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PROCEEDINGS AND DEBATES OF THE FIRST SESSION OF THE SEVENTY-FIFTH CONGRESS OF THE UNITED STATES OF AMERICA VOLUME 81-PART 3 MARCH 18, 1937, TO APRIL 15, 1937 (Pages 2377 to 3568) UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON : 1937 CONGRESSIONAL 2744 Mr. ROBINSON. I agree with the Senator that no effort should be made to dispose of the bill until next week, for many reasons. When the bill is made the unfinished business, however, I wonder if the Senator from Oregon would have any objection to an explanation by the Senator from Idaho [Mr. POPE] of the provisions of the bill, with the understanding that no further proceedings shall be had on the bill until Monday. Mr. McNARY. That would entirely conform to my wishes and views. The PRESIDENT pro tempore. The question is on agreeing to the motion of the Senator from Idaho. The motion was agreed to; and the Senate proceeded to consider the bill (S. 1397) to create a Federal Crop Insurance Corporation, and for other purposes, which had been reported from the Committee on Agriculture and Forestry, with amendments. Mr. POPE obtained the floor. Mr. THOMAS of Oklahoma. Mr. President—— The PRESIDENT pro tempore. Does the Senator from Idaho yield to the Senator from Oklahoma? Mr. POPE. I yield to the Senator. I realize that he gave notice a few days ago that he would speak today. I desire to proceed with my explanation of the bill at some time today. Mr. ROBINSON. In view of the notice which was given by the Senator from Oklahoma, I suggest to the Senator from Idaho that he withhold his discussion in order that the Senator from Oklahoma may now have an opportunity to present his views. Mr. POPE. That is entirely agreeable to me. NATIONAL RULE FOR NATIONAL COMMERCE Mr. O'MAHONEY. Mr. President, there has just come from the Government Printing Office the first part of the hearings on Senate bill 10, which was introduced on January 6 last and referred to the Committee on the Judiciary. It is a bill to establish a national rule for the government of corporations engaged in national commerce. I am asking that a copy of these hearings be placed upon the desk of every Senator, because the subject matter of the measure is of such paramount importance that I venture to express the hope that all Members of the Senate may find the opportunity of at least glancing through the hearings. Subsequent volumes will be ready for attention in the very near future. The bill deals with the most important economic subject now before the people of the United States. As the Senator from Idaho [Mr. BORAH] said a few days ago, there is not a monopoly in the United States that is not operating by virtue either of a grant by some State government or by virtue of the failure of the National Government to assert its power. The strikes which threaten to paralyze the commerce of the Nation and to destroy the economic recovery we have been enjoying have been declared chiefly in the plants of huge interstate corporations which derive their existence from State charters. A sit-down strike here or a sit-down strike there may be terminated by conference and agreement, but there can be no assurance of permanent economic peace unless we adopt a sound national policy. Our trouble arises from the fact that, although it has full power, the Congress of the United States has not seen fit to exercise it to protect the public interest. State authority is inadequate to the task, because the business with which we are concerned overflows State lines. We shall not even begin to solve this question until we recognize the very simple fact that a corporation is a creature of law. If the people, acting through Congress, will only write the charters of these great corporations which carry on the business of the country, thereby limiting and defining the powers which the corporations may exercise, we shall lay the foundation for permanent settlement. Until the Congress does enact such a law we shall not escape the evils of the present situation. The measure which I have introduced to provide a Federal system of charters and licenses for corporations engaged in commerce among the States, and a similar measure RECORD—SENATE MARCH 25 which has been introduced by the Senator from Idaho, furnish, I believe, the formula upon which public authority may be satisfactorily asserted in the present economic crisis. The volume to which I am now calling attention contains information which I am confident is of importance to the Members of this body. REGULATION AND STABILIZATION OF DOLLAR VALUE Mr. THOMAS of Oklahoma. Mr. President, yesterday I announced that immediately upon the conclusion of the morning hour today I would ask permission to introduce a bill and then to make some explanation of the reasons for introducing the bill. At this time I ask permission to introduce a bill having for its title "A bill for the regulation and stabilization of agricultural and commodity prices through the regulation and stabilization of the value of the dollar, pursuant to the power conferred on the Congress by paragraph 5 of section 8 of article I of the Constitution, and for other purposes." The PRESIDENT pro tempore. Without objection, the bill will be received. Mr. THOMAS of Oklahoma. I ask permission that a copy of the bill just introduced be referred to the Committee on Agriculture and Forestry and be printed in the RECORD as a part of my remarks. The PRESIDENT pro tempore. Is there objection? There being no objection, the bill (S. 1990) for the regulation and stabilization of agricultural and commodity prices through the regulation and stabilization of the value of the dollar, pursuant to the power conferred on the Congress by paragraph 5 of section 8 of article I of the Constitution, and for other purposes, was read twice by its title, referred to the Committee on Agriculture and Forestry, and ordered to be printed in the RECORD, as follows: Be it enacted, etc.— SECTION 1. Monetary policy: Pursuant to the authority conferred in paragraph 5 of section 8 of article I of the Constitution, wherein the Congress is authorized to coin money and to regulate the value thereof, the Congress does hereby declare that the monetary policy of the United States shall embrace, among others, the following principles: (a) To coin and keep constantly available an adequate supply of sound money; (b) To regulate the value of the dollar so as to best serve the domestic economy of the people; and (c) To place and keep in circulation a sufficient amount of properly valued currency to adequately supply the demands and needs of the people of the United States: Provided, That the regulation and stabilization of the value of the dollar shall be a fixed policy of the Government of the United States, and, in order to promote and give stability to agriculture, industry, commerce, manufacturing, mining, forestry, fisheries, employment, and other human activities, the regional Federal Reserve banks and the member banks of the Federal Reserve System, under the supervision and direction of the Monetary Authority, shall cooperate in carrying out the policy and principles herein set forth and as provided in this act. SEC. 2. Creation of monetary authority: The Congress, in order to vitalize the provisions of the Constitution and to carry into effect the monetary principles and financial policy set forth in section 1 hereof deems it necessary to, and does hereby, create the Board of Governors of the Federal Reserve System into a governmental agency to be designated as a Monetary Authority (herein referred to as the Monetary Authority) for the express purpose of regulating the value of money: Provided, That the constitutional clause—regulating the value of money—shall be construed to mean adjusting the value of the dollar to that point which will serve the best interests and best promote the domestic economy of the people of the United States: And provided further, That said clause—regulating the value of money—shall be construed to mean not only the adjustment of the value of money but also the stabilization of such regulated and adjusted value as hereinafter provided. SEC. 3. Dollar-value control items: The Monetary Authority, in regulating, adjusting, and stabilizing the value of the dollar as herein provided, shall take into account and give consideration to, among other things, the following: (a) The amount of the annual total tax bills necessary to support the several units of Government; (b) The amount of the annual total public and private interest items; (c) The amount of consolidated or massed debts, public and private, owned by the several units of Government, corporations, and the people jointly and severally; (d) The general price level and the relation of such price level to the tax, interest, and debt burdens resting upon the people. (e) The interests of taxpayers, mortgagors, debtors, producers, consumers, wage earners, holders of fixed investments, and those who live on fixed incomes; 1937 CONGRESSIONAL RECORD—SENATE (f) The relation of the general domestic price level to the general world price level; and (g) The relation of the value of the dollar to the values of the monetary units of the other governments of the world. SEC. 4. Standards and limitations: Immediately upon the passage and approval of this act, the said monetary authority shall assume and exercise the powers herein delegated and conferred according to the standards and within the limitations herein set forth: Provided, That the said monetary authority is hereby authorized and directed to proceed without delay and as provided herein to so regulate the value of the dollar as to raise the general price level to a point equal to the average of the general price level for the year 1926, as shown by the Bureau of Labor Statistics: And provided further, That, pending the regulation and adjustment of the value of the dollar to the 1926 level as provided herein, the said monetary authority shall proceed to investigate, consider, and determine the proper value of the dollar as provided in section 3 of this act: And provided further, That the adjusted, regulated, and stabilized value of the dollar, as may be determined by the said monetary authority, as provided herein, shall not be at a point of value in excess of the average value of the dollar during the year of 1926, as shown by the said Bureau of Labor Statistics. SEC. 5. Equilibrium price level: The monetary authority, in carrying into effect the principle of monetary policy stated in (b) of section 1 hereof, and after full consideration of said items (a), (b), (c), (d), (e), (f), and (g) in section 3 hereof, shall regulate and adjust the value of the dollar, as provided herein, so as to effectuate, produce, and bring about as nearly as possible, an equilibrium price level designed to serve the best interests of the people of the United States as mentioned in (e) of section 3 hereof. SEC. 6. Stabilization: Immediately upon the completion of the regulation and adjustment of the value of the dollar, as provided herein, the monetary authority shall proceed to stabilize and thereafter keep stable as nearly as possible, the value of said dollar at the point of value so determined as provided in section 4 hereof: Provided, That in the regulation, adjustment, and stabilization of such value at such point, the said monetary authority shall have all the authority herein delegated and conferred and, in addition, shall have all the authority heretofore delegated and conferred upon the Board of Governors of the Federal Reserve System. SEC. 7. Specific powers: In order to carry into effect the principles of the monetary policy set forth in this act, the monetary authority, acting under the powers conferred herein and acting as the Board of Governors of the Federal Reserve System, shall have the following specific powers: (a) Full and complete control over reserve requirements of member banks of the Federal Reserve System; (b) Full and complete control over the discount rate at each of the regional Federal Reserve banks; (c) Full and complete control over the eligibility of all kinds and classes of collateral to be accepted by the several regional Federal Reserve banks, their branches, and other member banks of the Federal Reserve System; and (d) Full and complete control over all open-market operations in all regional Federal Reserve banks, both in the buying and selling of securities at home and abroad. SEC. 8. Monetary authority statistics: For the purpose of assisting in the regulation, adjustment, and stabilization of the value of the dollar the said monetary authority is hereby authorized to investigate, prepare and officially adopt, subject to the approval by the Congress, a system of statistics to be known as the monetary authority statistics: Provided, That in preparing such statistics the monetary authority shall have authority to call upon other departments of the Government for such statistics, data, and information as may be desired and requisitioned: And provided further, That pending the adoption of such monetary authority statistics the said monetary authority shall make use of, and be governed by, the Bureau of Labor Statistics as provided herein. SEC. 9. Officers and employees: In carrying into effect the provisions of this act the monetary authority shall have power to appoint officers and employees, to define their duties, fix their compensation, require bonds of them, and fix the penalty thereof, and to dismiss at pleasure such officers and employees. The said monetary authority is hereby empowered to adopt and promulgate such rules and regulations as it may deem necessary to carry out the provisions of this act. SEC. 10. Interpretation of delegated powers: The powers conferred upon and delegated to the Monetary Authority herein created shall be construed to be a delegation of legislative powers conferred upon the Congress by paragraph 5 of section 8 of article I of the Constitution to regulate the value of money: Provided, That such powers so delegated shall be further interpreted and construed to be a delegation of such legislative powers to a governmental agency to carry out a fixed policy of the Congress according to definite and fixed standards, and within definite and fixed limitations, as set forth herein and as provided by this act. SEC. 11. All provisions of the Federal Reserve Act of 1913, with amendments, including title 3 of Public, No. 10, Seventy-third Congress, and amendments thereof, and other public acts of the Seventy-third, Seventy-fourth, and Seventy-fifth Congresses, when not in conflict and not inconsistent with the provisions of this act, shall be, and are hereby, continued in full force and effect. SEC. 12. There is authorized to be appropriated, out of any money in the Treasury not otherwise appropriated, annually such sums as may be necessary for carrying into effect the purposes of this act. 2745 SEC. 13. If any provision of this act, or the application thereof to any person or circumstance, is held invalid, the remainder of the act and the application of such provision to other persons or circumstances shall not be affected thereby. SEC. 14. The Monetary Authority shall report to the Congress annually such data, report of activities, and statement of policy as may be deemed in the public interest, and shall make recommendations to the Congress at its discretion relative to amendments of this act. SEC. 15. The short title of this act shall be the "Monetary Authority Act." Mr. THOMAS of Oklahoma. Mr. President, I have chosen an hour when the Senate would be least inconvenienced, and the time I shall consume will be devoted to establishing the background for the suggested legislation. Conditions are somewhat unsettled in the United States and throughout the world. With a nation of 130,000,000 people, the strongest and the richest and the most influential nation on the earth, it is presumed that conditions from time to time might be unsettled. It is my judgment that the unsettlement and the trouble we are now having throughout the United States, and largely throughout the world, are due, either directly or indirectly, to the value of the monetary unit in this country, and likewise the value of the monetary units in the other nations of the world. Take, for example, the sit-down strikes occurring throughout this country. What is the reason for those strikes? A few years ago millions of the wage earners of this country were out of employment. Now many millions of those formerly unemployed have secured employment. Formerly prices were very low and living was very cheap. Because the dollar has become cheaper, prices have risen. When prices rise the cost of living goes up, and while many of the men who were formerly unemployed now have jobs, they find that their living costs are going up but wages are still "sitting down", and these "sit-down" wages refuse to rise. To me the explanation is simple. The wage earners are sitting down with the wages, and they are refusing to rise until wages are willing to rise with them. Let me call attention very briefly to a few news stories appearing in the press of today and perhaps of yesterday. I have before me a copy of the American Banker, the issue of only 1 or 2 days ago. The editorial in this publication is under the following caption: Gold clause—no more. Responsibility now rests with Federal authorities for price level. The heading of this editorial merely states that the price level of today is the result of the management of Federal authorities. From this editorial we may deduce the conclusion that the price level of tomorrow and the price level of next week and of next year will be that which may be dictated and brought about by the Federal authorities representing the Government of the United States. I call attention to other news stories. For instance, I find in the public press of a recent date an article under very heavy headlines, which read as follows: Rising prices new worry of administration. Advance in commodities seen as peril like that of 1929. In the story is an attempt to broadcast a scare that prices are about to run away with themselves, and that because prices are about to run away with themselves conditions in the United States are likely to get out of control. Another news story I find under this heading: Inflation—How near is It? Another news story appears under the following caption: Eccles points boldly to danger. price and wage inflation. Federal Reserve head warns of I find another news story in another publication under the following heading: Rising price levels threat to recovery? A boom in prices. Effect on living costs. Aims of the administration. Money controls. Another news story appears quoting the chairman of the Finance Committee of the United States Senate to the effect that prices are not now too high. I find another news story under this heading: Rising commodity prices pinch District of Columbia wage earners' stable pay. But while his dollar has fallen in purchasing power, it is still far above 1929. 2746 CONGRESSIONAL If this story is to be credited, and if it is based upon the facts, while the dollar has fallen in value, causing prices to rise, yet prices have not risen to the point where they were in 1929, and in 1929 prices were not as high as they were in 1926. So we must first reach the 1929 level before we can reach the 1926 level. The 1926 level has been the goal of many persons who have been interested in the management and control of the value of the dollar. Another news story I find under the heading: Lack of policy. The article states that the Congress has no policy, that the Federal Reserve Board has no policy, and that the administration has no policy. In other words, no one seems to know to what point the dollar is to be cheapened before the cheapening process will stop. Mr. President, I have had prepared a graph, or chart, which is suspended on the wall of the Senate. Across the center of the chart will be found a straight, heavy black line designated by the figure "100." I call attention to the second line, a very crooked black line which is designated as "dollar value." It will be noted that the black, crooked line is sometimes above the center or medial line and sometimes below. That is the line which represents the rise and fall in the value of the dollar from 1800 to the present hour. This line is about as straight as a lightning flash. We have heard it said that we now have a rubber dollar. During these 137 years we have had a dollar as unstable as that line is crooked. If we have ever had a rubber dollar, a bouncing dollar, we have had it from 1800 up to the present time, save through two short periods of emergency, one from 1800 to 1810, when the dollar value was rather stable, the other from 1921 to 1928, when again the dollar value was rather stable. We have a system for measuring values, including the value of the dollar. This system is a set of statistics and is compiled by what is known as the Bureau of Labor Statistics. This system embraces 784 separate items or commodities and is sometimes designated as the wholesale price list. It is new generally admitted that the dollar value controls prices and that