The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Denver, Colorado, March 17, 1917. 117 dear Professor Fisher: Your favor of March 2nd, enclosing a repr u was sent to me at the ,ederal Reserve Bank In New received here where I am recuperating from a rece read the article with much interest, a you were good enough to send me in irk and has just been illness. we I have us article which as a p to interest ti To mg mind there is no a of the direct relationship between prices of goods and t of bank expansion. appear to observers who are not fam It may with the oolicies of the Reserve System in detail that served by the Lanag from the Financier, eived the attention it deanks, or at any rate that they have not displayed in efforts to control the inevit- able exnansi orts. Such a conclusion is hardly or of 1914, less than two months after the Res would r e Banks were o ized, the possibilities of expansion which ult from the me' table movement of gold to this country as a result o purchase Federal ReserV-6 s very fully considered by the management of the of New York, and at that time a policy of accumulating gold by issues of notes was definitely adopted. Early in January the plan Which we had worked out was submitted to the ,aovernors of the other eleven Federal Reserve Banks and to the Federal Reserve Board, and from that time to the present every effort has been made to accumulate as large a proportion of the imported gold as could be assembled by this means, and, as you will . realize, with considerable success. The Federal Reserve Bank of New York 2. To - Professor Asher. March 17, 1917. now holds $154,000,000 of gold behind its note issue, in addition to about $220,000,000 in its general reserve, and all twelve of the Reserve Banks hold a total of 028,000,000 in addition to In order to make our effort the general reserve. 38,000,000 held in ore effective, various amendments have been prepared and submitted to Coa.ess by the Federal Reserve Board, which unfortunately failed4. Had these amendments passed, I have a ion would have been added to Banks and swrie hundreds of ml note Unfortunately, the wisdom of this policy, I might almost at d the antagon Congress and has aro tions, particularly I had hoped e q.41t Commercial efforts courage or two influential publica- Imancial Chronicle of New York. friends of t students o give us aoubt that ananal ,250,000,000 reserves of the Federal Reserve of gold would have been added to the fund now accumulated by he last session. Reserve System and particularly roblems growing out of the war would e benefit of their independent support and encouragement in are these being 4, I may say ich considerable expense, and enat re friendly d helpful attitude both in Washington and among While I feel obliged to write to you privately and confidentially on this subject, I do so in the hope that you may be led to take some in- terest in studying this feature of the work of the Reserve System and that you may possibly find opportunity to give your influence to the encourage- ment, rather than discouragement, of our further plans and efforts. Should you have time and feel disposed to write me, 1 will be 3. To - Professor Fisher. klarch 17, 1917. most pleased to send any further data that you would 11230, or that would prove to be of any value or interest in connection with your work. It seems to me that the dangers of the future (and of course I rophesying) will realize that there is no greater danger by very low rates manifest themselves in a collapse of p for liquid capital and very high rate in fact for long government or fixed or pe loans, accompanied by a gra ent capital, even loss of our ity, unless it unwieldy gold reserves and a One feature can be controlled and unle uz' gold is a able for export. of future developments abr Which is shro d in mystery, and in connec- ehend tion with Which I ngs have been suppressed abroad. military dictatorship gol if the domestic value of gold our exchanges be affec I ha sent us by 90 of the consequ which one rare the Un- How may abroad rid to its international value as re- is suddenly readjust the internatio in the belligerent nations. possibility of a quote fleet will develop, lies t difficult exchanges? 1UYar of the much advertised flood of cheep products and its consequent effect upon the exchanges, than I have ces of our direct financial transactions of the character sees mentioned. Is it not more likely that England, France and Germany will at the conclusion of the war be distinctly sterile as lenders of money in foreign markets and will not the burden of paying off Practically all maturing loans no.7 owing in those countries by various smaller neutral nations fall entirely upon us? Furthermore, will not those countries and colonies which are without tariffs on imports be large pur 4. March 17, 1917. To - Professor Fisher. chasers of goods from belligerent nations and will they not find it necessary to borrow here in order to pay for them? These problems might be viewed with reaso We the compact, centralized and well controlled b Plans to control, or even influence t or Germany. le unconcern, had ng system of England activities of 25,000 in number are allied or 30,000 banks, of which hardly more t to the Federal Reserve System, will Indeed be a task o when these postwar developments ar those of us who are studying we can obtain from students of th Prof. Iry Fisher, Departmen of Political 460 2rosp et St., New Have Conn. and I am frai to say that elcome every suggestion which re and, personally, I would and Inc kindest regards, I am, Thank you for BS/CC , correspond with you, if you greatly value and appreci have the time or an proportions 110111y, Denver, Colorado, April 5, 1917. My dear Professor Fisher: I have received your kind letter of 1arch 28th, as wsll as the reprint from 'The New Republic" and the copy of "Haw to Live." It was most kind of you to send me this order from the publishers on the little book, Which I was just about to recommendations of my friends, Mr. Jerome Greene and Mr. James P. Curtis, Who have recently been visiting me and were most enthusiastic about the book. I had not read Professor 'Sprague's article in the New Republic, but will write you further after reading it. Referring once more to some of the activities of the Reserve Banks, I think we may now say that their strictly banking functions ouite fully developed, with the change charges. exception are of the puzzling problem of ex- Thislivill be worked out in time and we have started, as I feel sure you realize, upon a conservative and sound basis. The important do with development work of the our currency. Realizing, as we do, sound and progressive currency Congress on the subject, chief obstacle to that the reform has been the profound ignorance of it has not been the policy of the managers of the Reserve Banks to push this is needed. System from now on has to matter too aggressively; additional legislation Of course the greenbacks should be retired, the National Bank notes should be reduced as rapidly as possible and ultimately retired and the silver certificates should be relegated, to quote to the position of "large change". All of this, in my Professor Taussig, opinion, should be 2. To - Prof. Fisher. April 5, 1917. brought about by the gradual expansion of the Federal Reserve note issues of the Federal Reserve Banks, as rapidly as other currency is retired, without employing the use of Federal Reserve Bank notes at all, so as to avoid perpetuating a bond secured bank note. The necessary preliminary to any such extensive program of reform is a large gold reserve held by the Federal Reserve Banks and our policy of accumulating gold, as I recently described to you, adopted over two years ago, has already resulted in a total accumulation as of Uarch 31st of no less than 4937,030,000 in both the note and deposit reserve accounts. If the proposed changes in the reserve requirements of the Federal Reserve Act A are adopted, about 4250,000,000 additional gold will be accumulated and the continuance of our policy of issuin Federal Reserve notes in exchange for gold can be counted on to produce 4200,000,000 or 4300,000,000 more, proba- bly within a few months. This would give the Reserve banks about 41500,000,000 of gold and upon that huge gold base believe we would be justified in assum- ing at once all the greenbacks, taking over the 4153,000,000 of gold now held in the Trust fund and a low Government bond for the difference of 0.93,000,000 on such terms that they could be gradually marketed. the National ban, notes would remain to Then only be dealt with, and, with 7?,1,650,000,000 in gold in our vaults resulting from the changes in the Reserve requirements, the retirement of the greenbacks and further note issues, i see no reason why at least one-half of the National bank notes should not be retired just as soon as the war situation is behind us and it becomes possible to affect the\ necessary conversions and sales without interference financial program. with the Government's 3. To - Prof. Fisher. April 5, 1917. You will observe upon reading the Federal Reserve Act, the curious inconsistency in the provisions for the issue of Federal Reserve notes and for dealings in gold. It gives the Reserve banks the right to buy, sell and borrow gold and to pledge or sell their assets for the purpose. of notes. It does not give them the right to buy gold by direct issues But how can a Reserve Bank buy gold except by the issue of its obligations in some form? The sale of its assets is not a purdhase of gold -- it is simply withdrawing from the market, that is disconLinuing lending money so as to talcs in gold as investments mature, or as their maturity may be anticipated, by selling them. MY believe has right along been that the first step in prepara- tion for currency reform must necessarily be this accumulation of gold, and il \ I am hopeful that the wisdom of our policy will be demonstrated When we find ourselves able, as later we UD doubt will be, to persuade Congress to corn-. plate the Federal "/ Reserve Act by providing for real currency reform. I have road but one of Wicksell's articles on the subject of interest rates, and am inclined to agree with his theorty in part, but un, fortunately we must realize that in this country even a very strong central _ ban & is impotent, so long as American banking is decentralized ( to the ex., tent that it is, and conducted by 30,000 independent and, let me say, exceedingly indenendent, institutions. I fear that the employment of a brake or expansion, through arbitrary control of interest rates,would mean Government control and for that we are not yet ready. 4. To - Prof. Fisher. April 5, 1917. Could you send me some of the literature, thct is to say what you have written in relation to standardizing the dollar? I am interested particularly in considering What relation this might have upon the foreign exchanges. is going For some years to come this subject of the foreign exchanges to be of vital interest the world over. The pendulum which has made such a long swing in one direction is some day going to swing back, and for that we must be well prepared and we are undertaking the most important work of preparation by this very operation of accumulating gold. In fact, it was somewhat with that in mind that I went to Eurooe last winter ,1 to ne,otiate the pending arrangements with the Bank of England and the Bank of France, whic are now in a fair way to be concluded. Expressed in a few words, I hope to see the Bank of ngland, the Bank of France and the Federal Reserve Bank of New York operating in gold, in complete harmony, under some arrangement which will be nearly, if not quite, as economical and effective as is the gold settlement fund Which is now emoloyed for settling balances between the twelve Reserve banks. progress towards It is a rather ambitious program, but success will be vastly promoted by our alliance with England and France in the war. My thought in regard to assistance from those Who are studying these currency questions was largely prompted by the attitude of the Chronicle. If you and Professor Sprague, Professor Kemerer and others whose carry such hind us opinions weight in these matters, could just at this time get squarely be- In support of some such program as I have indicated, it would be a Liost patriotic contribution to the work of preparedness, which is now occu- pying the attention of the nation. Frankly, 1 have a great dread of the 5. To - Prof. Fisher. April 5, 1917. possibility of all sorts of freak legislation in such times as the present. Senator Thomas of Colorado recently introduced a bill to authorize the issue of $500,000,000 of greenbacks to partly defray the cost of military preparation. It seems inconceivable that any one familiar with the history of our Civil war finances could for a moment suggest chinery for the soundest possible such a course, When the ma- msrsgement of our currency is right at hand and ninety per cent completed. I have written you quite frankly and I fear burdened you with a very long letter, because I am conscious of my inability to do very much while I am out here a cripple ton and New York are so and at a time When my associates in Washing- deeply engrossed in a great many important matters. My health has shown such wonderful improvement since I came to Colorado last July that I am hopeful of returning to New York within the next two months. Possibly I may have the pleasure later of seeing you at the bank,in the operations of Which 1 know you will be greatly interested. This sojourn in Colorado has been a benefit in more ways than one. It has added twenty-seven pounds to my weight, given me an opportunity to do some reading of Which I have long been deprived and, furthermore, I think has given me a chance for some quiet reflection, which we all need now and then to get straight on some of the problems of the day. With kindest regards and again many thanks for the little book, which I shall read with much interest, I am, Very sincerely yours, Professor Irving Fisher, 460 Prospect St., New Haven, Conn. SS/CC May 11th, 1917. Dear Sir: Mr. Strong hg,s asked me to ae.;nowledge receipt of your letter of April 28th Which has been forwatded to him here and say that he will reply on his return to Denver. Very truly your Secretary to Mr. Strong. Professor Irving Fisher, Yale Univereity, New Haven, onn. Denver, Colorado, Lay 17, 1917. ity dear Professor Pisher: I have only now had opportnnity on my return from Wew York to read the enclosure contained In your letter of April 28th. Seaator Thomas' nronosal has been discussed somewhat in Denver and I gather from my banking friends here that they view his activities witn some concern. 