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Memorandum On N ational Preparedness By - R# L* Owen Our n a tio n a l preparedness has been launched mar n if io « n 11 v “s ’S is . r of th' - *"■ A aTUVB 0 MI31 I 0 M tremendoua expansion o f c r e d it by s e l l i n g bonds to A nil** «!!}* "J*5 p r iv a t e ly owned banks n e c e s s a r ily w i l l cause the i f d* f f 0,??*!? * • l t <il<3 urMl*r P resid en t W ilson, tinder him i t s ta r te d a t 14 ~ in Kay 1 9 1 3 , and went down to 60 in 1 9 2 0 . Tb? n * v io le n t r e a c tio n took p la c e due to c o n tr a c tio n o f c r e d it and ourreney. The d o lla r index was r a ise d bv the F ederal *Und*r th * 6 ul<iM1®* ®f the fe d e r a l Reserve Board to 2 2 n t T l J r 9 i T \ 7 «‘8r! ' V ” 8 9 t 8 b l l l s *<’ In 1926 fo r tha »! r®„ 22 4 , . 27 in c lu s iv e . Than v io le n t i n f l a t i o n took p la c e In SIo J ^ lS M through in d e fe n s ib le expansion o f c r e d it . rn lsed ^ th e d o l i i r ? r i « * e r ? « a ? 0 o n tr s e tio n o f c r e d it ensued which J “Jv la f , x to 166 in February, 1 9 3 3 . The purchasing aaeptemDer, s p t ^ b l r i s z s and i ^ June, ^ r * * ?1 9^3o2 6005 ln thewasa*c u r lty et« sebetween * Hoover d efea ted» «rk b ecau of sio n d*P" f 3 ,!-o r i 0f • ’ ?? ,nd Koo,®v # u was s le e t e d to end the d ep rea" iv e l to ^ i V “ SKf* th * P ™ -d ap ression p ric e o? *n end to the in d e fe n s ib le exp an sion and c o n tr a c tio n P l a t t o i ^ n ^ t E I a * * ? * p r o f it at p u b lic expense." Tha Democratic platform promised a ls o a sound currency which R o o sev elt c o r r e c t ly d lsp fi^ h t 0 th « London Koonomlc Conference * the® p r ic e l« v e l *end * ! eanf° i!Cf re sto re s t aK b lis h l¥a* d °ofllahrU whose d eb t-p ayin gto Durchaslnr power should remain the same from one g en era tio n to a n o th er. 1 tin ^ «nsU« « COn?^lt w ith the cc rr oe aa tin g f and r e ig ,uilahftin g th e U vat i10n lu e of money,Congress but Oonxrress has duty o f to™ S?d I t * dutJ* *lth o u «h bb* House of a . p r , a S ! v , 4 1 9 3 2 , a f t e r thorough in v e e t lg e t io n taking 50 C pages o f u I h m J y * r S n t o l ^ Gold .borough B i l l by 219 to 6 0 . That ^ i l l p r o p o M d to d t o .a t l l ' k * P,^-<l*P9 ***ler. d o lla r index and to m aintain i t and t h l S e o l i t ^ ^ ' r S 1 2 ***’’v* Eank*» the F ed eral R eserve Board end t..e <ecr«tar,s of th e Treasury to make e f f a o t iv e th a t p o lle v . i t w a s .u c o e s s f u U y sid a tra ck ed ln th e United S ta te s S e r ite bv subs t i t u e e t l l l s expending the b a s is of n a tio n a l bank c ^ r e n c y , which proved to be no remedy fo r the d e p r e s sio n . y to d e c la r a tio n by Congress o f a n a tio n a l monetary p o lic y i t I * * ? ? , th p£**"?*pr*, , l o n p r i8 * l *v« l 1926 end to m aintain i t would g iv e a b e a l . o f co n fid en ce t o b u sin e ss men an?, enable them t o m ake f u t u r e b u s i n e s s c o n t r a c t s o f a l l s o r t s w ith d e p e n d a b le s e c u r i t y b y g i v i n g th em a g o v e r n m e n ta l g u a r a n t e e o f a d o l l a r , w h o se d e b t - p a y i n g p u r c h a s i n g p o w e r s h o u l d b e s t a b l e and k e p t sta b le . O b v io u sly b u s in e s s c o n fid e n c e in th e v a lu e o f p r o p e r ty h a s no a d e q u a t e b a s i s w hen t h e d o l l a r o r t h e m o n e ta r y u n i t l a p e rm itte d to v io le n tly f l u c t u a t e . O b v io u s ly w i t h o u t s t a b l e m oney t h e r e c a n b e no s t a b i l i t y in th e v a lu e o f r e a l e s t a t e o r s t o c k s o r b o n d s, in s u r a n c e p o l i c i e s , s a v in g s a c c o u n t s , o f co m m o d ities or se rv ice s. T h is i s s s e l f - e v i d e n t t r u t h . F o r t u n a t e l y we k n ow t h a t we h a v e t h e m e c h a n i s m a l r e a d y p r o v i d e d b y w h i c h t o r e g u l a t e th e v o lu m e and v a lu e o f m oney* The m oney w h ich t r a n s a c t s o f t h e b u s i n e s s o f