prices control income and prosperity; hence, at all times the price of any given item or commodity embraced within the 784 items making up such index is controlled by the value of the dollar. The value of the dollar, as measured by commodities, is controlled by various elements, such elements including the size or the weight of the gold content of the dollar, the amount of the dollars or units in circulation, the amount of credit or deposit money in circulation, and the velocity with which such dollars circulate. Under the formula just stated, we find that during the past 137 years the value of the dollar has bounced up and down something like the bouncing of a rubber ball. According to the Bureau of Labor Statistics, the dollar had the value or purchasing power of 89 cents in the year 1800. From 1800 to 1810 the dollar value was rather uniform, and when the dollar value is uniform the price level is likewise uniform. From 1810 to 1820 we had the national disturbance known as the War of 1812. During that period money became plentiful, and thereby cheaper; hence, commodity prices rose accordingly. About 1820 the dollar value started upon an upward, irregular course, reaching 152 cents in 1830, dropping to 119 cents in 1837, going up to 160 cents in 1850, and to 164 cents in 1860. As the value of the dollar during the years from 1820 to 1860 remained above the medial line of 100, we find that the value of commodities remained uniformly below the 100 medial line. In 1860, when the disturbance between the States started to develop, the dollar value began to fall, and as the dollar went down the purchasing power or commodity price went up, until in 1865 the dollar had a value of 60 cents, and commodity prices had a correspondingly high value of 132 cents. In other words, about 1865, when we had no gold or silver in circulation, but only greenbacks, because of the amount of greenbacks in circulation and because the greenbacks were not at that time redeemable in either gold or silver, the dollar value fell to 60 cents as measured by this RECORD—SENATE MARCH 25 commodity index; and when the dollar value fell, commodity prices rose accordingly. In 1865 the dollar again started on an upward, irregular course, until in 1878 the dollar had a buying or purchasing power of 162 cents, and in 1896 the dollar reached its greatest value, as measured in terms of commodities, and, according to the graph and the Bureau of Labor Statistics, such dollar had a value or buying power of 215 cents. It was at this period that the general price level was at its lowest period in history. In passing I may call attention to the fact that it was this high-valued dollar and correspondingly low price level which brought on the campaign for cheaper money and higher prices as led by William Jennings Bryan in the socalled "free silver" campaign of 1896. That is in the period, as shown on the graph, from 1890 to 1900. At that time the dollar, in measure of commodities, was worth 215 cents; and because the value of the dollar was so high, and commodity prices were so low, Bryan led a party in an effort to secure a cheaper dollar, and likewise higher prices for the things people produced. That, as I have said, is known as the Bryan campaign for free silver in 1896. In 1897, because of the discovery of vast deposits of gold, money became more plentiful, and thereby the value of the dollar again began to fall; and as the dollar fell, we find commodity prices starting upon an upward trend. In 1914 the World War brought about another flurry in the value not only of the dollar but of the other currencies of the world; and as the dollar started on its downward trend in 1914 we find the wholesale price level starting upward again. In 1920 the dollar had a buying or purchasing power of 64 cents; and at that time commodities, as shown by the price level, had purchasing power to the value, on the average, of 154 cents. In the national campaign of 1920 the question of the price level developed into a national issue. The Democrats had been in power for 8 years, hence the high prices of that year were blamed upon the Democratic Party. The Republican National Convention met in Chicago on June 8 to 12, 1920, and in the platform declaration of such convention we find the following planks: Under the heading The High Cost of Living we find the following language: The prime cause of the high cost of living has been, first and foremost, a 50-percent depreciation in the purchasing power of the dollar, due to a gross expansion of our currency and credit. Also, in the same platform declaration, the Republican Party made the following promise to the people of the country. I quote: We pledge ourselves to earnest and consistent attack upon the high cost of living by rigorous avoidance of further inflation in our Government borrowing, by courageous and intelligent deflation of overexpanded credit and currency. The Republican Party was successful in the November election of 1920, and immediately a program of deflation, as promised in the Republican platform, was initiated. Mr. Harding was inaugurated on March 4, 1921, and during the following 18 months the sum of $100,000,000 per month was taken out of circulation, and the money thereby canceled. When Mr. Harding was inaugurated President we had $6,207,000,000 of money in circulation, and on September 1, 1922, 18 months thereafter, such circulation had been reduced to the sum of $4,393,000,000. During the 18 months from March 4, 1921, the policy of deflation took out of circulation $100,000,000 per month, or $1,800,000,000 in that brief period. That is deflation. Mr. LEWIS. Mr. President, will the able Senator please explain what is meant by his expression of vast millions being canceled? I confess not to understand it, and I shall be pleased to have enlightenment from him. Mr. THOMAS of Oklahoma. Mr. President, I have just stated that when Mr. Harding became President there was in circulation the sum of $6,207,000,000. At that time there were that many gold dollars and silver dollars and paper dollars actually outside the Treasury of the United States. 1937 CONGRESSIONAL RECORD—SENATE Some of this money was in bank vaults; some of it was in the tills and safety-deposit boxes of people; some of it was in hiding; some of it was in the cash registers of the merchandising establishments of the Nation; and some of it was in the pockets of the people. But on that date there was in circulation, as we define the term "circulation", the sum of $6,207,000,000. During the next 18 months there was taken out of circulation $100,000,000 per month. That was done in this manner: The Federal Reserve Board, in obedience to a resolution passed by the Senate, submitted a report to the Senate stating that it proposed to adopt a policy of deflation. In that report the Federal Reserve Board stated that the Board had advised the banks of the country not to be so liberal in making loans in the future as they had been in the past, and that not only should they not be so liberal in making loans as they had been, but they should serve notice on their borrowers that good policy dictated that the borrowers should not borrow in the future, but should begin to pay, should begin to reduce the amount of their loans at the banks. Pursuant to that policy, and under the influence of the banks upon their customers, the customers and borrowers began to pay. The borrowers from the banks throughout the Nation sold what they had or what they could, raised money, and applied the money on their loans at the several member banks throughout the Nation. As the member banks received the money on their loans the member banks sent this money to the Federal Reserve banks, because the facts show that during these years of activity the member banks, in order to finance the business of their customers, had to borrow vast sums from the Federal Reserve System. So the member banks had loans, or had money borrowed from the Federal Reserve banks. As the member banks collected money they sent it to the Federal Reserve banks and had it applied upon their indebtedness; and that is when the money went out of circulation. I hope I have in a limited way or in a partial manner answered the question of the Senator from Illinois. Mr. LEWIS. Mr. President, I appreciate the reply of the able Senator, but I should like to ask him a further question. In using the term, as used a moment ago, that these vast millions were canceled, did my able friend mean, by the word "canceled", the definition he has now given of the retirement of this money? Mr. THOMAS of Oklahoma. For the time being, the money went into hiding. It went where it could not be had except through another series of loans by the Federal Reserve System to member banks, so that in turn the member banks could, if they desired, make loans to their customers. When I used the word "canceled", I meant canceled for the time being. The money was not destroyed. The money went to the Federal Reserve banks, went into their vaults, and remained there until some future years when they should see fit to loan it again to member banks. But for the time being, at least, the money was taken out of circulation; it was returned to the several Reserve banks, and remained there until called for again at some future period. Mr. LEWIS. Then, its uses were canceled. Mr. THOMAS of Oklahoma. Exactly so. The money was not in a place where it could do any work; it was in prison, so to speak. The platform declaration of the Republican Party in 1920 contained, in condensed form, the economic principles relating to and controlling the value of the dollar. The action of the Republican administration from March 4, 1921, demonstrates the possibility of regulating the value of the dollar and, by such regulation, the control of the general price level of the Nation. At this point I might call attention to the fluctuation of prices caused by the deliberate deflation of currency and credit by the Republican administration under President Harding. By referring to the graph on the wall—and in order to make the graph understandable I have indicated under each period the name of the President—it will be seen that at this point [indicating] Mr. Harding came upon. 2747 the scene. That was in 1920. He was elected in November 1920 and was sworn in as President on March 4, 1921. When Mr. Harding was elected President the dollar had a value of 64 cents and commodity prices had an average value of 154 cents. That meant that commodity prices had an unusually high price level. At the same time it meant that the dollar had an unusually low price level. After