1J I am taking the liberty of bringing this matter of the President of the to the attention leading business organization in the state, - the Denver Civic and Commercial Association, and I have no doubt they will be willing to start an agitation that will aid in convincing 3enator Thomas that he does not in this matter represent the views of his constituents and that the people of Denver and Colorado view his activities with concern. My trip to New York was for the purpose of starting the Federal Reserve bank organization in the work of placing the new Liberty loan and preparing for the huge financial transactions in connection with clearing the payments. l think we have the work mapped out so as to avoid disturbance to the country's business and finance but expect to end of the month and stey there am working away here on and hope and believe return again before the until the matter is concluded. Meantime I such matters as can be attended to from this distance that two months hence the country will view with satisfac- tion the demonstration of strength and facility Which will be shown by the Re- serve banks. Just as soon as Lho pamphlets you were good enough to send me reach 2. To - Prof. Fither. Liny 17, 1917. Denver I will read them with great interest and write you further. With thanze for your letter, I am, Very sincerely yours, Prof. Irving Asher, 460 Prospect St., New Haven, Conn. Bs/co UNCA jun 3$ 191, 4101111101111/1101 June 29, 1917. Dear Madam: Mr. Strong has asked me to acknowledge re- ceipt of your favor of the 12th instant, with enclosures, which were forwarded from Denver, and state. that as soon as the pressure of work permits he will take pleasure in reading the literature forwarded by Professor Fisher. Very truly yours, Secretary to W. Strong. Miss Nary Prentice, Ueeretary to Professor Irviao: -Asher, 460 Prospect Street, ---/le* Haven, Conn. VOTA September 19th, 1917. Dear Sir: At ."x*. Strong' request, I sending you under separate cover copy of the chart regarding call money rates about which he spoke to you thili morning. Very truly yours, Secretary to Ur. ' :trong. Professor Irving Fisher, The Yale Club, New York city. VCV aptember 22, 1917. lAy dear Professor Fisher: I thank you very much for the "radio chart" and diagram vihich you have kindly sent me, and which I shall examine with much interest. Very truly yours, Governor. Professor Irving Fisher, 460 Prospect Street, New Haven, Conn. December 6th, 1917. Uy deaf Yr. Fisher: repTet the delay in replying to your kind letter of November 2.2nd. aril just in New York for a day or two 30 am taking the lierty of asking Wr. Jay. to consider the matter and you will 'Isar either from or from me a little later. Very truly yours, December 7th, 1917. Dear Sir: Your letter of November 19th has been received by Ur. Stronr and he has asked me to express his deep regret at having m seed you both at Hot Springs and in Washington. He ',vas recalled to 7-Ashinrton and Yew York during this week and next week is compelled to be in Washington again, after which he hones to continue his vacation at Aiken, S. C. yr. Strong has found it necessary to neglect all mail for the past few weeks but hopes to be able to give more attention tt it a little later. Very truly yours, Secretary to tr. Strong. Professor ving Fi3 46C Pospect t1et, New Haven, Conn. September 13, 1918. Dear Professor Asher: Thank you very much for the reprint of the article "Stabilizing the Dollar in Purchasing Power," just sent me. which you have It will be read with much interest. Cordially, Governor. Professor IrvinAlisner edt; 460 'PFBIMI Lew Haven, Conn, BS/MSB FiTLING Lake George, N. Y., February 19, 1919. T91.) FEDERAL RESERVE. BANK op) Dear Professor Fisher: r. Peabody sent me your note of Decembe_r00/rith enclosure, and I regret the delay in writing you about it, but have }led no stenographic help until very recently. Mr. Musher, Whom you will observe has advertising extensively, is the head of an ports olive oil from Spain. recently bean enterprise Which im- He got caught in his foreign ex- change commitments and made a greet deal of trouble for the Federal Reserve Board and the Federal Reserve Bank making all sorts of extravagant accusations which justify. he could not Unfortunately he has had a close relationship with Senator Oren and some people feel that in causing Senator Oren to establishment of a Federal he has push proposed Foreign Mxchange Bank. tell you a greet deal more about this embarra:sing and troublesome in the saved from bankruptcy rith vhich to insatiable in his desire obligations to willing to spend large sUMS to see you, I can matter, vhich has extreme. by the decision settle his been instrumental legislation for the Some time rhen I have opportunity of New York, to been He was literally furnish him with gold in Spain, but apparently is continue a propaganda because he seems in advertising for that purpose. It Sheet No. 2 tv*oktittr 1.# - 1` AL" aher 2.19.19. " I is supposed at his propaganda is financed wit}' his arm money. DER7 R E2ERvE Professor Irving Fieher,,_ Praapsct Stroet, rev Haven, Connecticut. BS.MSB piclially yours, April 4, 1919. T)ear Professor Fisher: I am indeed sorry to learn from your you will be -,revented from attending the conference this tolethat ,rning. e wore comting on your presence as we antickpLte having a very enjoyable meeting and luncheon. 7e sht.11 miss you, but possibly ie may have the pleasure of soein you in the near filtuic. .i.th warm regards, believe Ine, Very sincerely 'yours, l'rofessor Irving Fisher, Haven, Conn. GB i RA 1:: )1' 1. 8 . FPDERAL, July 2, 1919. Dear Professor Asher: 'he package of manuscript came and I am looking forward to reading it on the steamer. My sailing, however, has been delayed until the 12th, mulch may afford opportunity to send the additional sheets. Many thanks for your courtesy in giving me this opportunity. Sincerely yours, PZofe.s49J7J17.1-14g-4A4P-ts,,. 46-0-Prospect Street, New haven, Conn. BIVILSB V V.)9'° (.3 \`)14) ZIY- elttly Ny 1eaa Mr. 1919$V4Sc6°1( sher Many thatks for your prriphle t "3tabi1izth the Do1143.r" *hieh I shall to.le pleasuro in reading..,at the first o-.opwtrnity. I am sailing for Europa on the 12th :vd shall likely be away far ten or twelve maks. With red, , Yours s incor ely 9 Irviaas_Piener& 480 Prospect Street, Nov; Haven Conn& GB October 7, 1919. Professor Fisher: I feel very guilty in not having written you before this in regf,,rd to the manuscrl_t you were good enough to'1eave with me, which I brought back with me, but which is now packed L, other papers when. I am with a izreA, mass of unable, to get at it at the moment. I read the manuscript with great interest, and took the erty of asking r. Kent of the Bankers Tru 1. Comany, who VSHAi with me, to read it at the same time, but I was so deeply engaged in various matters durinL my 6tay in Euroe that I could reaiiy give very little thought to the subjet. Nor, in fact, Was I able to sele Lord D'Abernon, is I had hoped to do. Many develoAlents, now taking place in Europe have a very direct bearing upon your plan and some day soon I shall hope to have ortunity to discuT.s it with you, .,otioning again, for the writing you in detail. With kindest regard:, I am, Lncerely Professor IrvinE Fis c460 Pros,ect Stree New haven, Connecticut. your, moment Dec. 30, 1919. My dear Professor Fisher: Under separate cover i am returning the manuncript of your book !IZtabilizing the Doliar" which you were co kind to ltt me look over just prior to my sailing for Europe last. July. As you expect to send me an advanced cupy of the book when it is published, felt thut you my wish to keep the manuscript in your own files. With kindeA regards, and the SEidEOLV6 greetings, believe me, Yours sincerely, fessor Irving Fisher, 460 Prospect Street, New Haven, Conn. =26 cede tinibmiiip %Department of (politica ecottomp PROF. IRVING FISHER .0 PROSPECT STREET NEW HAVEN, CONN. March Mr. Benjamin Strong, Jr., Governor, Federal Reserve Bank, 16 Wall Street, New York City. 14. My dear Sir: 410 \ \ slittO MAR 1 6 1917 I send you the enclosed article which has recently appeared in the Financier with the hope that you will find time to glance at the diagrams. The plainly indicate that the present rising cost of living is mainly accounted for by superabundance of money and only slightly by scarcity of goods. Inasmuch as few persons are at present aware of this important fact and inasmuch as misunderstanding is leading to food riots, socialistic agitation and reckless proposals; I would suggest that the monetary side of the problem be considered with the rest in any investigati-n which you may cause to have made. Very sincerely yours, AG/c Enc. (64 Unibersiip ii)esrftnenf of Vofifica gconotnE ro` ROF. IRVING FISHER .60 PROSPECT STREET NEW HAVEN, CONN. rch 28, 1917 Yr. Benjamin Strong, 4100 Montview Doulevard, Denver, Colarado. My dear Mr. Strong:I have yours of March 17th which I have read with very great interest. I hope that your Colorado sojourn has rested you. Colorado always bringback my own experience, for I spent e)me months there with tuberculosis in 1898 and 1899. I should be extremely glad to correspond with you and help in any way that I can. I am entirely in sympathy with the policy which you descrne and if you can tell'me how, act any time,I can by writing letters or otherAse,help, I should be very glad. did not realize the details of the activities, which you mention in the effort to impound sold. I did realize in a gen- eral way that something of the sort must be in process. When the bills, which ought to be passed to help this, are again before Congress, I hope you will let me know and give me, their exact numbers with copies, if possible. The Commercial and Financial Chronicle seems to lack much vision and ability in its field. it seems to be a chronicle and little else. I wonder if you have seen an article by professor Sprague Mr. Benjamin Strong, March 28, 1917 -2- on how to finance the war advising a taxation policy, rather than a bond policy. I will try to get .a copy sent to you. It was in "The New Republic". I think the idea of Knut Ticksell of Sweden,that the control of the interest rate of banks should be a public function and not so much in the interest of the borrower as tradition has made it, is a vary good idea. In particular, when) as at present, prices are rising ,the rata of interest should be raised even above what unthinking. supply and demand would make it, in order to put a brake on the business boom and save us from a crash. If the Federal Reserve system can achieve this, it will help immensely, T believe, to prevent over-expansion of loans and deposits and, therefore,of prices. Of course the Bank of England has regarded the control of the rate of interest as a public function, but only in order to protect its reserve for the nation. Wicksellts idea goes further. My own idea of standardizing the dollar is, I believe, one which ought to be practically considered. But there is so little general knowledge concerning it at present that it seems almost hopeless to attempt to promote it until after the war. We never seem to be able to lock the door until the horse is stolen. Very sincerely yours, B.S. As one interested in health you may be interested in to Live", a copy of which I am sending you. MS/m a book; "How re4e, epottnent of .1..ttioerecitp pofiticaf economp ,"OF. IRVING FISHER J PROSPECT STREET NEW HAVEN, CONN, March 29, 191?. APR 5 Mr. Benjamin Strong, 4100 Montview Boulevard, 1917 Denver, riolorado. My dear Mr. Strong: In accordance with Professor Fisher's instructions I am sending you enclosed a copy of Professor Sprague's "The Conscription of Income" to which Professor Fisher referred in his letter to you of march 28th. Very sincerely yours, 0.. ' ).),AAVAD__. Secretary C81/4"A-ving risher. to Pdr.E. Enc. Taft UniDtrisifp ciZerdrfment of (pofificaf economp ROFJJNGJSH E_ ,.60 PROSPECT STREET NEW HAVEN, CONN. April 2) Wit OW 4 40344/, r. Benjamin Strong, 4100 Montview Boulevard, Denver, Colo. 4-; ji I" 4'4,1x MAY 17 1917 My dear Mr. Strong: Thank you very much for your interesting letter of April 5th. I am not at this time, owing to the pressure of very important, work, able to give you a complete reply but I am sending you under another cover a number of pamphlets