th e c o u n t r y I s c h e c k m oney b a s e d on d e m an d b a n k d e p o s i t s i n c i r c u l a t i o n . T hese ch e ck s a re c o n v e rt ib le in to le g a l te n d e r c u rre n c y on dem and, T he c u r r e n c y p ro b lem n e e d g i v e u s no c o n c e r n b u t r e g u l a t i n g t h e v o lu a a o f dem and b an k d e p o s i t s i n c i r c u l a t i o n i s t h e m ed iu m t h r o u g h w h i c h t o r e g u l a t e t h e v a l u e o f m oney b e c a u s e i t f u r n i s h e s t h e m eans f o r w h ic h t h e F e d e r a l R e s e r v e S y stem and t h e F e d e r a l R e s e r v e B an k a e a n exp an d t h e v o lu m e o f dem and b a n k d e p o s i t s w i t h o u t l i m i t b y t h e p u r c h a s e o f g o v ern m en t b on d s o r o t h e r sound b a n k a b le a s s e t s . The F e d e r a l R e s e r v e S y s te m s and t h e F e d e r a l R e s e r v e B a n k s c a n i n l i k e m a n n e r c o n t r a c t t h e dem and b a n k d e p o s i t s i n c i r c u l a t i o n u n d e r sim p le p r o c e s s o f s e l l i n g to th e p u b lic s e c u r i t i e s p re v i o u s l y a c q u i r e d and t h e r e b y w i t h d r a w i n g f r o m p r i v a t e u s e t h e dem and b a n k d e p o s i t s f o r w h ic h s u c h s e c u r i t i e s w o u ld b e e x o h a n g e d . I t h a s b een d e m o n stra te d t h a t a s th e d o l l a r in d e x g o e s dow n, o r a s t h e a l l - c o m m o d i t y i n d e x r i s e s , w h ic h I s t h e sam e th ln /^ t, w a g e s and em p lo y m en t i n c r e a s e s . O n ly t h e C o n g r e s s o f t h e U n ite d S t a t e s c a r g i v e t h e b u s i n e s s m en o f t h i s c o u n t r y t h e d e p e n d a b l e a s s u r a n c e o f s t a b l e m oney and I t c a n o n ly b e a c h ie v e d and m a in ta in e d i n a d e p e n d a b le m an n er b y t h e m ech an ism s e t up i n th e F e d e r a l R e s e r v e S y ste m . ahen th e U n ite d S t a t e s s h a l l have e s ta b lis h e d a d o l l a r w h o se d e b t - p a y i n g p u r c h a s i n g p o w e r s h a l l b e m ade s t a b l e b y g o v e r n m e n t, o u r n a t i o n a l in co m e c a n b e r a i s e d t o e x c e e d i n g 1 0 0 b i l l i o n d o l l a r s p e r annum . The d i s c u s s i o n o f th e s e q u e s tio n s w i l l b e fo u n d b y y o u i n 3 e n s t e D ocum ent 2 3 o f t h e 7 6 t h C o n g r e s s . W h en t h i s s t e p s h a l l h a v e b e e n t a k e n , i t w i l l m u l t i p l y t h e p o w e r o f th e p e o p le o f th e U n ited S t a t e s to c r e a t e n o t o n ly a s u p e r ab u n d an ce o f th e m u n itio n s o f w a r , b u t th e c o m f o r ts and c o n v en ien ces of l i f e . I n t h i s d o c u m e n t y o u w i l l f i n d m any a u t h o r i t i e s , t h e a t t i t u d e ta k e n by p o l i t i c a l p a r t i e s , by th e fa rm o r g a n is a tio n s and c h a r t s p r e p a r e d fro m r e c o r d s o f th e F e d e r a l R e s e r v e B u re a u of R asesreh * W hen t h i s g r a v e o m i s s i o n o f r e g u l a t i n g t h e v a l u e o f m oney i s c o r r e c t e d , A m e rica w i l l h a v e i t a I n d u s t r i a l p ow er v e r y g r e a t l y in c r e a s e d n o t o n ly f o r w ar p u rp o s e s , b u t w hat l a e v e n m o re i m p o r t a n t f o r t h e s a f e g u a r d i n g o f t h e a f t e r m a t h w h i c h w o u ld f o l l o w w ar and o t h e r w i s e p r o d u c e d e p r e s s i o n . —2 B y t h i s s y s t e m we w i l l p u t e o s i l i n ^ o n t h e r i s e o f c o m m o d ity p r i c e s end e f l o o r b e n e a t h w h ic h t h e d o l l a r i n d e x sh a ll not f a l l . B y t h i s s y s t e m we w i l l p r e v e n t i n d e f e n s i b l e e x p a n sio n o r I n d e fe n s ib le c o n t r a c t i o n o f m oney. By t h i s sy ste m we w i l l p r e v e n t h a r m f u l i n f l a t i o n an d we w i l l p r e v e n t t h e r u i n ous con seq u en ces o f d e p re s s io n . R. L . OWES. - 5-
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