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STABILIZATION OF COMMODITY PRICES
HEARINGS
BEFORE THE
SUBCOMMITTEE OF THE
COMMITTEE ON BANKING AND CURRENCY
HOUSE OF REPRESENTATIVES
SEVENTY-SECOND CONGRESS
FIRST SESSION
ON
H. R. 10517
FOR INCREASING AND STABILIZING THE PRICE LEVEL
OF COMMODITIES, AND FOR OTHER PURPOSES
MARCH 16, 17, 18, 21, 22, 28, 29, 1932
PART 1
111442
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UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON : 1982
COMMITTEE ON BANKING AND CURRENCY
HElNRY B. STEAGALL, Alabama, Oha4rman
CHARLES H. BRAND, Georgia.
W. F. STEVENSON, South Carolina.
T. ALAN GOLDSBOROUGH, Maryland.
ANNING S. PRALL, New York.
JEFF BUSBY, Mississippi.
MICHAEL K. REILLY, Wiscon!lln.
FRANK HANCOCK. North Caroll:,;i.a.
CLYDID WILLIAMS, Missouri,
P. H. STEWART, New Jersey.
WESLEY E. DISNEY, Oklahoma.
W. L. TIERNEY, Connecticut
o.
LOUIS T. McFAD,DEN, PennsylTil.llia.
JAMES G. STRONG, Kansas.
ROBERT LUCE, Massachusetts.
GUY E. CAMPBELL, Pennsylvania.
CARROLL L. BE,EJDY, Maine.
JOSEPH L. HOOPER, Michigan.
GODFR&Y G. GOODWIN, Minnesota.
BENJAMIN M. GOLDER, Pennsylvania.•
FRANCIS SEIBERLING, Ohio.
K. WEED, Olerk
SUBCOMMITTE OF THE COMMITTEE ON BANKING AND CURRENCY
ON H. R. 10517
T. ALAN GOLDSBOROUGH, Maryland, Ohairman
JEFF BUSBY, Mississippi.
ANNING S. PRALL, New York.
JI
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JAMES G, STRONG, Kansas.
CARROLL L. BEEDY, Maine.
CONTENTS
Pagir
The Goldsborough bill (H. R. 10517)__________________________________
Edward A. O'Neal, president American Farm Bureau Federation________
Henry A. Wallace, Des Moines, Iowa____________________________
Charles R. White, president New York Farm Bureau Federation________
C. A. Ewing, Decatur, Ill_________________________________________
Charles E. Hearst, presiaent Iowa Farm Bureau· Federation____________
L. J. Taber, master National Grange_______ ,,,__________________________
John A. Simpson, national president Farmers' Union____________________
Hon. Robert L. Owen, former Senator from Oklahoma__________________
C. C. Talbot, president Farmers' Union of North Dakota________________
Wilford I. King, professor of economics, .New York University__________
Alvin T. Simonds, president Simonds Steel & Saw Co _________________ 257,
Ethelbert Stewart, United States Commissioner of Labor Statistics______
Hon. Samuel B. Pettengill, Member of Congress________________________
D. H. Fisher, New Parish, Ind________________________________________
Hon. O. B. Burtness, Member of Congress____________________________ 296,
Malcom. C. Rorty_____________________________________________________
W. C. Hushing, legislative representative American Federation of Labor__
Prof. Irving Fisher, Yale University, New Haven, Conn ______________ 333,
Hon. C. William Ramseyer, Member of Congress_________________
Hon. Conrad G. Selvig, Member of Congress___________________________
George Shibley, Washington, D. c____________________________________
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STABILIZATION OF COMMODITY PRICES
WEDNESDAY, JVCABCH 16, 1989
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON BANKING AND C-cJRRENOY,
Washingttm, D. 0.
The subcommittee met, pursuant to call, at 10.30 o'clock a. m., in
the committee room, Capitol Building, Hon. T. Alan Goldsborough,
presiding.
Present : Messrs. Goldsborough {chairman), Busby, Prall, Strong,
and Beedy.
The CHAIRMAN. The committee will please come to order. The
order of business is H. R. 10517, and I have asked the clerk to distribute cov.ies of the bill to anybody present.
{The bill referred to is here printed in full as follows:)
[H. R. 10517, Seventy-second Congress, 11.rst session]
A BILL For increasing and stab1llzlng the price level of commodities, and for other
purposes
Be it enacted by the Senate and House of Representatives of the United Btatea
of America in Congress assembled, That the Federal reserve act is amended
by adding at the end thereof a new section to read as follows:
" SEC. 81. The Federal Reserve Board and the Federal reserve banks are
hereby authorized and directed to take all available steps to raise the present
deflated wholesale commodity level of prices as speedily as possible to the
level existing before-i the present deflation, and afterwards to use all available
means to maintain such wholesale commodity level of prices."
SEC. 2. If, in carrying out the purposes of the preceding section, the Federal
Reserve Board and/or the Federal reserve banks, in selling securities, should
exhaust the supply, the Federal Reserve Board is authorized and directed to
issue new debentures.
SEC. 8. If, in carrying out the purposes of section 1, the gold reserve is
deemed by the Federal Reserve Board to be too near to the prescribed minimum, the board is authorized to raise the official price of gold if the other
methods already authorized appear inadequate; if, on the other hand, the goldreserve ratio is deemed to be too high the Federal Reserve Board is authorized
to lower the official price of gold if the other methods already authorized appear
inadequate.
The CHAIRMAN. Now, the subcommittee made an agreement, some
weeks agoj to hear the representatives of the farm organizations
to-day anct to-morrow; but, of course, if it is necessary, because of
delay, to go along longer, it will be possible to do it; but we would
like to get through with those men to-da;y and to-morrow; and on
Friday to hear the members of Congress. Will the farmers organizations indicate how they would like to proceed and present their
witnesses¥
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OF COMMODITY PRICES
Mr. O'NEAL. Mr. Chairman, an agreement was reached that the
American Farm Bureau, and the Grange, and the Farmers Union,
in that order, would present their statements.
Mr. GOLDSBOROUGH. Well, that is entirely satisfactory, I am sure.
I am going to suggest to the members of the subcommittee that
these witnesses be. allowed to proceed until they finish, and then we
may ask questions, if that is desired.
Will you give your full name and designation, and whom you
representi
STATEMENT OF EDWARD A. O'NEAL, PRESIDENT AMERICAN
FARM BUREAU FEDERATION
Mr. O'NEAL, My name is Edward A. O'Neal, president of the
American Farm Bureau Federation, with headquarters at Chicago,
tll:, and with Washington offices in the Munsey Building. Mr.
··
Chester H. Gray is our representative here.
Mr. GOLDSBOROUGH. Will you proceed, in your own way, now,
please i
Mr. O'NEAL. Mr. Chairman, I would like to ask, if you·please, the
indulgence of the subcommittee. I am a farmer and have not done
anything else all of my life, and I have a statement that I would
like to make; a very brief statement.
Mr. GOLDSBOROUGH. The subcommittee will be glad to hear you.
Mr. O'NEAL. The position o:f the American Farm Bureau Federation in the matter o:f stabilizing our unit o:f value, o:f providing
our people with an honest dollar; is clearly ~stablished. First, in
a report made by the American Farm Bureau Federation committee on the stabilization o:f the unit o:f value; second, in resolutions
adopted at the thirteenth annual meeting o:f the American Farm
Bureau Federation in Chicago, on December 9, 1931, and finally,
in the joint resolution stating the position of the three major general farm organizations-the National Grange, the Farmers Union,
and the American Farm Bureau Federation.
The policy of the American Farm Bureau Federation, as outline<l
in the resolution adopted by the annual meeting in 1931, seeks two
main objectives; first, the restoration of the price level, and second,
the stabilization of the purchasing power o:f money.
It is very gratifying to me to appear to-day before this committee on behalf o:f the organization which I represent and to
submit to you the information and the :facts which have led to the
adoption of these statements of policy and, :further, to discuss with
you bills now before this committee for consideration which embody
some or all of the suggestions outlined in these statements of the
policy of organized agriculture.
· So :far this Congress has dealt energetically with various phas.es
of the problem of the depression. People 0£ this Nation are proud
o:f the nonpartisan attitude that has been evidenced in meeting this
problem. You have passed various legislative measures to give
relief. The various devices which you have set up are now in
operation. It is believed that they will help. But you have not
yet struck at the base and root of this matter. Temporary extension of credit will help, but the extending o:f credit to a people
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STABILIZATION OF COMMODITY PRICES
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already submerged in debt is not the final solution of this· problem.
It has become clearly evident that a major contributing· cause to
our grave economic illness is due to,. a failure of our· monetary
system to properly function as a medium of exchange.
. ..
Here we are in the United States, a country of _almost un:limited
natural resources-coal, oil, iron, timber, and raw materials.of every
kind, Here is a country of fertile farms and capable, efficient farm
people who can produce food, cotton, and wool in such abundance
that everyone can have plenty to eat and wear.
We have increased our power o:f mass production beyond any other
nation in the world. We have plenty of skilled labor and competent
management.
In :face o:f these basic facts, why are millions o:f people, who are
capable and willing to work, now hungry and cold and homeless 1
We are in the midst of a great abundance-food, raw materials,
skilled workmen, factories, stores, transportation-everything .that
should go to prosperity, and yet we are :faced with hunger, starvation, unemployment, bankruptcy. Our monetary system has broken
down. Our money, instead of being the servant o:f agriculture, commerce, and industry, facilitating the free exchange of goods and
services, has become the· oppressor, and through its inability to properly function has brought the distressing conditions of to-day.
There are two phases to this monetary problem. One ·has to do
with the base of our money system itself; the other with the control
and administration of that system.
Organized agriculture does not believe that the present monetary
system is adequate to property meet our present needs. To-day
there are approximately fifty billion dollars in bank deposits in the
United States and there is only five and a half billion in currency to
serve the interests of these fifty-billion-dollar deposits. This is not
enough. The failure is too evident to need exposition. Since 1923
more than 8,000 banks have closed, and we now have our banks on
the verge of hysteria and hoarding every available dollar in a vain
effort to protect themselves from increased depositor demand. Deflation brought about despair and cold :fear resulted in pessimism.
The bills pending on the general subject of money stabilization
before this committee classify under two or three general heads.
H. R. 10280 by Congressman Strong, H. R. 128 by Congressman
Ramseyer, and H. R. 8246 by Congressman Keller seek to maintain
a parity between commodity and monetary values by the method of
instructing and ordering the Federal Reserve Board through its
discounting, rediscounting, and eligibility activities, to keep as much
as possible a straight line of relationship between commodities and
money. These bills, however, go :further than the recently enacted
Glass-Steagall measure, in that they are permanent in nature instead
of temporary and contain definite provisions for maintaining a price
on commodities comparable to that of 1928.
A second type of bill before the committee attacks the problem by
the method of changing the weight of the dollar, or stated differently, by altering the number of grains of gold which constitute the
dollar, so that the value of the dollar may be kept in line with the
value of commodities. H. R. 20 by Congressman Burtness and H. R.
'7800 by Congressman Goldsborough are bills of this type.
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STABILIZATION OF COMMODITY PRICES
A third type of proposed legislation of monetary character is
pending before the committee in H. R. 6712 by Congressman Evans,
which seeks to a.ssist monetary conditions in our Nation by reestablishing a bimetallic system of currency.
Within the past few weeks we have heard a national effort to dislodge the hoarded dollars of the individual who has hidden his money
in safety deposit boxes and elsewhere. That is a good thing, but the
real hoarder to-day is the bank. The hoarding is not done by the
masses of the people but by those of considerable means, as is shown
by a recent statement of Treasury officials that over one-half of the
value of the hoarded money is in bills of $100 or over. In the world
to-day there are $12,000,000,000 of monetary gold to meet the obligations in excess of $500,000,000,000, which press so heavily on the
people. According to Professor Warren, of C9rnell University, the
approximate total of private indebtedness in the United States in
1931 was in excess of $172,000,000,000.
The base of our monetary system must be broadened if we are to
have a monetary system adequate to our present-day needs.
Our present gold standard is based upon the gold standard of 1875,
which provided that gold should be the basic money and all other
currency, Government paper, national-bank notes, and the silver
dollar ~hould either be redeemable in gold or maintained at a parity
therewith.
When the Federal reserve bank was established in 1913 it was provided that the Federal reserve note should be redeemed in gold on demand, and for this purpose a gold reserve of. 40 per cent against all
such notes in circulation should be maintained, together with a gold
reserve of 35 per cent against the depositor liabilities of the Federal
reserve banks.
Our supply of credit is limited by the quantity of gold available
for monetary use.
Our gold, through our monetary system, instead of becoming just
a symbol to express the relative value between various commodities
and services, takes upon itself a commodity value and finds itself
with the power to dictate the value of all other things.
This condition is in a great measure responsible £or the present
situation in this country. Our commodities are valued in terms of
their exchange value for a given quantity of gold. We have a supply
of money inadequate to finance the business of the country. The
value of money has increased, which means the price of all other
things has come down. Our general price level has been forced down
and down. The dollar, instead of being a fixed measure of value, has
failed to function. A dollar, which represented one-half bushel of
wheat in 1919, represented a bushel in 1929, and in the earl_y summer
of 1931 is represented 3 bushels. Yet each person in tlns country
needed his 4 bushels of wheat just as much one year as another.
In other words, the value of wheat as a human food did not change
from year to year. Even its value in its relation to supply and demand does not vary in any such ratio as the price changes of the past
12 years would indicate. Wheat in itself is more value than gold.
Yet the dollar that would bring exactly the same amount of gold
in 1932 as in 1919 would buy six times as much wheat. The dollar
fails to measure the value of wheat. It has become a dishonest
dollar.
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A bushel basket which would hold 4 pecks one year and 24 another
would never be called an honest measure.
The failure of our monetary system has created our present lowprice level which is the cause for so much of our distress and the
inability of our economic life to continue and progress.
The total indebtedness of agriculture to-day is some $14,000,000,000.
Agriculture can never pay off that indebtedness in dollars that have
suddenly taken on gigantic proportions in relation to the commodities of the farm.
A farmer who a few years ago borrowed $5,000 on a mortgage on
his farm when wheat was around $1.50 a bushel, borrowed in effect
3,333 bushels. To-day, in order to pay off his debt, he would have
to give the holder of his mortgage from 8,000 to 10,000 bushels of
wheat. His debt has literally trebled.
Agriculture is not the only industry su:ffering. Every commercial
-and industrial institution is facing the same situation. But agriculture represents our largest industry; the hardest-hit industry;
27,000,000 people live out directly on the farms; 24.8 to 22½ per
cent of our total population. The farms and rural towns represent
53,820,223. The collapse of the purchasing power of these farm and
rural people is the thing that has closed factories and paralyzed
our transportation system. Restore the buying power of agriculture
and unemployment will vanish: Factories will open. Prosperity
will return to the land.
The buying power of agriculture can be restored in just one
way-first, raise the general price level and, second, improve the
ratio between the farm price level in relation to the general price
level.
The farm price level is 60 per cent of pre-war prices and the
price level of commodities bought by farmers is 120 per cent of
pre-war prices.
If the purchasing power of agriculture is not restored, then Rll
ether industry and commerce must get down on the level with agriculture and we would then witness even greater disaster than we
see to-day. If deflation runs its course, i£ all others are brought
<lown on a level with agriculture, a recent economic survey has shown
it will mean that the cost of transporting, processing, and distributing goods will have to come down another 40 per cent. Freight rates
will have to come down about 33 per cent; passenger fares over 60
per cent; doctors and nurses will get from 25 to 50 per cent less than
they are now receiving.
The dollar capitalization of industrial companies will have to be
scaled down sharply and governmental expenditure will return to
a pre-war basis, a cut of some 60 to 65 per cent. Pay of mail carriers and police and firemen will drop sharply. School teachers'
salaries will be down one-third. State university appropriations
will be drastically reduced. Professors' salaries slashed from 25
to 40 per cent. Wages of union labor will have to be cut in half.
That is part of the picture of what will happen if the rest of this
country is brought down to a level with agriculture. It is much
more important that agriculture be brought up and the general level
raised. It is imperative that this price level be restored and the only
way it can be restored is through providing an adequate monetary
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system that will fully meet the needs of t;rade and commerce. We
farm groups are seeking, not £or a risEdn the price level of 10 per
cent, but :for an increase of 40 per cent, an increase that will put the
price level back on the 1921-~929 averagi
In asking that Congress give us an honest dollar, we are not asking that we abandon our standard. We want gold to be back of the
dollar but we want it to be back of an honest dollar. We are merely
asking that Congress exercise the power vested in it by the Constitution which says that, " Congress shall have the power to coin
money, regulate the value thereof, and of foreign coin, and fix the
value of weights and measures." Congress is not now and never
has fulfilled its obligation under the Constitution.
We. ask that you regulate the value of our money, so that money
itself will not distort the exchange value of commodities but will
serve as an accurate medium of exchange, expressing the true
exchange values of two commodities or two services. Our honest
dollar does not seek to fix prices. It seeks only to restore our general commodity price level to a basis comparable to the price level
at which our enormous debts were contracted and to stabilize its
value at that level.
·
Further, we are asking that our monetary system be freed :from
banker control. Money-the medium of exchange-is for the use
of the people, but under our present Federal reserve system we have
a banker-mana$ed currency. The original Federal reserve act included a provision instructing the Federal Reserve Board to use its
power to stabilize the price level. That provision was struck out.
Thomas Jefferson had a clear vision when he said, " I sincerely
believe that banking institutions are more dangerous to liberty than
standing armies "; and it was President Garfield who said, " Whoever controls the volume of money in any country is absolute master
of all industry and commerce."
·
We now seek to nationalize the national banking system and put
into the laws a legal mandate to the Federal Reserve Board, first,
to bring upward our general price level UJ> to the 1926 level and,
second, to use its powers to stabilize the pnce level at that point.
A monetary system, adequate to serve the industrial, commercial,
and agricultural needs of 1875, a banking system of pre-war cut, is
not sufficient for to-day. We.have applied science to the improvement and development of our industrial ·arnd agricultural productive
practices, to sales and distribtuion, to transportation, to communication. Science should be applied to bring UJ.> to date our monetary
system and our methods for the control and direction of that system.
American agriculture wants an honest dolfar, a dollar that represents a fixed standard of measurment, a. dollar that is not flexible,
with its value determined either by the. commodity price of gold
or by banker manipulation. Our monetary system to-day is bankercontrolled and the entire system, I am informed, is practically under
the complete domination o:f five banks, three in the East and two
in the West. These five great banking institutions completely control the flow of currency and our currency determines the value of
the products of our :farms and :factorie;,.., This situation must be
changed. We want to eliminate the gllJlllpling banker control of
the Federal reserve system; The real outstanding leaders of agri~
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culture, industry, and commerce should serve on that board !lld
on the board of the Federal reserve banks. We want the Umted
States Federal reserve syst.em to be as free from shortsighted,
selfish banker-control as is the Bank; of England.. This is the most
important and vital question of the Nation to-day.
If Congress does not fulfill its constitutional obligation to the
125,000,000 of this country, we are going before the Nation on this
great issue.
Mr. Chairman, in closing I want to read to you. a part of the
message of Andrew Jackson, President of the United States, to
Congress, when he retired after eight years of service:
You have no longer any cause to fear danger from abroad; your strength
and power are well known throughout the civilized world, as well as the high
and gallant faith of your sons; it is only from within, among yourselves,
from stupidity, from corruption; from disappointment of ambition, and an
inordinate thirst for power that factions will be formed and liberty endangered.
•. Mr. Chairman, I would like to include in the record the resolutions of my national organization on this question; also the unified
program in the three national organizations on this question.
Mr. GOLDSBOROUGH. Without objection, it will be so ordered.
(The matter above referred to is here printed in full as follows:)
RESOLUTION ADOl'TED AT THE THill.TEENTH ANNUAL MEETING OF THE AMERICAN
FARM BUREAU FEDERATION, DECEMBER, 1931
NO. 3--THE MONETARY PBOBLEM
The present period of depression and the falling price level has increased the
burden of taxes, interest, debts, and other fixed costs on all producers to an
intolerable degree. It now requires 45 per cent more of all commodities, and
70 per cent more of farm commodities, to pay these costs than it did a few
years ago. The long-continued deflation is crushing farmers, merchants, trans•
portation agencies, and all manufacturers except a few most favorably situated,
and has caused a declining price of property to such an extent that it has
largely eliminated equities and is affecting basic securities to such an extent
as to seriously impair the stability of our banking and insurance institutions,
thereby endangering the welfare of the general public. It is causing a lower.
ing of all wages and salaries, a process which has only started, and which
must of necessity lower the standard of living if continued.
The principal cause of this deflation of values is monetary. When the price
of any one commodity falls many causes may be responsible. ,vhen the average price level of all commodities fall with the rapidity of the last few years,
the principal cause is a shortage of money and credit in actual use. Commodity prices are expressed in this country in terms of dollars. Every pur,
chase and sale is the exchange of commodities for dQJ.lars. When dollars are
scarce it takes a larger amount of commodities to get them. In other words;
money is at one end of the balance, commodities at the other. Add to the
effective supply of money and prices go up. Reduce the effectiYe supply and
prices come down. The above statements are justified and supported by the
incontrovertible evidence coming from the experience of all former depressions,
The problem divides itself into two parts: First, the restoration of the price
level; and second, the stabilization of the purchasing power of money.
I.-BESTOR.ATION OF PRICE LEVEL
Two alternatives face farmers and other business interests at this time; the
first is. wholesale bankruptcy for farmers, industrialists, transportation agencies;
and mercantile establishments and the further deflation of wages and salaries;
the second is a rapid rise in the average wholesale commodity price level to a
point near that at the beginning of the present deflation, thereby restoring confidence and making it possible for individuals, corporations, and governments to
discharge their obligations and to proceed with their undertakings.
·
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STABILIZATION OF COMMODITY' PRICES
All the powers of the Federal reserve system and the executive officials of the
Federal Government should be used to bring about tl).e restoration of the price
level near the average level at which the present long-time indebtedness was
incurred. The most important of these powers are:
1. Open market purchases of eligible securities. ·
2. Lowering of rediscount rates.
,
3. Liberal interpretation of rediscount eligibility rules.
In order to relieve the Federal reserve authorities and other agencies connected therewith from discretionary authority, we recommend and insist that
the Federal reserve law be amended so as to make mandatory the exercise of
these powers so far as possible and to the extent necessary to restore the average wholesale commodity price level to the point inclicated.
II.-STABILIZATION OF MONltY
Permanent prosperity in this country demands that the dollar be made an
accurate measure of value-that its purchasing power .be always constant. This
means stability of the average wholesale commodity price level instead of
alternate periods of inflation and deflation which are the principal causes of
business uncertainty and depression. Fluctuation in the purchasing power of
the dollar causes serious losses to debtors in periods of deflation and to creditors
in periods of inflation, and benefits only the speculator.
We recommend the following action by Congress to stabilize the purchasing
power of money:
1. Direct the Federal reserve system to use all its powers, following restoration of price level, to stabilize the purchasing power of money in so far as
possible, using for that purpose all its monetary and credit powers, including
currency and credit control, open market operation, and changes in rediscount
rates and in rediscount eligibility rules. ·
2. Empower and direct the Federal Reserve Board to raise or lower reserve
requirements of the Federal reserve banks and to raise or lower the price of
gold.