Mr. Harding became President money was taken out of circulation, and money became scarcer and thereby dearer. The chart or graph shows the zigzag line going upward. From March 4, 1921, to September 1, 1922, the value of the dollar was increased from 64 cents to 100 cents, and as the dollar went up in buying power commodity prices fell. The chart shows that the average price of commodities fell from 154 cents on March 4, 1921, to 100 cents by September 1, 1922. Mr. VANDENBERG. Mr. President, may I ask the Senator a question? Mr. THOMAS of Oklahoma. I am glad to yield. Mr. VANDENBERG. Is it the Senator's statement that that was entirely due to the reflex in the volume of currency? Mr. THOMAS of Oklahoma. As stated a moment ago, there are different conditions that control the value of money: One is the amount of currency in circulation; another is the amount of credit or deposit money in circulation; and the third is the volume at which all classes of money circulate. But when the Harding administration decided to deflate, as they did, as announced in the Republican platform of 1920, when the party came into power and began to do the things they promised to do everything began to slow down; money went out of circulation; deposit and credit money ceased to expand and began to contract; and, as money went out of circulation and deposit money began to contract, the velocity began to be retarded, and within 3 years, according to my viewpoint, caused the dollar value to go up and commodity prices to fall. At this point I might call attention briefly to the fluctuation of prices caused by the deflation program of President Harding. When the Republican convention met in June 1920 cotton was selling for 42 cents a pound, and after 18 months of deflation, as promised by the Republican platform, cotton was selling for 22 cents a pound. When the convention met wheat was selling for $2.50 a bushel, and, within 18 months, the price of wheat had dropped below $1 per bushel. The same percentage of reduction was reflected in the several items making up the wholesale price list. In the brief space of 2 years it was conclusively demonstrated that the value of the buying power of the dollar could be changed and regulated by the control of money and credit permitted to be in circulation. By referring to the graph, it will be noted that the heavy black line, indicating the dollar value of 64 cents in 1920, took an upward trend until in 1922 the dollar value, as measured by commodities, had reached the medial line designated by 100. As the dollar-value line reached the 100 medial line, we find the commodity price level likewise meeting the same 100 medial line. From 1922 to 1928 the value of the dollar was adjusted, regulated, and stabilized at approximately 100. In 1926, at the middle of this period—that is, the period from 1922 to 1929—we had a stabilized price level and a stabilized dollar; and it is impossible to have a stabilized price level without having a stabilized dollar. In that year—1926—every group of commodities represented in the Bureau of Labor system of statistics showed that the buying power of the dollar was 100, which means, of course, 100 cents. It is because of the regulation and stabilization of the value of the dollar at 100 cents in 1926 that that year has been designated as the most satisfactory to consider as the norm or standard. During the period from 1922 to 1928 we had a general era of prosperity. Wage earners were generally employed at fair wages; commodity prices were adjusted to a level which enabled producers to receive the cost of production plus a degree of profit. It was during this period that the national income increased perceptibly; it was during this period that the income of the Treasury derived from taxation was sufficient not only to meet the expenses 2748 CONGRESSIONAL of the Government but at the same time to reduce the national debt approximately $1,000,000,000 a year. I might also suggest that this temporary regulation and stabilization of the value of the dollar, and consequently the temporary regulation and stabilization of the value of commodities, was due entirely to the ability and' courage of Benjamin Strong, the governor of the Federal Reserve bank located in New York City. In 1921 Governor Strong, without a mandate from the Congress, obviously exercised the power conferred upon the Federal Reserve Board, and thereby, through monetary and credit control, adjusted the value of the dollar to a hundred cents and kept such adjusted value stabilized during the remainder of his brief lifetime. In 1928 Mr. Strong passed on, and at the moment of his death, there being no one left who assumed to carry out his policy, the dollar began to seek its former haunts; it started upward; in a very few years the dollar had advanced from 100 cents to 167 cents; and as the value of the dollar rose the price of commodities fell. It cannot be doubted, Mr. President, that the high-valued dollar in 1932, as shown by this graph, it being then 167 cents, was responsible for the defeat of President Hoover and the election of Franklin D. Roosevelt. This point [indicating] shown on the graph is supposed to represent March 4, 1933, with the dollar at its highest value in recent years, such value being 167 cents. At that time, when the dollar was at its highest value, commodity prices were as low as they were back in 1896. So immediately upon the election of President Roosevelt the power of the administration was directed to the cheapening of the dollar and the consequent raising of commodity prices. As hereinbefore stated, the value of the dollar has fallen from 167 cents in February 1933 to a value, or purchasing power, of 114 cents on March 13, 1937. As the value of the dollar has fallen commodity prices have increased. By glancing at the graph it will be noted that the value of the dollar started to fall on March 4, 1933, and it has been on a downward trend from that day until this. The dollar has lost value from 167 cents in 1933 until today its value is 114 cents. So the dollar value now, after 4 years of effort, is still higher than it was in 1929, and much higher than it was in 1926. The graphic trend shows that commodity prices have not reached the level of 1926, The bill which I am proposing, and which I have introduced this afternoon, provides a plan for the still further cheapening of the dollar until the value or buying power of the dollar shall be reduced to the 1926 level of 100 cents. If the dollar value is still further reduced to the level mentioned, we will find the price level of commodities restabilized again at approximately the 1926 level. It is my contention that the value or purchasing power of the dollar can be absolutely and safely controlled, and that, through regulation and control of the value of the dollar, we can likewise absolutely and safely regulate and stabilize the price level for commodities. From the point where the dollar value of 114 cents is shown on the graph it is my contention and my purpose and my plan, so far as I can effectuate them, to see that the dollar is still further cheapened until this black line [indicating] shall reach the medial line of 100, which will bring the dollar value down to 100 cents in terms of commodities. If and when this black line [indicating] is brought down to this 100 medial line [indicating] it will be found that the red or commodity line will be raised to the same line, exactly as it was from the period of 1922 to 1928, and as it was away back from 1800 to 1810. The fluctuation from 1800 to 1810 was greater than the fluctuation from 1922 to 1929. Under Governor Strong the dollar varied only as follows: He brought the dollar to a hundred cents; it then fluctuated down to 97 cents; then up to a hundred cents; then to 101 cents; then up to 103 cents; then down to 96 cents; then up to 104 cents, a fluctuation above or below the line of 3 or 4 cents a year. I do not hope to have the medial line from this time henceforth as straight as an arrow. That is too much to RECORD—SENATE MARCH 25 be expected or too much to be hoped for. But if Governor Strong, without a mandate from Congress and without the powers that may be conferred by congressional enactment, could adjust and regulate the value of the dollar from 64 cents to 100 cents and thereafter keep such value regulated and stabilized at approximately 100 cents for a period of almost a decade, then I contend that with a mandate from Congress and with additional powers conferred, an agency of the Government may again adjust and regulate the value of such dollar to 100 cents and thereafter keep such regulated value stabilized in terms of commodities. My bill if enacted into law would bring the black line down to meet the medial line on the one hand. If my bill will do what I think it will do, it will bring the red commodity line up to meet the same medial line, and then when the dollar has been adjusted or regulated in value as the Constitution provides, from that time henceforth the dollar will be possible of stabilization, and with the stabilization of the dollar it will be possible, in my opinion, at the same time, to stabilize the value of commodities. Mr. VANDENBERG. Mr. President, may I ask the Senator a question? The PRESIDING OFFICER (Mr. POPE in the chair). Does the Senator from Oklahoma yield to the Senator from Michigan? Mr. THOMAS of Oklahoma. I yield. Mr. VANDENBERG. Referring to the period which the Senator describes as Governor Strong's era of stabilization, does the Senator think Governor Strong would have done what he says was done during that period if the Government itself had been running at a constant deficit and financing its deficits by borrowing? Mr. THOMAS of Oklahoma. It would have made it harder for him, I will admit. Is the Senator from Michigan worried about increasing the amount of the national debt and increasing prices? Mr. VANDENBERG. What I am trying to find out is the Senator's philosophy in respect to control, and I am wondering, and asking only for information, whether the factor to which I now allude would not have embarrassed Governor Strong if such had been the situation at that time. Mr. THOMAS of Oklahoma. No doubt it would have been harder for Governor Strong to do all that he did, but the fact is that he was in charge of the Federal Reserve Bank of New York City from 1913. He served as governor of the Federal Reserve bank in New York from 1913 until 1928, but during the war period others had control of finances. The bill was not passed until 1913. It took a good while to get the law in operation. Governor Strong was a young