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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. Wli m h . Alexander,
ila
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