3. Broaden the rediscount eligibility provision of the Federal reserve act.
UNIFIED PROGRAM-MONEY STABILIZATION
Believing that the general contraction of credit and the deflation of prices
of commodities and property have gone to disastrous lengths;
Believing further that the United States does not have to wait on Europe
for a solution of its problems ;
Believing further that the United States' recovery can take place by recourse only to the soundest monetary plans ;
Believing further that the United States' depression will not cure itself
but that deliberate action must be taken by its leaders;
We request of the President, the Federal reserve system, and of Congress:
That the Federal reserve system stop credit contraction and deflation and
inaugurate credit expansion to affect the price level favorably by such llberal
open-market operations as will bring about this result. This ls demanded
so that credit contraction, bank failures, hoarding and the other disastrous
results of deflation may be halted and that the whole trend of economic affairs
may be turned. Such action, in the opinion of the soundest economists is
necessary and will be effective in stoppiµg the fall:of prices, hoarding, in restoring normal values and bringing the return of normal business and employment. Unless such action is initiated we believe tllat even such measures dS
the Reconstruction Corporation are doomed to failure, for with continued contraction of credit on the part of the banking system they can not be successful.
A stable price level is paramount to prosperity.i We can not exist with
rubber money and iron debts. Therefore, we demand the adoption of effective measures to stabilize the purchasing power of money.
That in addition to these demands for immediate action, consideration be
given to the readjustment of the entire banking and fiscal policies and
structures of the United States, to the end that they may function in accord
with present-day knowledge and needs and the Oonstitution of the United
States.
. Mr. O'NEA:L. In addition to that, I wish to insert the action of our
board of directors last week iri the city of Chicago.
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LA.ST ACTION OF BOARD OF DIRECTORS, AMERICAN FARM BUREAU Fl!IDEBATION, MARCH
12, 11182
We have succeeded in getting introduced into Congress various measures designed to correct the inadequacies of our monetary system. The House Committee on Finance and Currency holds hearings on this on March 16 ; every
energy and effort, not only of the American but of every State federation,
should be thrown back of the effort to make Congress realize that this is thevital, necessary thing; that they must meet this situation.
We must have an honest dollar if we are to have a return of prosperity and
If agriculture is going to remain a free and independent industry. Agriculture·
can not pay off its present indebtedness. They say our indebtedness is
$12,000,000,000, but in terms of our commodities American agricultµre owes.
to-day 80,000,000,000 dishonest dollars. Unless we can have an honest dollar to
pay our debts, American agriculture must go bankrupt. And when agriculture.·
goes bankrupt our Nation will be bankrupt.
Now, in addition to that, I have here a little pamphlet that was:
prepared by the leaders in my organization, a special committee to
study this question, called "Honest money," and if that might be
included-Mr. GOLDSBOROUGH. Without objection, it is so o~dered. I think
it should be included myself.
(The pamphlet above referred to is here printed in full as follows :)
HONEST MONEY
AN EXPLANATION OF THE RELATION OF MONEY, PRICES, AND PROSPERITY
[Published by the American Farm Bureau Federation, Chicago, Ill., Jan. 7, 19821
FOREWORD
This booklet, prepared by the committee of the American Farm Bureau Federation on stabilization of the unit of value, is intended to give to our members
and others a clear, simp~e explanation of the money question, and the effect of
monetary policies on agriculture, business, and labor. The policy of the
American Farm Bureau Federation on this question is expressed in the resolution adopted at our last annual meeting, and reprinted herewith.
It is our opinion that the money question is of fundamental importance, not
only to agriculture, but to all classes of our population. We do not assume
that stabilizing the purchasing power of money will automatically solve all our
other problems. There will still remain many such questions as taxation,
transportation, tariffs, marketing and surplus control, which · must be settled
before agriculture can live and trade on terms of equality with other industries.·
The- position of the American Farm Bureau Federation on these questions is
well known, and we shall continue• to demand a fair solution of all of them.
We do believe, however, that the money question is of such fundamental im~
portance that its proper settlement wlll make a solution of all other problem•
much easier, and that without such a settlement we shall still be subject to the
hardships that hit farmers hardest .of all during alternate periods of inflation
and deflation, no matter how happily we may settle our other problems.
It is with the hope of assisting American farmers to study this question and
put themselves. in position to use their influence intelligently to secure action
by _Congress to solve it that this booklet ls being distributed.
Eow ABD O'NEAL,
President .American Farm Bureau Federation.
HONEST HOKEY
The United States of America la a country of almost unlimited natural reaource&-COal, oil, iron, timber; ln fact, almost every raw material needed to
make goods to 111pply hllJllaD wants•
. It ill a country of fertile farma and capable farmers. They can easily produce food and cotton and wool in such abundanee that everyone can have plenty
to eat and wear.
·
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It is a country of factories and power, of :mass'' produetion, with plenty of
skilled labor and competent management.
For centuries the world was hungry because it could not produce enough food.
In fact, until recent times the world never'had endugh of anytbing,-for everything had to be produced by hard hand labor.
·
The United States has solved the problem :of producing food and clothing and
manufactured goods. It can easily produce enough of everything so that .everyi
one could live like a king.
Then why are millions of people who are capable and willing to work, hungry
and cold and homeless?
Why are factories closed when so many people need goods? Why are people
out of work when so many others need the things that they might be producing?
Why are so many people hungry when the farms are glutted with surpluses?
Why are hard-working, thrifty people being sold out under the hammer, the
savings of a lifetime lost?
Why all this misery and poverty and despair in a land of plenty?
Millions of people are asking these questions. .The future of the Nation
'
depends on finding the right answer.
All through the ages mankind has struggled· with two problems:
1. To produce enough.
2. To divide up what is produced.
We have solved the first. We have failed to solve the second. We do not
dare to produce too plentifully, for we do not know how to divide up what
we produce so that we can all use and enjoy it.
We know that the more we produce the ,more we all ought to have. But
somehow it does not seem to work out that way. We produce until the warehouses are full, and then shut down factories and try to shut down farms,
throw men out of work, shiver and grow thin, and wonder what the trouble is.
MONEY MAKJ,<:S CIVILI7..ATION POSSIBLE
What is the trouble?
To answer that question we shall have to. go back a few thousand years.
In primitive times there was no money. The man with a herd of cows
traded with a man with a field of wheat, so tha.t both could have. bread and
butter. All exchange of goods was on a trade or-,barter basis. There were
no hard times except as the result of some natu~al calamity or of failure to
work.
,,
Barter was a clumsy and inconvenient way of doing business. We could not
possibly carry .on the complicated business ,of to-day on a barter basis.
So .money was invented-shells or beads or pieces of metal or paper-any
article or token that would be generally accepted In exchange for goods because of its own value or promises back of.it. We:exchange our labor or the
products which we produce for money, and exchaDiJe that money in turn for
the ,toods or services of others. Money isr the oll:without which the complicated machinery of modern civilization could not .run.
While many different materials might be used fbr . money and have .been
so. used, it was found that two metals were best foir that purpose-gold and
silver. Both were scarce enough and valuable enough in themselves to be
generally accepted, regardless of confidence in go"\fenments or banks.
For a time the leading commercial nations used Jboth metals as·tli.eir basic
money, with a definite ratio of value· between the two. In this country the
ratio was 16 tq 1. Gradually the nations diiopped silver as part of their basic
money, and began to use gold alone. To-Gilly •Ohlnit: is the only large nntion
using the silver standard. All other important nations are at least nominally
on the gold standard, or we're until recehtl)'J :
!
But as business grew in volume and complexity, it soon became apparent
that there was not enough gold. For that reason, and for reasons of convenience, governments began to issue paper notes for use as money instead of
gold. The value of paper currency is maintained by making it legal tender
In payment of debts, customs and taxes-;- by confidence in the government, by
limiting its quantity,,or by govenment promi$e1to>redeem it in.gold on-i:lemand.
.. ,A nation whose paper currency-is payable in gokt on demand .is said· to.be
on the gold standard. Since governments may ,or JDQY not .keep tbeit promises
to ,r~deem; it is evident. that th"e ·va1ue,-0fl paper,ubnelv depenrui,wholly.·on confl_denllf in the govern~nt, ·Whenever colillldence. tin •government wanei,, nauP,.
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STABILIZATION OF COMMODITY PRICES
11
money depreciates in value. In a nation with a stable government in which its
citizens have confidence, however, the value of paper money depends upon its
quantity in relation to the need for it more than upon ~romises to redeem it
in gold.
NOT ENOUGH GOLD
The only way a government can be sure of its ability to redeem its paper
money at all times is to keep a dollar's worth of gold in its treasury for each
dollar of currency outstanding. No nation does this, for tbe simple reason that
there is not enough gold to finance the business of the world.
The United States has in circulation $927,930,129 in gold certificates, backed
by an equal amount of gold in the Treasury; $386,701,217 in silver certificates,
redeemable in silver dollars and legal tender in payment of all public obligations, such as taxes and customs; $654,868,412 in national bank notes backed
by United States bonds; $294,447,188 in United States notes, backed by $156,000,000 in gold ; $1,232,250 in Treasury notes of 1890, redeemable in gold; and
$2,463,281,989 in Federal reserve notes, redeemable in gold and backed by at
least 40 per cent of their value in gold in the vaults of the Federal reserve
banks. The actual gold reserve is usually considerably greater than this legal
minimum. All these various kinds of paper money circulate at par because of
confidence in the Federal Government, and the public hardly knows one kind
from another.
But even this amount of paper money is entirely inadequate to finance the
business of the country. It is supplemented by " bank money "-checks against
bank deposits. Something like 90 per cent of the business of the country is
done with checks instead of cash. For all practical purposes bank deposits
subject to check are just as much a part of the money supply of the country
as currency or gold.
There are about $51,000,000,000 of bank deposits subject to check in the United
States. Most of this great volume of bank credit was not created by the deposit
of money. The majority of credits are created by borrowing. When William
Jones borrows a thousand dollars from his banlc, the bank simply gives him
credit for $1,000 on its books. The outstanding credits of that bank are $1,000
larger than before, and $1,000 has been added to the money supply ( considering
bank credit as money) of the country.
When business is transacted by check, little actual cash ls used. It is largely
a matter of bookkeeping in the bank and between banks. For that reason banks
can lend money ( create credit) up to something like ten times .their actual reserves. In order to meet the needs of business we have built up a great monetary pyramid (paper money and bank credit) on a small gold base. The
required gold reserves provide only $1.60 in gold to meet each $100 in promises
to pay gold. Actually the gold reserves are somewhat larger than this.
Our whole monetary structure depends on confidence rather than on gold,
however. If there were any concerted attempt to convert currency and bank
credit into gold, gold payments would have to be stopped. The gold standard
is theoretical rather than actual, and must be so unless vast new supplies of
gold are discovered.
WE llEA.SUJIE VALUES WITlI HONEY
The com.mO'D notion about money is that it is a medium of exchange. That
ls a correct but not a complete definition.
:Money has another very important function. It is a measure of value. The
unit of value in this country ls the dollar. We measure all values in terms
<>f dollars.
We ordinarily think of the dollar as being an accurate measure of value, as
the yard is an accurate measure of length and the pound an accurate measure
of weight.
That is not true. It is because the dollar is such an uncertain measure of
value that the whole economic machine gets into trouble every now and then.
The fundamental reason for hard times is not overproduction nor underconsumption nor any of the other reasons so frequently given. The real reason
is that the dollar, by wliich we measure all values, is such an inaccurate
measuring stick.
The dollar ls a fixed measure of value only in one respect-it will always
buy 23.22' grains of gold. But what does that amount to? We can not eat
gold nor wear gold, nor will gold keep us warm.
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When it comes to measuring the value of tbe things we do want, the dollar
is far from being a fixed unit of measurement.
Wheat is our most important article of food. We eat about four bushels
apiece every year and could not very well get along without it. We measure
wheat in bushels. A bushel of wheat is always the same amount.
We value wheat in dollars, but a dollar's· worth of wheat varies greatly.
A dollar would buy less than half a bushel of wheat in 1919, a bushel in 1929,
and 3 bushels in the early summer of 1931. Yet each of us needed his 4
bushels of wheat just as badly one year as another. It is plain that the value
of ,wheat as human food does not change from year to year. Even its value
in relation to its supply and demanrt does not vary in any such ratio as the
price changes of the past 12 years would indicate.
Certainly wheat in itself is more valuable than gold. Yet the dollar that
would buy exactly the same amount of gold in 1931 as in 1919 will buy six
times as much wheat. It is plain that as a measure of the value of wheat the
dollar falls far short.
A bushel basket that would hold 4 pecks one year and 24 pecks another
could not be called an honest bushel. Neither can a dollar whose purchasing
power changes in that proportion be called an honest dollar.
In the Middle Ages the yard was the distance around the King's middle.
It was then the same kind of a measure as the dollar is now. You can
imagine the difficulty of doing business with a yard that would go arounrl
Taft in 1913, shrinking to the circumference of Coolidge in 1928.
We have been wise enough to make the yard a standard, unvarying measure
of length. Some day we shall be wise enoug~ to make the dollar a standard
measure of value.
MF..ASURING THE DOLT.AR'S BUYING POWEB
We have a method of measuring changes. in the purchasing power of the
dollar by what is known as the wholesale commodity price level. This price
level ls determined each month by the United. States Bureau of Labor Statis•
tics by taking the average of the wholesale priclll!I of sorne 500 commodities,
.·
each figured according to Its importance. .
This wholesale commodity price level is e:ipressed by a percentage figure
cnlled an Index number. The year 1926 is taken as a base. The price level
of that year is expressed by 100. For several. years following 1926 the price
level was fairly stable. Those were prosperous years for everyone except
farmers, and farm prices were steadily coiqing Into better relationship with
other prices. In the fall of 1929 the price ]s;!vel was 97, only three points
below 1926. During the two years since then it dropped to ~- (November,
1931.)
.
1.45 DOLLAU
We say that goods are that much cheaper~ ~ut what has really happened ls
that dollars are worth more. A dollar wouhi :b11y 45 per cent more goods in
November, 1931, on the average, than in 1926; T~e 1931 dollar, in terms of
,vhat it wlll buy (and that is all that dollars are good for) is worth $1.45.
That means that if we borrowed a dollar in 1926, we must pay back (in terms
of goods) $1.45 at the price level of November, 19~1. Every dollar in taxes,
interest, and other fixed expenses has become $1.45:
The farmer is even worse off, for his prices have dropped more than the
average. The farm price index has dropped to 58, ·and the farmer's dollar of
debt nnd taxes has become $1.70.
·
When we borrow money we expect to pay -lt back. but we do not expect to
p:iy $1.45 for each dollar we borrow. Most of us can not do so. The debts of
this country and of the world, public and private,, ,can not be paid back in
.
$1.45 dollars.
· ·. .
The effect of the deflation since 1929 has been to increase public and private
debts in this country (interms of commodities) by $80,000,000,000. On the
present price level, when we have paid off ·oJir , ~bts on the basis of what
those debts were worth in terms of commodities :ip .1926, we shall still have
$80,000,000,000 more to pay. Even the most . naricious loan shark never
dreamed of legalized robbery In such terms as that.:'
Worst of all, it is the most able and most ambitious part of the population
which is in debt. This country has been built up by people who were willing
to work and borrow and take a chance. The Nation can not afford to cruclfr
this most virile_· and valuable portion of Its prifulation.
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STABILIZATION OF COMMODITY PRICES
13
SUPPLY AND DE.KAND
The value of every product depends on supply and demand. That is just
as true of money as it is of wheat and hogs. When the price of hogs goe,,;
down while other prices are stationary, the reason is that there are too many
hogs in proportion to the demand for pork.
But when the average level of all prices goes down, as from 97 to 68 in two
years, that is not due to the supply and demand of goods. It is haru.ly possible
that there could be such a sudden increase in the production of all goods in
two years, or such a sudden lessening of the desire of people for goods.
The cause in such a case is a change in the supply of money and credit.
The price of money can not change, for it is fixed by law. So when the
supply changes, the effect can only be shown by a change in the price of
goods. Commodity prices not only must change to compensate for changes
in their own supply and demand, but also to compensate for changes in the
supply of money and demand for it.
Suppose we think of all the money and bank credit of the country as being
on one end of a pair of balances and all the goods on the other end. Take off
part of the goods, and that end of the balance goes up. That is, goods are
scarce and prices rise. We are all familiar with that result in the case of
individual commodities.
We are not so familiar with the fact that a change in the supply of money
on the other end of the scale will have exactly the same effect. If we take
off some of the money, the money end will go up and the goods end will go down.
That is exactly what has happened during the past two years. The goods end
of the scale has gone own-the average wholesale price level has dropped 29
per cent-not because we put too many goods on that end of the scale but
because there was not enough money on the other end.
As a matter of fact, the amount of goous on the scale never varies much.
The total production of goods in the world is about the same one year with
another, excepting only times of world war and severe world depression. Even
then the change--remember we are speaking of the total production of all
commodities-is not so very great. Over a long term of years the annual production of goods in the world has increased steadily at the rate of a little more
than 3 per cent a year, with little change from that amount. The rate of
production increase in the United States is about 4 per cent annually.
The changes are chiefly on the• other end of the balance. The volume of
money and bank credit, .and hence its value in terms of goods, varies greatly.
That variation in the buying p9wer of money is the cause of most of our
business troubles.
BALANCE THE SCALE
It is quite apparent that we should all be better off if the scale were ~ept
in balance-if the average wholesale commodity price level were kept just about
the same from month to month and year to year. All business could then plan
for the future with much greater confidence, and we could all go ahead producing to somewhere near the full capacity of our farms and factories. That
would mean real prosperity, Because we should produce more of everything,
.
everyone could have more.
We can only go on producing when the goods produced are moved steadily
into consumption. That means solving the problem of dividing up what we
produce.. We can only do that when prices are in such relation to one another,
that we can trade among ourselves on a fair basis.
While such things as tariffs, wage and price-fixing agreements, etc., sometimes work. against a fair price relationship, the tendency is always for prices
to adjust themselves in a fair relationship to one another so that commodities
can be exchanged freely when the average price level is stable.
But when the average price level changes greatly all these relationships
are thrown out of joint. There are other causes than the supply of money
and credit that tend to disturb· price relationships. But these causes are of
minor importance compared to the monetary factor. That is more important
than all the others together-,-important enough so that, properly handled, it
can largely ofl'set the effect of all. the others.
We can ·keep money constant in purchasing power-keep the average commodity price level stable-by maintaining just the right amount of money on
111442-32-PT 1--2
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STABILIZATION' OF COMM'ODITY :PRICES
the money end of the scale; in other words, by providing business at all times
with just the amount of money it needs to keep going in a normal way.
That means fitting the volume of money, and credit to the volume of business instead of having to close down factaries and fttrms. and throw men out
of work every now and then in order to. fit the volume of business· to an
arbitrary volume of money.
IDLE MO?j'EY DOESN'.T COUNT
When we ·consider keeping the volume of. money epd credit in proper relation to the need for it, there is another factor that needs to be taken into
consideration. That is the amount of work that each dollar does,---,what
economists call the velocity of circulation. • '.
The am,ount of work done by a crew of men deJJends on how hard they
work. If some of them sit in the shade, and others work only half-heartedly,
they will not accomplish as much as if they all worked steadily.
It is the same with money. The dollars that are idle, perhaps hidden away
under the mattress or in safety-deposit boxes, are not working. Neither is the
credit which in times like these bankers are afraid to loan in a normal way.
We have already seen that by far the largest amount of "money" is not
money at all, but bank deposits created by borrowing. When the future is
uncertain because no one knows what further change1;1 may occur in the average price level, both borrowers· and bankers are timid."
The rate of turnover of demand deposits in 141 cities in August, 1929, was
five and eighty-three one-hundredths times per moo~. In August, 1931, the
rate of turnover in the same cities was only two and :(orty-four one-hundredths
times per month. A given amount of deposits in 1931 would finance only 40
per cent as much business as in 1929. When: we talk Bjbout " frozen assets " we
mean that the velocity of circulation of money is lO"f. In other wotds, that
confidence, on which our whole credit structure is built, is at a low ebb.
So when we are talking about the necese\ary amount of money and credit,
we must consider velocity as well as ,quantity. We h,ave the right amount of
money and credit when business is proceeding normally without any appreciable change in the average price level. When prices· are going up and speculation is increasing, we have too much. When prices are going down, factories
closing, and men being thrown out of work, there is not enough. Enough
money at one time may be too much or not.enough at another. The measure
is its purchasing power-the average wholesale COJllll\Odity price level.
The problem, then, is to expand and co:µtract cur:c:ency and credit, not in
accordance with the amount of gold we may happen td have, but in accordance
with the needs of business.
The monetary system of the United States is largely under the control ot
the Federal reserYe banks and the Federal Reserve Board, together known as
the .Federal reserve system; The Federal reserve system can expand or contract currency and bank credit at will in normal times, subject only to the
limitations of the Federal reserve act relating to gold reserves, member bank
reserves, and rediscount eligibility rules. In abnormal :times, lack of confidence
may weaken the effectiveness of measures" adopted ,by the Federal reserve
sYStem.
·
1
When the Federal reserve act was adopted by the House of Representatives 1n
1913, it contained a provision dir~cting tlle Federal reserve system to use
its powers to stabilize the purchasing power of money. That provision was
eliminated 1n the Senate. The system has at variousitimes used its influence
to maintain stability. At other times, it has not. 'Its ability to maintain
stability under normal conditions can hardlJr be questioned. Additional power&
may be needed to enable it to maintain stability underi abnormal conditions.
PRICE LEVEL MUST BE RAISED
Two things are necessary at this time :
1. Restore the wholesale commodity priceilevel to a point somewhere near
that at the beginning of the present deffation.
2. Stabilize the price level at· that point.
The first is necessary in fairness to debtors,.and in order ·to prevent further
wholesale.defaults and bankruptcies..A large part .of the outstanding indebtedness, both public and -private, can not b1t ,paid on the. present price ·level
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An increase of 30 to 40 per cent in the price level would restore confidence,
put men to work, stimulate business activity, and definitely put an end to the
present depression. It would cause farm prices to increase faster and further
tban others, just as deflation caused tbem to fall further and faster.
To start that process at a time like this is difficult. The chief inflationary
powers now possessed by the Federal reserve system are as follows:
1. Open market operations.-When the Federal reserve banks purchase Government securities in the open market the effect is to turn those securities into
cash. .And because of the pyramiding of credit, an open-market purchase of
$100 in Government securities makes available approximately $1,000 in bank
credit.
Early in 1931 the Federal reserve system bought large quantities of Government securities in the open market until it had accumulated more than
$700,000,000 wortb of such securities and about the same amount of bankers
acceptances. Sucb purchases were insufficient to start the price level upward
and the attempt has apparently been abandoned.
2. Rediscount rate.-One of the functions of the Federal reserve banks is to
make loans to member banks by accepting securities of various kinds from
them and issuing Federal reserve notes in exchange. The rate charged on
such loans to member banks is known as the rcdiscount rate. When that rate
is low it is profitable for banks to borrow from the Federal reserve and reloan
to customers. Low rediscount rates tend to expand credit. High rediscount
rates tend to contract CJedit.