man. No doubt he went along carefully and cautiously. Governor Strong took charge immediately after the war closed. The war closed in 1918. Governor Strong was then governor of the Federal Reserve Bank of New York City. He began to exercise his power and his genius shortly after the close of the war, but he actually took charge March 4, 1921. From then on what was done, as I believe, was done by Governor Strong through his ability, his foresight, his knowledge of money, and his knowledge of what the country needed and demanded in order to get back on its feet again. I wish to state for the public record that I approve of what Governor Strong did. I am hoping that what he did may be done again. I believe it can be done again. With reference to the bill which I have introduced, I do not expect it to pass tomorrow. It may never pass. But the question of the regulation of the value of money is now uppermost. I realize that few, perhaps, understand the mechanism of money. It is difficult to get people to listen to one talk about money. Some people seem to think that money is an Einstein proposition. They never did understand it; they never can understand it; they will never try to understand it. But from my viewpoint it is the most important question that confronts the Congress. The Constitution provides that Congress shall regulate the value of money. That provision has stood in the Constitution for 148 years. During those 148 years the Congress 1937 CONGRESSIONAL RECORD—SENATE has made no effort or little effort, if any, to regulate the value of money. There was a time when the people thought that a little piece of gold of a fixed weight and fineness was an unvarying measure of value just as the yardstick is an unvarying measure of length. But it has been demonstrated now, and I think admitted by the nations of the world, that gold is not stable in value. For a long time we had the gold dollar as the basis of our money. We had what is called the single gold standard. That simply meant the currency we had, our checks or money, upon our own motion could be taken to a bank and redeemed in gold. The last word in money was the gold dollar. That is the reason why we said we were on the gold standard. Many people seem to think that the gold dollar was an unvarying, unchanging, and unchangeable measure of value. Look at the graph which I have placed on the wall of the Senate Chamber. We had the gold dollar for one-hundredand-thirty-odd years and, as shown by the graph, the value of the gold dollar has bounced up and down, as I said a moment ago, exactly like a rubber ball. As the dollar bounced up and down the prices of commodities likewise bounced up and down. The Congress in all those years has never made a serious effort, so far as I know, to regulate or stabilize the value of our money. The Constitution provides that the Congress shall have that power. No one else has the power to regulate the value of money. Some have assumed to use some power to do the job. Governor Strong had the power of the Federal Reserve System at his command. He was the head of the largest bank in the Federal Reserve System. That bank had charge of the open-market operations. No doubt he was the best qualified man to advise the Federal Reserve officials as to what they should and should not do. I have read the book prepared by Dr. Burgess on the Strong plan, and it is my viewpoint that the officials of the Federal Reserve System deferred to Governor Strong and let him outline what should be done. Then the whole Federal Reserve System fell in behind Governor Strong and did what he recommended. At the present time this power is not centralized. Some power is vested in the Federal Reserve Board, called now the Board of Governors of the Federal Reserve System; some power is vested in the President; and some power is vested in the Secretary of the Treasury. Today there are three boards or three agencies which might assume to control and regulate the value of the dollar, but the Congress has never tried to do this directly. It is obvious, as I shall explain in a few moments, that Congress cannot do this, and I shall give the reasons why. Mr. President, 4 years ago, when the dollar value was high and prices were low, I introduced in the Senate a bill providing a plan for the cheapening of the dollar and thereby raising prices. The bill was passed by the Congress. The law was held to be constitutional by a 5-to-4 decision of the Supreme Court. During these 4 years the dollar has been cheapened and prices have been raised. Today the value of the dollar is still falling and, consequently, prices are still rising. Because of this 4-year trend, the following questions have arisen: How cheap shall the dollar be made, and how high shall prices be raised? Who is able, competent, and qualified to answer such questions? In all the land there is but one tribunal legally qualified to make reply, and that tribunal is the Congress of the United States. Section 8 of article I of the Constitution confers upon Congress the exclusive power to regulate the value of money. Save the power delegated and conferred upon the President by the act of 4 years ago, no person, board, or department has any mandate to presume to say how cheap the dollar shall be made, or how high prices shall be raised. The Federal Reserve System, a private banking organization, has power to alter, change, and, to a degree, regulate the value of the dollar, but has no legal mandate from the Congress to act in such capacity. 2749 The President and the Department of the Treasury have power to alter, change, and, likewise, to a degree, regulate the value of our money. While full and complete power rests in the Congress to adjust and regulate the value of the dollar, no mandate other than the one mentioned has ever been given any person, board, commission, or department of the Government. Our Government is now almost 150 years of age. The Congress has had full constitutional power to adjust and regulate the value of the dollar during all this time, but has failed to act. During all these years just what has the Congress done to vitalize this constitutional provision? When the Constitution was adopted we had practically no monetary system. Alexander Hamilton, the first Secretary of the Treasury, in 1791 recommended that a mint should be established and that both silver and gold should be used as money. The Congress in 1792 enacted a law making silver and gold dollars the basic units of currency for the States. The silver dollar was to contain 3711/4grains of pure silver, and the gold dollar was to contain 243/4grains of pure gold, and each such weighted dollar was to answer to a dollar in the money of account. From the first the content of pure silver in the dollar has never been changed. During the administration of Andrew Jackson the weight of the gold dollar was twice reduced. In 1873 the Congress demonetized silver. In 1900 the Congress, for the first time, made the gold dollar the single standard and basis of our monetary system. Then, in 1933, the Congress conferred upon the President power still further to reduce the weight of the gold dollar. The power delegated was exercised, and the weight of the gold dollar was reduced from 25.8 grains of gold 0.9 fine to a weight of 155/21grains of gold 0.9 fine. Until recently all our money, consisting of currency and subidiary[subsidary]coins, was based upon and redeemable in gold. Today all dollars outside of the boundaries of the United States are, in effect, based upon gold, and each such dollar is worth exactly what 155/21grains of gold 0.9 fine are worth in the markets of the world. Our domestic dollars are neither based upon nor redeemable in gold; hence the value of such dollars has little, if any, relation to the value of the foreign dollar. Under present law, rules, and regulations, the United States is on a pseudo-gold standard abroad and on a managed currency at home. Formerly the public was led to believe that fixing the weight or size of the silver and gold dollar regulated and stabilized the value of such dollar. This was on the principle that a large nugget of silver or gold would be worth more than a smaller nugget of either of such metals. Both gold and silver, while held to be monetary metals, are now and have always been commodities with values subject to the law of supply and demand. When the dollar is given a fixed weight in gold, such action stabilizes the value of but the one commodity of gold. If the law of supply and demand operates on the value of gold in the same way that that law operates on the value of other commodities, then it is obvious that the value of the gold dollar fluctuates exactly as the value of other commodities fluctuates. In 1920 we were on the gold standard, and our basic monetary unit was the gold dollar. In that year 1 bale of cotton would exchange for 10 ounces of gold. In 1932 1 bale of cotton would exchange for only 1 ounce of gold. In 1920, 1 ounce of gold would exchange for 81/2bushels of wheat, while in 1932 the same ounce of gold would exchange for 80 bushels of wheat. In 1920, 1 ounce of gold would exchange for 8 barrels of oil, while in 1933 the same ounce of gold would exchange for 100 barrels of oil. At the times mentioned the same approximate ratio which obtained between the value of gold and the value of cotton, wheat, and oil also obtained between the value of gold and 2750 CONGRESSIONAL corn, gold and livestock, and gold and property, real and personal, of every kind and character. Heretofore we have been taught that the value of gold was stable, and that it was the value of commodities and property that fluctuated in the market places. Since the close of the World War public opinion has crystallized into an axiom that the value of gold fluctuates with the supply and demand therefor. Because of this belief and development practically all nations are today off gold insofar as concerns having their currency tied to and redeemable in a fixed weight of such metal. For 4 years the American domestic dollar has been a managed dollar. The value of the dollar is exactly what its managers have prescribed and dictated. For 4 years our dollar has lost value constantly. Today the consumers and creditors complain that the dollar is becoming too cheap and that prices are already too high. The producers and debtors deny that the dollar is too cheap or that prices are too high. Thus this ancient issue—consumers against producers, creditors against debtors, and bulls against bears—is to the fore again. What are the facts? Consumers and creditors call rising prices inflation, and