bearing on my plan for standardizing the dollar and should be much interested t o have you express youseif on the subject when you have had opportunity to peruse them. I am very glad to know of the great improvement in your health and trust that it will not be many months before you will be able to be back in New York. discuss these matters It will give me pleasure to with you. Very sincerely yours, ' JRdAG ressional I am enclosing herewith some pages from the C Record of April17th. Senator Thomas of -Cinel-nrk&ter has again in Congress. Could not introduced his inflationistic.. some of his constitutents be influenced to influence him against this sort of thing' Can you do anything in this way or suggest anything that might be done P.S. '--'6, TafttncU Ceeparftnenf of (I) ofif ic f economp PROF. IRVING FISHER 60 PROSPECT STREET NEW HAVEN, CONN. June 12, 1917 . Mr. Benjamin Strong, 4100 Yontview Boulevard, Denver, Colorado. My dear Mr. Strong: Professor Fisher has instructed me to write you in acknowledgement of your letter of May 17th, and to say we are sending you today duplicates of the pamphlets which we sent with our letter of April 28th since you had not received the original set when you wrote Professor Fisher on May 17th. Very sincerely yours, Secretary to Pc1EE n r) Fisher. o S TA TEM EN T Do Not Detach D A TE B o s t o n ,____ & jilLIL — j . AMOUNT :.;-U v y u THE |§s N a tio n a l 55 z h No.s 5-20 EE OF R IO O ^ O O . s o _ ,w m u t B a n k Pay S5s a H " Sh 2 ± _____ 191 £ u > j ••;V> | r | H l?;*J D R = n v AM D 2 i tn Receipt i s hereby acknowledged of fiv e hundred (500) d o lla rs, *pai,d to Sinclair Kennedy by the Boston Herald and Journal for fa ilu re to carry out i t s contract to publish in it s issues of February 26, 28, March 2 and/§7~ 15T §», e quarter page advertisement !b consisting of quotations ^6my^resident Wilson, Treasurer KcAdoo, and the Chairman of the WarS^^vings Committee, said advertisement having been stopped bjZ/the February 28, 1918, raid* a fte r it s second publication on x ;— Th^yBostcm Herald end Journal joins herein in acknow ledgment that the SB frd-^gum is paid and received on account of the above described breach of contract, and in f u ll of a l l claims on the part o f said Kennedy. Dated tz. lg l8 resident, In his address to the farmers, January 31, 1918, said: “ It means the utmost economy, even to the point where the pinch comes. It means the kind of concentration and self-sacrifice which is involved in the field of battle itself, where the object always looms greater than the individual. ” The Secretary of the Treasury, In a statement published in the Official Bulletin, December 28, 1917, said: o a “ The people of the United States can render the most far-reaching patriotic service by refraining from the purchase of all unneces sary articles, and by confining themselves to the use of only such things and the expendi ture of only such money as is necessary to y y maintain their health and efficiency/ The Chairman of the National W ar Savings Committee, At the Boston City Club, December 3, 1917, said: “ The Government should have a free track in the workshop. It should have labor which is not competed for by unnecessary things. No matter how well we can afford to buy unnecessary things, no matter how well we can afford to do it, the Government cannot affdrd to have us do it.” T I I I 3 A D V E R T I S E M E N T 13 I N S E R T E D B T S I N C L A I R K E N N E D Y , 10S0 B E A C O N S T ., B R O O K L I N E , S IA S S . _D ollabs '7 i >, ' /D A A 'V< '’- W h y Massachusetts Lags THE T h e p osta l rates, con tin u in g p ea ce tim e p olicie s, still c u t d - FACT d iz e a d v ertisin g. A c c o r d in g t o th e A p ril I figures o n T h r ift an d W a r S avin gs S ta m p s, M a ssa ch u se tts w a s fa r b e lo w c o u n tr y . fo r 1 c e n t fo r 2 ou n ces, w h ile p erson al letters co st 2 cents o r 3 cen ts p er o u n c e ; first a m o n g th e states, w h ile M assa ch u setts, In d ia n a , I o w a , O h io, Illin o is — o f th e an d p eriod ica ls o f all th e v a rio u s s o r ts fro m n ew spa pers t o m agazines, w ith th eir b u lk s o f advertising* h a v in g p u t in 8 8 ce n ts p er ca p ita , s t o o d th ir ty -fo u r th . K an sas, F o r exam ple, p rin ted a d v ertisin g p o s t ca rd s g o fo r 1 cen t, w h ile w ritten p o st ca rd s c o s t 2 ce n ts ; circu la rs g o th e a v e ra g e o f th e N e b ra sk a , w h ich h a d p u t in t o sta m p s $ 1 1 .0 6 per c a p ita s t o o d o g o anyw here in the U n ited S ta tes for 1 cen t fo r 4 ounces, w h ile M id d le o rd in a ry m erchandise costs m ore. W e s t w h ic h o n ly a fe w m on th s a g o M a ssa ch u setts p eo p le A d v e r tisin g ta lk e d a b o u t “ w a k in g u p ” ; W is co n sin , w h ose lo y a lt y M a s s at su p p orts m ost n ew spa pers and m ag azin es. O reg on , C a lifo rn ia , A r iz o n a , T ex a s, w h ere th e W ild W e st la rg ely o n th e press fo r th eir fa cts an d fo r g u id a n ce in th eir su rv iv es in th e m o v ie s ; M a in e , N e w H a m p sh ire, V erm on t, op in ion s, th is a d v ertisin g c o n tro l is a g ra v e d an g er. R h o d e I s la n d , C o n n e c t ic u t — th e o th e r N e w E n g la n d sta tes: . are u n w illin g t h a t a n y interests, b y c o n trib u tio n s to o u r a ll o u t-r a n k e d M a ssa ch u se tts. colleges, sh ou ld c o n tro l th e te a ch in g o f o u r y o u n g m en an d THE M a ssa ch u se tts la g s o f th e am ount an d S ta m p s. L ast p olicies shall b e p resen ted t o th e p u b lic in th e g reat p o p u la r C h ristm a s, fo r in s ta n c e , c o lle g e o f t h e press, th u s p re v e n tin g th e A m e rica n p u b lic they fr o m p ro fitin g b y th e u n d o u b te d in tellig en ce an d in t e g r it y p u t th e ir m o n e y in t o C h ristm a s p resen ts — so m u c h o f it o f t h e m a jo r it y o f jou rn a lists. t h a t o n e store a d v e rtise d its D e c e m b e r sales as “ b r e a k in g all M o s t new sp a p ers in M a ssa ch u setts h a v e o p p o s e d th e idea-, r e co rd s.” T h e y h a v e p u t m o n e y in t o p leasu re cars. B etw een Ja n u a ry I a n d A p r il 6 , 1 9 1 8 , th ere w ere o v e r 1 5 ,0 0 0 m ore n o n -c o m m e r cia l a u to m o b ile s reg istered in o f d e v o t in g a m a x im u m a m o u n t o f th e n a tion a l resources t o w in n in g th e w ar. M assa ch u setts th a n in t h e co rre sp o n d in g p e riod o f 1 9 1 7 . us n o t t o b u y ; in th eir n ew s colu m n s t h e y h a v e su ppressed th e p u t in t o p leasure cars a n d n o t in t o G o v e r n m e n t secu rities. T h e e n u m era tion n e e d g o n o fu rth er. p o lic y . in to th e p ro d u c tio n a n d tra n sp orta tion o f th a t th in g . v a r io u s a c t iv it y in a m iser . (a n d “ C lo th e s are g o in g t o c o s t a w h o le t o g e t in A ll y o u n eed is g o o d o ld C O M M O N S E N S E . w h ile p r e s e n t ------- v a lu es are still ob ta in a b le . . . . t o b e W E L L N I G H U N O B T A I N A B L E !” an y A ty p ic a l a rticle sta tes: “ E c o n o m y in c loth es is n o t pursued longer t o a great e x te n t fo r several reason s. O n e is th a t w e all realize th a t t o so m e e x te n t tra d e m u st ru n in its usual c h a n nels. S e c re ta r y o f th e T re a su ry said o f th e sale o f th e S ta m p s: W e m u st n o t c u t d o w n t o o strin g en tly o n a n y sort o f sp en d in g , fo r fea r w e m a y cre a te a sort o f p a n ic an d b rin g “ T h e a ctu a l sale o f t h e se cu rity , h ow e v e r, is n o t as im p o rta n t h a rd sh ip fo r som e classes o f w ork ers . . . B u t last y e a r ’s as sp re a d in g a b ro a d th e g osp el o f th e c o n se rv a tio n o f lab or, sk irts! fo o d , a n d m a te r ia ls , a n d th e a v o id a n c e o f c o m p e t it io n b y D e a r m e, t h e y are q u ite im p ossib le, m o st o f t h e m .” A n e d itoria l rem arks, “ E c o n o m ie s o f dress are a t m a x im u m th e c iv ilia n p o p u la t io n w it h th e fig h tin g fo r c e s .” in T h e ch ild re n o f M a rsh a lltow n , Io w a , h a v e g o t th e idea. sav a ge com m u n itie s, b u t th e ‘sim p le life ’ is o b ta in e d th ere a t th e c o s t o f c iv iliz a tio n its e lf.” T o th e q u e stio n “ H o w ca n I h elp w in th e w a r?” t h e y g a v e, C o m p a r e th ese w ith th e a p p e a l o f th e G o v e r n m e n t, d is 1918, such trib u te d b y t h e N a tio n a l W a r S av in g s C o m m itte e : “ A re replies as fo llo w : y o u w ea rin g o u t y o u r o ld th in g s? “ G o w ith o u t c a n d y a n d g u m .” “ G o w ith o u t a C h ristm a s T r e e .” B y so d o in g y o u are sa v in g la b o r a n d m a teria l t h a t sh ou ld b e e m p lo y e d fo r w ar w o r k . . . T o dress or liv e e x tr a v a g a n tly in w a r tim es “ S a v e m y c lo th e s b y n o t lettin g th em g e t t o m . ” is n o t o n ly “ B e satisfied w ith w h a t I h a v e .” u n p a tr io tic, it is b a d fo r m . . . . R e m e m b e r t h a t la y in g in a su p p ly fo r th e fu tu re m a y b e g o o d h ou se T h e y ea t t o o m u c h .” k ee p in g in p e a c e tim e s — in “ S a v e p ap ers a n d su p p lies a t s c h o o l.” h oa rd in g , “ T e a c h oth e rs t o b e t h r ift y w h o d o n o t k n o w h o w .” and h in d ers th e w ar tim es it is u n p a tr io tic, G o v e r n m e n t. D o n ’t q u estion w h eth er y o u c a n a fford it, b u t w h eth er th e c o u n tr y ca n “ A lw a y s ask , w h e n I b u y a n y th in g ,‘ D o I r ea lly n eed t h a t ? ’ ” afford t o le t y o u h a v e it .” “ D a r n m y stock in g s as so o n as th ere is a t in y h o le so it T h e d a y a fte r th e T h ird L ib e r ty L o a n d riv e term in a ted , w o n ’t g e t la rg e r.” a M a ssa ch u setts p ap er p rin ted an a rticle con cern in g a u to “ L o o k o v e r o u r scra p b a gs fo r c lo th th a t ca n b e used fo r m ob iles, w a rn in g its readers n o t t o b e lie v e all th e stories garm en ts o r q u ilts .” about “ G e t a lo n g w ith o u t teasin g fo r th in g s.” th e fr o m “ S a v e g a so le n e .” a u to m o b ile W a sh in g to n .” in d u s try , It sta ted “ p a rticu la rly t h a t it w as d isp a tch es p a tr io tic fo r m o torists t o u se u p gasolen e in th eir cars a n d sa id , “ I f y o u “ D o w ith o u t v a le n tin e s .” are th in k in g o f b u y in g a car, g o a h ead a n d d o it. M a ssa ch u se tts p e o p le , o n th e o th er h a n d , w h ile d e v o tin g som e m a teria l a n d la b o r t o th e ca u se o f w in n in g th e war, g rea t m a n y m iles o f e n jo y a b le r id in g .” C o m p a re th is w ith th e sh o w , h a v e d e v o te d m u ch m aterial an d la b o r t o th eir ow n G o v e r n m e n t a p p e a l: “Do you sav e g asolen e, ru b b e r, a n d sk illed la b o r b y c u t tin g o u t all g ra tifica tio n s, as th e C h ristm a s sales a n d a u to m o b ile reg is tra tio n s, a m o n g o th e r th in g s, sh ow . T h e re w ill b e fu e l en ou g h a n d tires e n ou g h t o g u a ra n tee y o u a as th e ir L ib e r ty B o n d s a n d th eir fe w W a r S av in g s S ta m p s u n n ecessa ry u se o f m o to r cars? T h e y h a v e n o t con fin ed m o st im p o r ta n t w a r s u p p lies. th e ir sp en d in g t o th e d em a n d s o f “ h ea lth an d e fficie n cy .” G a s olen e is o n e o f th e E v e r y g a llon c o u n ts. R ubber is also in demand. Chauffeurs are needed on Government w o r k .” T h e p a g es o f som e n ew sp a p ers h a v e n o t b e e n o p e n t o T H E R E S P O N S IB IL IT Y W h o is re s p o n s ib le fo r this lagging? T h e y w an t t h e G o v e r n m e n t p le a fo r T h r ift, e v en as p a id a d v ertisin g . th em selv es, A n a d v ertisem en t co n ta in in g o n ly q u o ta tio n s fro m officia ls I t is n o t b eca u se t h e y o f th e G o v e r n m e n t w a s d ro p p e d b y th e B o s to n H era ld in N o t th e g re a t b u lk o f M a ssa ch u setts p e o p le . w in th e c loth es G o o d c lo th e s are n o t o n ly g o in g t o b e h ig h — t h e y ’re g o in g S o w ell d o e s th e G o v e r n m e n t u n derstan d th is, th a t th e “ G e t a lo n g w ith o u t ca ts an d d ogs. by C o m m o n sense e n ou g h t o b u y th e clo th e s y o u ’re g oin g t o n eed w ar a n d m o re d eath s. to t o ju d g e Y o u d o n ’t n eed a r a b b it ’s f o o t . . . o u t o f th e r a in ! T h e G o v e r n m e n t d o e s n o t ask C ross M a g a z in e , Ju ne, g o in g is j u s t as fo o lis h a s ,” e tc. fo r p a r t o f th e su rplus ovter th e d em a n d s o f “ h ea lth an d a . W a r is n o t w o n b y k illin g bu sin ess o f a n y k in d .” l o t m o re ! M y s e lf first — - t h e n eed o f W ith h o ld in g be can w h y n o t w ear clo th e s t h a t w ill m a k e th e m ju d g e y o u a W o rld - fo rts r a t h e r th a n t o g ro w fo o d , b u ild ships, m a k e m u n ition s, m u n ition s, m u st all y o u B e a te r in s te a d o f a G u tte r-P u p ! . . . W e a r in g p o o r c lo th e s W ho t o e m p lo y m aterials an d la b o r fo r m y o w n ta stes an d c o m less “ T h ere “ Spend t h e y ’re g o in g t o w h eth er or n o t y o u h a p p e n t o lik e it) — e v er b u y s in excess o f th is m in im u m says in e ffe ct: “ I ch oose b u t fo r all o f t h e surplus. a re: all bu sin ess.” O r a gain , “ I f p e o p le are fo r th is p u rp ose, th e G o v e r n m e n t h a s ask