During the summer of 1931, however, reducing rediscount rates to 11/2 per
cent failed to have any appreciable inflationary effect because bankers lacked
confidence to loan in a normal way. Rediscount rates have since been raised
to around 3½ per cent, whicb is still low compared with normal times.
3. Red,iscount eligibility rules.-Under the law the Federal reserve banks
can rediscount for member banks only certain kinds of securities and commercial paper. By their own rules the Federal reserve banks can still further
restrict the kinds of paper eligible to the rediscount privilege. Liberal rediscount rules tend to make money " easy " and to expand credit. Strict rediscount rules tend to restrict credit .
.At the close of 1931 the reserve banks were following a " tight money "
policy as far as rediscount eligibility was concerned. They were reluctant to
accept anything but Government securities for rediscount.
It is apparent that the Federal reserve system could use its present powers,
especially (1) and (3) above, more effectively in an effort to expand credit
and start the prive level upward. But even if used to the limit, they might
not be effective with public confidence at the present low level.
Certain additional powers would help, particularly broadening the rediscount
eligibility requirements. A large proportion of property owners, particularly
owners of real estate, are now practically without credit. If high class, sound
real estate securities could be made eligible to redlscount temporarily, a marked
expansion of credit would be almost sure to result. Admitting debentures of the
intermediate credit. banks to rediscount · would aid those banks in providing
farm credit, which would also aid in credit eXJ?Rnsion.
President Hoover has proposed a system of emergency credit agencies, which
to the extent it becomes effective will help to expand credit and raise prices.
The National Credit Cor~oration is• already, iri operation and has had a
marked efl'ect in checking the number of bank failures. His others-the home
loan discount banks, the reconstruction finance corporation, and a Government
subscription to stock in the Federal land banks-will all help to start the
necessary inflation.
Once started, inflation, like deflation, will move rapidly of its own momentum.
That is wby some people are so afraid of any Inflationary move, even though
they know that it is necessary to get business ofl' dead center. They fear that,
·Once started, inflation will go too far before it is stopped. Those fears are
unnecessary. The Federal reserve system has ample power to stop inflation,
cand bas learned how to do so. By selling Government securities in the open
market, and by making rediscount rates abnormally high, it can contract credit
1>0 rapidly as to quickly put a stop to inflation once it has restored price levels
to the desired point.
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OTHER INFLATIONARY MEASURES
Some of the other inflationary measures that have been suggested are as
follows:
1. Dooalu,ing the dolla,r.-If the price of gold were raised from $20.67 to $30
an ounce, which would mean that a dollar would be worth about 15.5 grains
of gold instead of 23.22 as at present, the price level would be restored very
quickly. The chief disadvantage of this plan is the fact that so many debts.
public and private, are payable in gold dollars of the present weight. Devaluing the dollar would not help this class of debtors.
2. Paper money.-A large issue (perhaps two or three billion dollars) of
greenbacks (paper money not redeemable in gold), to be put directly into the
hands of consumers by using them to pay Government salaries and other expenses and for unemployment reliltf. This is perhaps the most eff'ective'
remedy that has been proposed, although it is probably politically impossible
because of the popular prejudice against irredeemable paper money,
3. Siwer.-Restoration of free coinage of silver on a definite ratio with gold
would be an effective plan of inflation but 'would be impractical except by international agreement with the other leading commercial nations.
4. Symmet,!l'li&m.-Under this plan both gold and silver would be basic money.
Currency would be redeemable, not in either one alone, but in a definite amount
of each. This plan, too, requires international agreement.
5. Granting the national bank note privilege to the one and one-half billions
of Government bonds issued in the spring of 1931. That is, such bands would
be made the basis of a national bank note issue when deposited with the
Treasury by national banks. The disadvantage of national-bank notes is that
they lack the elasticity of Federal reserve notes and can not be retired readily
when they are no longer needed.
When a patient is sick the chief consideratioq. is to make him well. Any
medicine that will accomplish that purpose is good medicine, and even certain
unfavorable after effects can be tolerated if tbe medicine brings about a
speedy cure.
The present situation demands a speedy cure. Inflationary measures should
·
be applied promptly and until results are secured.
Deflation has reached the point where capital has been impaired so seriously
as to threaten the whole financial structure of the country. Continued deflation may easily bring disaster, the wreckage of which can not be repaired in
a generation. The results already have been bad enough. Two years more of
falling price levels might easily bring flnaI1ciaJ.. political, and social consequences that would wreck our civilization.
This is not a time to be afraid of. radical remedies.. No remedy can be as
radical as the disease.
STABILIZE BUYING POWER OF MONEY
After inflation bas st:Brted prices upward and stimulat~d business activity,
the price level should be stabilized at a fair •evel, preferably near .that of the
fall of 1929. This stability of the price level and of the purchasing power of
money is necessary in order to avoid a recurrence of the speculative boom of
1928 and 1929 and the deflation and hard .times of;l.930 and 1931.
· The principal •Stabilization measures that hl\Ve been proPQsed are as follows:
1. Amend the Federal reserve law directing the Federal reserve system to
use all its monetary and er-edit powers to maint;aiI;l a stable price level.. We have
already explained what these powers are. To make its efforts. more effective
the reserve system shauld be directed to, take· the public into its confidence,
so that instead of ita moves qeing shrouded in rpystery as is often the case
now, the public will understand just wha,t Jt is trying to do and why•. ·
2. Amend the Federal reserve act to grant the following additional· powers:
(a) To issue Federal rese;rve notes of its own volition against Government
;
bonds in times' of emergency.
( b) To broaden the redlscount ellgibility rules.
(c) T.o raise or ,lower the-reserve requirements·-0f member banks.
(d) To raise or lower the gold reserve requirements of .the Federal reserve
banks.
( e > To raise or lower the price of gold.
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3. Amend the Federal reserve act to direct the Federal reserve system to
expand credit steadily at the rate of 4 per cent a year in order to keep pace
with the expansion of business.
4. Hold an international conference to devise and put into operation plans
to maintain world monetary stability,
·
Of these the first is the most impartant. Once we have adopted a definite
national policy of stabilizing the purchasing power of money, international
action will follow as a matter of course. It will be some time before the
stabilizing efforts of the Federal reserve system will be endangered by lack of
gold, and before that time we may reasonably hope for international action to
conserve gold and use it mainly for the settlement of international balances,
or to adopt some practical substitute for the gold standard. The recent abandonment of the gold standard by England, Japan, and 13 other nations shows
how rapidly events are moving to force the world to find a solution of its
monetary problems.
It is highly important that the principles of (1) above be enacted into law at
the present session of Congress. It would be very desirable if part or all of
the recommendations in (2) could also be written into the law.
Humanity has been enslaved long enough by an unstable measure of value,
resulting in misery and distress second only. to that of war. Once we apply to
our monetary system the same intelligence that- has solved our production
problems, another depression like the present one will have become impossible.
QUESTIONS, AND ANSWERS
'
Q. Why is business always bad when
prices are falling?-A. No sane person
will buy except for immediate necessities when the price is likely to be lower
next week. Merchants and manufacturers buy as little as possible when they
face the prospect of having to resell at a loss.
Q. What happens when money and credit expand faster than production?A. Speculation, increasing prices, complaints about the high cost of living, and
a tendency to unbalanced production, with overexpansion of production facilities and temporary overproduction of some commodities.
·
Q. What happens when the expansion of money and credit fails to keep pace
with production ?-A. Production slows up, prices fall, men are thrown out of
work, and business enterprise and relationships are thrown out of balance.
Q; What happens when the volume of money and credit is maintained in
proper proportion to production ?--'A. Producers and merchandisers can plan
for the future with confidence. From 1907 to 1915 the volume of credit expanded
at almost exactly the same rate as the growth in production. Prices were
stable and business was good.
Q. Does not stabilizing the price level mean price fixing, and has not Government price fixing always been a failure?-A. Stabilizing the average wholesale commodity price level does nf:>t mean price fixing. The price of each individual commodity would be free to :fluctuate up and down in accordance with
the supply of that commodity and the demand for it. When the average price
level is stable, if the price of any one commodity falls because of oversupply
or failing demand, capital and labor will promptly shift to some other field
sufficiently to restore the balance. But when prices of all commodities are
falling, capital and labor have nowhere to go. So capital goes into hiding and
labor goes into the bread line, and a long period of hard times ensues. Such
a state of affairs is due to insufficient money and credit, and can be prevented
by keeping the supply of money and credit in proper relation to the needs
of business.
·
Q. Is there not more money in circulation now than in 1929?-A. In November, 1931, total money in circulation was $44.46 per capita, as compared with
$37.72 per capita the same month in 1929.
Q. Then, how can. you say that our present troubles are due to a shortage
of money?-A. "Money in circulation" is an uncertain phrase. It means
money outstanding, but money behind the clock and In safety-deposit boxes
is not in circulation. The a.mount of our money held abroad also varies
greatly. Bank deposits subject to check are the same as money for all practical purposes, and are about ten times greater in volume. When we speak
of the volume of money we mean the total volume of money and bank deposits
subject to check. From 80 to 90 per cent of. bank deposits are created by credit
extended by banks, which always shrinks whe.n confidence declines.
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It is the efrective supply of money and credit that counts, and money ls. etfectfve only in proportion as it works. The actual circulation of money and
credit is only 40 per cent as rapid now as two years ago, and it is therefore
only 40 per cent as effective in creating purchasing power.
Q. How much monetary gold is there in. the world ?-A. About $11,625,000,000
worth. This gold was held as follows June SO, 1931 :
Amount
United States••••••••••.•••••••••••••••••••••••••••••••••••••••••••••••••••••• $4, 956, 000, 000
France...•••••••••••••.•••••••..••••••••••••••••••••••••••••.••••••••••••••••• 2,212,000, 000
England ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••
i~::ny·.::::::::::::::::::::::::::::::::::::::::: ::::::::::::::::::::::::::
ill other countries •••••••••••••••••••••••••••••••••••••••••••••••••••••••.•••••
793, 000, 000
339, 000, 000
262, 000, 000
3, 063, 000, 000
Per cent
or total
42. 7
19.0
6.8
2.9
2.3
26.3
Q. How rapidly is the world's supply of monetary gold increasing?-A. Less
than 2 per cent a year. The increase in monetary gold falls more than 50
per cent._short of keeping pace with the growth of production. That means
that we must do one of the following things:
1. Submit to a steadily declining price level for a long period of years.
2. Build up a still larger credit structure on the gold base.
3. Abandon the gold standard.
Q. Are new gold discoveries probable?-A. Not large ones. The world has
been thoroughly explored for gold. Some chemist may at any time discover
a practical method of transmuting other elements irito gold. Such a discovery
would force the world to abandon the gold standard. Once gold could be
manufactured, it would become unsuitable for money because there would be
no limit to its quantity.
Q. What is meant by the gold standard ?-A. A country which is fully on the
gold standard buys and sells gold on demand through its treasury or its
central bank, it redeems its currency in gold on demand, and sells foreign
exchange freely on demand, payable in gold abroad.
Q. What is the gold bullion standard ?-A. A country which is on the gold
bullion standard does not mint and circulate gold coins. It keeps its gold in
bullion form, which it buys and sells freely, and with which it will redeem its
currency on demand. It also sells foreign exchange on demand.
Q. What is meant by the gold exchange standard ?-A. A country which is on
the gold exchange standard does not redeem its currency with gold, nor does
it buy and sell gold on demand. It sells foreign exchange, payable in gold
abroad, freely in exchange for currency or bank checks.
Q. What is the reason for the gold standard ?-A. It Is an automatic regulator
of finance. It imposes a limit on the quantity of money and credit. When
a nation continues to spend more than its revenue, balancing its budget by
borrowing, or when it lives beyond its means by importing more than It exports,
gold moves from it to other countries. This loss of gold· serves both as a
warning and as a means of ··forcing deflation and economy. Without more
confidence among nations than at present, gold is the only satisfactory method
of settling international trade balances.
Q. What has caused so large a part of the world's gold to move to France
and the United States?-A. (1) Lack of confidence in other nations. People
and nations feel that their money is safer in France or the United States. (2)
"Management" of the gold supply. Since the war no nation has allowed the
gold standard to operate freely. It bas been managed In all sorts of ways, until
some economists contend that we no longer have a gold standard at all, but a
"bankers' standard."
At times during the past year the United States has had more gold than the
total amount of outstanding currency. If this gold had been permitted to make
Its influence felt normally, it would have caused such a marked expansion o~
currency and credit as to have raised prices to twice the present level. Prices
would not actually have gone that high, because as soon as they reached a
certain point, the greater buying powel'. of gold abroad would have caused us
to lose part of our supply.
.
·
When gold is allowed to work automatically it _seeks its own level, distributing itself among the gold standard nations and keeping world prices in such
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adjustment among the nations ·that world commerce can proceed on a normal
basis.
· The managed gold standard or the "bankers'i standard" interferes with this,
causing excessive accumulation of gold in some countries and a serious shortage
in others, and seriously disrupting world traqe.
Q. Why did England abandon the gold' standard ?-A. To keep from losing
all its gold. All European countries abandoned the gold standard during the
World War. When France went back on the gold standard in 1925, it devalued
the franc. The gold value of the franc before the war, in terms of our money;
was 19.3 cents. In going back o~ the gold standard in 1925, France valued its
franc at 3.93 cents in gold. The effect of that was to reduce the burden of its
war indebtedness, incurred on an inflated price level, by 80 per cent.. Relieved
of this excessive debt burden, France was able to balance :its budget, and .bY
avoiding excessive taxation, its business became prosperous and its foreign
trade balances were maintained.
.
When England went back on the gold. standard after the war, it disregarded
the advice of its economists to follow the example of France (and all other
European nations). Instead of devaluing the. pound sterling and thus ·ridding
it~lf of some of its excessive indebtedness, it placed the pound on the pre-war
basis of $4.86 in our money.
The resulting burden of interest, debt payments, and taxes was greater than
it could bear. Business was stagnant, unemployment an<l the dole added to
its difficulties, and maintenance of the pound on a $4.86 basis caused a continued drain on its gold supply.
. .
. To stop from losing all its gold it had to abandon the gold standard and
allow supply and demand to fix the value of the pound. If and when England
goes back on the gold standard, it will probably be with a pound that has been
devalued to something like $3.50.
Q. What happened to prices in England following the recent abandonment
of the gold standard?-A. They advanced. Lard at Liverpool went up from
42 shillings in September to 53 shillings in late December. During the same
period lard at Chicago went down from $7.30 to $5.65.
Q. Since no nation can possibly have enough gold to redeem its promises to
pay gold, what is the advantage of having any gold backing for its currency?A. To act as a check against ihfiation. With no gold cover for its currency,
the value of that currency is determined by its quantity. Experience in coun,
tries like Germany and Austria, which issued currency after the war in such
excessive quantities that it became valueless, has created public fear of currency inflation.
Q. Is there any other method that could be used to help maintain the value
of irredeemable paper money?-A. Yes, by making it full legal tender in payment of taxes, customs and other legal obligations.. The best method, however,
ls to limit its quantity. A rising price level indicates that the quantity is
becoming too great.
Q. How much money is outstanding in the united States.-A.. At the end
of November, 1931, $5,446,142,677 as follows:
Federal reserve notes.. _______________________________________ $2,468,281,989
United States notes__________________________________________
294,447,138
Federal reserve bank notes________________________ _:_________
2, 851, "951
Treasury notes of 1890-------------------------------------1,232,250
National bank notes-------------------------------------'----654, 868, 412
Gold certificates-------------------------------------------927,930,129
Silver certificates____________________________________________
386,701,217
Gold coin___________________________________________________
382,841,032
Silver dollars-------------------------~--------------------33,226,523
Other silver coins----------------------------------------~-271,718,795
117,043,241
Minor coins-------------------------------------~----------Q. Can we not hope to have a more substantial basis for prosperity after
prices have been deflated down to the pre-war level or lower?-A. No. We can
be just as prosperous on a high level as on a low price level, or vice versa.
It is stability of the price level that makes prosperity possible, and changes
in the . price level that throw business out of adjustment and cause hard
times. The only possible reason for lowering the price level is to bring demands
for money and credit more nearly in line with a limited supply of gold.
. It ls unnecessary and a form- of economic insanity, however, to endure the
suffering that would be necessary to cut down the world's business:to fit .a
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STABILIZATION OF COMMUDITt PRIOBS
limited gold supply. It is much better to so1ve the problem by rearing a
larger credit structure on the gold base, adopting a· combination gold and
silver standard, or abandoning the gold standard altogether except for settling
international balances.
Q. Did not the American people !le:flnitely go on record against bimetalism
(combination gold and silver standard) in 1896?-A. No. Both major parties
favored bimetalism in 1896. The Republicans favored it only as a result of in·
ternational agreement. The Democrats favored it for the United ·States regardless of international action. The Republicans won, but England blocked their
attempt to secure bimetalism by international agreement. Discovery of vast
gold fields in the Klondike and South Africa soon afterward relieved the gold
shortage for a generation. We are again facing the results of a gold shortage
similar to that of 1896.
,
Q. What is meant by " symmetalism? " What adtantages are claimed for tt
over bimetalism ?-A. Under bimetnlism a dollar in currency is redeemable in a
given weight of gold or a given weight of silver. Under symmetalism the paper
dollar is redeemable in a given weight of gold and a given weight of silver.
Under bimetalism there is always danger of one metal driving out the other.
That is impossible under symmetalism, for both metals are always used together
for redemption, never one separately.
Q. During the period of 1923-1929, was there any abnormal overproduction of
goods as a whole, or any abnormal falling off in the demand for goods?-A. No.
World production increased at about the normal rate of 8 per cent a year, and
there is no evidence to show that demand was other :than normal.
Q. Did the supply of gold keep pace with this normal increase in production?A. No. Increase in gold output during this period was only about 2 per cent a
year.
Q. What was the effect of the adoption of the gold standard by India in
1927?-A. To put a further strain on the world's gold supply. India drew
$85,000,000 worth of gold out of the world's gold supply in 1928. It threw a
large amount of silver on the market and this, combined with the sale of
50 000,000 ounces of silver by Great Britain as a result of debasing its silver
currency, and the adoption of a partial gold standard'bY the French East Indies,
demoralized the silver market, reduced the price from 65 to SO cents an ounce,
and paralyzed the purchasing power of China, the only large country to remain
on the silver standard.
Q. If gold production has been insufficient from 1924 on, why did pri~ not
drop sooner?-A. A marked credit eXPansion in the United States, together with
large American loans abroad, compensated for this shortage until the latter part
of 1929.
Q. Is not lack of confidence a more serious cause of the depression than lack
of money and credit?-A. Lack of confidence is a result rather than a cause.
There was plenty of confidence in 1929.
Q. Would monetary stability help the mass of people?-A. Yes; monetary
stability is necessary to business stability. Stable .business, proceeding year
after year at a normal rate, permits a wide distribution of national wealth
and income, accompanied by a high standard of living for everyone who is
able and willing to work. Unstable business and wiuely fluctuating prices
permit strong and unscrupulous individuals to accumulate an undue proportion of the national wealth and income. They take advantage of unstable
prices and credit stringency to add to, their possessions until we approach the
undesirable condition of great wealth for the few ~nd poverty for the many.
That is not a sound foundation on which to build the Nation's future.
Q. What is meant by inflation and defiation?-A. Inflation means eXPansion
of money and credit. It is usually used to mean, expansion of money and.
credit beyond the needs of business. The result is a rising price level and
encouragement of speculation. Inflation reduces the buying power of money,
making money less valuable. Debts, taxes, interest;· and other fixed expenses
can be paid more easily because commodity prices are higher. People with fixed
incomes begin to complain about the high cost of ltving, because their money
will buy less, and there are demands for wage an<J salary increases. Rising
prices stimulate business, increase profits, and th8'e Is little unemployment
during such a period. Producers, especially producers of raw materials, find
a ready market at good prices. Inflation generates eonfidence which soon may
become overconfidence. If inflation continues long enough, speculatfon reaches
the point where people forget production and thrift in their desire for speculative profits.
i.
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Ordinarily inflation is bad, though not as bad as deflation. The worst thing
that can be said about it is that if carried too far, it is almost sure to lead
to deflation. In a time like this, when a moderate degree of iwlatlon would
only restore the price level of two years ago, the results would be highly beneficial. Practically all medicine has some undesirable after ,effects, but that ia
no reason for letting the patient continue to su.tfer from the disease. There
is no other way except moderate inflation to end the depression except by a
wearing-ow process that will take years and wear out a lot of the best people
of the country.
Deflation is the reverse of inflation. The supply of money and credit is reduced or fails to expand to match the growth of business. Prices go down
and profits vanish. Business has to be cut down to tit the supply of money
and credit, and unemployment results. This reduces purchasing power still
more, and causes a further shrinkage of business and more unemployment.
Farmers are hit hardest of all, because of the falling demand for their products
and because they are least able to restrict production, control marketing and
resist falling prices
The future value of goods and property of every kind becomes uncertain.
Money is more valuable than anything else, because it is increasing in value
while everything else is decreasing. Everyone wants to turn property into
cash and hoard that cash. Money in a safety deposit box involves no risk, and
when its buying power is increasing, because of falling prices, faster than interest would accumulate, there is no. incentive to put it to use.
Credit shrinks alarmingly. Bankers seek to collect all or part of their outstanding loans, because the property on which those loans are based is shrinking in ve:lue. New loans are made reluctantly. This hoarding of money and
shrinkage of credit cause still further deflation. It is a process which, once
well started, is hard to stop. It can not be stopped by individual action, but
only by action of the Government and the central banking system.
Deflation benefits the creditor, because his interest and payments on· loans
are made in dollars that have greater buying power. When deflation goes so
far as to impair or wipe out the security, however, as in the present instance,
·
many creditors join the class of sufferers from deflation.
The ideal condition is neither inflation nor deflation, but a steady price level
and an unchanging purchasing power of money-an honest dollar.
• Q. What is meant by liquidity?-A. That is a word often heard in times of
deflation. Liquid assets are those which can be turned into cash quickly,
They include listed stock and bonds, and grain and other commodities for which
there is an open market. Basic property such as homes and farms is not liquid
because it can not be turned into cash readily in hard times. While liquid
securities may depreciate in value faster than real estate, the banker always
knows their cash price, and if the margin of security becomes too small, he can
force the borrower to sell them and pay his loan.
When that happens, however, the price is forced down still further, throwing
more loans into distress, forcing more sales, and so on. As a matter of fact, all
prices are based on confidence, and only a small part of the property of the
country can be turned into money. If lack of confidence should extend to the
Government, only gold would be really liquid, and gold payments would be
stopped as soon as any large number of people began to ask for them.
The demand for liquidity is just another name for fear-a selfish fear that
causes a person or an institution to grab for what he can get regardless of the
efl'ect on the general welfare.
·
Q. What is meant by the commodity dollar?-A. That is the term sometimes
used to mean a dollar whose purchasing power is always the same in terms of
average commodity prices.
Q. What is meant by a compensated dollar?-A. One plan that has been advanced to stabilize the commodity price level is to change the weight of gold In
which a dollar is redeemable as often and to the degree necessary to keep the
commodity price level constant in terms of dollars. A dollar redeemable in
varying amounts of gold according to the commodity price level is sometimes
<!tilled a compe;nsated dollar.