condemn the policy. Producers and debtors know that falling prices constitute deflation, and that deflation produces panics, depression, and bankruptcy. As stated, our Government is almost 150 years old. From the beginning these groups have engaged in constant economic warfare. During our national existence, in all periods save three, the producer and debtor groups, because of high-valued dollars and low prices, have been at a distinct disadvantage. I am not arguing that the producer and debtor groups should have an advantage; but it must now be obvious to all that these groups, embracing by far the larger percentage of our population, should not—and I prophesy that they will not—continue to feed the few on the fat of the land, and clothe the privileged class in fine raiment, while they themselves, undernourished, scantily clothed and improperly housed, toil and slave on a price level below cost of production, and on wages too low to permit a decent or humane standard of existence. Mr. President, the monetary system of any government is one of the most important problems with which any such government has to deal. Our own monetary system is no exception to this rule. The all-important item in all financial systems, at all times, is the value of the monetary unit. The value of the dollar controls prices, and prices control income and prosperity. When money is too plentiful, the dollar is too cheap, prices are too high, and we have inflation. When money is too scarce, the dollar is too high, prices are too low, and we have depression. Too cheap money produces inflation and consequent booms, while too scarce money produces deflation and the inevitable depressions and panics. The Constitution confers upon the Congress the power to regulate the value of the dollar; hence, the power to minimize, if not prevent, both inflation and deflation, and the resultant booms and depressions. To this date this constitutional power conferred upon the Congress has never been formally or legally vitalized. During most of the life of our Nation the dollar has been either a fixed quantity of gold or silver of a certain degree of fineness and minted into coins forming the basis of our monetary system, or paper currency based upon and presumably redeemable in such monetary metals. Today the dollar is neither based upon nor redeemable in either gold or silver. Gold is out of circulation; hence, no form of currency is redeemable in such metal. Formerly silver certificates were redeemable in silver dollars, but now such certificates are redeemable not in silver dollars but in so many dollars' worth of silver. Literally, this RECORD—SENATE MARCH 25 means that the amount of silver needed for the redemption of silver certificates varies from day to day as the value of silver bullion varies in the markets of our country. A few years ago our silver certificates contained on one side, in substance, the words "redeemable in one silver dollar." Those certificates have been withdrawn from circulation, and the present certificates contain the wording, "So many dollars, redeemable in silver." Mr. President, if you should take a $1 silver certificate to the Treasury and ask for its redemption, they probably would give you a silver dollar; but that would not conform to the contract. The contract on the silver certificate would require the Treasury to weigh out to you $1 worth of silver and tender to you or redeem for you your bill in either $1 worth of silver or $2 worth of silver or $10 worth of silver, as the case may be. Since the value of silver bullion changes daily, the amount of silver you would receive for your dollar is subject to change daily. So the contract as now printed on the paper silver certificate is impracticable of operation. Nevertheless, that is what it states on its face. Today we are on neither a gold nor a silver standard. As stated, the dollar is a managed money unit. We now have a commodity dollar. The value of the dollar in terms of commodities and services changes from day to day. In February 1933 the dollar, then on the orthodox gold standard, was valued in commodities at 167 cents. One year ago the managed dollar, in buying power, was worth 127 cents. Today such dollar is worth 114 cents. The dollar is constantly changing in value. Under the old gold standard it likewise changed in value. In the past the dollar, when based on gold or silver, or both, has been a dollar of varying values. Who is responsible for the kind or value of the dollar provided for the people of the country? The Constitution answers: The Congress shall have power * * * to coin money, regulate the value thereof, and of foreign coin. No other tribunal has the constitutional or legal right or power to regulate the value of the dollar. Important as this question is, the Congress has never exercised this power in a formal, practical, or legal manner. It is obvious that the Congress could not, through its committees or otherwise, exercise this constitutional power directly. The exercise of such power makes mandatory adequate and proper legislation. If Congress is unable to act directly in regulating the value of the dollar, then such power must be delegated. The delegation of legislative power is surrounded with difficulties. Under the Constitution the coinage of money and the regulation of the value thereof was intended to be a complete governmental monopoly. In practice at times this monopoly has been farmed out to private interests. At this time there is no congressional mandate relative to the regulation of the value of the dollar to any definite point. As I have stated, the dollar is constantly losing its value. It is going down day by day; and as the dollar goes down in value, as it is doing today, as it did yesterday, as it will do tomorrow, prices are constantly rising. The question now is, How far will the Congress permit the value of the dollar to fall, and, consequently, how high will Congress permit the prices of commodities to rise? I desire to place in the RECORD at this point plans and specifications of the new dollar as outlined by the President. On May 6, 1933, over a Nation-wide radio hook-up, President Roosevelt said: The administration has the definite objective of raising commodity prices to such an extent that those who have borrowed money will, on the average, be able to repay that money in the same kind of dollar which they borrowed. Again, on July 3, 1933, in a message to the London Economic Conference, the President said: Let me be frank in saying that the United States seeks the kind of dollar which a generation hence will have the same pur- 1937 CONGRESSIONAL RECORD—SENATE chasing and debt-paying power as the dollar value we hope to attain in the near future. He was frank to admit at that time that the dollar did not then have the value which he wanted the dollar to have, but he said that in the near future we hope to so regulate the value of the dollar that it will have the value at which we hope it may be stabilized. On July 5, 1933, in a second message to the World Economic Conference, President Roosevelt said: The revaluation of the dollar in terms of American commodities is an end from which the Government and the people of the United States cannot be diverted. We wish to make this perfectly clear: We are interested in American commodity prices. On October 22, 1933, in a Nation-wide radio address, the President said: It is the Government's policy to restore the price level first. In the same address, at another point, he said: When we have restored the price level we shall seek to establish and maintain a dollar which will not change its purchasing and debt-paying power during the succeeding generation. I said that in my message to the American delegation in London last July. And I say it now once more. Mr. President, there we have the plans and specifications of the President of the United States, if I may so term them. But the President does not have the complete power to adjust and regulate the value of the dollar perhaps to the point where he thinks it should be fixed. The only power the President has directly over money is the power to still further reduce the gold content of the dollar. Under present law he can take from the gold dollar 10 percent, approximately, of its present weight, thereby reducing the weight, and consequently the value, of the gold dollar. Under existing law the President has the power to reduce the old gold dollar to one-half its former size. He has taken 40 percent from the value of the dollar, leaving 60 percent in the dollar, and the only power the President has is as to the remainder, between the 40 percent and the 50 percent. Whether or not he will exercise that power further remains to be seen. At the present time I see no occasion for him to reduce the content of the gold dollar any further, for the very obvious reason that the domestic dollar, the commodity dollar, is a much higher valued dollar than the foreign gold dollar. Every dollar in American money, when it gets outside of the United States, becomes a foreign dollar, and the moment it becomes a foreign dollar it becomes of the value exactly of 155/21grains of gold, because the foreign dollar can be converted into gold. We have set aside a $2,000,000,000 stabilization fund in gold to see to it that our foreign dollar is held stable at the value of 155/21grains of gold. But that rule does not apply in the United States. The value of the dollar in the United States is controlled entirely by the number of dollars in circulation, not by the amount of gold in the foreign dollar, and not by the amount of silver in the domestic dollar, because the value of the silver in the domestic dollar is worth about 30 cents, so that is out of the question. The question now is, Can we regulate the value of the dollar down to the point where we think it should be? The Attorney General of the United States, in discussing the gold clause issue before the Supreme Court, made some reference to this question, and I desire to place in the RECORD at this joint just what the Attorney General said, and inasmuch as Senators are not very busy, I think it might not be out of place to read what he said. In arguing the gold-clause cases before the Supreme Court, Attorney General Cummings used the following language: It is my belief that the word "regulate" as used in the Constitution has never been completely and carefully analyzed in all of its implications. How far does the term "regulate" carry us? Manifestly, it reaches to the regulation of value, and value itself is a relative thing. Value appears only in relation to the value of