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April 25, 1938.

l r I . T. Hardin,
i* f
Pet Milk Company,
St. Louis, Missouri.
Dear Bills
Before escaping for a short rest, I told you that
I wanted to fire back at you on your letter of March ?th.
In ay absence, the enclosed memorandum, dealing with some
of the points in the case you make, was prepared by the tax
experts in our Research Division and I aa enclosing a copy
for your own information and, I hope, enlightenment, pro­
vided you are not so swamped with more pressing matters that
you cannot find time to wade through it.
In going over a transcript of my offhand dis­
cussion on the Wednesday afternoon to which you refer, I
cannot find any statement I made to the effect that the
accumulation of cash surpluses of #1,500,000,000 by some
SIS of the large corporations was "deflationary** The point
I was making with reference to this figure was that the
rainy-day-reserve; argument won’t stand up under analysis.
If that reasoning was sound, then why did this large and rep­
resentative list of big corporations have in each year after
1929 cash balances of approximately the same amount as they
had in each year from 1925 up to 1929? In fact, their cash
balances were actually higher in each year since 1929 than
they were in any year prior to 1929. 1 did not say that this
was deflationary. In point of fact, 1 have contended all
along that the accumulation of these cash surpluses tends
to result in unhealthy speculation, as the Brookings Insti­
tute has so well pointed out in their studies, from which
the enclosed memorandum quotes some pertinent paragraphs.
Nor can I let you get by with putting in my mouth
the assertion that I think this tax alone, had it been in
effect in the late *20*8, would have prevented the speculative
mania. It might have helped some. It probably would not have
stopped it« After all, the real point is that the essential
problem, as I see it, before this country is, first, the
creation of an adequate supply of money, then the maintenance




Mr. S. T. Hardin

- ()
2

April 11, 1958

of a steady flow of fonds into investment and production, and
the maintenance of a balance between investment on the one
side and consumption o < the other*
|
Among all the complications as to price and wage
policy and the distortions that tend to develop, as evidenced
by what happened in housing a year ago, not the least important
factor is the problem of preventing large accumulations of
funds from being diverted into speculative instead of pro­
ductive channels. X know it is a large and formidable sub­
ject and X have no intention of delving into all of its
ramifications in a letter, even if you had the time and
patience to read it. X would like to have a chance to talk
it out fully with you sometime when we are in the same place
at the sane time without other distractions, because X flatter
ayself sufficiently and regard your intelligence so highly
that X think we would come out at about the same place when
all the factors are taken into consideration.
Xn the meanwhile, let me reiterate what you say at
the end of your letter, to wit, do not impose upon yourself
by feeling that you need to reply to this letter*— much as I
like to hear from you and much as X feel that it comes under
the general heading of a contribution to ay own enlightenment
as well as yours.
With kind regards,
Sincerely yours,

t . S. Eccles,
f
Chairman.
enclosure