Q. What is meant by managed currency?-A. Currency the quantity of which
does not bear any fixed relation to the amount of gold or silver in the eountry,
but the purchasing power of which is kept constant by regulating its amount
in accordance with the commodity price level
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Q,. What is· the Federal reserve sy'stem?..:-A. Twelve independent regional
F-ederal reserve banks and· the Federal Reserve Board at Washington; There
:are··s mehibers of the Federal Reserve'Board-the Secretary of the ·Treasury,
the' Comptroller of the Currency, and 6 members appointed by the President of
the United States for i0-yeat -terms. One of the Six is designated as governor
-And one as vice governor. The ·present governor is Eugene Meyer, jr.
Q; Whd- owns. the Federal ·reserve banks, and how are they controlled?:A. They are owned ·by the member' banks. All national banks mU1t be ment•
hers, and state banks are permitted to become members. Each regional I<'ed-eral reserve bank is governed by nine directors. - Three of these are chosen by
the· Federal Reserve Board and six are elected by the member banks.
Each member bank is; required to carry its reserve funds against deposits with
the ·Federal reserve bank of its district. These reserves are ·3 per cent of
its time deposits and ,from 7 to 10 per cent· of its demand deposits. The re-serve banks must keep a 35 per cent gold reserve against these member bank
l'eserves.
·
Reserve banks may loan to member banks on notes secured by collateral or
,on self-liquidating paper, and may make sueh loans in the form of Federal
reserve notes-new money. Reserve banks must keep a gold reserve of at
least 40 per cent of outstanding Federal reserve notes. Such loans are called
rediscounts. Reserve banks may further restrict the paper eligible to rediscount
when they desire to do so.
·
Q. What is self-liquidating paper?-A. Evidence of debt based on a definite
-commercial or industrial operation 1,vhich will automatically produce the money
to .pay the debt.
Q. What is meant by the "banker standard?"-A. That is a term used by
Prof. Lionel D. Edie, economist, to desigrtate the money system as managed
by the Federal reserve system and other central banks.
Professor Edie points out that the supply of gold is relatively constant,
increasing at a fairly even rate year by year. "The ultimate outcome of a properly working gold standard is to protect the community
from • • * soaring or collapsing price levels."
But he adds that "something has happened to the gold standard which has
destroyed its fundamental supply-function. The link which unites credit
growth to gold has been cut." Central banks "have sanctioned that excessive
variability of crerlit volume which it was the very heart and soul of the gold
standard to prevent."
It is this new condition that Professor Edie calls the " banker standard,"
which term, he says, " emphasizes the responsibility which the central bankers have usurped for themselves. They have arrogated to themselves the right
and power to say during boom times that credit shall be allowed to expand
two or three times as rapidly as the long-term rate of growth either of gold
stocks or of industrial production. And equally they have arrogated· to themselves the right and power to ·say during slump times that· the reserve base of
member bank credit ·shall be allowed to shrink as fast as the mob psychology of
·a frightened community of private hankers dictates.
" This banker standard has given the world the most unstable peace-time
monetary structure and price level that the world has had in the past century.
" It is useless to pretend that the gold standard can endure under these
circumstances. The banker standard is killing it."
Q. What is meant by the "production standard "?-A. That term is used by
Professor Edie to describe a system which he recommends of expanding credit
steadily year after year in the same ratio as the increase in production-,ust
about 4 per cent a year. In boom times credit is now expanded much more
rapidly than that, and in times of depression much less rapidly or is actually
contracted. A steady expansion of credit at the rate of 4 per cent a year would
do much to prevent booms and depressions, in the opinion of Professor Edie
and a number of other leading economists.
In 1920, for instance, Federal reserve rediscounts reached a total of $2, 780,000,000 and then shrunk to $396,000,000 during the depression which followed.
The peak of rediscounts in 1929 was $1,096,000,000, followed by a shrinkage to
$149,000,000. With credit· volume as unstable as that, it is no wonder that
price levels fluctuate so greatly, with consequent disaster to business.·
Q. Would a bill directing the Federal reserve system to use all of its powers
to restore prices to the 1926 level result· in corn prices going, to where they
were at that time?-A. No money bill can affect the price of any individual
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product, except in so far. as :it affects- all products;- It is conceivable, for: in.stance, that the general price level might be restored to the 1926 level and com
prices· remairi - ilt: 40 :cents li · bushel in case we h&ve some exceedingly• large
corn crops. On the other band, corn prices might be relatively better than they
were in_ 1926. No.thing can be done through the money system to cause agricultural prices to advance relative to other prices. This part. of. the agrlcul•
tural program must be tackled through cooperative endeavor, .systematic
control of· acreage; the equalization fee or - some other scheme, which will
effectively control production, storage, and selling.
SOME COMMENTS
Carl Snyder, statistician, New York Federal Reserve Bank: "It seems a
blind fatuity to trust the smooth working of this vast and magnificent engine
of modern industry to the chance forces of production.or maldistribution either
of credit or of go}d. Surely we can not permit the fortunes of the nations,
their happiness and welfare, to be left to the caprice of finding new gold fields
in South Africa or ·California, or conversely, to their inevitable exhaustion.
We may look forward, I hope, to the time when the scientific organization of
currency and credit will be deemed as essential as the scientific organization
of industry itself.
" Let us hasten the day ; for the world-wide disorganization which is now so
vividly before us seems evidence enough that, as in the long ages, gold, not
science, is still the arbiter of economic destiny."
J_phn R. Commons, University of Wisconsin: "Our own huge war debt has
been reduced about one-third, but if we consider the fall in prices since 1920,
the burden of the remaining two-thirds on ta:iqiayers is greater than was the
whole burden at the prices of 1920."
George F. Warren, Cornell University: "Extended studies of the gold question by the League of Nations show that over a long period of time, .when
monetary stocks of gold in the world have increased at the rate of 3.1 per cent
per year compounded, commodity prices have been stable. For over a century
prices have fallen when monetary gold has increased less rapidly than 3.1 per
cent, and prices have risen whenever gold stocks have risen more rapidly."
Herbert Hoover (-1921) : "There is no economic failure so terrible in its
import as that of a country possessing a surplus of every necessity of life in
which numbers, willing and anxious to work, are deprived of those necessities.
It simply can not be if our moral and economic system is to survive. * * •
" What our people wish is the opportunity to earn their daily bread, and
surely in a country with its warehouses bursting with surpluses of food, of
clothing, and with its mines capable of indefinite production of fuel, with
sufficient housing for comfort and health, we possess the intelligence to find
the solution. Without it our whole system is open to serious charges of
failure."
Daniel Willard, president Baltimore & Ohio Railway: " The mere existence
of the (unemployment) problem presents a serious challenge to our economic
system." After discussing our natural and human resources, our productive
capacity, and our surpluses, he added :
"And with all this surplus of wealth and resources, we h,ave millions, so ft is
said, in dire need of food and clothing-in short, more of everything to eat and
wear than we can possible use and at the same time millions of human beings
hungry and cold. That is another problem, although closely related to the first,
and the two problems together-unemployment and the distribution of re·sources-bring into question the very foundations of our political and economic
system."
·
Sir Josiah Stamp, British economist: "A stable price level is the most bitterly practical of all questions."
Lord D'Abernon, British financier: "The fall in prices which has occurred
is nothing more or less than a rise in the price of currency, or means of payment. If the means of payment had been available in adequate quantity with
adequate dispersion, the general fall in prices would not have occurred."
T. B. Macaulay, president Sun Life Assurance Co. of Canada: " That the
purchasing power of currency depends on the amount of that currency and
currency credits which may be outstanding can no longer be denied."
Claude L. Benner, vice president Continental American Life Insurance Co.:
" I am of the opinion that as long as basic commodity prices remain where they
are at present, there can be no large increase tn business activity."
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STABILIZATION OF COMMODITY PB.ICES
H. G. Wells: "The world requires (that money) must represent absolute11
stable purchasing power."
.E. W. Kemmerel', eeonomist: "The world sooner or later must either learn
how to stabilize the gold standard or devise some other monetary standard to
take its place."
Owen D. Young: "The proper handling of price stability is one of the most
important matters facing the capitalistic system. In it will be found the r!>Ots
of those maladjustments which result in unequal and unfair distribution of
wealth, in unemployment, and other serious problems."
Sir Charles Addis, director, Bank of England: " It is simply intolerable that
we should continue to sit with folded hands while industry and trade throughout the world are becoming the sport of our ineffectual monetary systems. We
must be masters in our own house, the rule1·s, and not the slaves of money."
Lionel D. Edie, economist: "The bankers have frightened everybody, including themselves, away from doing anything."
T. E. Gregory, London School of Economics: " The efl:orts of the politicians
(to end the depression) must be seconded by the central bank&-a concerted
effort must be made, primarily through the financing of budgetary deficits
through central bank credit, to cause a rise in prices."
George N. Peek, Moline, Ill.:" We should have a measure of controlled inflation that debts may be paid with the same size dollar with which they were
incurred, as far as that is possible."
Frank O. Lowden : "All classes now agree that unless there ls an improvement in the general price level there can be no substantial relief from the
unprecedented depression in which we flnd ourselves. The question therefore
is a vital one. We have boasted in the past of our ability to meet new situations
as they arose. To say that nothing can be done in this matter is the counsel of
despair.
" Why not give heed to the· opinions of the long line of eminent economists
who believe that, without any disturbance to our gold standard, we have it
within our power to erase some of the drastic deflation from which we are now
suffering. And that deflation is the greatest in our history and it seems to be
gathering momentum all the time. The decline in bank credit has been more
rapid in recent months than at any time since deflation set in. Unless some way
can be found to check this contraction of credit, thoughtful students fear that
we have by no means yet seen the worst."
AHEIUCAN FARM DUBEAU MONETARY BESOLUTION
The present period of depression and the falling price level has increased the
burden of taxes, interest, debts, and other fixed costs on all producers to an
intolerable degree. It now requires 45 per cent more of all commodities and
70 per cent more of farm commodities to pay these costs than it did a few yeara
ago. The long-continued deflation is crushing farmers, merchants, transportation agencies and all manufacturers except a few most favorably situated, and
has caused a declining price of property to such an extent that it has largely
eliminated equities and is affecting basic seL-urities to such an extent as to
seriously impair the stability of our banking and insurance institutions, thereby
endangering the welfare of the general public. It is causing a lowering of all
wages and salaries, and which must of necessity lower the standard of living
if continued.
The principal cause of this deflation of values is monetary. When the price
of any one commodity falls, many causes may be responsible. When the average price level of all commodities falls with the rapidity of the last few years,
the principal cause is a shortage of money and credit in actual use. Commodity
prices are expressed in this country in terms of dollars. Every purchase and
sale is the exchange of commodities for dollars. When dollars are scarce, it
takes a larger amount of commodities to get them. In other words, money is
at one end of the balance, commodities at the other. Add to the effective supply
of money and prices go up. Reduce the effective supply and prices come down.
The above statements are justified and supported by the incontrovertible evidence coming from the experience of all former depressions.
The problem divides itself into two parts : First, the restoration of the price
level; second, the stabilization of the purchasing power of money.
Two alternatives face farmers and other business interests at this time; the
first is wholesale bankruptcy for farmers, industrialists, transportation agencies,
and mercantile establishments and the further deflation of wages and salaries;
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STABILIZATION OF COMMODITY P~CES
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the second is a rapid rise in the average wholesale commodity price level to I.
point near that at the beginning of the present de:O.ation, thereby restoring confidence and making it possible for individuals. corporations, and governments
to discharge their obligations and to proceed with their undertakings.
All the powers of the Federal reserve system and the Executive officials of
the Federal Government should be used to bring about the restoration of the
price level near the average level at which the present long-time indebtedness
was incurred. The most important of these powers are :
1. Open market purchases of eligible securities.
2. Lowering of rediscount rates.
3. Liberal interpretation of rediscount eligibility rules.
In order to relieve the Federal reserve authorities and other agencies connected therewith from discretionary authority, we recommend and insist that
the Federal reserve law be amended so as to make mandatory the exercise
of these powers so far as possible and to the extent necessary to restore the
average wholesale commodity price level to the point indicated.
Permanent prosperity in this country demands that the dollar be made an
accurate measure _of value--that its purchasing power be always constant.
This means stability of the average wholesale commodity price level instead
of alternate periods of in:0.ation and de:0.ation which are the principal causes
of business uncertainty and depression. Fluctuation in the purchasing power
of the dollar causes serious losses to debtors in periods of deflation and to
creditors in periods of in:O.ation, aJ}d benefits only the speculators.
We recommend .the following action by Congress to stabilize the purchasing
power of money:
1. Direct: the Federal reserve system to use all its powers, following restoration of price level, to stabilize. the purchasing power of money in so far as
possible, using for that purpose all its monetary and credit powers, fl)_cluding
currency and credit control, open-market operation, and changes· in rediscount
rates and in rediscount eligibility rules.
2. Empower and direct the Federal Reserve Board to raise or lower reserve
requirements of the Federal reserve banks and to raise or lower the price Of
gold.
3. Broaden the rediscount eligibility provisions of the· Federal reserve act.
NATIONAL GBANGll JmlOLUTION
The deflation of the past three years bas injured farmers more than any other
class of producers in the country. While the average of all wholesale prices
bas fallen 30 per cent, the average priee of farm products bas fallen 45 per
cent. This means that the burden of debts, most of which were contracted more
than. three years ago, and of which there is estimated to be $11,000,000,000
secured by farm mortgages, bas increased 80 per cent in terms of the products
which farmers selL
In view of this serious situation, we urge· upon the Federal reserve system
and the Federal Govemment to take all steps possible to secure (1) restoration as nearly as may be of the wholesale price average as computed by the
United. States Bureau of Labor Statistics to the level prevailing 1n 1926, or
the average of 1923-1928, and (2) the stabilization of the price level as nearly
as practicable at that Point.
Contributing to tbe!!E! ends, the National Grange reconmiends the following
measures: ·
·
·
1. An increased purchase in large volume of securities 1n the open market by
the Federal reserve banks.
2. Reduction of rediscount rates by the Jl'Mer!ll reserve banks. .
3. Reduction of the legal minimum gold reserve ratios of t~e Federal .reserve
banks to points materia~ly below the present 35 and 40 per cent iegal raf;fos, to
the end that the surplus gold in the United States may. be exported without
endangering the gold standard.
·
·' ·
'
4. An International monetary conference for the ·purpoiie of (a) stabilizing
the gold price of sliver. and ( b) stabmzing the purchasing power of gold ln
terms of the average of. wholesale_ prices of commodities.
BOOKS . ON THlC
:MONll:Y
QUESTION
The Banks and Prosperity. By Lionel D. Edie, published by Harper & Bros.,
New York.
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STABILIZATION OF COMMODITY PRJCES
The Money Illusion. By Irving Fisher, Adelphia, N. Y.
America Weighs Her Gold. By James Harvey Rogers, Yale University Press.
The MacMillan Report. By British Committee on l!'inance and Industry.
His Majesty's Stationery Office, London.
Money. By Foster and Catchings, Houghton & Mifflin, New York.
This booklet has been prepared under the direction of the special committee
of the American Farm Bureau on stabilization of the unit of value. The
members of this committee are as follows :
Ralph Snyder, chairman, president Kansas Farm Bureau.
Charles E. Hearst, pre.:ident Iowa Farm Bureau.
C. R. White, president New York Farm Bureau.
H. A. Wallace, editor Wallace's Farmer.
C. V. Gregory, editor Prairie Farmer.
C. \V. Ramseyer, Member of Congress, Bloomfield, Iowa.
Andrew Shearer, Frankfort, Kans.
Prof. John R. "Commons, University of Wisconsin.
Charles A. Ewing, president National Livestock Marketing Assoctntion.
Mr. O'NEAL. That covers this subject in a very broad way. I would.
say, Mr. Chairman, that last Saturday evening over the National
Broadcasting System I made an appeal to the folks all over the·
Nation on this subject, including a few of the major projects of our
national organization, and I would like to have samples of the reJ>lies
go into the record; or I would like to read them to this subcommittee,
as it will only take a few moments to present the immediate replies
received from 28 States of the Nation, you might say, within 36 hours.
They were mailed from California, mailed from the far South, and
replies have been received from every section on this subject, showing
the earnest desire of the people of the Nation in answer to this appeal
that we be thinking about- this great question; and I would like to
have that go in the record. For the Northeastern r~gion, I think this
is a very typical sample, this wire from Hartford, Conn. :
Speed the day for honest dollar program. Tell committee America's future
wariants this policy. Hold high the torch that rays may light our way.
I have listed the people from whom I have received communications in that section of the country, which shows their vital interest
in the program. Here is a letter from Cornelia, Ga. ~ _
I have just been listening to your talk over the radio. I am much impressed
with what you said, and am going to try and become a member of your organietion. Tell our Georgia Members of Congress to get right when you appear
before them on the 16th. • That we will check their votes, and if they are not
right, that we will soon have an opportunity to get a Member who will back up
the farmer. The business men and bankers' program for legislation has fallen
down.
Here is one from the mid-West, fx:om Elk City, Okla. I thought
that would give you a typical idea of how the folks out there are
thinking about it.
Just listened to your address over the radio. rm in sympathy with the
plan suggested therein to restor.e prosperity to our Nation. It ls the only
feasible plan yet proposed that will accomplish the results desired.
· I hope you will succeed in convincing Congress of the merits of th{s plan.
It seems to me that if our Representatives are sincere in their desire to help
restore prosperity to OUl" Nation, they are intelligent enough to see that there
can, be P.O perman~nt prosperity without an adequate supply of money circulating among the people, and that money can not reach the people unless they
are paid for their labor and for the products of their labor. They must receive
prices that will net them a return. above cost of production. That these prices
must be fixed by an agency in sympathy with the producer as well as the
consumer, and not by a bunch of heartless ~mblers.
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STABILIZATION OF COMMODITY ];'RICES
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Our Government is either hopelessly impotent or wholly out 9f sympathy
with the welfare of the masses. u· it continues to disregard the appeals of
such organizations as you represent, and refuse to pass bills and make laws
that will bring relief from our present calamity and prevent the return of like
conditions, what are we to expect_ from it?
We condemn communism, we abhor disloyalty to our Government, we stand
aghast at the thought of revolution, but what may we expect if our people
continue to starve in this land of plenty-yea, some say· overproduction? We
may lull our consciousness and dismiss the thought with a jest about such
conditions, but it is to be hoped that the seriousness of this matter will dawn
upon those in authoriu before it is too late.
Something will be done. If our Government refuses to act, then the people
will. ·Only a lack of organization, which prevents concerted action, restrains
them from rising en masse and asserting their rights now. Let us hope for
relief from our trusted representatives and -other officials through the channels
of our present organized Government. They can meet the emergency of this
hour if they will. Will they?
Visualize, if you will, millions of our citizens with their backs against the
wall, their wives and children hungry and in rags, their eyes turned toward
Washington, their arms outstretched toward Heaven, praying for relief from
the most demoralizing, unnecessary. depression that ever_ scourged. a people,
suffering with a forbearance born only of a sustained hope that something
will be done to relieve them. If their prayers are unanswered and no relief
comes, despair will supplant hope-then what the consequences will be God only
knows.
God speed you on your mission to interview the congressional committee, and
may they in their wisdom and delegated authority meet the emergency by giving the relief which your suggestion will bring to the ~eople of America.
From Michigan: I have this com·munication :from Michigan, from
the mid-West:
.
Go. before the House committee on March 16 and help them realize. that the
b_ackbone of the Nation is very weak ari.d needs some sort of brace, which. is
needed at once.
_If my support means anything at all, it-~ yours.
And from Sedalia, Mo., I have, this letter :
"0. K. Montreal." Yours of 12th ixstant is only justice. The bank credit
financial :System built np since the· Civil War has eliminated money· and thrown
control of credits into the hands of Morg:an, Mellon, et al. The effect,. ytz:
Our old ~ome place of 205 acres entered in 1853--54 is a summit silt 1011m prj\irie;
oue-hillf virgin soil. Rent for 1931 wa_s less than one-third the average for
24 years. After paying taxes, insurance, and a $75- repair bill, gave a rewainder
of "$2;55 for a year'.s net receipts.; ·many have done· worse. · ·
Seeond effect: We needed $200 rec~nt~y t<> make ·a tr~d~; ~Ii' spite
of the fact we do no~ owe a penny; with town and ()o~ntry.property,
a. few nickels· besides, my daughter and I eoula not get ~t in two' good
Missouri counties without further -endangering the ·credit 6f the
banks, because of Morgan-Mellon _banking laws.
Mr~ HooPER. Mr. Chairman, I ·am iJ1·sympathy, and feel that :we
are all in sympathy with the people who have -written in here/ but
this is not going to help us in the record as to the particular question,
it seems to me. Ou~ht the record to be encumbered with these
messages, or how far 1s it going i
Mr: GoLDSBOROUGH. My thought was that probably Mr.. O'Neal
·
··,
was nearly through with the letters,
Mr. O'NEAL. Mr; Congressman, I have just two more.
Mr. HooPER. I am in sympathy with what v:ou are saying,__ Mr.
O'Neat
·
·
.,,
Mr. O'NEAL. I think Mr. Congressman, that these expressionsMr. HOOPER. I will not object.
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STABILIZATION OP COMMODITY PRICES
Mr. GoLDSBOROUGH. Of course, Mr. O'Neal, you realize that the
Members of Congress are getting hundreds of letters, heart-rending
letters, and-Mr. STRONG. I think he ouiht to put those in.
Mr. HOOPER. I will not obJect.
Mr. STRONG. Mr. Hooper does not object. I think they ought to
go in.
Mr. DISNEY. I am pretty sure that is my attitude.
Mr. GoLDSBOROUGH. There is.no objection to putting them in.
Mr. O'NEAL. There are only two more, and if the Congressman
objects, I will not read any more.
Mr. STRONG. He does not object, Mr. O'Neal.
Mr. O'NEAL. I was just saying, Mr. Congressman, that one of
our greatest Presidents once said: " Public sentiment is everything,"
and my thought was, in giving you this, I would give you an expression of what the folks all over this great Nation are feeling and
thinking. I know how busy you are, but they come from every
section of the Nation.
Mr. GOLDSBOROUGH. I am certain that the Members of Congress,
and certainly every member of this subcommittee, sympathizes with
everything you have said, and everything you have read from those
letters.
Mr. HooPER. No question about that..
Mr. O'NEAL. I have another one, from Centerville, Iowa, as
follows:
Countrywide meeting Appanoose County Farm Bnreau overwhelmingly for
monetary reforms along lines outlined by farm organizations of America.
Wholesale repudiation inevitable without immediate readjustments. Present
conditions are sacrificing the farmer, the backbone of democratie structure, to
a short sighted whollY unfair system. We are behind your efforts 100 per
cent. If administration does not heed dire consequences may follow.
And I also have this last one, from Nebraska City, Nebr.:
I heard your talk over the radio this noon. I have a farm of 120 acres.
lly taxes are $287.70, with com 25 eents per bushel, hogs 8½ cents per pound,
eggs 7 cents per dozen. The farmer ls so flat on his back he can't fight back.
I have seen more than 70 years In Nebraska. I went through the graBBhopper Invasion of 1874-75 and 1876, and some droughts whieh oecurred here,
but they were not to be. compared with this man-made depression. Some one
made this depression to gouge the people.
