w e r e c a l l e d i n and c o n v e r t e d i n t o i n t e r e s t b e a r i n g b o n d s . $900,000,000. o f c u r r e n c y d e s t r o y e d , and s e t t o d r a w i n g i n t e r e s t . The s i l v e r was d e m o n i t i z e d . The Government h a d no G o l d . Mr.Marriner S.Eccles. 2 I note M r . E c c l e s remedies f o r i n f l a t i o n . "Reduce t h e r e s e r v e r e q u i r e m e n t s . O n l y C o n g r e s s c a n do s o . ' But i n c r e a s e t h e i n t e r e s t r a t e s . T h a t i s a k i l l e r p u r e and s i m p l e . An Alabama b a n k t h a t t r i e d t o s a v e i t s c u s t o m e r s i n 1 9 2 1 was c h a r g e d 8 7 - f ^ . on some l o a n s Government s u p p o r t t o f a r m p r i c e s . In 1938 t h e Government p a i d me t h e s t u p e n d o u s sum o f $47. i n support of a p r i c e of 58^ w h e a t and 3 | cen t a c c l e . As I see i t t h e Government w i l l h a v e t o w i p e o u t t h e F e d e r a l Reserve System. R o o t , s t e m , b r a n c h e s and l e a v e s . I remember t h a t P r e s i d e n t W i l s o n armouncfed i n 1914 t h a t he had a Christmas p r e s e n t f o r the people of the United S t a t e s . He h a d s i g n e d t h e F e d e r a l Reserve A c t . me T h a t Ct c a u s e d a l o s s t o me o f $300. $2.15 t o produce f o r $1.34 a bushel. I s o l d wheat E v e r y f a r m e r h e r e knows who h a s b o o s t e d t h e p r i c e g r a i n s , c a t t l e , hogs, eggs, b u t t e r f a t etc. of that cost farm A l i t t l e o v e r one jrear a g o , when t h e f a r m e r s h a d s o l d t h e i r f l a * ffcr $ 6 . 0 0 a b u s h e l t o t h e g a r i n t r a d e . The g r i a n d e a l e r s upped t h e p r i c e t o $2c& $ 8 . 0 0 a b u s h e l , and sold f l a x t o t h e government a t t h e p r i c e . S i d n e y , R i c h l a n d c o u n t y M o n t a n a , h a s a L i v e s t o c k Commission f i r m , and s a l e s r i n g . * A y e a r ago I t o o k i n some o f t h o s e s a l e s i n o r d e r t o see why c a t t l e w e r e p r i c e d so h i g h that t h e OPA c o u l d n o t w o r k . B u y e r s f r o m C h i c a g o , S i o u x C i t y , Omaha, w e r e t h e r e , and b i d on t h e c a t t l e . These p e o p l e knew w h a t t h e f r e i g h t was on c a t t l e to the rendering establishments. They knew t h e t o a l c o s t s t o p u t t h e meat on t h e r e t a i l d e a l e r s blocks. These p e o p l e d i d n o t g i v e a damn f o r t h e p e o p l e , i t was t o k i l l t h e OPA. The NAM s t o o d b ^ and p a t t e d t h e s e men on t h e b a c k . S a i d t h e NAM do awa^ w i t h t h e BPA and we* 1 1 b r i n g p r i c e s down. Has a n y o r g a n i s a t i o n f a i l e d * m o r e s i g n a l l y than that organisation d i d . ??? B y r o n f s " Where ma^ t h e w e a r y eye r e p o s e , when g a z i n g on the g r e a t , Where n e i t h e r g u i l t y g l o r y g l o w s , o r d e s p i c a b l e s t a t e 1 1 ? They a r e n o t t o be f o u n d i n o u r economic leaders, In finance. The l e s s s a i d t h e b e t t e r . What must be d o o n e . S t a b i l i z e p r i c e s a t a l e v e l so t h a t e v e r # wage e a r n e r i n t h e U n i t e d S t a t e s , h a s a wage a n d a b u y i n g power< Wheat can be s o l d toda^y f o r $1.90 a bushel. C a t t l e must n o t go b e l o w 12$ f o r grass f e d . nor 18^ f o r g r a i n f e £ . Flax $ 3 . 0 0 a b u s h e l . Oats 60c. barley 80^. ' I n t e r e s t r a t e s on money Z%* The s i o o l e n s a l a r y g e n t r y must h a v e t h e i r emoluments c u r i n h a l f . The P r e s i d e n t o f t h e U . S . g e t s o n l y $125,000 a ^ear. The gujrs d r a w i n g more t h a n t h e P r e s i d e n t e a r n s not? more t h a n h a l f as much A r e t i r e d f a r m e r . P u t i n 32 ^ e a r s on a n e a s t e r n M o n t , Who a m # I ? homesteaa. w r i t i n g up my e x p e r i e n c e . B e e n a t i t now f o r two ^ e a r s . J u s t a b o u t h a l f done a t t h e p r e s e n t w r i t i n g . December 17, 1947. Mr. William h . Alexander, Culbertson, Montana. Dear Mr. Alexander: This i s t o acknowledge your l e t t e r of December 8. I suppose the myth t h a t t h e Reserve System caused the a g r i c u l t u r a l d e f l a t i o n a f t e r World War I and t h e equally f a n t a s t i c notion t h a t i t brought on t h e recession i n 193S w i l l never d i e , regardless of cold, hard f a c t s . I t would be i n t e r e s t i n g t o know from you, as a r e t i r e d and experienced'farmer, why you think so, or rather j u s t how you t h i n k t i e Reserve System could have caused theae recessions. I strongly suspect t h a t you are echoing what you have heard and have not studied the f a c t s of t h e matter y o u r s e l f i As f o r the current s i t u a t i o n , i n view of your i n t e r e s t I am enclosing a copy of a statement I p r e statsd before.tlie Joiqt . .Coiipifctee_ m t h e .Icmomic- Bepoart^ on November 25* Sincerely yours, M. S. Eccles, Chairman. Enclosure ST:b
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