ed t h a t w e b u y n o th in g fo r o u r o w n p u rp oses b e y o n d w h a t is a b solu tely n ecessa ry t o m a in ta in o u r “ health a n d efficie n cy .” a d v ertisem en ts a ffo rd . . . . dress as w ell as y o u c a n — d o n ’ t sh ow y o u r s e lf A n d , so th a t th ere m a y b e en o u g h m aterials a n d la b or in th e m ark et th e R e d u rg in g T h r ift ; T h e fo llo w in g q u o ta tio n s are fr o m B o s t o n p a p ers in crea sed The G o v e r n m e n t has a ik e d u s t o let it use o u r m o n e y in b u y in g m aterials a n d h irin g la b o r t o w in th e w ar. a c c o rd in g t o N a tio n a l G o v e r n m e n t d riv e. A m ong E v e r y tim e w e b u y a n y th in g , w e ta k e from th e lim ite d n a tio n a l su p p ly all th e m aterials a n d th e la b o r th a t enter p a r t m e a n s less fo o d , less ships, o f th e o f A p ril 6 t o M a y 4, th e p eriod o f th e T h ir d L ib e r ty L o a n sh ow s w h a t M a ssa ch u se tts p e o p le b u y . e fficie n cy ,” m essage an d e d ito r ia lly t h e y h a v e n o t su p p o rte d th e G o v e r n m e n t A g la n ce in t h e sh op . w in d o w s o r a t th e a d v e rtisin g p a g es o f th e new spapers th e c o u n tr y a fte rw a rd s.” O n th eir ad v ertisin g p ages th e y h a v e u rg ed p e o p le t o b u y th e v e r y th in g s th e G o v e r n m e n t asks, I f th ese cars c o s t o n a n a v e ra g e as lo w as $ 1 ,0 0 0 , th is m ea n s $ 1 5 ,0 0 0 ,0 0 0 o r oth e rw ise h e lp w in th e w ar. We ca n , b y th e sp a ce t h e y b u y , d eterm in e w h a t fa cts an d w h a t o f m oney M a ssa ch u se tts p e o p le h a v e p u t in to th in g s o th er th a n L ib e r ty B onds th is d e m o c r a c y w h ere th e p e o p le d ep en d w om en . B u t it has c o m e a b o u t th a t th e a d v ertisin g interests REASON b e ca u se In p resen t a ch u setts q u e stio n e d ; M is s o u r i, w h ic h h a s t o b e “ s h o w n ” ; w ar sp e e d ily , a t a n y sacrifice t o for t h e y k n o w th a t d e la y c o s ts liv es. are u n w illin g t o d o th e ir p a rt th a t th e y h a v e fa ile d a d eq u a tely th e m id d le o f a c o n tr a c t (see o v e r ) an d w as refu sed b y t o su p p o rt th e fig h tin g m en a n d th u s t o insuire th eir ow n B o s to n P o s t (see b e lo w ). T h e sh ort-sig h ted business m en an d th e new spapers m ig h t fu tu re sa fe ty . T h e y are n e ith e r so u n p a tr io tic n o r so stu p id . h a v e b een en lig h ten ed b y th e state leaders. T h e y h a v e b e e n r e a d y t o d o w h a t w as n ee d e d — i f o n ly is th e N a tio n a l G overn m en t sa id cle a rly w h a t sh o u ld b e d on e. resp on sible. It in th e cau se o f releasing m aterials an d la b or, th e state leaders has of A s e a rly as M a y , 1 9 1 7 , sh o u ld cea se e m p lo y in g la b o r in M en en g a g e d in p ro d u c in g a t o n c e as a p a t r io t ic a c t .” lu xu ries sh ou ld cease an d W ar S avin gs S ta m p s th en is resp on sible? th eir n ew sp a p ers, th e n a tu ra l ch a n n els th r o u g h w h ic h th e G o v e r n m e n t sp ea k s t o th e p e o p le , h a v e n o t tra n sm itted it w ere fid d led business m en, M a ssa ch u se tts bu sin ess m en , in m any R om e b u rn ed . N ero M a ssa ch u setts p eo p le t o d a y N o t rea lizin g w h a t th e y w ere d o in g , M a ssa ch u setts p e o p le h a v e b e e n u sin g u p fo r cases, h a v e n o t th em selv es m aterials a n d la b o r n eed ed b e e n w illin g t h a t th e n ecessa ry m aterials a n d la b o r sh ou ld b e c o n trib u te d t o t h e p u rp ose o f w in n in g t h e w ar. t o b a c k u p th eir o w n b o y s in F ra n ce. T hey h a v e w a n te d th e p e o p le t o g o o n b u y in g m u c h as b efore, M ORAL C u rta il a d v ertisin g. T h is ca n b e d o n e b y ta x a tio n , rev ised p osta l rates, an d t h u s u sin g a g re a t d e a l o f m aterials a n d la b o r in n on -w a rU su a l.” w h ile m a in ta in a n o rch estra o f fid d lers. n ew sp a p ers an d sta te leaders. w in n in g w a y s. RESULT a n d h a v e cou n selled th e p e o p le in o p p o s it io n t o it. S h ort-sig h ted A m essage o n w a r e c o n o m y b e ca u se th e ir lo c a l lead ers an d d evised t o h e lp to w a r d th is end. W ho it. M a ssa ch u se tts p e o p le h a v e n o t r e c e iv e d t h e G o v e r n m e n t m aterials a n d la b o r w h ich ca n b e released b y th e c iv ilia n T h r ift to T h is a ttitu d e has b een general. TH E S in ce th e n , th e P resid en t, th e S e cre ta ry o f th e T re a su ry , a n d o th ers h a v e em p h asized th e The o p p o s itio n “ L e t th e ch a n g e b e as gradu al as w e c a n m a k e it . . . T h e re is d an g er o f o v e r -th ir ft.” n e e d o f p u ttin g a t th e d isp osa l o f th e G o v e r n m e n t all th e p o p u la tio n . en cou ra g ed th e la b o r-w a stin g ind ustries t o th e w a r-w in n in g in d u stries, u n n ecessa ry bu sin ess. . . . W e w ill th r o w n o o n e o u t o f e m p lo y m e n t, b u t in to a situ a tio n w h ere t w o m en are n eed ed in stead o f one. have m ittee a n n ou n ced , con cern in g th e tra n sfer o f en erg y fro m n o t p a trio tic t o sp en d m o n e y fo r a n y th in g b u t necessities Y ou M a ssa ch u setts p rom in en t m em b er o f t h e M a ssa ch u setts P u b lic S a fe ty C o m M r . V a n d e rlip o f th e A d v is o r y C om m ission t o ld us, “ I t is now . B u t in stea d o f ex p la in in g th e G o v e r n m e n t’ s p o sitio n an d using th eir p ow er t h e y h a d k n o w n w h a t th a t w as. N or th e A y e a r a g o t h e y cla m ored fo r “ B usin ess as I f th e y h a d su cce e d ed in fa sten in g th is p o lic y on oth er co n stitu tio n a l m eth od s. th e c o u n tr y , v e r y litt le m aterials an d lab or w o u ld h a v e been a v a ila b le d u rin g th e p a st y e a r fo r w ar w ork . o f o th e rs p re v e n te d this. S IN C L A IR T h e w isd om B u t o p p o sitio n to “ T h r ift ,” th e S e cre ta ry o f t h e T re a su ry defines it, “ sa v in g t o th e p oin t o f sacrifice — self-den ial o f ev e ry th in g u n n ecessa ry ,” KENNEDY. 1 0 8 0 B e a c o n S treet, as B r o o k lin e , M a ssa ch u setts. still Ju ne 4, 1918. con tin u es. T h is o p p o s itio n has been m ad e effectiv e th ro u g h a d v ertis o in g , w h ich stim u lates p e o p le t o b u y w h a t t h e y oth erw ise w o u ld n o t b u y . T h is sta te m e n t m a y b e p u b lish ed b y a n y o n e an d extra T h e m eans used are b ill-b oa rd s , electric co p ie s -d isp la y s, th e m ails, new spapers, m agazin es, etc. m ay be o b ta in e d fro m th e a b o v e address. Copy of An Affidavit I, JO SEPH P. DRAPER OF CANTON, M ASSACH U SETTS, I A M A N A T T O R N E Y A T L A W W IT H AND ME O F F IC E A T M AKE A CONTRACT P U B L IC A T IO N COPY OF OF W H IC H A W IT H THE C E R T A IN IS A S OATH BOSTON “ IT M EANS M EANS THE BATTLE THE THE K IN D P R E S ID E N T UTM OST OF IT S E L F , SECRETARY IN W HERE THE THE “THE IN PEOPLE BY OF THE U N IT E D R E F R A IN IN G FROM THE o THAT C H A IR M A N OF TO CAN P U B L IS H E D RENDER OF THE N A T IO N A L T H E IR THE ALL W AR HEALTH S A V IN G S DECEMBER “ THE LABOR CAN GOVERNM ENT W H IC H AFFORD THE TO SH OULD NOT IN OF BUY CANNOT OF BOSTON IM M E D IA T E L Y R E F E R R E D ANT STATED THE BOSTON HAD NEDY THAT HE HERALD N O T IF IE D TO W AS AND H IS AN IN S E R T IO N REFERRED TO H IM . W AS A G A IN S T IN H IS P U B L IC PAPER. C O N T A IN E D TREASURY TH E A D V IC E GOOD AND W H IC H THAT, AS L E A D IN G TO THE AND HE AND W IT H ME THAT AS A A T T E N T IO N THE H IS V IE W S U P O N THE A U T H O R IT IE S , T H A T T H E F O R E G O I N G IS T H E IN OR TEN THE THE IT F IE L D I N D I V I D U A L .” O F F IC IA L B U L L E T IN , THE THE A R T IC L E S , P A T R IO T IC AND BY CON OF O N LY SUCH TH E BOSTON HOW NO C IT Y CLUB, UP THE THE M ANAGER IF OF TH E AS REQUEST DO HE HAD SEEN T H IS IT AND FROM KENNEDY THAT W AS M R. M ARCH- E D IT IO N S ) CAME MR. DEPART AND IN THAT M R. KEN SH OULD BE A D V E R T IS E M E N T P R IN C IP L E HE NOT P U B L IS H A D V E R T IS E M E N T M ERELY THE U N IT E D W OULD SEEM THE EXCERPTS W OULD STATES, S A V IN G S SECRETARY S U B JE C T S IN C E WE TO THAT THE FACT THE PAPER. TW O POST, C O N S ID E R E D OF A D V E R T IS IN G A D V E R T IS E M E N T FOR A THE THE AFFORD CAN HAVE W ELL I T .” THAT OF SH OU LD HOW WE W ELL I CALLED IN IT M ATTER A D V E R T IS E M E N T HE TH A T THESE W ER E . W ORKSHOP. APPEARED C O N T A IN E D SHORT F A R -R E A C H IN G SECRETARY A C C O R D IN G L Y OF THE AND TO BE TREASURY STATEM ENT FROM THE C O M M IT T E E ABOVE SPEECH ES OF THAT G IV E N HAD, HE QUOTED AND OFTEN M IS W ERE N O T W IT H S T A N D IN G W H A T I S A ID , H E W A S O F T H A T H E W O U L D N O T P U B L IS H S U B S T A N C E O F T H IS T E L E P H O N E C O N V E R S A T IO N IT . W H IC H L A S T E D M IN U T E S . W IT N E S S W HEREOF I HEREUNTO SET MY HAND T H IS T W E N T Y -N IN T H DAY (S I G N E D ) J O S E P H S U B S C R IB E D AND SW O RN TO BEFORE OF A P R IL 1918. P. D R A PE R . M E, (S I G N E D ) H E N R Y (S E A L ) COM ES. IN E F F I C I E N C Y .” T H E O P IN IO N T H A T T H E A D V E R T IS E M E N T W A S A B A D O N E A N D F IV E C A M P A IG N , P IN C H T H E E X P E N D IT U R E N A T IO N A L W A R THAT THE THE M OST D E S C R IB E D M ATTER TO P R E S ID E N T OF IN T H IN G S . DO HAD THAT DECLARED C O N S ID E R E D IT DEPARTM ENT A D V E R T IS E M E N T OTHER US A D V E R T IS E M E N T C H A IR M A N HE IN M ATTER HAVE (W H E R E TOLD AND H IS FROM A U T H O R IT Y . B E L IE V E D , C H A N G E D T H IS THAN C O M M IT T E E , A T TRACK NO TELEPHONE A C Q U A IN T E D THEN THE THE BOSTON, FO R 1917, S A ID : M R. A. H. M ARCH AN T, TH E OF P O L IC Y AND K E N N E D Y ’S R E Q U E S T , BY JO U RN AL I CALLED Q U O T A T IO N S THE UPON HE TO THE IN V O L V E D UNN ECESSARY UNN ECESSARY T H IN G S , A D V E R T IS IN G FOR 3, FREE BY AFFORD MR. POST A FOR UNNECESSARY PU RSU AN CE THE HAVE COM PETED GOVERNM ENT THAT M ENT IS IN T H R IF T 2 8 , 1917, S A ID : PU RCH ASE M A IN T A IN IS GREATER AS IS N E C E S S A R Y W HERE W H IC H M ONEY THE THE FARM ERS, P O IN T LOOM S STATEM ENT STATES THE TO T H E M S E L V E S T O T H E U SE O F O N L Y SU C H T H IN G S A N D IT SAY P U B L IS H E D W IT H THE S E L F -S A C R I F I C E ALW AYS A TO F IN IN G HE AND 1918, S A ID : EVEN AND O B JE C T TREASURY 31, DECEMBER S E R V IC E NEW SPAPER CONNECTED H IS A D D R E S S ECONOM Y, C O N C E N T R A T IO N OF POST, A A D V E R T IS E M E N T JAN U ARY IT , DEPOSE STR E E T, BOSTON , M ASSACH U SETTS, FOLLOW S: THE OF ON STATE 15 T H A T O N M A R C H 5 , 1918, M R . S IN C L A IR K E N N E D Y OF B R O O K L IN E , M A S S A C H U S E T T S , R E Q U E S T E D TO THE A AN MY C O M M IS S IO N L. B U R N H A M , N O T A R Y E X P IR E S JAN U ARY P U B L IC . 10, 1924 Taft Unthaifitp ii)eparfmetsf of Vofific4f economp PROF. IRVING FISHER 'OSPECT STREET NEW HAVEN, CONN. 460 September 20, 1917. PEP.. ILT..13:Strong, Jr., Governor, 1 Lr, Federal Reserve Bank of New York, 19 Nassau Street, New York City. Fr My dear Mr. Strong: In accordance with our conversation I am sending you the "Ratio Chart" and a copy of the diagram showing how closely changes in the price level follow on the heels of changes in I am delighted at money in circulation. the prospect of get- ting full statistics in regard to deposits subject to check month by month. I shall be intensely interested in studying these. I shall also be interested in seeing the charts which you spoke of. It was a great pleasure to have met our acquaintance and talked with you and I hope to renew f on my return from California in a couple of months. With kindest regards, I am Very sincerely yours, AGm Enc. Taft tiniursiip izeparfment of pofificaf econotrip P 46-C .ROSPECT STREET NEW HAVEN, CONN. NoVember 19, 1917. = Afra- :r. Benjamin Strong, Jr., 16 Wall Street, Yew York City. ,u t,o5et f-",! k V WO My dear Mr. Strong: On my return from my Califon-II:la trip I learned that you had gone south. and restful vacation. I hope you are having a pleasant As you kindly suggested that during such a period you might like to talk over, or correspond concerning standardizing the dollar, of which I spoke to you before going west, I am writing you to say that I found a great interest in the subject in the west in response to the various lectures I gave on the subject. For instance, John Perrin, Federal Reserve agent for the Pacific coast, is particularly enthusiastic and anxious to have the meeting He had a special/of the matter pushed as a war measure. Chamber of Commerce at San Francisco called in order that I might present the matter before them and expects to have committee of that chamber appointed to memorialize the President. I have also had a talk with George Foster Peabody which we very helpful. I hope to get the pivotal men in the country sufficiently interested to give the subject a thorough study. If so I do not fear the result so far as their opinion, at least, is concerned. I am hoping soon to run down to Washington and if down you are still at Hot Springs I might run/and see you if Mr. Benjamin Strong, Jr. perfectly convenient -2- to you. But if you do not wish your vacation interrupted by "shop" please do not hesitate to say so. ould you be interested to see a chapter or on two of my proposed book on standardizing the dollax/which I am working? 