·
Now, Mr. Chair~&n, I womd. like to have these papers illS8rted
in the :reeord, these· letters that l have read. Others are being
received daily.
Mr. GOLD1oououau. Without objection, they will be included.
(The- papers referred to a.re here printed in full as follows:)
NOBTHIJ:AS'J:DN REGION
HABTFoRD,
l:DwABQ, A. O'N&u.;
President American· Farm Bureau B64eralion,
·
CoNN., March 18, 19S2.
Waall.ington, D. 0.:
da;v for honest-dollar program..
Tell com1nittee America's fUture
warrants tllls policy; Hold high the torch that rays may light our way.
llrs. T. C. W.6.TJCU.
,.Speed the
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Federal Reserve Bank of St. Louis
STABILIZATION OF COMMODITY PRICES
RHODE ISLAND
Cornelius F. Riley, R. F. D. No. 1, Westerly.
:MASSAOHUSl!lTTS
James A. Gile, P. 0. box 211, Haverhill.
NEW YORK
Robert E. Moody, Rushville.
Alfred Ilsley, Castile.
Harry Bailey, 207 West Sixty-sixth Street, New York City.
Herbert M. Van Voorhis, 264 Van Ness Street, Newburgh.
William V. Stewart, Canister.
Mrs. Catharine M. Stewart, Oanister.
Miss Marjorie E. Stewart, Canister.
A. W. Hamm, Lakewood.
S. J. Carson, secretary Cayuga County Farm Bureau, King Ferry.
G. B. Fassett, Albion.
N. A. Fassett, Albion.
A. D. Fassett, Albion.
Lewis E. Child, Philadelphia.
Marion F. 0stiom, 162 West Main Street, Middletown.
Charles L. Noble, Clyde.
James McGuire, chairman Genesee County Farm Bureau, South Byron.
A. J. Benning, Lyons.
John W. Totterdale, Stafford.
Samilla Love Jameson, Princes Bay, Staten Island.
Glenn T. Carter, Marathon.
DELAWARE
H. A. Shock, master Seneca County Pomona Grange.
H. C. Richardson, Wyoming.
NEW JERSEY
George W. O'Neill, 157 Quitman Street, Newark.
Mr. and Mrs. Milton C. Creamer, route 6, Bridgeton.
John W. Vohman, Jamesburg.
H.J. Hambrock, Toms River.
Edmund Shimp, Hancocks Bridge.
PENNSYLVANIA
William Roulston, 6218 Dickens Avenue, Philadelphia.
Walter E. Seely, Nescopeck.
Peter A. Graver, route 2, Bath.
Lee Francis. Lybarger, 510 Chestnut Street, Miffl,inburg.
Edw. S. Casey, Audubon.
F. B. Eshleman, Landisville.
Dell R. Lemmon, North Girard.
G. H. McCarthy, route 5, Lancaster.
Mrs. G. W. McCarthy, route 5, Lancaster.
:MARYLAND
Eugene Sponseller, Frederick.
Dr. S. B. Hendrickson, Lutherville.
H. C. Tunis, St. Michael.
William E. Sanger, Cordova.
E. Thomas Massey, president Kent County Farm Bureau, Chestertow:Q.
J. Wilson Lard, president Howard County Farm Bureau, Ellicott dity.
Wm. G. S. Rosin, Worton.
DISTRICT OF COLUMBIA
Violet Thonvaith, Washington.
111442-32-PT 1 - 3
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29
80
NORTH' CAROLINA
Clarence Poe, president and editor Progressive Farmer, Raleigh.
·
M. Malloy, Asheville.
CONNECTICUT
l\fr. and Mrs. George W. Wilcke, 173 Remington Street, Bridgeport.
Joseph Watson, Hazardville.
Sophia C. Watson, Hazardville.
Robert J. Hawthorne, Hazardville.
Leland R. Hawthorne, Hazardville.
Clara E. Hawthorne, Hazardville.
Mildred B., Hawthorne_, Hazardville.
NEW HAMPSHIRE
Howard T. Moulton, Hampton Falls.
M. W. Moulton, Hampton Falls.
SOUTHERN
REGION
CORNELIA, GA., March 12. 1932.
President Enw ARD A. O'NEAL,
Amerioan Farm Bureau Federation, Chicago, Ill.
DEAR Srn: I have just been listening to your talk over the radio. I am much
impressed with what you said and am going to try and become a member of
your organization.
Tell our Georgia Members of Congress to get right when you appear before
them on the 16th; that we will check their votes and, if they are not right,
that we will soon have an opportunity to get a Member who will back up the
farmer. The business men and bankers' program for legislation has fallen
down.
Sincerely yours,
R.H. BLACK.
GEORGIA
W. C. Moore, Oak Hill, Decatur.
FLORIDA
E. T. Smith, 2121 Perry Street, Jacksonville.·
G. A. Brauer, 1826 25th Street, South, St. Petersburg.
M. White, Jacksonville.
J. J. L. Phillips, Homestead.
A. C. Belmont, box 95, Station A, St. Petersburg.
Burr Gunsaullus, 3521 Iri,;, Street, St. Petersburg.
Mrs. Edith C. Worley, Orange Park.
ALABAMA'
0. B. Myrick, Cullman.
J. D. and Mrs. Giles, Selma, route 2.
W. D. Prier, 4023 Fourth Avenue South, Birmingham.
J. E. Orman, Russellville.
C. J. Higgins, Cullman.
C. L. Phillips, Phil Campbell
S. A. Burns, Montgomery.
MISSISSIPPI
T. S .. Johnston,_ Nesbitt.
'
TENNESS1':E
George M. Brasfield, Trenton;
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Federal Reserve Bank of St. Louis
STABILIZATION OF OOM:M:ODlTY PB.ICES
31
KENTUCKY
T. S. Wright, West Point.
Eva Carrigan, Irvington.
James S. White and family, Campbellsville.
F. B. Haskell, Erlanger.
LOUISIANA
B. L. Orvis, Welsh.
E. A.
ELK CITY, OKLA., March 1'2, 193! •.
O'NEAL,
President Am.erican Farm Bureau Federation,
Chicago,
ni.
DEAR Sm: Just listened to your address over the radio. I'm in sympathy
with the plan suggested therein to restore prosperity to our nation. It is the
only feasible plan yet proposed that will accomplish the results desired.
I hope you will succeed in convincing Congress of the merits of this plan.
It seems to me that if our Representatives are sincere in their desire to help
restore prosperity to our nation, they are intelligent enough to see that there
can be no permanent prosperity without an adequate supply of money circulating among the people, and that money can not reach the people unless they
are paid for their labor and for the products of their labor. They must
receive prices thnt will net them a return above cost of production. That
these prices mui;t be fixed by an agency in sympathy with the producer as
well as the consumer, and not by a bunch of heartless gamblers.
Our Government is either hopelessly impotent, or wholly out of sympathy
with the welfare of the masses.. If it continues to disregard the appeals of
such organizations as you represent, and refuse to pass bills and make laws
that will bring relief from our present calamity and prevent the return of like
conditions, what are we to expect from it?
We condemn communism, we abhor disloyalty to our Government, we stand
aghast at the thought of revolution, but what may we expect if our people
continue to starve in this land of plenty-yea, some say overproduction. We
may lull our consciousness and dismiss the thought with a jest about such
conditions, but it is to be hoped that the seriousness of this matter will dawn
upon those in authority before it is too late.
Something will be done. If our Government refuses to act, then the people
will. Only a lack of organization, which prevents concerted action restrains
them from rising en masse and asserting their rights 1;1ow. Let us hope for
relief from our trusted Representatives and other officials, through the channels
of our present organized Government. They can meet the emergency of this
hour if they will. Will they?
Visualize, if you will, mlllions of our citizens, with their backs against the
wall, their wives and children hungry and in rags, their eyes turned toward
Washington, their arms outstretched toward heaven, praying for relief from
the most demoralizing unnecessary depression that ever scourged a people,
suffering with a forbearance born only of a sustained hope that something
will be done to relieve them. If their prayers are unanswered, and no relief
comes, despair will supplant hope-then what the consequences will be God
only knows.
God speed you on your mission to interview the congressional committee and
may they, in their wisdom and delegated authority, meet the emergency by
giving the relief which your suggestion will bring to the people of America.
Yours truly,
J. C. WEAVER.
OKLAHOMA
Mrs. P.H. Rutherford, Cordell.
Mrs. Bettie H. Cox, box 701, Duncan.
Leo Barnett, Oklahoma City, 607 West Fifth Street.
Claud Reese, Fairview.
W. M. Stunkard, R. F. D. No. 2, Tulsa.
J. H. Carney, Cashion.
Mrs. Winnie W. Carney, Cashion.
Miss Orvilla F. Walton, Cashion.
H. C. Reagan, Nicoma Park.
Thad Slaght, Hitchcock.
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32
STABILIZATION OF COMMODITY PRWES
ARKANSAS
J. E. ·singleton, Bigelow.
L. E. Morlan, Hot Springs.
R. W. Boucher, Springdale.
TEXAS
William Kuykendall, Cotulla.
H. A. Willson, Cotulla.
Mrs. J. H. Long, 510 North Tancahua, Corpus Christi.
H. C. Harrington, Chillicothe.
W. V. Robinson, box 499, Temple.
Peter Harton, Danevang.
Charles P. Luck, 911 West Eleventh Street, Austin.
J. C. Wilson, 308 Payne Avenue, Houston.
George A. Mawman, 1418 Seventeenth Street, Wichita Falls.
Mrs. Bertha D. Johnson, 415 Park Place, Austin.
Mrs. Wm. R. Nash, East Columbia.
Mrs. Browning Grace, East Columbia.
H. D. Thode, Clegg.
MIDWESTERN REGION
FERNDALE, MICH., March 12, 1932.
PRESIDENT
AMERICAN FARM BUREAU FEDERATION,
Chicago, Ill.
DEAR Sm: Go I.Jefore the House committee on l\Iarch 16 and help them realize
that the backbone of the Nation is Yery weak and needs some sort of brace,
which is needed at once.
If my support means anything at all, it is yours.
Sincerely yours,
ROBERT E. BELL.
P. S.-There are five other backers of you in my family.
MICHIGAN
Mrs. Josephine Quinet, 8125 Carlin Avenue, Detroit.
Harry Rogers, Dundee.
Alfred Vincent, Durand.
Mrs. William J. Tilby, 8197 Alpine, Detroit.
H. J. Clabuesch, manager Cooperative Elevator Co., Pigeon.
James C. Price, 417 North Fayette Street, Saginaw.
Joseph Skoda, Brighton.
Harry M. Thorne, 4168 Helen Avenue, Detroit.
Mrs. Grace S. Godfrey, Lansing.
D. V. Mitchell, route 2, Farmington:
Evelyn Mitchell, route 2, Farmington.
Mr. and Mrs. S. Strobridge, Boyne City.
N. J. Biddle, 5951 Fischer Avenue, Detroit.
John Engle, route 2, Imlay City.
Warren E. Hobson, Batavia.
F. H. Teerance, Temperance.
J. M. Conlin, Temperance.
Gilbert Scott, Hastings.
Art Heath, Milan.
Don C. Lane, 1915. East Ganson, Jackson.
Ralph H. Bach, president Hillsdale County Farm Bureau, IDllsdale.
R. V. Beardslee, Owosso.
Fern L. Beardslee, Owosso.
B. L. Bird, Holly.
R. R. Lyon, 2639 Liddlesdale Avenue, Detroit.
E. W. Irwin, route 2, Saginaw.
Jesse A. Coller, R. F. D. No. 2, Snover,
C. B. Cook, Owosso.
Charles A. Scott, Hastings.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
33
STABILIZATION OF COMMODITY PRICES
Mr. and Mrs. Charles Kernkamp, St. Paul Park.
A. O. Garley, 426 North Pierce Street, St. Paul.
J. E. Martin, 506 Phoenix Building, Minneapolis.
Mr. and Mrs. S. R. Brown, 820 South Seventy-first Avenue, West Duluth.
Mr. and Mrs. F. Brass, 8886, Twenty-third Avenue South, Minneapolis.
Robin A. Moore, Moorewood Farm, Carlton.
Mrs. Maude H. Moore, Moorewood Farm, Carlton.
R. H. Radke, Hastings.
Oscar Schebloom, 1070 Seventeenth Avenue SE., Minneapolis.
Clarence Tollifson, Ashby.
J. S. Jones, secretary Minnesota Farm Bureau, 812 Old Capitol Building,
St. Paul.
Montgomery E. Drake, 2686 Fifth Avenue South, Minneapolis.
W. C. Blandatt, Angus Hotel, St. Paul.
-WISCONSIN
H. 0. Bigelow, 1215 Williamson Street, Madison.
Henry Stillman, route 8, box 18, Ladysmith.
SOUTH DAKOTA
George B. Kennard, secretary South Dakota Farm Bureau Federation, Huron.
J. T. Lothrop, Mitchell.
SEDALIA, Mo., February LS, 198!.
PBESIDl!lNT AMERICAN FARM BUREAU FEDERATION,
Chicago, IlZ.
Dl!lAB Sm: 0. K. Montreal. Yours of 12th instant is only justice. The bank
credit financial system built up since the Civil War has eliminated money and
thrown control of credits into the hands of Morgan-Mellon et al. The effect,
viz, our old home place of 205 acres entered in 1853--o4 is a Summit silt loam
prairie, one-half virgin soil. Rent for 1981 was less than one-third the average
for 24 years. After paying taxes. insurance, and a $75 repair bill, gave a
remainder of $2.55 for a year's net receipts ; many have done worse.
Second effect: We needed $200 recently to make a trade. In spite of t'1e
fact we do not owe a penny, with town and country property, a few nickels
besides, my daughter and I could· not get it in two good Missouri counties without further endangering the credit of the banks. Because of Morgan-Mellon
banking laws.
·
Very truly,
JAMES
MISSOURI
H. G. Geyer, Neosho.
T. P. Manne!, Moberly.
H.J. Heter, 2925 Baltimore Avenue, Kansas City.
R.H. Wotyen, 6444 South West, St. Louis.
L. R. Lawrence, Harrisonville.
George A. Colin, Belton.
C. J. Rothermich, St. Charles.
Mr. and Mrs. A. G. Adams, R. F. D. No. 1, Revere.
OHIO
H. D. Hopkins, Tiffin.
F. Clair Boothby, 202 East O'Connor Avenue, Lima
R. R. Adams, route 5, Fostoria.
H. H. Lesher, Columbiana.
Paul F. Frank, Crestline.
Oby. D. Garn, Gibsonburg.
Fred A. Schulz, Piqua.
E. D. McLaughlin, route 1, Forest.
George W. Taylor, Cincinnati.
Mr. and Mrs. Everett J. Starbuck, Wilmington.
Albert J. Livezey, Barnesville.
A. E. Osbot"ne. 8 Findley Avenue, Zanesville.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
M,
WARD.
STiln~rzATION Ol!' COMMODITY PRICES
E. G. Brueckner, 6843 East· Britton Avenue, Cincinnati.
E.W. Roush, secretary Sandusky County Farm Bureau, Lindsey.
·
·
G. W. Meyer, route 4, Clyde.
Mr. and Mrs. H._ L. McPherson, rural route 8, Dayton.
Mr. and Mrs. Irvin Coy, rural route 8, Dayton.
Clarence Mowry, R. F. D. No. 7, Mansfield.
Arthur H. Deeks, West Dover.
Marie R. Buescher, rural route No. 5, Batavia.
Arthur J. Stone, Harrison.
Clarence J. Burchfield, R. F. D. 2, Maumee.
Mr. and Mrs. A. Verne Joslin, 1217 Yarmouth Avenue, Cincinnati.
F. E. Stoeckl, 4279 Webster, Deer Park.
T. Stoeckl, 4279 Webster, Deer Park.
Charles Stoeckl, 4279 Webster, Deer Park.
John Rosenzweig, rural route No. 5, Batavia.
J. W. Ander!!On, 548 East High Avenue, Bellefontaine.
D. W. Dailey, Maumee.
Mrs. Sara Smithman, 250 North .Miami, West Milton.
Bernard Desch, Chickasaw.
·
Mrs. Leah B. Fawcett, Novelty.
John W. Fawcett, Novelty.
C. J.. Windon, Pandora,
INDIANA
Edw. E. Hiatt, route 3, Greentown.
_
_
H. Barnard, president Union County Farm Bureau Cooperative Association,
Liberty.
·
· H. R. Atcheson, Scottsburg.
Mabel G. Spencer, Idayille.
Mr. and Mrs. Edw. Stahl, Newburg.
F. N. Wilsoµ, route 1, Pleasant Lake.
Robert Blank, rural route 31, Corydon.
A. A. Higdon, Scottsburg.
Jobn S. Mitchell, Windfall.
R, A. Baker, manager Steuben County Fari;n Bureau Cooperative Association
(Inc.), Angola.
Mathias Ritter, rurai route No. 2, Jeffersonville.
L. C. Frinck, route 2, Ossian.
Harry Bell, secretary Steuben County Farm Bureau, Angola.
Bayard Taylor, route 2, Lawrenceburg.
Mrs. Bert DeLong, Plainfield.
L. S. Ratliff, Spiceland.
Henry F. Meyer, chairman Lawrenceburg Township, Dearborn .County, Farm
Bureau, Aurora.
F. A. Addison, rural route No. 3, Carthage.
H. A. Addison, rural route No. 3, Carthage.
G.D. Addison, rural route No. 3, Carthage.
Byron Shupp, treasurer Steuben County Farm Bureau, Angola.
F. L. Spencer, Idaville.
A. N. York, Marion.
ILLINOIS
H. T. Lauterback, Itasca~
Mrs. Henry J. Mies, president Illinois Home Bureau Federation, 220 West.
Henry Street, Pontiac.
Emory C; Maxwell, 210 West Eleventh Street, Mount Carmel.
W. J. Swayer, president Lake County Farm Bureau, Grayslake.
G. M. Diehl, Mount Morris.
Eldon Diehl, Mount Morris.
Mr. and Mrs. J. C. Shores, Atlanta.
Stanley W. Porter, Elgin.
KANSAS
A. T. Holsbury, Willsville.
Dora B. Mctaggart, Independence.
John J. Freeley, 135 North Yale, Wichita.
Fred Arnett, Arkansas City.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
STABILIZATION -oF .COMMODITY PRICES
35
Mr. and Mrs. Sylvester Baringer, Westphalia.
Wilbur M. Jones, Lenexa.
Cyrus Lincoln Bennett, sr., Johnson.
John Lortscher, Fairview.
H. A. Kunkle, Ellsworth.
Mrs. C. J. Allen, route 2, Liberty.
Newton H. McKinnie, route 4, B~loit.
J. R. Senefl', route 4, Ottawa.
CENTERVILLE, IowA, March 14, 1982;
EDWARD A. O'NEAL,
President .d.merican Farm Bureau Federation,.
·
· Munsey Building, Washington, D. 0.
County-wide meeting Appanoose County Far111 · Bure.au -overwhelmingly for
monetary reforms along lines outlined by; farm . organizations of America.
Wholesale repudiation inevitable without immejliate readj:ustments. Present
ieotiditions are sacrificing the farm.E:r, the backbone of democratic structure,- to
a short-sighted, wholly unfair system. We are behind your efforts 100 per. cent.
If administration does not heed, dire consequences: may follow.
PAUL B. STBICKLEB,
President .d.pPanoose Oounty Farm Burea.u.
IOWA
Fred Otto, president Muscatine County Farm Bureau, Muscatine.
Edward Dohrmann, Chapin.
G. T. Schlenker, president Polk County Farm Bureau, route 4, Des Moines.
C. G. Heidman, secretary Polk County Farm Bureau, Granger.
C. W. Clark, president cooperative extension work in agriculture and· home
economics, Fairfield.
.
F. C. Duffield, president Davis County Farm Bureau, Bloomfield.
Lester Hofl'a, Grundy County Farm Bureau, Grundy Center.
Mrs. Louis White, Marion.
0. E. Erickson, president Pocahontas County Farm Bureau, Pocahontas;
C. H. Thompson, County agent cooperative extension work, Le Mars.
R. L. Weidauer, director Plymouth County Farm Bureau, Le Mars.
Albert Lundgren, director PlymJ>Uth County Farm. Bureau, Le Mars.
C. H. Mamman, director Plymouth' County Farm Bureau, Le Mars.
R. P. Krause; director Plymouth County Farm Bureau, Hinton.
· Bernard Lucken, director Plymouth County Fai:-m Bureau, Akron.
Herbert A. Johnson, director Plymouth County Farm Bureau, Akron.
Andrew Bogh, director Plymouth County Farm Bureau, Le Mars.
William F. Foley, director Plymouth County Farm Bureau, Le Mars.
N. H. Majires, director Plymouth County Farm Bureau, Le Mars.
George Sitzmann, director Plymouth County Farm Bureau, Kingsley.
W. G. Anderson, director Plymouth County Farm Bureau; Remsen.
Leo J. Sitzmann, director Plymouth County Farm Bureau, Kingsley.
Will Berger, director Plymouth County Farm Bureau, Hinton.
Dewey Bender, director Plymouth County Farm Bureau, Hinton.
George V. Parlik, director Plymouth County Farm Bureau, Le Mars.
W. E. Vogel, president Adams County Farm Bureau, Corning.
Reuben N. Bergquist, Council Bluffs.
Arno R. Vanhurann,. Council Bluffs.
Gus Swenson, · director Fairfield Township Fa_rm Bureau of Buena Vista
County, Albert City.
·
Fay Galbraith, secretary Fairfield Township Farm Bureau of Buena Vista
County, Albert City.
Olay County Farm Bureau, Spencer.
C. W. Brobeil, president Sac County Farm Bureau, Sac City.
Erlin Lomen, president Winneshiek County Farm Bureau, Decorah.
H. F. Pitstick, president Buena Vista County-Farm _Bureau, Storm Lake.
A. B. Kline, president Benton County Farm Bureau; Vinton.
Mrs. Raymond Sayre, county chairman Farm ·women of Warren County,
Indianola.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
36
STABILIZATION' OF COMMODITY PRICES
Willlam H. Mast, route 8, Davenport.
G. E. Sauerbry, president Fayette County Farm Bureau, Fayette.
Mr. and Mrs. R. C. Wood, Traer.
R. B. Blinks, president Linn County Farm Bureau, Marion.
Lillian Rogers, Council Bluffs.
Idella Bakke, Council Bluffs.
Ben Niewendorp, Sanborn.
S. Hootman, Woodburn.
E. H. Adams, Quimby.
.
0. J. De Vault, R. F. D. No. 2, Earlham.
A. P. Llewellyn, Waukee.
Mr. and Mrs. Joe Lawton, Lewis.
Mr. and Mrs. S. H. Schroeder, Holstein.
Carroll G. Carson, president Winnebago County Farm Bureau, Forest City.
Mr. and Mrs. I. S. Pearson, Springville.
E. Shotwell, Mount Vernon ..
Mr. and Mrs. Elmer Rosa, Ossian.
R. A. Grove, Rockwell City.
Iowa Farm Bureau Federation, 805 National Valley Bank Building, Des
Moines.
Roy F. 0. O'Donnell, Des Moines.