other things. And, moreover, the word "regulate" implies a continuing power, and is the same term that is used with reference to commerce, and connotes the power of adjustment. It implies the power of making the condition accord more fully with reality and with justice. But when you come to the power "to fix the standard of weights and measures", the Constitution abandons the word "regulate" and uses the word "fix." 2751 All these things, philosophically or semiphilosophically considered, have some relationship to these sudden and violent fluctuations in commodity prices which so completely disarrange important equities; and to the proposition that, as a matter of essential justice, the dollar we borrow should be, in purchasing power, substantially the dollar we are expected to repay. What that relationship is I do not assume to suggest, what the future may develop with regard to this aspect of the constitutional question I do not know. These things will follow in due course. Only a few months ago the Governor of the Federal Reserve Board, Mr. Marriner S. Eccles, delivered an address in Cincinnati. After discussing some elements of the money question at some length, in summarizing what he intended to leave as definite suggestions, he used the following language: The Government fiscal policy and the central-bank policy, credit expansion and contraction should be coordinated. I think that within the Treasury and the Reserve System there is a real possibility of money management. Mr. President, my construction of Mr. Eccles' statement is that he thinks that if the power now vested in the President and the power now vested in the Treasury Department were vested in his board, with the power which he now has plus these two additional powers, he could satisfactorily manage money. Governor Strong did it without the powers which Governor Eccles has. If Governor Strong was able to do it, Governor Eccles could do it. But he has no mandate. Who is there anywhere who can tell Governor Eccles at what point of value the dollar should be stabilized? No one can do that save the Congress. Anyone else who undertakes to do it assumes that power and speaks only for himself. That is what has happened for 148 years, and when that has happened in these 148 years the holders of fixed investments have had control and the producer, as shown by this graph, for 149 years, save in three short periods, have been at a distinct disadvantage. Mr. Winthrop W. Aldrich, the chairman of the board of directors of the Chase National Bank, in a recent address before the Illinois Manufacturers' Association, described some of the methods of control of the value of the dollar. In this address he referred to the following powers: (a) Raising the reserve requirements of member banks of the Federal Reserve System. (b) Control, through Federal Reserve, open-market operations. (c) Control of the discount rate. Mr. President, before I overlook it, I ask unanimous consent to print in connection with my remarks, and after I shall have concluded, some data in the form of quotations from Supreme Court decisions as to how the Congress can delegate its power. The PRESIDING OFFICER (Mr. SCHWELLENBACH in the chair). Is there objection? The Chair hears none, and it is so ordered. (See exhibit A.) Mr. THOMAS of Oklahoma. Mr. President, the Senator from Michigan [Mr.VANDENBERG]asked me a question awhile ago about one phase of this subject, and in return I asked him whether he was alarmed because of the amount of the public debt which now rests upon the people of the United States. I do not remember that he gave me a definite answer. I will not insist that he shall give me a definite answer. Mr. VANDENBERG. Mr. President, will the Senator yield? Mr. THOMAS of Oklahoma. I yield. Mr. VANDENBERG. I shall be very happy to answer the Senator if he desires to have my opinion. The subject was injected solely because I was endeavoring to determine what the Senator's interpretation of the Strong episode was. It is my feeling that a continuous operating deficit in the Government inevitably leads to an inflation which is dangerous. Mr. THOMAS of Oklahoma. I agree entirely with the statement of the Senator, and I wish to suggest at this point that there is no chance ever to balance the Budget until the dollar has been stabilized, and there is no chance ever to get rid of ever-recurring strikes until the dollar is stabilized. 2752 CONGRESSIONAL The dollar tomorrow will have a different value from what it has today. Not long ago strikes broke out in one of the States of the Union. For the time being, those strikes were temporarily settled; but shortly, with a mounting price level, unless wages are increased accordingly, the wage earners who went on strike only a few weeks ago will be forced to face a higher price level, so they will perhaps go on a second strike. If that is settled, shortly afterward there will come a third strike. There is no chance to avert strikes, there is no chance to balance the Budget until the dollar shall be stabilized. With the stable valued dollar we shall have stable valued commodities. Rents will become stabilized. All the things the wage earners and all our people have to buy will become more or less stabilized. Of course, I do not say that the farmers will receive a dollar and a half per bushel for wheat every year. Under the system I am advocating, we might have $2 wheat one year and 50-cent wheat the next year. In other words, if wheat became unusually scarce because of drought or rust or the chinch bug it would rise in value even with the stabilized price level. On the other hand, if we should raise a double crop of wheat it would go down in value, although at the same time we might have a stabilized price level. However, the theory of a stabilized price level is that as a rule the commodities will be stabilized. In stabilizing seven or eight hundred commodities it will be necessary to stabilize some that are going up while others are going down. Getting back to the question of the amount of the national debt, I wish to place this statement in the RECORD for what it is worth. It is my contention that the increased debt resting upon the people of the United States today is less in value than the smaller debt which rested upon them when Mr. Roosevelt became President of the United States. If that statement be true, no one has a just ground for complaint because of the increase of the debt in terms of dollars. It has not increased in terms of gold; it has decreased in terms of gold. The debt has not increased in terms of wheat; it has decreased in terms of wheat. It has not increased in terms of cotton, or oil, or oats, or of commodity prices generally. The debt has decreased during the past 4 years in terms of the things I have just mentioned. In order that an answer shall be available to those who may wish to question my reasoning, I desire to give in the RECORD the reasons for my statement. Under this program the country is working out of the worst depression in history. Some of our people are complaining that the dollar is already too cheap and that prices are now too high. Also we hear fear expressed that the public debt is becoming so large as to be dangerous, yet the facts are that such debt today, in terms of gold and commodities, is not nearly so large, burdensome, or dangerous as the debt inherited by the present administration. On March 3, 1933, the total national debt was $20,934,729,209. Since 1933 the public debt has increased to $34,753,487,389, yet the debt today, in terms of gold, is $1,000,000,000 less than the debt of 4 years ago. The truthfulness of this statement is easily demonstrated. On March 3, 1933, we were on the single gold standard and all our bonds were payable in gold at the rate of 25.8 grains of gold 0.9 fine to the dollar. By multiplying the amount of the debt by the number of grains of gold in each dollar, we find that, on March 3, 1933, we owed 540,116,013,592 grains of gold. Since March 3, 1933, we have reduced the gold content of the dollar from 25.8 grains to 155/21grains, so that the present debt, multiplied by the number of grains of gold in the present dollar, shows that, at the present time, we owe only 529,576,950,685 grains of gold. By subtracting the value of the present debt, in terms of gold, from the value of the 1933 debt, likewise in terms of gold, we find that the present debt is almost $1,000,000,000 less than the debt of 4 years ago. In terms of commodities the value of the present debt is far less than the value of the debt of March 3, 1933. The RECORD—SENATE MARCH 25 truthfulness of this statement is likewise easily demonstrated. On March 3, 1933, cash wheat was selling for approximately 25 cents per bushel or 4 bushels to the dollar. The national debt at that time, measured in terms of wheat, was equal to the value of approximately 84,000,000,000 bushels of wheat. Today cash wheat is selling for approximately $1.35 per bushel, so that the present debt, valued in wheat, is equal to only approximately 26,000,000,000 bushels; and 26,000,000,000 subtracted from 84,000,000,000 leaves 58,000,000,000, so that the present national debt, valued in wheat, is approximately 58,000,000,000 bushels less than the total national debt of March 4, 1933. Certainly the man who raises wheat has no right to complain, because so far as he is concerned the debt resting on his shoulders, or his portion of it, is 58,000,000,000 bushels of wheat less than the smaller debt which rested on his shoulders on March 4, 1933. So far as prices are concerned, wheat and oil are Siamese twins. When wheat sold for 25 cents a bushel, oil was selling for 25 cents a barrel. Today, when wheat is selling for $1.35 per bushel, oil is selling for about the same amount per barrel, so that the national debt, in terms of oil, is approximately 58,000,000,000 barrels less than the national debt of March 3, 1933. In terms of cotton the national debt during the past 4 years has been decreased rather than increased. On March 3, 1933, the total national debt, in terms of cotton, equaled approximately 837,000,000 bales. Today the total national debt could be liquidated with approximately 496,000,000 bales, or the sum of 341,000,000 bales less than the value of the debt 4 years ago. In terms of corn the same conclusion is reached. Four years ago the value of the national debt in terms of corn equaled approximately 105,000,000,000 bushels. At that time corn was selling for less than 20 cents per bushel. Today corn is selling for over $1 per bushel; hence the present debt in terms of corn is equal to approximately 34,500,000,000 