17ith kindest regards, I am Very sincerely yours, r- .AGm 4TA24-4_ Exransiun and PreSS Statement No. 4 In the couree of the oampaign to raise the third Liearty Loan of 4,010,000,000 the Tar Finance Corporation wa$ created with a oapital of $500,00,000 and power to issue bonds amounting to $8,000,000,000 for the purpose of providing credits for Induetties in the United States necessary or contributory to the prosecution of the war. The Corporation is also empowered to limit new iosues of securities for eiscellanecue purpeaes during the reriod ef the wax in order to prevent the diversion ef oepital needed for war work. Altho it may not be realized, the fact is that these two greet war measures, the raising of the Literty Leen end the oreation of the War Finance eeeperation are connected lin'es in a chain. The Liberty Loan puts Uncle Sae in funds for buying geode of our induatriesi the Finance Corporation helps cur manufacturers make the zoods. lien 0,000,000,000 or more hae oeon subscribed the third But it is only the Liberty Loan campaian is hailed as a auDOOSS. first step. We can't buy equipment, food, and munitione until ae make them. We are oalled upon not only to subscribe to Liberty Loans but to help make or release the goods. If we subscribe not with savings but with borrowings the Loan will not be a great success tho fully subscribed.. For the burden of the Loan will then be thrown back upon the banks, and banking funds will be withdrawn from war industries. Furthermere, if vie lend by borrowing it will be beoause -1- we are not curtailing our personal expeeaiteeee but are insisting en *luxuries as usual", which means that the industries producing luxuries must produce as usual and be financed as usual. To be effective the funds subscribed for Liberty Bends must be saved, saved chiefly by econemies in consumption. In general, the family that buys 4,000 worth of Liberty Bonds during the year should reduce its consumption by $1,000, se that it will not only turn over to the Government the money but will do its part toward making available to the Government the supplies for which the money is to.be spent. The most careful estimate of liquid savings known to the committee, that of Prefeaeor David Friday, places the figure for the United States in 1917 at eleven billions. This is in addition to about seven and half billions Which are not liquid wad au not available for financiag the war: Part of this eighteen or nineteen billions saved in 1917 was enforeea by the greet rise in prices which produced great profits of corperations and correspondingly discuureged consumption by the public. The corporations saved their profits by putting teem to aurplus account. It is Impossible to fereCaat exactly the liquid savings of 1918 as so many new conditions have -entered. not curtailing our personal expenditures but are insistinL on ffluxuxies as usual", which means that the industries producing luxuries must produce as usual and be financed as usual. To be effective the funds subscribed for Liberty Bends must be saved, saved chiefly by economies in consumption. In vneral, the family that buys $1,000 worth of Liberty Bonds during the year should reduce its consumption by 4,000, so that it will not only turn over to the Gevernment the money but will do its part toward makinc; available to the Government the supplies for which the money is to.be epent. The most oarful estimate of liquid savings known to the oommittee, that of Profeoeur David Friday, placee the figure for the United States in 1917 at eleven billions. This is in addition to about seven and a hi.lf billions Which are not liquid end so not available for finaaciag the war: Part of this eighteen or nineteen billions saved in 1917 was enforced by the gre-t rise in prices. Which produced greet profits of corporations and correapondingly discouraged consumption by the public. The corporations saved their profits by putting tem to mirplus account. It is Impossible to fe*st exactly the liquid savings of 1918 as oo many new conditions have entered. ESTIMATED EXCECS OF PRODUCTION OVER CONSUMPTION IN THE UNITED 9TATE2 AND AMOUNT AVAILABLE FOR INVESTMENT AND FINANCING THE wPR. (Billions) xoess of Productift, cvre uzpttcn' source Available for Investment Financia6 the W4x c/1 1913 corporations Other businesses Farms All other TOTAL 1.5 1.2 1.2 2.5 1917 NI 1913 1916 1917 3.0 5.4 3.0 2.8 6.5 3.5 5.0 .5 .2 .1 3.6 3.5 2.0 2.0 1.5 1.0 3.0 6.4 14.7 18.5 3.2 7.5 2.0 3.0 3.0 If there be security flotatiens for private investment and for finanoine the war in excess of savings such exceed, will have to be provided by new savings through a deceease in oonsumption, or by a greater speeding up of production. If we subscribe for Liberty Bonds and do not save by dacreseed consumptien, the amount necessary to pay the subscription price, the banks will be obliged to carry the burden. The local banks will atteg4t to get relief by borroeing on bond oollateral froM the Feeeral Reserve Benks. Banking expansion in conjunction with a :Jae in the prices of goods well result.. The Federal Reserve Board has givet us a warning which ee should heed: *It cannot have esoaped the attention of the *Inks that, since the beginning of the war, deposits have increased at a rapid rate and that loans, disceunts,and investments have grown at an even more rapid rate. "Conservation of credit as reg rds non-eseential enterprises is necessary in order to provide, without undue expansion, the credit required by the Government end by businese essential to the success of the war and the well-being of the country." The shipping engaged in the import of at goods or rueeer or silk free the 14r East might be oarryine supplies to France. do not eoonoraiie in art goods or pleasure autoeobiles or fine If clothes, we are, in effect, insisting that the shtps do rbusinees as If es subscribe to Liberty Bonds we are providing funds to usual*. convert the shipping to war bueiness. Neither ships nor manufacturing plants can do Nbusinees as usual" and add war business as a side line. To attempt to do both will end in failure. The crux, both of the industrial and the financial guestions confronting us is speeding produotion of essentials and limiting If too great an issue of bones be oensumption of non-essentials. made there will be credit expansion, increase of prices, and other economic dieturbancq. If we do nct economize now we will be forced to economize thru higher prices. Thy Government oan expend the proceeds of bond issues efgactivoly only if the goods it wants are produced in the required They c.an only be so produced if the public buys Liberty amounts. Bonas and pays for them out. of the savings arising from reduced consumption. Yr 0 cotsputsAu'is of 0,,G os-ER' AMEETCN ECONOMIC ASSCCIATION. Special Reports of the "Committee on the Purchasing Power of Money in Relation to the War." Members of the Committee:- Irving Fisher (Chairman), Yale University B. M. Anderson, Jr., Harvard University E. W. Kemmerer, Princeton University Royal Meeker, U. S. Commissioner of Labor Statistics W. C. Mitchell, Columbia University W. M. Persons, Colorado College. RELEASED FOR MORNING NEWSPAPERS April 26, 1916. (269) Third Report - "Loans, Ilaxes and the Purchasing Power of Money." 37nopsis of Report The present generation mast pay the whole cost of the war; the burden cannot be shifted to the next generation. -,Financing the war by long-term bonds does not put crushing tax burdens on future generations, because the taxes they pay out of one pocket come back to the other pocket in the form of interest and principal. In former times the rich lent money for war and the next generation was taxed to repay the heirs of the rich, but in this war the bonds are so widely distributed among all classes, the rich of future generatiors may be the chief taxpayers. Saving is the soundest method of financing the war, but rapid readjustment makes necessary some credit expansion to stimulate war industries and conserve peace industries. Washington, April 25 The Committee of the American Economic Association, appointed to investigate the purchasing power of money in relation to war, has submitted the following report: (269) TEXT OF REPORT. There is a widespread idea that, so far as the war is paid for out of loans, its cost is shifted to the next generation, and that only so far as it is paid for out of taxes does the cost fall on this generation. The whole cost of waging the war falls necessarily This is an error. on this generation alone, and cannot be shifted to the next by loans or any other device. This would be perfectly clear if there were no money or credit to If we should wait for the next generation to provide the confuse us. soldiers' food, shoes and guns, clearly our soldiers would go hungry, barefoot and gunless, and we shoun lose the war. This essential fact is not in the least altered because food, shoes and guns are obtained through that convenient shuffler of goods, a circulating medium. But even when No one doubts this when the money is paid as taxes. the money is paid as loans, the same principle holds true; for the next It can only regeneration can never reimburse the present generation. imburse itself: When our descendents pay back the billions "borrowed" today to carryon the war, they are simply as tax-payml,j=iiignIIIM The money simply goes out of one back to themselves, as bondholders. The payment and receipt pocket into another, via the Government Treasury. cancel themselves out. Some people are afraid that great loans will saddle the future with a crushing burden of taxes. We might just as well talk of great loans as a means of enriching the next generation by what their bonds will bring in to them: It is exactly as broad as it is long. That is a chief reason why, after the war, a nation recuperates so fast as to astonish those who think of its war debt as a burden. When the war is over, the cost of waging it is over too: Future generations willebe saddled not with the burden of paying for the war, but with the .burden of disease, of shattered men, destroyed lands, forests, mines, and factories for which the havoc of war is responsible. These conclusions hold when we view the country as a whole, or a generation as a whole, or when we look at the case of "the average man." It is when we view the distribution of the burden among individuals and among classes that the differences between loans and taxes begin to appear. If you subscribe to war bonds beyond your share of the burden today, your son or grandson may receive more as bondholder than he pays as taxpayer. Thus if the rich finance the war by bonds, and if taxes after the war fall largely on the poor, the descendents of the rich may live on the interest and principal of bonds, paid by the poor. This is a way by which, in the past, wars have often been financed. The opposite situation is possible, however, and is today actually The poor of this generation are more likely than ever before in history. buying many bonds; and, in the next, the rich will probably be n taxed and so contribute to the millions of inheritors of small bonds. e'ly A further important difference between loans and taxes grows out of their effect on the current money income of the people, and their effect on the volume of bank credit. A tax receipt has no commercial value, The former is not property and the while a bond is a negotiable security. latter is.. The bond sets aside a future return to the individual but it Inel.ead it does not assess the future tax to pay it with against him. spreads this tax over the whole community. Consequently, a man is not so likely to borrow in order to pay his taxes as he is in order to subscribe (269) to bonds. The tax-payer is more likely to give up a part of his current money income to the Government. The purchaser of a bond may borrow at the bank, with the bond as collateral, either at the time he lends to the Government or later, and remain with as undiminished moneyincome, competing with the Government in the commodity market, and forcing a rise in commodity-prices. A large bond issue is almost certain sooner or later, to lead to the expansion Of bank loans and deposits which tends, under conditions like those present today, to raise commodity prices. But high taxes may also force men who can do so to borrow at the There is evidence that some banks, using other property as collateral. large corporations are planning to borrow to pay thein excess profit taxes. Rich men, of taxes very heavily, may also borrow to avert a drastic reduction in their customary mode of living. From the standpoint of the purchasing power of money over goods the important thing is not whether the tax policy or the loan policy is most used. The important thing is that the cost of the war should be paid as far as ossible out of conscious savirross and not out of borrowin s While a heavy tax policy helps toward this end, it could never of itself achieve it. The public should understand that lending by borrowing, though much better than nothing, is still a very unsatisfactory way to help the GovBy raising prices such a procedure tends to shift the cost of the ernment. war to the poor who pay it in a higher cost of living. But there is a further difference between taxes and loans which must not be overlooked. A policy of exclusive taxation would cut drastically into the earnings of many businesses, and force them into bankruptcy. The creditors of these businesses would also be in