Frank A. Youngberg, Eddyville.
Paul B. Strickler, Centerville.
William M. Smith, 2885 Army Post Road, Des Moines.
Mrs. Brownlie Graham, Brooklyn.
·
M. Gullickson, president Worth County Farm Bureau, Northwood.
J. J. Akre, Decorah.
J .. P. Hansen, Otranto.
R. L. Blackwood, Newton.
M. G. Thornburg, secretary of Agriculture, De.s Moines.
R. B. Blinks, president Linn County Farm Bureau, Cedar Rapids.
A. T. Bennett, president Ringgold County Farm Bureau, Mount Ayr.
Paul M. Burson, Nevada.
W. W. Latta, Logan.
Kermith S. Huehn, Manchester.
L. D. Dickey, Lohrvllle.
W. H. Mccrae, Lohrville.
F. H. Bl,ss, member Keok~k County Farm Bureau Board, Sigourney.
John White, member Keokuk County Farm Bureau Board, Sigourney.
J. E. Zepp, member Keokuk County Farm Bureau Board, Sigourney.
G. F. Stoner, member Keokuk County Farm Bureau Board, Sigourney.
S. T. Yates, member Keokuk County Farm .Bureau Board, Sigourney.
S. T. Wheeler, member Keokuk County Farm Bureau Board, Sigourney.
D. W. Bruns; member -Keokuk County Farm Bureau Board, Sigourney.
Peter Wehr, member Keokuk County Farm. Bureau Board, Sigourney.
Glen Sorden, member Keokuk County Farm Bureau Board, Sigourney.
Oscar Dawson, member Keokuk County Farm Bureau Board, Sigourney;
0. W. Gode, Marengo.
Fred H. Barnes, Cedar Falls.
Mrs. Amy Chamberlin, Ankeny.
Ed Doolittle, president Hamilton County Farm Bureau, Webster City.
H.J. Teachont, president Fremont County Farm Bureau, Sidney.
.
Mrs. S. Hoinesley, Woodward.
Clarence E. Carlson, Ogden.
M. C. Harmsen, Sabula.
Verne M.- Smith, Dayton.
M. C. Harmsen, secretary Jackson County Farm Bureau, Maquoketa.
N. P. Nissen, president Jackson County Farm Bureau, Monmouth.
L. R. Teeple, Baldwin.
H. J. Cleverley, president Stary County Farm Bureau, Maxwell.
C. E. Poffenbergen, Marshalltown.
L. S. Gillette, president Dickinson County Farm Bureau, Spirit Lake.
F. L. .Wallace, president Iowa County Farm Bureau, Marengo.
F. H. Bliss, president Keokuk County Farm Bureau, South English.
Louis Taber, Springville.
C. W. Files, Mason City.
Nellie Gilbertson, St. Ansgar.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
STABILI2:ATlO:N OF OOMMODITY PRICES
William Claussen, box 204, Paullina, Iowa.
Miss Florence J. Young, EarlvWe.
Mr. and Mrs. C. P. Moore, Rippey.
E. J. Hollander, Logan.
0. I. Redfern, Winterset.
Al Haches, 301 East Fifteenth Street, Davenport.
Blanche W. Barclay, West Liberty.
Helen Hoffman, rural route No. 1, Murray.
C. H. Trueblood, Inq.ianaola.
P . .E. Williams, Indianaola.
Walt Murray, Indianaola.
Mr. and Mrs. A.H. Beebee, Logan.
W. Mlghell, Quinsby.
E. H. Dull, Cherokee.
Mr. and Mrs. A. R. Kuhl, route No. 1, Eldridge.
D. E. Hollingsworth, Winterset.
W. W. Latta, president Harrison County Farm Bureau, Logan.
Mrs. Harry C. Henriksen, route No. 2, Harlan.
F. Schwendemann, Washington.
E. C. Hovey, Webster County Farm Bureau, Fort Dodge.
R. H. Reed, Webster County Farm Bureau, Fort Dodge.
H. I. Jones, Duncombe.
E. T. Davidson, Duncombe.
0. M. Olson, Duncombe.
G. D. Belken, Duncombe.
Mrs. G. D. Belken, Duncombe.
Agnes Simonson, Duncombe.
Esther Housken, Duncombe.
Alvina Housken, Duncombe.
W. Storey, Duncombe.
L. 0. Lande, Duncombe.
J. J. Claresen, Duncombe.
Clarence W. Jacobson, Duncombe.
Mervin Ruscher, Duncombe.
J. H. Suer, Duncombe.
F. W. Teleschaw, Vincent.
J. B. Thorsners, Vincent.
Wm. Courtney, Vincent.
Connie Beisser, Vincent.
Arthur Adson, Vincent.
D. J. Kelly, Eagle Grove.
Walter Wagner, Vincent.
F. A. Ouishots, Vincent.
John Dencklan, Vincent.
Mrs. Eugene L. Rusher, Duncombe.
Eugene L. Rusher, Duncombe.
Emil Hansch, Duncombe.
Velma Hansch, Duncombe.
Trist Hansch, Duncombe.
Albert Rossow, Duncombe.
Laura Rossow, Duncombe.
Walter Telschaw, Vincent.
Edward Dencklman, Duncombe.
Clara Rosmann, Duncombe.
M. L. Champlin, Vincent.
A. 0. Swasand, Vincent.
D. D. Workey, Vincent.
Mike Mellinger, Duncombe.
R. H. Reed, Fort Dodge.
Mrs. M. T. Mallinger, Duncombe.
Glenn C. Beck, Duncombe.
James J. Hogan, Duncombe.
John F. Hogan, Fort Dodge.
Henry Scharf, Fort Dodge.
Arthur W. Scharf, Fort Dodge.
Carl H. Scharf, Fort Dodge.
F. G. Lunblad, Fort Dodge.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
37
38
STABILIZATION OF COMMODITY PRICES
F. Melvin Stanek, Fort Dodge.
W . .A.. Berrer, Vincent.
James McMannus, Vincent.
Sam Maybilld, Fort Dodge.
Kent L. Pellett, Lehigh.
W. J. Guild, Fort Dodge.
Elizabeth Peterson, Fort Dodge.
Pearl Johnson, Fort Dodge.
Louis Rank, Fort Dodge.
Lloyd Carlson, Gowrie.
Ren Crummer, Gowrie.
W. A. Griffin, Gowrie.
F. E. Sitterstrom, Gowrie.
Ed Farslund, Gowrie.
Laverne Quick, Gowrie.
Ernest Anderson, Gowrie.
Roy Sandon, Gowrie.
A. R. Knutson, Callender.
Martin Thorsend, Callender.
M. H. Peterson, Callender.
Ben Hanson, Gowrie.
Emil Hanson, Gowrie.
A. C. McCullough, Gowrie.
Ole Higgen, Callender.
P. J. Peterson, Callender.
Charles Bohme, Callender.
G. W. Knutson, Callender.
H. Olson, Callender.
Martin Jacobson, Callender.
.A.. Larson, Callender.
Herold Hunter, Callender.
W. F. Adams, Callender.
George ·w. Loehr, Moorland.
A. F. Thomas, Callender.
R. H. Biesemier, Moorland.
G. T. Byrne, Moorland.
Mrs. G. Blesemier, Moorland.
Mrs. June Kusterer, Moorland.
Paul Nelson, Harcourt.
Victor Gustafson, Harcourt.
Joe Hlll, Harcourt.
C. A. Lindstadt, Gowrie.
Minnie Rasch Anderson, Harcourt.
Reuben Jll. Anderson, Harcourt.
P. Swanson, Harcourt.
Thomas Anderson, Harcourt.
Nellie Youngdale, Harcourt.
Frank Youngdale, Harcourt.
John P. Gustafson, Harcourt.
A. Martinson, Harcourt.
J. W. Ryburg, Harcourt.
Marold .A.. Lind, Harcourt.
Josie Lind, Harcourt.
Oscar A. Lind, Harcourt.
Hattie E. Engquist, Harcourt.
Esther Engquist, Harcourt.
Joe Lilyegren, Harcourt.
Oscar Schill, Harcourt.
Emily Schill, Harcourt.
J. A. Holmstrom, Harcourt.
Esther Holmstrom, Harcourt.
F. B. Benzing, Harcourt.
Allin Sandell, Fort Dodge.
Grant Spangler, Fort Dodge.
C. A. Hedeen, Fort Dodge.
L. W. Hoyer, Dayton.
A.H. Johnson, Burnside.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
STABILIZATION OF COMMODITY PRICES
S. E'. Manchester, Dayton.
C. E. Johnson, Burnside.
G. G. Berg, Dayton.
George T. Johnson, Burnside.
F. A. Peterson, Burnside.
E. L. Howdy, Badger.
T. A. Chanlland, Badger.
Andrew Rod, Fort Dodge.
J. G. Varland, Badger.
Charles B. Johnson, Goldfield.
Henry B. Olson, Thor.
Sam Christenson, Badger.
T. A. Gray, Badger.
Leonard Thompson, Badger.
Paul Hoen, Fort Dodge.
L. J. Gevoli, Badger.
L. T. Nelson, Badger.
L. C. Falvag, Badger.
C. E. Knudson, Fort Dodge.
Myron Fivold, Badger.
J. H. Locke, Badger.
Frank Groat, Badger.
H. H. Mayer, Fort Dodge;
P. J. Peterson, Badger.
C. J. Hovick, Fort Dodge.
Merl Locke, Badger.
Alfred Knutson, Badger.
Clarence Lock, Badger.
Frank Kendall, Badger.
George M. Anderson, Elliott.
C. A. Thorne, Dayton.
Chris Hanson, Dayton.
T. W. Swanson, Dayton.
S. A. Burnquist, Dayton,
H. C. Sheldon, Dayton..
Q. S. :1;.,a,rson, Dayton.
N. H. Hocum, Gowrie.
C;· J. Telli:en, Gowrie.
Aaron Peterson, Gowrie.
Reuben E. Nelson, Harcourt.
Art Johnson, Badger.
P. 0. Bradley, Badger.
Edwin Thompson, Badger.
H. J. Berrier, Badger.
Bert Olson; Badger.
Raymond Axness, ·Badger.
Ole J. Larson, Badger.
C. F. Berrier, Badger.
L. M. Fevold, Badger.
Floyd Gray, Badger.
G. R. Peterson, Badger.
Andrew Vinsand, Badger.
t.. 0. M. Yr.eand, Badger.
James Houge, Badger. ·
Otto Gangstead, Badger.
C. Cleveland, Badger.
Andrew Chantlund, Badger.
J. F. Olson, Badger.
H. D. Reeves, Badger.
L. J. Cody, Badger.
Alvin Gangstead, Badger.
Henry F. Olson, Badger.
J. G. Mettvedt, Badger.
Robert M. Clark, Mitchellville.
Max McMillan, Estherville.
Mrs. S. F. Putzke, Fort Dodge.
R. B. Booth, route No. 3, Cedar Rapids.
G. M. Goudy, Mount Vernon.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
40
STABILIZATION OF COMMODITY PRICES
H. H. Rinker, president Boone County Farm Bureau, Boone.
R. B. Blinks, president Linn County Farm Bureau, Cedar Rapids.
H. L. Walker, president Washington County Farm Bureau, Washington.
Erlin Lomen, president Winneshiel County Farm Bureau, Decorah.
H.F. Lubkeman, president Franklin County Farm Bureau, Hampton.
Charles Woods, president Lyon County Farm Bureau, Rock Rapids.
A. C. Hanson, Rock Rapids.
Bernard Rosonke, New Hampton.
John Arnhalt, New Hampton.
L. E. Meyer, Ionia.
E. E. Tracy, Nashua.
L. J. Shores, Waucoma.
George Holkspeier, New Hampton.
W.W. Karnatz, New Hampton.
Will H. Lienaur, Fredericksburg.
S. B. Leichtman, New Hampton.
F. C. Putan, New Hampton.
Hubert Laures, New Hampton.
Mrs. S. B. Leichtman, New Hampton.
A. R. Mitchell, president Hardin County Farm Bureau, New Providence.
Frank Bell, president Monroe County Farm Bureau, Albia ..
Lester Hoffa, Grundy County Farm Bureau, Grundy Center.
F. J. Philpott, Chapin.
J. G. Showalter, Hampton.
Donally McKee, Hampton.
L. M. Lemke, Hampton.
Peter Harting, Hampton.
George Stokes, Iowa Falls.
l\Irs. H. T. Lubkeman, Coulter.
William R. Held, Dumont.
H. T. Lubkeman, Coulter.
Austin Reynolds, Hubbard.
W. B. Hamilton, Hampton.
Carroll Carson, president Winnebago County Farm Bureau, Thompson.
Earl Watts ,Clarinda.
Mrs. C. E. Leary, president Westburg Township, Buchanan County Farm
Bureau, Jesup.
Mrs. A. C. Holman, secretary, Westburg Township, Buchanan County Jl'arru
Bureau, Jesup.
H. C. Zeman, director, Westburg Township, Buchanan County Farm Bureau,
J"esup.
Simon T. Jossfm, Primghar.
Harold E. Barringer, Emmetsburg.
S. Roy Crawrod, president Perry Township, Buchanan County Farm Bureau,
Jesup.
.
W. D. Patten, director, Perry Township, Buchanan County Farm Bureau,
Jesup.
.· >:-< .,
Alice Laird, secretary, Perry Township, Buchanan County Farm Bureau,
Jesup.
H. E. Winterink, president Floyd County Farm Bureau, Charles City.
Raymond T. Pim, president Lucas County Farm Bureau, Chariton.
Ray Redfern, president Des Moines County Farm Bureau, Burlington.
E. V. Humphrey, president Louisa County Farm Bureau, Wapello. ·
R. S. McKee, president Warren County Farm Bureau, Indianola.
Iowa Live Stock Marketing Corporation, Des Moines.
Milford Beeghly, president Woodbury County Farm Bureau, Sioux City.
R. G. Sandager, Calmar.
Lester Hoffa, Grundy Center.
Bertel J. Jessen, Missouri Valley.
D. W. White, president Greene County Farm Bureau, Jefferson.
Burns M. Byram, Rock Rapids.
Emil Hanson, Gowrie.
Mr. and Mrs. W. Van Bloom, Dayton.
M. J. Norton, 402 Seventh Street, Des Moines.
S. H. McNutt, Algona.
F. W. Stover, president Cerrogordo County Farm Bureau, Mason City.
Jack Liverca, Buffalo Center.
·
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41
L. W. Scharf, Buffalo Center.
Dick Winter, Buffalo Center.
George Liverca, Buffalo Center.
John Mathison, Buffalo Center.
A. A. Howe, Buffalo Center.
J. K. Martin, Buffalo Center.
Clark Methen, Buffalo Center.
John Vangerten, Buffalo Center.
S. O. Smalling, Waterloo.
W. E. Roberts, Eddyville.
James E. Downing, Des Moines Chamber of Commerce, Des Moines.
Wapello County Farm Bureau, Ottumwa.
John H. Fitch, Lake City.
Mr. anct Mrs. Clifford L. Knight, Springville.
NEBBASKA CITY, NEBB., March 12, 193~.
Mr. E. A. O'NEAL,
President American Farm Bureau Federation, Ohicago, Ill.
DEAR SIB: I heard your talk over the radio this noon. I have a farm of 120
acres. My taxes are $287.70, with corn 25 cents per bushel, hogs 3½ cents per
pound, eggs 7 cents per dezen. The farmer is so fiat on his back he can't fight
back.
I have seen more than 70 years in Nebra~ka. I went through the grasshopper
invasion of 1874, 1875, and 1876, and some droughts which occurred here, but
they were not to be compared with this man-made depression. Some one made
this depression to gouge the people.
Keep up your fight for the honest dollar.
Very respectfully yours,
Mrs. MARY L. J AMl!lS.
NEBBASKA
Henry Schrieber, Laurel.
Ward T. Denning, Geneva.
J. C. Bahls, 1843 K Street, Lincoln.
George Arendt, 2933 Wendover Avenue, Lincoln.
John W. James, Nebraska City.
Dr. F. J. Woods, 3100 North Street, Lincoln.
R. H. Zimmerman, Sutton.
COLOBADO
John Dobler, Bethune.
A. P. Jaszkawiak, Sterling.
Ezra A. Moore, Rocky Ford.
John T. McClure, 4373 Yates Street, Denver.
Mr. and Mrs. F. R. Wolfie, Denver.
Dr. John L. Ceranet, 123 East Third Avenue, Denver.
C. A. Parker, 3605 West Thirty-second Avenue, Denver.
S. E. Lumry, Boulder.
Nancy B. I. Miller, Colorado Federation of Women's Clubs, 117 West Irvington
Place, Denver.
G. H. Sult, Rocky Ford.
Dr. W. J. Mummey, Denver.
J. F. Williams, 1101 Steele Street, Denver.
Mr. and Mrs. Robert L. Pettit, Eaton.
MONTANA
Mr. and Mrs. F. J. Kunz, 319 South D Street, Livingston.
Mr. and Mrs. Clarence Stevens, Lodge Grass.
WYOMING
F. C. Titus, Wheatland.
B. J. Schwab, president Deaver Farm Bureau, Deaver.
WISCONSIN
E. F. Raeder, Glenbeulah.
NORTH DAKOTA.
R. S. Long, Upham.
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UTAH
George W. Brown, secretary Utah County Farm Bureau, Provo.
Raymond Cutler, R. F. D. No. 2, Provo.
C. Z. Harris, Richmond.
IDAHO
M. K. Jenkins, Malad City.
Marie A. Ellis, Hayden Lake.
NEVADA
Florence- Bovett, secretary Nevada State Farm Bureau, Reno.
W:msTEBN REGION
CALEXICO, CALIF., March 13, .l93~.
EDWARD
A. O'NEAL,
President American Farm Bureau Federation,
Washington, D. C.
We indorse your efforts for stabilization of the dollar and trust you will
have support of all California Representatives in House and Senate.
IMPERIAL COUNTY FARM BUBEAU,
CALIFORNIA
Alexanaer B. Barrett, 1735 Orchid Avenue, Hollywood.
Mrs. M. L. Thompson, El Monte.
Mrs. M. H. Lane, El Monte.
Fred L. Hogue, Mod~to.
William Jaeckle, Grass Valley.
M. 0. DUiin, president, Contra Costa Farm Bureau, Concord.
L. E. McChesney, regional director, San Luis Obispo County Farm Bureau,
San Luis Obispo.
J. S. Graves, 915 West Pine Street, Santa Ana.
Tulare County Farm Bureau, by M. W. Dula, Visalia.
Charles P. Stone, president, Sonoma County Farm Bureau, Santa Rosa.
Fletcher Ayres, president, Ivanhoe Farm Bureau Center, Visalia.
Los Angeles County Farm Bureau, Los Angeles.
Mrs. Anna D. Parrett, 564 Endicott Street, Los Angeles.
Albert A. Nelson, 564 Endicott Street, Los Angell;ls.
Mrs. Roy Wehlage, 564 Endicott Street, Los Angeles.
Mr. Roy Wehlage, 564 Endicott Street, Los Angeles.
George D. Hayes, 202 Orange Avenue, Santa Ana.
T. M. Martin, president, Kern County Farm Bureau, Bakersfield.
Roy Newman, director, Rio Bravo l!,arm Center, Bakersfield.
E. C. Eckmann, director, Shafter Farm Center, Bakersfield.
A. A, Sprehn, director, Weedpatch, Farm Center, Bakersfield.
Harry Fowler, Bakersfield.
Frank Coddington, director, Delano Farm Center, Bakersfield.
F. W. Parsons, San Clemente.
Dr. W. N. Sherman, Hotel California, Glendale.
Trace Leon Clark, Tulare.
Mary A. Mastel, Tulare.
Mr. and Mrs. Charles Burkhart, 433 West Ortega Street, Santa Barbara.
:Q,alph A. White, route No. 1, box 62, Covina.
W. B. Parker, Stockton.
E. P. Shier, president, Butte County Farm Bureau, Oroville.
Alex Johnson, secretary, California Farm Bureau Federation, 338 Giannini
Ball, Berkeley.
R. C. MacLachlan, president, San Benito County Farm Bureau, Hollister.
WASHINGTON
J. Carl Laney, secretary Washington State Farm Bureau, Yakima.
Ferdinand Rinaldi, jr., 2615 West Andover Street, Seattle.
James J. Edwards, Dayton.
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Walter W. Street, 2'.f26 Sixtieth· Street,: :southwest, Seattle.
Clark Israel, manager Columbia County Grain .Growers (Inc.), Dayton.,
Troy Lindley, presi!lent Wa~ingj;on State Farm Bureau, Dayton.
· ·s. B. Shiley, route No. 8, Yakima.
·
C. G. Waterman, Oakesdale.
C. R. Kenyon, 413 Liberty Court, Seattle.
Mrs. George H. Morris, 6428 Fawcett Avenue, Tacoma.
Mr. O'NEAL. Mr. Chairman, that concludes my statement, I believe, unless you wish to ask some questions.
Mr. PRALL. I would like to ask the gentleman, Mr. Chairman, just
what effect will this readjustment have on unemployment and how1
Mr. O'NEAL. I think this: I have seen charts and have seen studies
of the men who have studied the data on a. national basis, which
show, from past history, that as commodity prices fall, unemployment increases enormously; and I say this, Congressmen, that
whatever the effect now is on· the :farm, on the forest, and on the
mines, and i:f what they produce and what they make has little value,
then we simply stagnate our efficiency and our production overwhelms
us, and we simply can not move. This results in thousands of people
all over the Nation being thrown out o:f employment.
We go in the eastern section of the United States and see factories
dead, folks out of employment, and we say, "There can be no trade;
there can be no exchange; there can be no employment unless commodity exchange values are equalized." I venture to say that within
the next two months, in spite of the Lord bringing on the gentle
season, you will see a million more out of employment.
I talked to one of the greatest bankers in the city of Chicago,
where I have my temporary residence, just the other day, and he is
a great thinker, a student, and he said :
I see that nothing has as yet been done by Congress that has helped at all.
There is the fear; there is pessimism, and he said :
I would rather keep my money in the bank; why lend it out?
If I make a man a loan, he runs his factory, employs a lot of people, but
how do we know he is going to· move his goods? We can just say to him.,
"Yes ; you are all right ; you are worthy of a loan, but, my friend, you have
asked me frankly, and I say that I would like to lend you the money; you
pay me interest on it and give me good security, but what good does that do?"
Just think of that fear in the heart of a great banker I
That conveys that fear to the producer out there, and the manufacturer. Take my own farm; I can not get back what I put out
last year on my .Alabama cotton plantation.
Mr. PRALL. Because you can not sell it.
Mr. O'NEAL. I can not sell it; I can not even give it away. The
transportation charges, the fixed charges that are all along the line
are too high, and I could not move it. You can not move 1t, and it
stagnates. Agriculture, you know, and the mines and the forests
are the producers of wealth, and if we have nothing to buy with
how are the factories going to run i They can not. operate, they
can not run. I was in New York last fall, and one of my business acquaintances there said, " Well, I thought. you were always a
little wild-eyed, Edt and an agragrian, but," he says, " we are on the
thirty-first story or one of these office buildings and the bats and
breezes are blowing . through these office buildings in the city of
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STABILIZATION OF. 00:MMODITY PRIOlilS
New York; we are all broke, because the fund.amental industries
of the Nation are flat; there is no exchan~e."