bushels; so that in terms of corn the national debt is approximately 70,000,000,000 bushels less today than on the day Mr. Roosevelt became President of the United States. Mr. President, let me recapitulate briefly. During the past 4 years the Congress has passed laws cheapening the dollar and raising prices. The first law reduced the weight of the gold dollar by 40 percent. The second law has expanded the currency by some $700,000,000 through a wider use of silver. These laws have worked. The dollar is cheaper and prices are higher. As stated, the Constitution provides that Congress shall regulate the value of our money. The laws enacted to date form the first step in the program for the regulation and stabilization of the value of the dollar. The next step is to determine the proper point of value at which the dollar should be stabilized. That is the purpose of the bill introduced by me today. The bill just introduced suggests a formula for determining such point of value, suggests the means by which the dollar shall be adjusted, regulated, and stabilized, and also provides a governmental agency to carry out the policies to be adopted by the Congress. The bill proposes that the Board of Governors of the Federal Reserve System shall be converted into an agency of the Government, designated as a "monetary authority", for the expressed purpose of supervising the operations of the law. The bill provides for the kind of a dollar favored by President Roosevelt. At this time many reasons suggest, if not demand, that the dollar value be decided upon, and thereafter that such adjusted and regulated value should be stabilized. The end sought to be attained is in the public interest. The plan suggested to bring about the desired results is possible, practical, and constitutional. If the bill becomes a law, the value of the dollar will be adjusted, regulated, and thereafter stabilized. CONGRESSIONAL RECORD—SENATE 1937 The practical effect of this program will be substantially as follows: First. The value of the dollar will be agreed upon and thereafter adjusted to such value. Second. The adjusted value will be stabilized, thereby tending to stabilize the price level of commodities and services. Third. Under the plan suggested the threats of inflation, likewise deflation, will be eliminated. Fourth. This program is absolutely necessary and, when adopted, will give the country a breathing spell, insofar as monetary legislation is concerned. EXHIBIT A United States Reports, volume 293, October term, 1934, page 421 (Panama Refining Co. v. Ryan) : "Undoubtedly legislation must often be adapted to complex conditions involving a host of details with which t h e National Legislature cannot deal directly. The Constitution has never been regarded as denying to the Congress t h e necessary resources of flexibility and practicality which will enable it to perform its function in laying down policies and establishing standards, while leaving to selected instrumentalities t h e making of subordinate rules within prescribed limits and t h e determination of facts to which the policy as declared by t h e legislature is to apply. Without capacity t o give authorizations of that sort we should have the anomaly of a legislative power which in many circumstances calling for its exertion would be but a futility." United States Reports, volume 293, October term, 1934, paragraph 8, page 390 (Panama Refining Co. v. Ryan): "Congress may lay down its policies and establish its standards and leave to selected instrumentalities the making of subordinate rules, within prescribed limits, and the determination of facts to which the policy, as declared by Congress, shall apply." MESSAGE FROM THE HOUSE A message from the House of Representatives, by Mr. Megill, one of its clerks, announced that the House had passed without amendment the joint resolution (S. J. Res. 110) declaring Joseph P. Kennedy eligible for appointment as a member of the United States Maritime Commission. The message also announced that the House had agreed to the report of the committee of conference on the disagreeing votes of the two Houses on the amendments of the House to the joint resolution (S. J. Res. 75) making funds available for the control of incipient or emergency outbreaks of insect pests or plant diseases, including grasshoppers, Mormon crickets, and chinch bugs. PROFIT SHARING AND SIT-DOWN STRIKES Mr. VANDENBERG. Mr. President, a few days ago, when discussing the labor situation, I made this statement: I think that appropriate and definite profit sharing is the essential key to the appropriate American labor relationship. I believe that firmly although I do not pretend to present a standard formula by which it can be done. I believe the part the Government can play in such a prospectus may be to offer tax exemptions to encourage the diversion of employer funds for profit-sharing purposes. I welcome every evidence I see of encouragement for the profit-sharing idea. There was a very interesting dispatch in the newspapers this morning from Jersey City indicating a very significant development in this connection, and I ask that it be printed in the RECORD. I should like to see an official legislative study of the whole profit-sharing subject. The PRESIDING OFFICER. Is there objection? There being no objection, the dispatch was ordered to be printed in the RECORD, as follows: JERSEY FIRM'S 200 EMPLOYEES NOW PARTNERS—WORKERS ARE JUBILANT AT 15 PERCENT SHARE I N MONTHLY PROFITS JERSEY CITY, N. J., March 24.—Recognized now as partners, the 200 employees of the Union Packing Co. set out today to increase business and the profits they will share in. A promise of monthly dividends to the extent of 15 percent of the profits came in a surprise announcement by Joseph Gross, president of the meat-store chain, and Louis A. Falk, secretarytreasurer. Employees, jubilant at the news, estimated their monthly cut would range from $5 to $20 each for butchers and $18 to $75 for managers of the 50 stores in New Jersey and New York. SEVENTY-FIVE DOLLARS A MONTH MORE "I stand to make $75 a month more under this system", said Stanley Tarack, manager of the largest in the chain. "It is one of the best things t h a t ever happened. I t is going to make every man step out now and see t h a t more sales and more profits are made." 2753 Tarack also predicted employees would be anxious to cut down operating expenses. Joseph Coppola, who has been behind a meat counter 3 years, commented: "I would rather work under this system than to get a flat raise of so many dollars a week. I t is a very fine thing the company is doing and they will benefit by it in the end." MAY SOLVE UNITED STATES' PROBLEM As for t h e bosses, Falk says t h e company has never had any labor difficulties, and t h e partnership idea "might prove a way out for the rest of the country if it follows suit." "We may be altruists", Falk said, "but we can't see why one person should earn $1,000,000 and another $20." In business 16 years, the company has stores in Manhattan, Long Island, and Westchester County, N. Y., and in five north Jersey counties—Hudson, Passaic, Bergen, Union, and Essex. I n 1935 it gave employees $14,000 in cash bonuses. Mr. VANDENBERG. Mr. President, while I am briefly referring to the labor situation, may I add the statement of my great satisfaction to see in the newspapers that a White House conference apparently is contemplated this week end, out of which may come seme expression from the President respecting sit-down strikes. I know of nothing which would be more important to the welfare of a harassed Nation than an explicit statement from the Chief Executive upon this subject. Government should speak upon this matter without further delay and through its highest and most authoritative mouthpiece. CROP INSURANCE The Senate resumed the consideration of the bill (S. 1397) to create a Federal Crop Insurance Corporation, and for other purposes. Mr. POPE. Mr. President, it will be recalled that today Senate bill 1397 was made the unfinished business. That bill has to do with the creation of a crop-insurance program to be effective for the year 1938. It is my purpose to discuss generally the arguments for a crop-insurance program in its relation to other agricultural programs that are in effect, and perhaps at a later time I will discuss in detail the specific provisions of the bill. Mr. President, the Federal Trade Commission has just submitted a report to Congress in response to a resolution passed last year requesting an investigation of conditions of agriculture. This report contains some very interesting information. It is pointed out that in the last 25 years, while the Nation's population has grown nearly 40 percent, farm population has actually declined. In 1910, population on farms was about 32,000,000. In 1929, it had fallen to 30,257,000. In 1935 it was back to 31,800,000, but about 200,000 less than in 1910. This decline took place in spite of the fact that the annual excess of births over deaths on the farm is from 400,000 to 500,000 a year. If those who were born on the farm since 1910 had remained, farm population would have increased more than 10,000,000. Instead of that, it has decreased some 200,000. It is estimated by the Bureau of Agricultural Economics that over 6,000,000 persons left the farm between 1920 and 1929; yet this period is regarded as one of general prosperity in business. Between 1930 and 1935, about 1,000,000 more people left the farm than went to it, notwithstanding the fact that during the depression a considerable number did move onto farms in order to exist. Interestingly enough, during the past 25 years the national land area included in farms rose from 46 to 55 percent. This leads the Federal Trade Commission to conclude that the survival of independent farming by home owners is in jeopardy. Into this picture comes the specter of tenancy. In 1900, 35.3 percent of farmers were tenants; in 1910, 37 percent; in 1920, 38.1 percent; in 1930, 42.4 percent; and in 1935, 42.1 percent. The actual number of tenants in 1935 was estimated at 2,865,000. It is estimated that tenancy is increasing at the rate of 40,000 a year. The depression, of course, greatly accelerated tenancy. During the 4 years before the depression the number of foreclosures per 1,000 farms varied from 19 to 23 percent. In 1932 it was about 42 percent, and in 1933, 50 percent. In 1936 it had been reduced to 28 percent. Hardships among farmers are reflected in various ways. It is found that in rural areas about 13 percent of those who
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