danger of insolvency. And, apart from actual bankruptcy, doubt and timidity on the part of business men, with reduced efficiency of industry, would result. We must take account of the motives under which modern industry is carried on as well as of the iron necessities, growing nut of the interwoven fabric of debts and credits, under which business is conducted. The loan policy on the other hand, increasing the volume of liquid securities, available as bank collateral, increasing the activity of banking .operations and the volume of liquid bank credit, tends to "grease the wheels" of commerce and inaustry, and makes the readjustment to war .conditions proceed more smoothly. The very rise in commodity prices which goes with it compensates in part for the reduced volume of sales which many businesses must meet, and gives business men a breathing spell during the necessary but painful process of curtailing activity in the non-essential industries. . Under many economic conditions, and particularly in times of panic, stress, or rapid readjustment, expanding bank credit is often needed to tide over temporary difficulties, and to make transition easy. At the present time we are going through a process of rapid readjustment, in which many industries are being speeded up at the same time that others are being checked and shut down, and this cannot be carried through efficiently if sand is thrown into the oil. Some expansion of bank credit, therefore, and even some rise in commodity prices, must be tolerated. In the long run, prices will be lower, and aggregate production greater, if things take this course. Just how far we can go in the tax policy is a question for the special students of taxation, rather than for a committee on the purchasing power of money. A wise discrimination, however, on the part of thOse wha control the extensions of bank credit is important. Loans to enable people to continue luxurious living do unmitigated harm; but loans to the industries expandLoans to non-essential ing to meet war needs must be made liberally. (269) 1,4 industries to enable them volume of production, are guarded loans to business by them to maintain their assets are justifiable. . to expand, or even to continue at their present clearly pernicious; but limited and carefully men in non-essential industries to funds needed sol7enoy and gi7e them time to liquidate slow The purpose underlying the projected Finance Corporation, is apparently, to make just this kind of discrimination in the extension of bank credit in financing business, -- to lend liberally 1,-,here expansion is required, to lend where bankruptcy is menaced, but to prevent the financing of business a:mansion in non-essential lines. This committee expresses no opinion as to the need for this particular legislation, but it is convinced that some organized public policy should guide the distribution of banking accomodations. We feel that the danger is so great, however, that expansion may be carried too far, rather that taxation will be made too drastic, that we feel justified in placing heavy emphasis on the need of limiting expansion of bank credit by every practicable means. (269) Taft Unibtreitr epeafmettf of cpofificaf Gconomp PROF. IRVING FISHER 60 PROSPECT STREET NEW HAVEN. CONN June 28, 1918. Mr. Benjamin Strong, Federal Reserve Bank, 50 Wall Street, New York City. My dear Mr. Strong: I am writing to thank you for your letter of June 15th relative to the December meeting of the Economic Association. It is not at all due to lack of courage that the subject of reduction of con- sumption of less essential godds during the war is not, as such, included on the program. Under separate cover I am sending you copies of four reports of the Committee on the Purchasing Power of Money in War Time (of which I am Chairman),s0 that you may see that we are not neglecting this subject. Ihre of these reports have already been published by Mr. Vanderlip's War Savings Committee, and we are expecting the fourth to be printed 'y soon. ; have encountered a good deal of difficulty in getting \c, S ç\- X this material of ours before the peopleen account of the newspapers being controlled by advertisers of non-essentials. In this connection you may be interested in the experience of Mr. Sinclair Kennedy of 0 Mr. Benjamin Strong, 0 June 28, 1918. Boston as outlined on the enclosed sheet. I should be glad if you would return this when you have finished with it as it is my only copy. I shall hope to see you when it is convenient for you and talk over my plan for standardizing the dollar which has received the endorse- ments of many bankers-s-,-.:, ) ( Vd,!eix With the hope that you are feeling well and with kindest regards, I am Very sincerely yours, Di& alnitteroite ii)evartment of politica (conomp UP. Dear Sir: PROF. IRVING FISHER 460 PROSPECT STREET NEW HAVEN, CONN. SEP 1 3 191$ I enclose a reprint of "Stabilizing the Dollar in Purchasing Power" taken, in advance of publication, from a book of joint authorship entitled "American Problems of Reconstruction". I also enclose a selected list of written statements of approval, to which might be added important oral ones, e.g., from President Wilson and Mr. Frank A. Vanderlip. The reprint is a condensation of the Hitchcock Lectures at the University of California, given last fall, and to be expanded into a book presently. The close of the War will doubtless bring, as one of the great public questions, that of reconstructing standards of value. Already certain people, interested in silver and gold mining are starting their respective propaganda. A conference of such interests has been called to be held at Spokane on Sept. 5th and 6th next "to discuss the gold mining situation". The conference is said to be "in the nature of a patriotic response" to an alleged official call "to do everything possible to speed production" of gold. To prevent the discussion of this question from degenerating into a contest between special interests or between debtor and creditor, ought not those who believe in justice endeavor to secure a just, i.e., a stable If a better method for this purpose than that standard? here proposed can be found, I hope you or others will point it out. In any case, I should value, for future use, any comments which you may be moved to make. Very sincerely yours, Irving Fisher Diet KilliWrgitE esrfinent of porifica Gomm t, PROF. IRVING FISHER 460 PROSPECT STREET NEW HAVEN, CONN. December 10, 1916. Mr. Georae Foster Peabody, 25 Broad Strezt, New York. My dear Mr. Peabody: I am enclosing a page from the Washington Star which I have just received from the Rusher Company. Have you any idea what the financial interests behind this are? Very sincerely P/ t Eno. tea& ainioersitp 4., o!'"'14471 iNstiment of potific4f economp OF. IRVING FISHER PROSPECT STREET NEW HAVEN. CONN. FiLINC-0 -4I 4s February 24, 1919. 111) r7DERAL ROME DIU11( Mr. Benjamin Strong, 15 Nassau Street, New York. dear Mr. Strong: eeelMy I thank you for your letter of February 19th1 which is just received, in regard to Mr. Muller. I am glad to have the information which you have given me in regard to him, and shall welcome an opportuniti to hear more of the matter, sometime when I see you. sincerely yours, P/t Form 1201 CLASTbF CLASS OF SERVICE SYMBOL Blue Message Day Letter Blue Nth) ' otter Night Message Nite NL If none of these three symbols Night Letter NL If none of these three symbols Night Letter appears after the check (number of words) this is a telegram. : ,:wise its character is indicated by the syn SYMBOL Telegram 'elegram 'spearing after the check. Other- NEWCOMB CARLTON. PRESIDENT GEORGE W. E. ATKINS, FIRST VICE-PRESIDENT appears after the check (number of words) this is a telegram. Otherwise its character is indicated by the symbol appearing after the check. tAr- t!Ik';'RECEIVED ATT/ 4.1,1 AM 4 FY NEWHAVEN CONN 829AM APRIL 4 1919 .10 it 594 BENJ STRONG FEDERAL RESERVE BANK 'NEYORK URGENT NEED OF MY PRESENCE HERE TODAY.PREVENTS ATTENDANCE GREATLY REGRET YOUR .MEETING IRVING FISHER tit 843A Tat UnibtrSiir Vesrfmenf of Mofifica economp PROF. IRVING FISHER 460 PROSPECT STREET NEW HAVEN, CONN. 28 June 19).9 Mr. Benjamin Strong, Hotel Plaza, New York City. My dear Mr. Strong, In accordance with uur conversation, I am sending you the enclosed copy of the manuscript of my book. This is nearly complete, but if it should happen that your sailing is postponed, I should be glad to send two missing sections of the appendix. I can mail these early next week if you will let me know. '11W2ading Chamber of Commercd, where I have just spoken, has appointa committee to study the matter with a view to adopting resolutions. The American Federation of Labor has, by resolution adopted at their recent meeting in Atlantic City, directed the Executive Counsel to study the plan. I envy you your opportunity to go abroad! Among others whom you will meet will, I suppose, be Lord D'Abernon, who has been thinking somewhat along these same lines in regard to dur monetary probieT. I appreciate your willingness to look over this material. Very sincerely yours, El*t Taft Unibersiip Qtparfittertf of porificaf economp ..ROF. IRVING FISHER 460 PROSPECT STREET NEW HAVEN, CONN. July 10, 1919. Benjamin Strong, Jr., 59th Street, Hotel Plaza, Fifth Avenue & New York City. My dear Governor Strong: I enclose some addenda which almost complete sent you. also enclose copy the manuscript of correspondence with Lord D'Abernon which explains itself. With kindest regards, T am Very 4incere1y yours, IFdG Enc. Taft Unibersiip Npatintent of pofificof economE October 2, 1919. PROF. IRVING FISHER 460 PROSPECT STREET NEW HAVEN, CONN. Mr. Benjamin Strong, Federal Reserve Bank, New York City. My dear Mr. Strong: I am sorry so much time has elapsed before replying to your letter of July 17th, in regard to the manuscript on stabilizing the dollar. I suppose I let th4atter go as you spoke of writing me again first. The questions which you state in that letter are briefly dealt with in the manuscript which you have. In the compass of a letter I can not add very materially. Your first question refers to the effects of the plan on the gold mining industry. As John Hays Hammond, who is one of the backers of the plan, has said, the plan would, it seems to me, scarcely affect the miner one way or the other. He will, while gold is depreciating, get fewer dollars for an ounce of bullion, but these dollars will, of course, have an increased purchasing power. He will be able to get as much in goods for an ounce of metal as he would without the plan. Though his net proceeds in dollars are less, so also is his cost of living less than it would have been with an unstabilized dollar. Though his receipts are leas, so also is the cost of running the mine Mr. Benjamin Strong -2 (outgo for wages and equipment) less. The present trouble of the gold miner is due to the depreciation of his product due not so much to the great amount of gold as to the great amount of credit substitutes for gold which the war has produced. Your second question refers to what shall be done with our present silver currency. My idea is that that would remain in circulation just as at present. I should personally like to see them made specifically redeemable in the gold bullion certificates, and hence in gold itself, though at present this redeemability practically exists. The value of our token currency would thus be stabilized together with the rest of the currency. Your third question, in regard to the effects on international commerce if the plan were adopted in this country alone, is treated with some fullness in Appendix I, section 8, of the manuscript which you have. In a word, it would be best to secure either international action, or at least concerted action by a number of the more important powers. Pars of exchange are already broken, however, and the present is therefore an opportunity for any nation to launch the plan, confident that, when the advantages of the system are seen, other nations will fall into line. If this country, especially, should take the lead, with its present financial supremacy, that result would be sure to come to pass. In the meanwhile, if we were temporarily alone, the advantages to our domestic Mr. Benjamin Strong - 1 - commerce would fax outweigh the slight disadvantage of a shifting par of exchange for foreign commerce, -- our domestic commerce being many times as important as our foreign commerce. I hope that while you are abroad you will get in touch with Lord D'Abernon, whose recent remarks as to the relation between the high cost of living and Bolshevism have attracted considerable attention. His address is 114, Piccadilly, London, W.I. and his telephone number Mayfair S968. I have written 7. him of Your trip and he responded that he would be interested to meet you. Very sincerely yours, AGc 91 04 XJ.9 Taft timibusiiE Vepairfmenf of pofificaf econotnE PROF. IRVING FISHER 460 PROSPECT STREET NEW HAVEN, CONN. December 22, 1919. ttik* Mr. Benjamin Strong,Jr. Governor, Federal Reserve Bank, New York. My dear Governor Strong: I am expecting in a day or two a few advance copies of my forthcoming book "Stabilizing the Dollar" (which will be published in January), and shall take pleasure in sending you one. You will note from the enclosed memorandum that the idea has made some progress, although as yet no organized propaganda has been begun. Four Congressmen have offered to introduce a bill on the subject and one of them has done so. Very sincerely yours, tJ Eno. P. S. I shall