Mr. PRALL;· Do you think this· will reVIve the general financial
cbndition ¥
Mr. O'NEAL. I am sure it will. I have here, to put in the record
an analysis of the conditions in France caused by the deflation of
the franc; and an analysis of the condition in England, when they
came off of the gold standard.
Mr. STRONG. And Germany?
Mr. O'NEAL. I have not a statement on Germany, just England
and France.
Mr. HOOPER. Is it your belief that this will revive the condition
in the United States?
Mr. O'NEAL. Yes.
Mr. HooPER. Do you take into consideration the world condition i
Mr. O'NEAL. Yes; I think so.
Mr. HOOPER. The distressed and disastrous condition in which the
world is?
Mr. O'NEAL. Yes; I think, as to that, that the economic facts show,
first, that America probably is, without doubt, the most self-sufficient
Nation; yet, in our economic set-up, we simply have to depend on
extraneous conditions, the little surplus that we sell abroad, small in
volume, but it affects our whole picture ; and I think you should go
further: I think that we should have a conference with the nations
of the world on this whole exchange question. I think it would be
very splendid for this committee, or any committee of Congress, to
call in some of the men out· in California, :for instance-I use that
often as an illustration, because they had .a commodity out there
where their surplus was growing, and they sent scientific men all
over the world to see what the money was in every country in the
world, what was the medium of exchange, what was the practice and
customs of the people of those countries, so that they could get their
commodity in shape to deal with those people all over the world, and
you will see that that commodity, in our foreign exports, has increased, gone up considerably-those fruit men who produce both
fresh and canned commodities.
How do they do, such a thing; as one of these scientists said :
. I went over there, first, to study their money, what they carried in their
pocket; not theoretical money, not gold, but the money, the medium of exchange,
and what their habits were; second, so I could come back and reach my conclusions and tell my farm people here how they looked at jt over there, and
how we could get our commodity over there to them in shape so that their
money over there. would buy it.
I think that is one of the most enlightening things that has been
done in this country in a long time. It is not a theory; money is the
most intensely practical thing in the world.
Mr. HooPER. In my question to you, I wondered if you had taken
into consideration the world situation in regard to this particular
bill.
Mr. O'NEAL. Yes.
Mr. HOOPER. And what this bill might do for it.
Mr. O'NEAL. Yes.
.
Mr; STRONG. President O'Neal, if 'Cong11esi;; sliould, as I hope it
will do, direct the Federal reserve system to use its powers to stabilize
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the purchase price of our dollar, what measure of value do you
think we should direct them to use, if any~
Mr. O'NEAL. I think the general commodity price levels, as we say,
in 1926 or 1928, along in there, on 501 commodities, would be all
right.
Mr. STRONG. Set up by the Labor Departmenti
Mr. O'NEAL. Yes.
Mr. STRONG. Would you care to give your reasons? I agree with
you, but I would like to know your reasons.
Mr. O'NEAL. Well, I think this is it: That plan takes a number of
commodities, both agricultural and industrial, and by so doing secures a good cross section of prices in our whole Nation. The period
mentioned is fair to all, as farmers can live on prices received in
that period, and consumers can afford to pay such prices.
Mr. STRONG. And do those commodities represent all the commodities that people-Mr. O'NEAL. The basic commodities.
Mr. STRONG. All the commodities that the people of the United
States deal with in their exchanges between each other?
Mr. O'NEAL. Yes.
Mr. STRONG. Now, if we do that, the Federal reserve system, of
course, will reach the time when they have got to change their
policies; that is, they will say: " We will increase the value of
money."
_
Sometimes they will say they will increase it, and they will get to
the time when it will be high enou_gh so that they can decrease it.
Mr.. O'NEAL. Make them do it, Congressman. I would not fool
with them. If they come to that point, I would go right after them.
I think they have failed, and I think .the country thmks so.
Mr. STRONG: Now, when they do that, do you not think we should
have publicity as to what their change of policy shall be, so all the
business will know about it and not simply the big bankers as a
group?
Mr. O'NEAL. I feel that the governor of the Federal Reserve
Board, when .a change of policy comes, should announce it to the
people of the United States. I think we should have less executive
sessions and more open sessions.
Mr. S'l'RONG. Well, as I have studied the effect of it, I feel that the
people of the United States are entitled to know when they make a
change of policy, when they intend to buy bonds or sell bonds, or
raise or lower the discount rate; that all of the people should know
it and not a few.
Mr. O'NEAL. Yes, sir.
Mr. PRALL. How could they otherwise do business, if they did not
know~
Ml'., STRONG. They do not know now. It comes like a flash, maybe
not even an announcement; but first they prepare the market, as
Governor Strong explained to us in this committee, then they raise
the discount rate or lower it, but it comes suddenly; and it seems to
me that every bu,siness man, every banker, every farmer, and every
man connected w_ith any industry should have a right ~o know when
they propose to mcrease the volume of money by buymg bonds, or
111442--82-PT 1----4
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decrease the volume of money by selling bonds; and when they decide to raise the discount rate or lower it, it should not be a proposition that only a few people in the United States know of.
Mr. BusBY. In speaking of the basis for currency, you mentioned
gold as being needed to serve busines~, instead of to dominate it.
·
Mr. O'NEAL. Yes, sir.
Mr. BusBY. Is it the position of your organization. and yourself
that the gold basis for currency should be rearranged by law, so that
you would have a variable quantity of gold redeemable by the outstanding gold certificates those certificate dollars 1
Mr. O'NEAL. I think, Congressman Busby, that here has been the
whole trouble: That we have built ourselves a golden calf out here.
Now, in talking to a high official in the Government two or three
years ago-we farmers asked them to do a lot of things away back
there-and when we talked to high officials they would say, "Shush,
shush; sacred! Be careful ! You must not t!llk about the Federal
reserve; you must not talk about the financial system."
I think, as a matter of fact, through the gold medium they are able
to manipulate and control the whole fiscal system.
Mr. STRONG. That is, as I have indicated by my questions, in the
absence of statute.
Mr. O'NEAL. Yes.
Mr. STRONG. Yes.
Mr. BuSBY. Now, back to the question; would it be your position
to advocate fixing by statute an arrangeµient whereby the dollar, the
gold dollar, could be evaluated in relation to the center of gravity of
prices, and in saying that I refer to the wholesale commodity index
prices determined by the Bureau of Labor Statistics?
Mr. O'NEAL. I believe firmly, Congressman, in a commodity dollar;
and I tell you, frankly, we ought not to have any gold' money at all.
I bet there is not a man in this room who has got one cent's worth of
gold.
Mr. BusBY. By commodity dollar, what do you mean j
Mr. O'NEAL. I like the chairman's bill there definitely. I think it
is a fine scheme, and I think it would be a fine scheme also if we could
just cut gold out of ci_rculation entirely. You do not need any gold in
circulation. What do you want with it,
Mr. BusBY. You say gold in circulation?
Mr. O'NEAL. Yes.
Mr. BusBY. I thought your United States gold certificates represented dollars.
· Mr. O'NEAL. No, sir; I do not give a darn for the gold certificateif you. will pardon the s~rong expression-we do not care anything
about 1t; we want a medmm of exchange; we want money for circulation. That is the confidence that we have in the Government.
Mr. BusBY. I understand that, and you are using rather strong
language, which I understand fairly.
Mr. O'NEAL. Fine. I am sure you do.
Mr. BusBY. What would you have to represent your gold, if you
are going to use it a~ a basis, and something did not relate to. it !n
the form of the certificate proposed bl Mr. Goldsborough's bill m
1922, and proposed by Professor Fisher s plan. What would you use
to relate to this gold, unless you used some order, and some study
along the line?
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Mr. O'NEAL. That would be fine, but if you make the order so
damned difficult to work, then it would not amount to much.
Mr. BusBY. I want to tell you, frankly that I am not getting
much out of the details you are proposing, because you are too general, and that is the trouble. I am trying to get specific about what
we shall have in the legislation which is gomg to be written into
words, and not in the waving of hands.
· Mr. O'NEAL. Well, Congressman Goldsborough is already with
me.
Mr. BusBY. I am not being controversial with you.
Mr. O'NEAL. I know, but, Congressman-Mr. BusBY. Do not get excited so. I understood your language.
Mr. O'NE.AL. I want to say to you, Congressman, that I read your
speeches and, why, I am for you. I will let you work that technical
part out; I believe you can do it better than I can.
Mr. BusBY. We are making some progress.
Mr. O'NFAL. I will let you work it out.
Mr. BusBY. I looked in your "Honest Money" pamphlet, published on January 7, 1932, searching for the plan proposed by the
committee that wrote this document. I find on page 32, under the
headings of 1, 2, and 3, your proposals in the form of a remedy to
meet the present situation, but those proposals would not relate to
anything, except a type of activities directed through the Federal
reserve system.
That is true, isn't it 1
Mr. O'NEAL. Yes.
Mr. BusBY. There is no other remedy proposed in your pamphlet
except those 1
Mr. O'NE.AL. You have to operate through the Federal reserve
system.
Mr. BusBY. Now, the third one of those, as I understand it, has
simply been enacted through the Glass-Steagall bill.
Mr:O'NEAL. Yes, sir; it was hedged around with so damn many
"ifs :'-you know about those things-I pray to God it will operate,
but I doubt it.
Mr. BUSBY. I see you still use that l:mguage. I want to tell you
I was born in the county adjoining where you were born and I
understand it.
·
Mr. O'NEAL. Good. Do not get too technical with me, Professor.
Mr. BusBY. Now, I want to come to another thought:
If these transactions dealing in commodities were carried on and
executed, at the present time-or, we might use the word, in
presenti-there would be no particular complaint about the value
of the measuring stick that we call currency, because you would
sell eggs cheaper, and buy flour cheaper, and you would sell other
things cheaper, and you would buy the things you need on the same
basis; that is true, is it not 1
Mr. O'NEAL; That is right; yes.
Mr. BusBY. Does not our trouble at the present time relate back
to 3 or 4 or 5 years ago, when we made fixed obligations, comitments,
issued bonds, and so forth, at times when those bonds and those
obligations were in relation to commodity prices at that time~
Mr. O'NEAL. That is right.
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Mr. BusBY. And now we find ourselves, some years later, at the
point where commodity prices, such commodities as you have mentioned, for some resemblance to the commodity prices back -where
our obligations were fixed.
Mr. O'NE~. That is right.
Mr. BusBY. And we find it is impossible, especially in agriculture;
to make the payments we agreed to make back four or five years
ago; that is the situation, is it not?
Mr. O'NEAL. That is right, yes; not only in agriculture but a lot
of other things.
Mr. BusBY. I am coming to that. Now, agriculture is composed,
of course, of commodities that are perishable, that are bulky, hard to
transport in commerce, and hard to house and care for; and, therefore, agricultural commodities naturally take a bigger slump than
steel and copper and other things, things that are not so hard to
care £or. But do you know of any commodity that is dealt in, generally, in commerce, or other commodity, that have not met this
same hard situation at our present currency conditions j
Mr. O'NEAL. Most of them have.
Mr. BusBY. Do you know of any appreciable number, or any class
of commodities, that have not yet been hit by this inadequate cur-'
rency set up that we are now struggling under i
Mr. O'NEAL. They are relatively very few. There are a few.
things that have not come down, things that are fixed by law, such
as utility rates and telephone rates, and things like that, and freight
·
rates; and that is where you have been self-governed, in fact.
Mr. BuSBY. I am not, of course, speaking of things that are not
subject to the law of supply and demand.
Mr. O'NEAL. Those things have come down.
Mr. BusBY. I believe that is all.
Mr. PRALL. I would like to ask the gentleman what will be th~
effect on all other products than farm products under this plan 1
Mr. O'NEAL. Congressman, they will all go up. In other words,
when the buying power increases of the producers of new wealth
that just naturally gets the factories to work. This summer I traveled practically all over the United States, and I went over it twice,
and I did not see 20 freshly painted barns. We have got no money
to buy any paint, and you do not see many town houses painted.
They have factories to make paint, and they have plenty of labor-Mr. PRALL. I mean the products of the country other than these
things connected directly or indirectly with farming or agricultural
interests. I have the words of men in every other line of businessMr. O'NEAL. It will put the factories to work if we have the
buying power and can pay our debts. If we can do that, we can
then start industry and commerce to work.
Mr. PRALL. Well, your opinion is that it would comparably bnilefit
every industry-Mr. O'NEAL. Yes.
Mr. PRALL. Practically every other industry~
Mr. O'NEAL. Yes, sir; and I would say this: The record shows
that many groups, the Chamber of Commerce of the Upited States
and other great groups, have finally recognized that when the bliy-.
ing power of agriculture is destroyed, it strikes right .at the heart
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49
of every other group of the Nation. That is the reason I told you
about the New York business man. It strikes our best market in
America, in spite of all we can say, and the market in America is
with the producers of the raw materials; and when we can not buy,
industry is dead. I might go just a little further and say that I
was looking at a chart yesterday by Doctor Warren of Cornell University, showing employment, and it showed when commodity prices
go down, there is an enormous increase in unemployment. I am
sorry to say that, unless some change is made, we are going on
down, we have not seen the bottom of our lot yet.
Mr. GOLDSBOROUGH. Is that all, Mr. O'Neal ~
Mr. O'NEAL. There is one other thing.
Mr. STRONG. Until we had the establishment of the Federal reserve system, we had no way to increase or decrease the volume of
money, and it was not until after the Federal reserve system
was created, that we sought, by directing them to sell or buy Government bonds, that we hoped to carry out the mandate of the
Constitution to regulate the price of money by regulating the volume
and the theory that supply and demand is the old basic principle
bv which it has been regulated; and so we asked to have the supply
and demand of money so regulated as to establish the price or
value in purchasing power. Is not that your theory~
Mr. O'NEAL. Yes; it runs on through, Congressman.
Mr. STRONG. I know, but I am seeking to direct i t Mr, O'NEAL. Somebody cut that all out of the law.
Mr. STRONG. It was taken out in conference between the Senate
and the House when the Federal reserve act was passed. ·
· Mr. O'NEAL. Yes.
Mr. STRONG. And we hoped to have ex-Senator Owen here to
speak of that. But it is through the supply and demand of money
that we hoped to regulate its value, and we hoped, by increasing the
1:1upply of mo~ey, to increa~e the price levels. And I ~lso wartt to
call the attent10n of my friend to the fact that the price levels or
index of commodity prices, as established and set by the Bureau of
Labor, does not only include farm products but it includes all
products.
·
. Mr. HooPER. Mr. O'Neal, do you think this bill is broad enough in
its language 1
' Mr. O'NEAL. Generally speaking, was my_comment, as I m.ade it in
the record. I think that you technical men know better how to work
this thing out, but be sure you go far enough.
Mr. HOOPER. What I was getting at was whether you thought this
bill eovered it.
··
' Mr. O'NEAL. I think it is goin~ in the right direction, and I think
the,se other bills are all in the right direction; but just let me say
this in closing, Mr. Chairman. Go far enough and do the job right,
and· I believe, if there is any criticism, it will be that you are not
going far enough.
·
·
· Mr. PRALL. You mean to put teeth in it?
Mr. O'NEAL. Not only teeth, but operate the teeth.
Now, Mr. Chairman, I want to get back again to what France i,tnd
E~gland have _done, and~ want to say that France, instead o~ J?Ur.:.
sumg a deflationary policy such as was followed by the ·Umted
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States and such as was followed by Great Britain in 1925, revalued
the franc at a kvel of one-fifth of its pre-war value. It did this by
reducing the weight of gold in the franc to one-fifth the pre-war
amount, reducing it from 322.58 milligrams of gold 900/1,Q0O fine
to 65.5 milligrams of gold 900/1,000 fine. This action was taken by
the French Government on June 25, 1928.
If France.had attempted to revalue the franc at the old pre-war
ratio, it would have precipitated a terrific decline in prices because
the prevailing prices were based on the prevailing value of the franc
which was about one-fifth of the pre-war level. Obviously an increase in the value 0£ the franc to five times the prevailing level
would have resulted inevitably in a crash in commodity prices which
are valued there in terms 0£ the franc.
France, therefore, avoided a deflationary policy by revaluing its
franc at one-fifth of the pre-war level. As a result no serious decline
in prices took place until 1930-31. Debts could be repaid without
paying back a gr~at deal more than was borrowed. Farm land has
a higher value than before the war.
.
The following extract from. Special Circular No. 143, published
by the United States Depart:rp,ent of Commerce, contains the follow~ng analysis of th~ fa.vorable results expected to :follow this action
m France :
_,
A further revival of economic activity which is, with few exceptions, already
at a. satisfactory level, may reasonably be expected, and, if political stability
and the equilibrium. of the· Budget can be maintained· and the soµnd, polieies
that have been strictly adhered to by the present Government are continued.
France should enjoy a period of iiicreasing productivity and growing prosperity.
'.1-'he action ?:f France s~o.ws how a government can . a'void the
evils of deflati9n 11nd. stabih~e commodity values at a i'e.asonable
level $<> that del}tors cal,l repay their debts, employers can keep their
factories rnnning, and £armers can sell their t>roducts at price·f;>
somewhere commensurate with their true value.
'
During the war England, · while .th~qretically holding the gof4
sta:tidtird, actually abandoned the gold standard because of her heavy
oblig~tions -abroad. ~he, pound sterli~g was ~egged at a)Jont .$4;7G:,
or slightly below par ($4.8665). This went along until the. m1r
closed; then t~e. pound was, unpegg~d by the, withdrawal of the
government stabilization op_erations. The value. of . the pcn(rnl
dropped from $4,76 to $4.43. m 1919, and to $3.66 m 1920. In the
period 1921-1924 the value of the pound rose somewhat, due t6 a
more favorable balance of Great Britain in her international payments, which in itself had a tendency to increase the value of thepound.
In 1925 the government decided to restore the gold standard ..
Instead 0£ contmuing the reduced valuation of the pound, it attempted to revalue it.on a pre-war basis 0£ $4.86 in our money. The
e:ffect of this action was to lower prices and thereby make it more
difficult to pay debts and interest charges. Unemployment was
increased and business was stagnant. The maintenance of the
pound on a $4.86 basis caused a continual drain on the gold supply
0£ Great Britain. Despite great efforts to maintain the gold stand~rd it was found necessary to abandon it on September 20, 1931, on
account of the disastrous conditions created following the revaluing
0£ ~he pound in 1925.
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When England abandoned the gold standard and the attempt to
value the pound at the $4.86 level, the effect was to increase prices
for domestic products in England. Lard at Liverpool increased
from 42 shillings in early December to 53 shillings in late December. During the same period, when the United States was pursuing a
deflation policy, lard at Chicago dropped in price from $7.30 a hundred to $5.65 a hundred.
While there were no increases in the prices of numerous commodities, the sharp decline in prices which had been going on in England
was greatly checked a result of this action, and the unemployment
situation was relieved to an appreciable extent. There was also some
improvement in the eX!)Ort trade, particularly in the case of textiles
and manufactured goods. The benefits to the British export trade
would have been still larger had it not been for countervailing duties
put on by countries importing British goods.
In other words, the abandonment of the effort to maintain arbitrarily a high value for the pound, and the decision to let it be valued
by supply and demand has reduced the exchange value of the J?Ound
but has resulted in increased prices in England, greater ability to
pay debts, stimulation of business, and improvement in the export
trade.
Mr. Gm..nsnonouou. Mr. O'Neal, the subcommittee wants to thank
you for ~our fine statement.
Mr. 0 NEAL. I thank _you, Mr. Goldsborough.
Mr. GowsooRouoH. Gentlemen, we .ordinarily' recess about this
time and then meet at half-past. 2, but fm:·the conveni(;ln<;e. of those
.
who live out of town, we will recess now and m_eet at 2 o'clock.
(Thereupon t_he committee took a recess until 2 o'clock p. m. of the
.same day.)
AFTERNOON ·i;IESSION
(At the expiration of the recess, the committee ,resumed:its session.)
Mr. GowsnoROUGH (cha!rman). The committee will please come
to order.
Will you produce your next witness, please 1 ·
Mr. O'NEAL. Mr. Henry A. Wallace, a friend of mine and a distinguished member of our cominittee that' worked on this whole
problem. He is the editor of one of the greatest farm papers in the
world (Wallace's Farmer).
.
·
Mr. GoLDSBOROUGH. Now, Mr. Wallace, I suggest that you proceed
in your own way, and when you get through we will ask you such
questions as the committee t~mks proper.
STATEMENT OF HENRY A.. WALLACE, EDITOR WALLACE'S
FARMER, DES MOINES, IOWA
Mr. WALLACE. Mr. Chairman and gentlemen of the committee: I
happen to be the editor of a farm paper which has a circulation of
approximately 250,000. We have had numerous editorials on the
i;:tabilization matter for the past 12 years, but more especially during
the past year. We called for the signing of ballots which we printed
in our paper regarding, substantially, the Strong bill or the Ramseyer bill or the Keller bill, which provided for our readers to signify
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that they were in favor of the Federal reserve people being instructed
to use their power to restore prices and to stabilize them at the predeflation point. Some ten thousand of our readers signed those ballots and mailed them in, which was ·!ltogether an extraordinary
showing for anything of that kind. We felt that we might get
three or four hundred, or something like that, but we were astounded
to have them run into such unusual numbers, which showed that deflation had finally had its effect in bringing about a public interest.
Back in 1921 when we dealt with the matter, but not quite so
emphatically, the returns were not nearly so great, which showed that
either the education was only beginning to take hold or that the
emergency was not so apparent.
Mr. GoLDSBOROUGH. I:f you will permit me to say, right there-and
this is not intended as an interruption-at that time, if you remember, your paper gave my bill a very favorable editorial, and your
distinguished father, the Secretary of Agriculture, was just as kind
as he could be.
Mr. WALLACE. Yes, sir.
Well, I am just pointing out that to show the degree of my own
interest, and the degree of mterest of the farmers of the mid-West in
the matter.
Next, I would like to refer, very briefly, to a publication known
as Farm Economics put out by Cornell University, the particular
issue being February, 1932. Mr. White, who will appear on behalf
of the Farm Bureau, I think immediately .after me, will deal more
practically with this publication,· but there were one or· two points
which I thought I would introduce, and Mr. White will introduce
the rest. The first point was:" No one gains by deflation."
I will read this particular paragraph from the statement by
Doctor Warren, of Cornell University:
All action, public or. private, that is based on the i-dea that some person or
group of persons are to blame for the present situation le unsound. All action
that assumes that the losses ·which one is sustaining are due to gains being
made by some one else is equally unsound. The losses are unequal, but practically everyone loses. The trouble is that civilization has not yet progressed
far enough to invent a stable measure of value. Not lorig ago, an outbreak
of bubonic plague was blamed on individuals. It is now known that the trouble
was due to the lack of development of science or education, or both. Economic
diseases are due to a lack of development of economic science ·and education.
Vast sums of money have been spent on chemical and medical research. Very
little has been spent on economic research. The little science that has been developed in economics has not become common knowledge, as, for example, the
knowledge about bacteria.
Economic troubles are not acts of Providence any more than pollut·ng a
stream with typhoid is an act of Providence. Both are acts of man and can
be remedied, when there is sufficient knowledge.
.