greatly value your comments. PROGRESS OF THE IDEA OF STABILIZING THE DOLLAR - Anticipations of the Plan Plans for stabilizing the dollar have been proposed, substantially like that which I am advocating, by at least nine other persons, including Simon Newcomb. I published my own presentation first in 1911 in the Purchasing Power of Money and have elaborated it in various forms since that time, including that in the Hitchcock Lectures at the University of California in 1917 and my book Stabilizing the Dollar to appear in 1920. Public interest dates from 1912, when the plan was presented before the International Congress of Chambers of Commerce. A resolution approving the stabilization idea was adopted unanimously by the economic faculties of the University of Washington, Washington State College, and the University of Montana, including altogether seventeen economists. A committee of the American Economic Association, corn4c4r posed of experts in money and prices, reported the plan to be desirable and economically feasible. CA This committee included B. M. Anderson, Jr., now of the National Bank of Commerce; Prof. E. W. Kemmerer, Princeton University; Royal Meeker, Com- missioner of Labor Statistics; Wesley Clair Mitchell, then Professor of Economics at Columbia University; Warren M. Persons, now lecturer at Harvard University, and myself. President Seerley of Iowa State Teachers College re- ferred the matter to a committee made Up from his economic and political science faculties. The committee reported favorably. The Schoolmasters' Association of New York passed a vote of endorsement. A distinguished foreign economist, Edwin Cannan of -. the University of London, says: nWs have all long recognized that the use of metallic money as'a medium of exchange' has been largely dispensed with by the help of banking machinery which substitutes a civilized system of bookkeeping for the primitive method of exchanging counters, and most economists, I think, have expected that the material of metallic money would not permanently remain the standard of value, but that it will eventually be superseded by something bearing a closer relationship to the satisfaction of ordinary wants. It has been difficult, however, to see how the transition could be effected without a disturbance which the commercial world would never face. Your scheme appears to me to provide just what was wanted - a method of making the transition insensibly without any shock to existing habits of thought and expression." F. Y. Edgeworth of All Souls College Oxford, England, says: "I entirely concur with the verdict pronounced on your standardized dollar by Professor Pigou in his reSubject to cently published work, WEALTH AND WELFARE. the reservation which he had indicated, I say with him, 'I am inclined to believe that 'a very considerable net benefit would probably result." Achille Loria, of the University of Torino, Italy, says: "Je viens de lire avec un grand charms votre interessant projet dun dollar invariable et je m'empresse de vous dire qu'il me semble parIl pr6sente quelque analogie faitement raisonne. avec une des nombreuses m6thodes de regularisation de la valeur de la monnaie que jai signalee dans mon Essai cur la valeur de la monnaie." At the present writing I find, on consulting my files, 42 economists and 28 other academic professors and university presidents who have, in some specific way, expressed approval of the proposal._ These include, besides those already named, Pres. Arthur T. Hadley of Yale; Allyn A. Young, ex-President, Amer. Stat. Ass'n.i... Pres. Frank L. McVey, Univ. of Kentucky; Joseph French Johnson, Dean of the School of Commerce, New York University; J. B. Clark, Columbia University; Gilbert N. Lewis, Univ. of California;.Dean Fredericx S. Jones of Yale College; Paul H. Douglas, Univ. of Washington; C. L. Stewart, Univ. of Arkansas. 2 The Business and Industrial World The entrance of the project into the world of business marks the second stage. Only a mall, though a good, beginning has thus far been made. Among those who approve of the general idea of stabilization as desirable and feasible are twenty-four prominent bankers of whom ten are bank presidents and about fifty other individual business men, not including the members of the various business organizations which have passed resolutions of endorsement. Among the prominent bankers are: John Perrin, Federal Reserve agent for San Francisco, The late Henry Lee Higginson of Boston, George Poster Peabody, Director Federal Reserve Bank, New York, Clarence H. Kelsey, President Title Guarantee and Trust Company, New York, Evans Woollen, President Fletcher Savings and Trust Company, Indianapolis, Ind. Robert Kent, President Passaic Bank of Passaic, N. J. Among the prominent business men other than bankers are: John Hays Hammond, mining engineer, John V. Farwell, Chicago, Roger W% Babson, business statistician, James H. Brookmire, business statistician, A. B. Farquhar, York, Pa., Norman Lombard, President, Western Farm Credit Company, San Francisco Richard A. Feiss, Cleveland, J. Kruttschnitt, Chairman, Executive Committee, Southern Pacific Company, Albert H. Mowbray, Vice-President and Actuary, Liberty Nutual Insurance Company, Boston. Selected quotations from some of these men follow: Roger W. Babson, "Your only critics are those who misunderstand you." Albert H. Mowbray, "It seems to me, that to a large degree, the success of many of our plans for attaining social justice depends upon a stabilized dollar." Richard A. Feiss, "I am in hearty accord with your idea and feel that it is not until the dollar is stabilized that industry can get together for the proper solution of its problem." J. Kruttschnitt, "Your proposed plan is ingenious, clear, and convincing." The business organizations before which the subject has been brought have either formally approved the idea or referrei it to committees which have not yet reported. None have thus far voiced disapproval. In April 1919 the Bridgeport Chamber of Commerce, follow- ing a favorable committee report,passedaresolution as follows: RESOLVED: That the Bridgeport Chamber of Commerce, recognizing the many evils that flow from the ever-changing value of the dollar, hereby calls upon Congress to enact such legislation, if it be feasible, as shall tend to make the dollar stable at all times, in its purchasing power; and to that ehd it respectfully recommends the adoption, in substantial form, of the plan put forward by Professor Irving Fisher for stabilizing the dollar by adding weight thereto or subtracting therefrom in accordance with the fluctuations of prices as represented by the index numbers. RESOLVED: That this action of the Bridgeport Chamber of Commerce shall be transmitted to the Secretary of the Treasury, the Comptroller of the Currency, and all of the Senators and Representatives from Connecticut. The Chamber of Commerce of Waterbury, Conn., passed a somewhat similar resolution as did the Society of Polish Engineers and Business Men in America, and the New England Association of Purchasing Agents. The American Bankers' Association at its annual meeting, October 1919, voted unanimously to investigate the subject. A committee has been appointed, under the Currency Commission of the Association, to make a thorough study of the plan. Seven other business organizations have appointed .committees to consider the subject. - 4 - As to the world of labor, only a small beginning has yet been made. At the session of the international Socialist Congress at Berne, Switzerland, February 1919, the following resolution was adopted as part of Article 10 of the International Labour Charter: "the contracting States shall call as soon as possible an international conference instructed to take effective measures to prevent the depreciation of the purchasing power of wages and to insure their payment in a non-depreciated money." The American Federation of Labor (June 1919) resolved: "That the Executive Council be and is hereby instructed to make a study of the problem of establishing a dollar of stabilized purchasing power as it may be presented through legislative effort, or otherwise during the year, and to submit a report upon the subject at the 1920 convention." Among those interested iriour labor problems who appreciate the need and value of the plan for stabilizing the dollar are Louis F. Post, Assistant Secretary of Labor, Dr. Royal Meeker, Commissioner of Labor Statistics, George W. Nasmyth of the Trade Union College in Boston, David J. Lewis, mentioned below, a former labor leader, now on the Tariff Commission, and Hugh Swindley, an active Canada labor man. Four women's organizations in Washington, D. C. adopted resolutions favoring the idea of stabilization. Newspaper and Popular Publicity Newspapers and magazines have given the project an increasing amount of attention. Over one thousand clippings touching on the proposal have been received. Many papers have commented editorially. The total number of editorial comments which have come to my attention is over two hundred, of which about a third did not take sides. 1914 there were two favorable editorials to three opposed. 1919 there were about three favorable to four opposed. August 1919, I find two favorable to one opposed. - 5 - In Up to July Beginning with The Newspaper Enterprise Association carried two articles descriptive of the plan which were pUblished by the many members of the Association. Articles describing the plan have also been carried by big popular magazines, the the the the the Independent, Review of Reviews, Red Cross Magazine, Saturday Evening Post, and Scientific American, I have had frequent requests from persons in many sections of the country for material to aid them in speaking on the subject before Rotary, Commercial and other Clubs and associations. In the World of Public Life This phase of the movement has only barely begun. Royal Meeker, Commissioner of Labor Statistics, has favored the plan both before he was in office and while in office. Labor Louis Post favors it. Assistant Secretary of Representative Husted of New York has introduced two resolutions in Congresb on the subject, the last one to appoint a National Monetary Commission which should investigate the currency problem "especially to the end that the purchasing power of the dollar may be stabilized." Three other members of Congress have offered to introduce bills looking toward the practical application of the stabilized dollar plan. Others have indicated interest in the question. the Senate also some leading members have shown an interest. The late Ssaator Newlands wrote: "Your plan of stabilizing the dollar by so adjusting the amount of gold in it from time to time as to make it at all times purchase approximately the same quantity of a number of things which constitute the necessaries of life, is an excellent one, and will make the dollar as real a standard of value as the yardstick is of measure. Nothing better could be done to establish justice between debtor and creditor, producer and consumer, employer and wage earner, and to avert the economic crises arising in all these relations because of the uncertainty of the value of the dollar. I wish you great success in the propaganda which you are urging." -f- In Ex-Senator Shafroth has endorsed the plan as follows: "The pamphlet you sent me is a most excellent one. It is clear and very convincing. -I think the necessity is very great that we stabilize the dollar in purchasing power and I hope that you will send your pamphlet to all of the members of the Committee on Banking and Currency of the Senate. I regret that I am not in the Senate now, in order to be of service in formulating legislation that will stabilize the dollar." Senator Myers wrote me as follows: "I am interested in stabilizing the dollar. I think it would be to the interest of everybody in this country to have it made stable. It is a subject of great importance." Senator Owen says of the plan: "The plan is feasible and meritorious." David J. Lewis, now United States Tariff Commissioner and former labor leader writes: "Having carefully gone over your proposal to stabilize the gold standard and giving it the best consideration I could, I have reached the conclusion that you have found the method in your 'Compensated Dollar', a method, moreover, so simple and easy of application as to command admiration. Next to the economilc havoc of war itself there is probably no more devastating agent at work than the rudderless and ballastless unit of value which has I resulted in the prices anarchy of the past generation. think of a depositor at three per cent in his savings bank, who has allowed his savings to accumulate, along with the principal, for the last fifteen years. He has actually less money in the virtual sense than when he made his deposit. Our dollar has become Mexicanized, and it seems high time that thoughtful men should be looking out for a remedy. I think they will find it in your brilliant and well considered proposal." William Kent, also of the Tariff Board, writes: "The only question in my mind as concerns your scheme is as to when it should be adopted." William S. Culbertson, also of the Tariff Board, writes: ..e your proposed remedy for fluctuating price levels should have the serious and immediate consideration of Congress." Official interest extends to other countries than the United States. The rise in prices since 1896 has been world-wide. Interest in remedies has not been confined to this country. -7- Sir David M. Barbour, one of the chief originators of the gold exchange standard for India, wrote: ... think it likely that some such system may ultimately be adopted." Lord D'Abernon arote me: "With regard to the precise means suggested for stabilizing the dollar, I think your proposal is the most ingenious I have seen, but I would not bind myself to this solution to the exclusion of all others." Marshall Stevens, M.P. is now interested in introducing a bill in the British Parliament looking to monetary stabilization. The Minister of Switzerland, Hon. Hans Sulzer, wrote me as follows: "Your solution strikes me as an excellent one. I have not failed to transmit your views to my Government, and I shall be delighted to have an opportunity of discussing the matter further with you." New Zealand officials have shown particular interest in reviving the idea of an international conference and in this in particular. plan I have received two cablegrams from the New Zealand Board of Trade on this subject. The outcome of this correspondence and the study in New Zealand of the material sent by me is indicated in the following quotations from the 1919 Report of the New Zealand Board of Trade (chiefly concerned with the regulation of prices and other aspects of the high cost of living) "That control of the general price-level by standarization of the purchasing-power of the monetary unit of value, the sovereign, is the way out of the economic labyrinth has been suggested by many economists; and this solution is being advocated by Professor Irving Fisher with a brilliancy of statement and wealth of statistical reasoning that has attracted world-wide recognition. So hopeful does Professor Irving Fisher's suggested remedy appear to the Board that we earnestly recommend it to the serious attention of the Government. W. G. McDonald) J. R. Hart, ) Members of the Board." P. Hally A bill introduced in Parliament, empowering the Board of Trade to deal v:ith the prices situation, resulted in considerable debate. 0 I quote extracts from the remarks* of Hon. Sir J. G. Findlay (Hawke's Bay) on the Board of Trade Bill in the House, September 12th: "Sir, that is why I have taken the liberty of asking the House to listen to the details of the scheme which, in my judgment, for what it is worth, will do more, if we adopt it, to remove the evil of the increased cost of living permanently than any other cause you can discover. I am glad to say that when I brought this matter before the Prime Minister, and later before Sir Joseph Ward, they both very fully sympathized with it; and, although it involves an amount of consideration I could not expect them to give to it in the short time they had to consider it, both were prepared in the future to give it patient and indulgent consideration. Sir, with these preliminary observations, I proceed as rapidly as I can to place you in possession of what has been declared the greatest discovery or suggestion in this branch of economic thought since the early days - since the time of Adam Smith, or ..... I do not want to say one word to even ea:clier. reflect on the Victory Loan we are to have issued, but it is relevant to my suggestion to the House that we should cure the evil inherent in that loan, as it is inherent in every time contract, and we should as far as possible prevent the interest on the bonds in the Victory Loan dwindling down, as they will dwindle down, in purchasing-power to 2i per cent0 or even less if the present reduction in our money ...... ........ standard's purchasing power continues. Sir, is it unnatural that with this marked dwindling of money in purchasing-power there should be resentment, and even violence, on the part of those who suffer? Not only are there the evils of inequitable distribution of wealth; not only the evils produced by inflation of our currency; not only the oppressive high cost of living, professional profiteering, and speculation - these are all great evils; but the evil which I would impress upon the House and upon the leaders of the House is this: that the people do not understand the cause of these evils, and they have a blindfold sense of wrong - that sense of wrong which cannot distinguish its true justification, and which is the most dangerous sense of wrong that you can have. If the people can see the real cause, and it is pointed out to them that that cause is being grappled with, you will escape the wild fury of the mob. It was found at the time of the French Revolution, and has been found all thewomlci over, that the main evil to contend with is that the mob are often left in ignorance of the real cause of their misery. ........ Now, Sir, what I want to say is this: that if you do not cure this evil it is going to be accentuated. While the war was on the great mass of the people were prepared to accept the war as sufficient explanation of these soaring * New Zealand Parliamentary Debates, Sixth Session, 1919, Legislative Council and House of Representatives, pp. 498-505. -9-- t, cr The war is over, and unless these soaring prices prices. are checked you will rtncrease the resentment. One th:ng is clear - and I say this after fair deliberation: if the present high prices have come to stay, if your h is to be worth no more than 13s. 2d., then the sooner the proper adjustments are made in increased wages and salaries - including the super-annuation of your Civil servants who have retired and your old-age pensioners - if the depreciation in the value of money is to remain or is going to go on, then you must adjust matters by increasing the rate you ...... pay, so as to restore its purchasing-power. It may seem a startling proposition, but it is nevertheless a true one. Our monetary unit - and I would ask the House to pause upon this statement - is the only unstable unit left in Christendom or civilization. I do not think there is one man in this House but will admit that, if the present trend goes on, increasing injustice will be done to the unhappy victims of this condition of things. I had not long ago, a retired Civil Servant in He was an old my office who had served his country well. man who retired some years ago, and he pointed out that his superannuation, which was something under L300, I think, had shrunken in value to about h200, and he had to get along as best he could on that sum with an ailing wife, and he asked me whether I could influence the Right Hon. the Prime Minister and other members of the House to recognize this shrinking of the purchasing-power of his I know the difficulty of a remedy in our annuity. With some people everything new is dangerous, money system. and there is no conservatism more resistant than that which is aroused by any attempt to deal with our money system. ... $o I would urge on the Prime Minister and the Government to give us a chance of having this matter investigated, 1 would beseech the as is being done in America today Prime Minister to regard this as one of the most important propositions with regard to reducing the cost of living in this country we have ever had before .us.' The Hon. W. D. S. MacDonald, who was until recently Minister in Charge of the Board of Trade, is quoted in a newspaper interview on the Board of Trade Bill (which was drafted on his instructions) as follows: "The real root of the cost of living problem is to be found in what the Prime Minister termed in his speech of the currency.' .............. 'inflation "If the rise in prices is due to exploitation and profiteering, then these figures clearly show that New Zealand suffered a good deal less from exploitation and profiteering ),,h&n any other country in the world, with the solitary exception of South Africa, and that in neutral Sweden exploitation and profiteering must be at least six times as bad as it is in New Zealand. .... The question raised by the member from Hawke's Bay is, in my opinion, the greatest problem that the war has bequeathed to us; and a solution is imperatively - 10 - demanded, if our country is to escape economic and financial disaster. During my presidency of the Board of Trade, this matter received my most earnest consideration; and, on the advice of the Board of Trade, early this year I. got into communication with Professor Irving Fisher as to the details of his scheme. On June 23rd, 1919, I received from the acting chairman of the Board of Trade the following memorandum:'The industrial unrest throughout the world, from which New Zealand is not free, is directly attributable to ascending prices which are now on a higher level than at any previous period of history. Most competent judges consider that prices will go higher yet, and will then subside somewhat, but not to the pre-war level.' 00 Ot "I am profoundly impressed by Professor Fisher's scheme, and if applicable to New Zealand, its importance cannot be exaggerated. Therefore, I suggest, and earnestly recommend, that you appoint a Royal Comrission to study this vital question from the point of view of New Zealand's interest, and to report to you from time to time the result of its inquiries. I also venture to suggest the following personnel of the commission:- The Hon. Mr. Justice Sim (chairman), Sir John Findlay, K.C., Dr. J. Hight (Canterbury College), Professor H. W. Segar (Auckland University), Messrs. A. Jolly (inspector, National Bank of New Zealand), W. D. Hunt (Wright, Stephenson and Co.), Gerald Fitzgerald (accountant, Wellington), and myself. The order of reference should be as follows:- To inquire into and report upon - (1) The effect of the war (2) The various problems conditions upon price levels. that will arise in connection with currency and exchange during the period of reconstruction after the formal declaration of peace. (3) What steps are required to bring about the restoration of normal conditions and reduction in the cost of living. (4) The causes of the variations in the purchasing power of money and the practicability of preventing violent fluctuations in price levels so as to render the purchasing power of money stable. I urged upon the members of the National Government the necessity of appointing a Commission to inquire into the practicability and the feasibility of this scheme and into matters in connection with currency generally, as suggested in the Order of Reference. I again urge this matter upon the serious attention of the Government. GO The remedy for the tide of rising prices as urged by Professor Fisher and Sir J. G. Findlay seems to be the only scientific remedy that has been propounded." Future Plans The publication of my book "Stabilizing the Dollar," in the immediate future, will enable all who are interested to secure - 11 - a full discussion of the proposal, with a description of the technical details involved in the plan and with answers to objections. If there is sufficient interest of others I hope to see this followed by the formation of a "Stable Money League" for the purpose of educating the public and bringing to any legislative action for the adoption of the plan. support Espe- cially will it be necessary to gain the attention and support of business men. These can be reached through the Chambers of Commerce, which comprise the important men in each community. I hope myself to address the more important groups and secure a referendum to the local Chambers of Commerce the country over. With their support, there can be no delay in securing the passage of a bill establishing a monetary commission which can make a searching investigation of this and other plans to meet the troublous currency situation. - 12 - 0 YALE UN IVERSITY DETARTIOL T OF P 01. ri2IJAL Ea& OLIY NEW HAVEN , JUIN EOT I OUT April 24, 1926. .kvernor Benjamin Strong, Federal Reserve Bank, New York.Jity. dear Jovernor dtrong: Thank you for yours of April 19th. I think I unierstand your position and sympathize with it to a large extent. not approve of the bill in its present form. I realize that you do I hope it may be changed so that you may be in general sympathy with it I realize the dangers to which you refer, that the passage of the bill may lead to extravagantAaopes and disappointments and consequent criticism of the Federal Reserve system. I also understand the misunderstandings likely to occur as illustrated by today's editorial in the New York Times. As you may have noticeu in theitestimony which I sent you I have myself said some of these things very much as you have said them. I shall further take to heart your letter and consider carefully all your cautions. I should be the last one to want to upset or impair the work which you and your associates are doing. I cannot help but think, however, that some sort of legislative declaration can be framed which will help you both with the public and with and will your less enlighteneu associates in the Feueral Reserve system safeguard against any pressure from the Treasury or public clamor which made the trouble in 1919 and 1920. There is such a thing as being unduly cautious and self defeating. At any rate this has been nu observation among business men ia mEppy dases. I should expect it of many of your associates and I think I could name some who would try to influence you and your policies unduly in that direction. 2 Governor Benjamin btrong I think they would differ more radically with the views to which I incline than would you. With kindest regards, I am Very sincerely yours, (bigned) Irving Fisher. could you reciprocate by sending me a copy of your testimony? I had mine copied especially for you. to,to COL' bartv de) 2/17,J4o ym it kaUAoi)iii ( Li V