Our essential problem, of course, is producing enough of the commodities of life to have a high standard of living. The figures compiled by Doctor Warren indicate that, in this country, since 1840, the
output of goods per capita has increased at the rate 0£ 1.7 per cent,
which means that our standard of living, per capita, has increased
at that rate. Incidentally, wages have increased at exactly the same
rate, which does prove that point that labor does add, in terms of
wages, to that which it. produces. The economic problem is, first,
the intelligent planning and control of production;· and, second, the
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distribution of the result of production. Money is one of the pieces
of economic .machinery which is used, sometimes most unintelligently, to bring about the distribution of the result of production
and also at times, unfortunately, to interfere with the sensible plan•
ning of production.
·
Now, let that point rest there.
I would like to take a very brief survey of the gold situation, and
I think it is pertinent to House file 10,517, because this is an allembracing bill, especially in legislation which deals very definitely
with the gold situation. It is a matter of price history that during
the period extending from 1260 to 1300, the price of wheat averaged
about 17 cents in England ; during the period from 1300 to 1350, it
averaged about 18 cents; and from 1350 to 1400, about 17 cents; 1400
to 1450, about 17 cents. I may not have the figures absolutely correct, but there was a variation of not more than 2 cents for every
50-year period previous to the discovery of America. Starting with
1260 and until about 1450 the price did not go below 16 cents or
above 18 cents. ·
America was discovered in 1492; and during the first 50 years
of the sixteenth century, that is, from 1500 to 1550, the price averaged 22 cents; from 1550 to 1600 it average 58 cents, and from 1600
to 1650, it averaged $1.08. The larger quantities of silver and gold
had begun to flow in from the New World. It is rather interesting
to note that, in the King James version, it is ,suggested that wages of
labor was 1- cent a day, a holdover from the period of, perhaps, 50
years before, when wages actually were an English penny, or, we
would say to-day, 2 cents in our money; but that was in a period
when all things were cheap, before the precious metals had flowed, in
large quantities, into the Old World. As a matter of fact, the wages
of labor lagged behind the price of wheat and created a very serious
situation, which brought its expansion through a series of wars,
• especially during the first half of 1600.
Coming up to more modern times, of course, you are familiar with
the price history since 1850 and the way in which the discovery of
gold in Australia and California caused prices to rise all over the
world, from 1850 to 1872 or 1873. That is, for the world basis; but
in this country the Civil War confused the issue, and the high point
was reached here about 1865. On a world-wide basis the high point
was reach~d in the early seventies. New gold was discovered for a
period of 20 years, but not enough to keep pace with the demand.
The rise of prices all over the entire world during the period created
a social tax, of a kind, everywhere.
Then large quantities of gold were discovered in South Africa
and the Klondike and elsewhere, and the cyanide process was discovered, and more gold brought into use from 1895 on than had ever
been found in all of the history of the world. That caused prices to
rise over the entire world, until the World War was on, and then
extraneous factors went to work. That is merely by way of background of the gold situation, illustrating that, in the broad swing,
gold has actually controlled the world price level.
Now, from our point of view, the price level, of course, is quite
independent of gold, although gold will always stand there in the
background, ready to assert its influence at the most inconvenient
moment.
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As I take it, your House file 10,517, the first powers to be irivoked
is to bring the price levels up to the predeflation point, which would
need the forces now possessed· by the Federal Reserve Board, or
the Federal reserve system, and if they were not efficient, then there
would be invoked a variable gold standard, or, in brief, what is
known as the Fisher plan, or the Dennis plan, the Goldsborough bill,
or the Burtness bill. This bill, I think, expresses wisdom in having
it as a reserve measure. It is obvious that the policy of the admiriistration is a credit expansion on the gold basis; that the administration and most . powerful bankers feel that we should first use our
·present gold supply to the maximum, before varying the weight of
the gold behind the dollar. From the psychological point of view,
l suspect that is sound, unless we could act very suddenly, as the
English people acted. If we could go off the gold standard suddenly and without debate, I think it would be the most valuable
thing that could happen to the United States, but I am afraid it
can not be done. that way; and on that account I feel that this
measure handles the situation quite wisely.
I would like to comment on a statement made by the Bank of
France in January of 1932, in regard to the gold matter. This is
the annual statement of the Bank of France, as quoted in the Wall
Street Journal :
·
Firmly resolved to guarantee the free play o:i' the gold stanc:lard, we ·proclaim our unbreakable resolve to remain faithful to this principle to which
the American and French Governments, in full accord, have affirmed their
attachment.
Mr. GRAHAM. Is the Bank of France on a true gold standard,
to observe all conditions i
Mr. WALLACE, I would not presume, myself, to stand as an author,
ity on international exchange. The last quotation I saw on the de•
pressed franc, it was still about 3.93.
Mr. GRAHAM. Does anybody know 1
Mr. WALLACE. The Bank of France has such an enormous gold
supply, running up to about $70 per capita in France, nearly twice
as much gold, per capita, as we have, and I think it would be able
to serve as a requirement of the gold standard.
Mr. GRAHAM. Pardon me for interrupting. I just wanted to
know. I was under the impression they did not; that what accounted for them having so much gold was simply the fact that they
did not part with it.
Mr. WALLACE. There might be someone in the room who would
know positively.
Mr. GOLDSBOROUGH. They are on the true gold standard, at this
time.
Mr. FISHER. I would call France on the g-old standard.
Mr. GRAHAM. No import or export conditions1
Mr. FISHER. I think so.
Mr. WALLACE. I want to continue with my statement· of the Bank
()f France:
We consider the convertability of gold not an outworn servitude, but a
necessary discipline and the sole effective guarantee of the security of con~
tracts and the morality of transactions.
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That is a most extraordinary statement, coming from France; or
coming from the French bank, in view of the fact that they allowed
their franc to decline from a· pre-war normal convertibility of 19.3
to as low as 2 cents, and finally stabilized at 3.93 cents ; and in view
-0f the fact that, as the result of that reduction in the gold convertibility of the franc, the price level in France at one time reached
more than eight times pre-war, and at the present time is more than
four times pre-war; and that France, as the result of that cancellation of internal indebtedness, because that process is the automatic
cancellation of more than three-fourths of its internal indebtedness,
they were able to relieve very greatly the pressure on their debtowing class? parti~11:lar_ly their f~rmers, an~ thus bring . about a
state of soe1al eqmhbrmm. I thmk the, thmg was unfair to the
creditors, if they carried it too far; but they were able to bring
about a thing which was quite stimulating to those active, energetic
sections of the population which are always in,debt, and thereby
were able to enjoy prosperity of a kind. But to find a nation which
did a thing of that kind, when the time comes that another nation
like England, for instance, finds it necessary to do something.similar,
to find France making a pious statement of this kind, " that it looks
on gold not as an outworn servitude, but necessary discipline," makes
you pause and think and wonder if France and the French nation is
quite as logical as it is supposed to be, or if that logic does not apply
only to its own interests.
I may say that if this country had done what France has done,
the farmers ·to-day would be able to sell their wheat for about $2
a bushel, their hogs for $15 a hundred pounds, and other things in
proportion. The farmers' creditors would not be bothering them,
the life insurance companies would not be worried; and, incidentally,
the railroads would be able to meet the interest on their bonds.
If it is relevant, I would like to make a few remarks on the silver
situation, Mr. Chairman. Would it be germane to the hearing to
make some comments on the silver situation~
Mr. Goi:.osnoRouaH. Yes.
Mr. ·WALLACE. I read Senator Wheeler's bill with interest. This
bill provided for the remonetization of silver on the 16-to-1 ratiothe regular Bryan bimetallizatibn. He wrote and asked me for a
-statement on the matter, which he did not incorporate in the record.
My statement was of such a nature, I suspect, that he _did not care
to incorporate it; but, nevertheless, I would like to make some comment before this committee on the silver question.
If_ we are approaching this prob~em fro~ an int~rna~ional point
of view and not merely from a national pomt of view, it would be
a wise idea to bring silver into the picture, providing the other
nations, especially England and her colonies, were inclined to rome
.along with us. Winston Churchill and some of the others have made
overtures of that kind. Some of the Republicans may not be aware
-0f the fact, although I suspect most of them are, that in the platform
-0f 1896 the Republicans had a :elank in which it was stated that the
:Republicans were in favor of bimetallism, if it could be done on an
international basis and not merely national.
On March 3, 1897, an act was passed, and I think was signed by
the President, providing for international monetary plans to consider the advisability of remonetizing silver.
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Again, we have in the House at the present time a Committee on
Coinage, Weights, and Measures, with its investigations dealing with
the desirability of an international monetary conference on the matter of the remonetization of silver. Bimetallism is, according to
most of the economists, a rather impracticable thing because of the
ratio feature, which makes it probable that it may shift the emphasis
toward one metal or the other, depending upon mining costs and
industrial uses, even tending to become a civic standard of one sort
or other. The great English economist, Alfred Marshal, however,
perceiving that difficulty, suggested what is known as symmetalism.
Under bimetallism, the dollar would be redeemable-assuming the
16 to 1 ratio-in either 23.20 grains of fine gold, or ten times that of
silver. Under symmetalization, however, the dollar would be redeemable, assuming the 16 to 1 ratio, for the purpose of illustration,
in 13 grains of gold and 160 grains of silver-a little of each. International exchange,, would be settled, and bars composed of one end
silver and the other end gold could be used. There may be, and
doubtless are, objections to symmetalism.
The Iowa Farm Bureau Federation in its annual meeting passed
a resolution calling on Congress and the administration for an international monetary conference to consider the desirability of remone'tfaing silver on either the bimetal or symmetal basis, as might seem
desirable.
It may interest some of you to know that Nicholas Murray Butler,
the conservative J,tepublican gentleman of New York City, in an
address in November before the Republican Club of New York
City, in outlining the proposed platform for the rehabilitated Republican P~rty, ~uggested, a~ plank _No. 11, I believe, in the platform,
the desirability of this mternabonal monetary conference to coil
sider the desirability of remonetizing silver, and thus restore to a
large section of the Orient the particular purchasing power which
it now lacks for the commodities of the rest of the world. Silver
obviously comes into the picture only if they deal with any international questions. I feel it is hopeless to bring it into the picture in
this country by itself; I think that would be a serious mistake, and
to that extent I disagree with Senator Wheeler, except for the pur'pose of strategy, to get it discussed, and it is necessary, if you are
going to get the thing discussed, to discuss it, first, on a national
basis.
A good friend of mine, whose name must be kept out of the hearings because he is connected in a rather high way with the Federal
reserve system. He is a man who has studied these credit matters,
to my own personal knowledge, for more than 12 years. I have
known him that long myself, and have talked over with him these
matters for that length of time. He heard that I was coming back
to Washington and expected to talk before the committee on stabilis
zation. I asked him for his suggestions as to the things which might
be profitably brought to the attention of the committee, and he ·
writes:
0
I have been thinking over your note and find it rather hard to give any pare
ticular answer. What I feel is that it will have to be a slow and difficult process of education and that all these economists will have to come first. What I
mean is, that as long as the economists of the country do. not understand this
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problem or the strategic approach thereto and can not understand the principles involved, how can we hope that the banker or the business man will do
any better?
·
Personally, I am not very hopeful of congressional action, but as to this
you are a much better judge than I am. I ani inclined to agree with you
that we are in danger of overexpansion when the time comes and possibly
a return of a boom situation. Possibly a further wild period of speculation
and another collapse is the only way that the importance of credit control can
be brought clearly to the popular mind. It might be interesting to suggest that
this is Jhe proposition that wUI happen if we do not adopt a method of scientific
control. That is my best suggestion.
That brings me to a discussion of the Glass-Steagall measure and
the Reconstruction Finance Corporation-Mr. GoLDSBOROUGH. Excuse me a minute. What was the date of
the letter you have just read i
Mr. WALLACE. March 2.
Mr. GoLDSBOROUGH. Proceed, please. You started to speak of the
Glass-Steagall bill and I interrupted you.
Mr. WALLACE. Yes. It is obvious that under the provisions of the
Reconstruction Finance Corporation bill and the Glass-Steagall bill
it is possible to have enormous credit inflation. The moment there
is sufficient confidence in the international situation to permit of
certain of the very wealthy hoarders to enter production and speculation with full confidence it is obvious that there may be tremendous
inflation and a strong upward movement in prices. I realize that the
majority of people in the room probably would not share in this
optimism..
The movement is occasioned, to a considerable extent, on the way
in which the international situation stands up. If the thing does
work out in that way, and the gentleman whose letter I just read
seems to feel that there is a good probability of it doing so-and I
myself feel there is at least l!,n even chance that it will work out that
way during the next year or so-if it does, it can only be followed
again by another smash, if the control of our monetary system resides where it does now. Not that I am speaking against any specific
banker, but as long as you have men in our regional reserve banksthe fault is more with our regional reserve banks out of New York
City than it is in New York City, in my opinion-dominating the
policies who have been trained in the country school of bankmgwhich is the school that is excessively careful in times of depression,
and is the school that will take a chance and puts out money to
profitable uses in times of inflation-just so long will you have
exactly the wrong kind of steps taken in the control of this monetary
machinery. Perfectly natural, there is opportunity for the local
banker to act in that manner, as that is the way in which he makes
money and the way in which he survives. Ogden Mills recognized
this condition very clearly in the statement he made January 25 before the New York acceptance bankers; Randolph Burgess, of the
Federal reserve system, has recognized the condition again and again
in his statements-but, nevertheless, we continue to have central
b~kers, who.have come up through the local banking school,, acting
in exactly the wrong manner as a central banker. He has as associates men who have, in the case of New York City and other centers where they have stock exchanges and commodity exchanges.,.:_
these associates are men of the type who think in terms of speculative
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fluctuations, and who have their security affiliates whose money is
loaned to support policies of one sort or anoth~r.
That means that the very heart of our banking system is influenced
by the short time, selfish, speculative desires. I am not talking
against speculation, because I feel speculation has a function; but
when speculation in a country like the United States, with its monetary power so centralized, does cause inconvenience to the nonspeculating public, and especially to the farming public, as we have seen
during the past 12 years. Those of us who do not happen to belong
to any speculative system might well inquire into the type of management of our banking system, and suggest that different leadership be given to that banking system than has been given. That,
as I see· it, is what is proposed under this bill.
As a final, technical approach to the problem, I am not altogether
convinced this bill is the last word, Mr. Chairman-and I beg your
pardon-but as a general statement, it seems to me to be most
admirable.
Mr. GoLDSBOROUGH. It was not prepared, Mr. Wallace, by me
with the idea it was the last word. I deliberately prepared it as I
did, as a working basis.
This bill will be amended before it is reported out by the committee. It was felt, however, by me, it was better to have a working
basis, and let the bill develop during the discussion.
Mr. WALLACE. There is one point in the Keller bill which, it seems
to me, might well be included in this bill, and that is part of th&
Keller bill under section 14 (b) :
For the purpose of enabling the Federal Reserve Board and the Federal
reserve banks more effectively to carry out the provisions of section 14 (a)
hereof·
·
which would be the first section of your billthe Federal Reserve Board is hereby empowered and :directea, whenever it
shall become necessary, on the attainment of the object specified in section 14
(a) hereof: (1) To authorize and direct any of the Federal reserve banks to
accept·
Mr. GoLDSBOROUGH. What section was that, 14 (a)@
Mr. WALLACE. 14 (b), and part (2) reads, in part:
And to hold said bond used as collateral under the preceding paragraph
subject to the orders of the Federal Reserve Board.
It would seem to me it might be wise to include that. That is a
temporary part of the Glass-Steagall bill, if you !will remember, .operative, I believe, for only one year; but if it coµld be written into
this bill so that it could be operative for a longel'. period it might be
a desirable addition to the powers of the Federal reserve system.
Mr. GOLDSBOROUGH. Well1 that same thin_g was included in sections
2 and 3 of the bill that I mtroduced on January 19 (H. R. 8026),
and from which the Glass-Steagall bill was made up; but that was
not accepted by the Federal Reserve Board. The committee drew
the Glass-Steagall bill as it was drawn, leaving that provision out.
Mr. WALLACE. Is it not true, however, that the Glass-Steagall bill
does have the first part of section 14 (b) 1
Mr. GOLDSBOROUGH, Oh, yes.
Mr. WALLACE. It has that in it, does it not¥
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Mr. GoLDSBOROUGm Yes; but it did not includ~ all that.
Mr; WALLA.CE. It did not include all of that¥
Mr. GOLDSBOROUGH. No.
Mr. WALLACE. There is one other rather technical point which
enters into this, it seems to me. Have you and the other members
6f the committee had members of the Federal Reserve Board before
you as yeti
·
Mr. GOLDSBOROUGH. They will be before us, but not until next
week.
Mr. WALLACE. I think, probably, I might well assume that when
they come before you and you fut this bill up to them that they will
hold up their hands and say, 'We can not undertake, through our
powers, to do a thing of such magnitude as this contemplates; it
will put a burden on us and possibly more criticism, which will
destroy the Federal reserve system "; and some of them will doubtless even threaten to resign should such a bill become the law.
Mr. STRONG. I want to say that they have taken that position in
the past, but they never threatened to resi~.
Mr. GOLDSBOROUGH. Do you think any criticism could be any more
drastic than the criticism the Federal Reserve Board had after the
deflation of 1921 and of 19301
Mr. WALLACE. Yes; I think it can be more drastic than that, and
I think it will probably be, in any event. There are some competent
economists who feel this is not possibly the best way to go about it.
There are some men, for whose opinion I have the very highest
regard, who feel that, instead of price being the criterion, that credit
should be the criterion, and that credit should be expanded at a constant rate, equal to the rate at which physical production expanded
during the five years preceding, or 10 years preceding.
Mr. GoLDSBOROUGH. You are referring to Mr. Edie's idea i
Mr. WALLA.CE. Yes; referring to Mr. Edie's idea, that trade is the
criterion, and credit is brought in and adjusted to trade.
·
Mr. GomsnoROUGH. That is propably what you had in mind, was
it not'I
Mr. WALLACE. Yes; it is, exactly. Has that bill been introduced,
by the way1
Mr. GOLDSBOROUGH. No; it has not. Professor Fisher, as a matter of .f~ct, prought it with liim when he came to Washington, and
he gave 1t to me.
Mr. WALLACE. Now, from my own point of view, I would look on
that bill as possibly, eventually, satisfactory to agriculture, if this
bill could not be obtained, or something like this. As I say, if the
competent monetary authorities really feel that there were altogether
too many technical objections to carrying this out, if they did feel
this was impossible, then this thing might eventually be compromised.
Mr. GOLDSBOROUGH. May I ask you a question right there:
Do you feel that the carrying out of that bill, the legislation provided in H. R. 10517, is impossible, as a practical proposition i
Mr. WALLACE. I do not think so. There are certain psvchological
things that we do not know anything about yet which can flow out
of this thing.
Mr. GOLDSBOROUGH. We all ·understand perfectly well that it does
not make any· difference what legislation is passed, that it is not
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going to make people unselfish necessarily, is it, not going to make
them cooperative and it is not going to make them understand that
their own best interests depend upon how the best interests of the
great masses of the people are subserved and this legislation will not
produce immediately an Utopian situation.
My question is this: As .a practical proposition, to be administered
by competent men, does 1t not seem to you th~t they ought to be
able to administer this law as satisfactorily as other laws are administered, and with the same result 1
Mr. WALLACE. The ramifications are so infinite that I would hesitate to say yes. My prejudice is to say yes. There is one thing I
Jo like about that though. ,
•
Mr. GOLDSBOROUGH. YOU mean about the Edie bill 1
Mr. WALLACE. About the Edie bill, and that is that it does relate
to the very fundamental thing, which is the physical production, and
the ultimate objective of the monetary change should be to allocate
credit in such a way as to have a continuous, increasing quantity of
goods for distribution. It is an extraordinary· thing, and an unthinkable thing to have, as we do have at the present time, a reduction in :manufactured commodities of more than 30 per cent below
normal for this year; while, at the same time,[ou have 8,300,000 folks
out of work, according to President Green o the American Federation of Labor, and who desire work, all because of the fact that there
is a lack of confidence in the future of the price s~ructure, and that is
partly because of the- declined commodity values1, the declined stock
values, and all that sort of thing; but the thing is, they feel that
things may go lower yet; and no businessman that is an intelligent
man will borrow money so long as there is that fear, and the banker
will not lend any money as long as there is tha( fear. That is the
thing flowing out of our money system.
Mr. GOLDSBOROUGH. Now, as a remedy-Mr. WAILACE. And the bill, if it really does work, of course, would
meet that.
Mr. GOLDSBOROUGH. Mr. Wallace, as a remedy-I am talking about
an emergency measure now, and this, of course, has emergency features-this bill (H. R. 10517). The Glass-Steagall bill was passed
as an emergency measure, primarily. Now, do you not believe that,
if the Federal Reserve Boa:r:d would announce_, as a ~onsijltent policy,
that they propose to go out mto the market, with their vast resources,
and buy Government securities, until the price level was raised to a
given point, and the public in general knew that was going to be
done, that that would almost immediately take care of the situation.
Mr. WALLACE. I think so..
Mr. STRONG. Then, regardless of what law were passed, the willingness and the desire of the Federal reserve system to bring about a
stabilization becomes a· very vital question.
Mr. GoLDSBOROUGH. How is that 1 Piease read that.
(Thereupon .the stenographer read the statement of Mr. Strong as
before recorded.)
Mr. WALLACE; That is very true; but this bill makes that
mandatory.
•
Mr. GOLDSBOROUGH. The point I make is this: We are in the greatest national emergency we have e:v!'r known; we have businesses that
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61
have been careful about their secondary reserves; we have farm
families who have been thrifty from grandfather to grandson, who
are simply being wiped off of the face of the earth.
Now, that is an emergency. The question I am asking you is:
Whether or not if the Federal reserve system would announce a
policy such as I have just stated,-it would not cause business to
resume almost immediately i Now, of course, I understand perfectly well that wl?-en you get a thing started and it gets going toe
fast, it is hard to stop; but, at the same time, it is not, by any means,
impossible, as I see it, to stop it; and it is not, by any means, impossible to retard the advance in price levels at such times as to act as
a precaution for business not to expand too far.
Mr. WALLACE. I think the retort of Mr. Edie, :for instance, to
your point of view-and he would sympathize with you about 99
per cent-but the retort of Mr. Edie to you would be this: Suppose
the Federal reserve system stepped into the market and bought, we
will sa~ $500,000,000 additional of Government securities-Mr. liOLDSBOROUGH. Yes; but they ought to announce what they
are going to do.
Mr. WALLACE. So we can all be in on it.
Mr. STRONG. There should be a publication of that action.
Mr. WALLACE. Yes; I think we are all agreed on that. I think
Mr. Edie's possible retort would be this: Once you get a thing going
after a year or so it might .become unbalanced and produce over
production.
Mr. GOLDSBOROUGH. Of course, that is what always happens in
times of undue inflation; but here we have got a dreadful condition
on our hands. We have got a conditi-on where every bank in the
country is apt to fail to-morrow, and destroy the community in whreh
the bank is located. We have got a. condition in this country where
there is an attempted readjustment of sahi,ries and wages; m 0th.er
words, the heart is being torn out of everything. Now, when this
rise comes, as it certainly will in a few months, the result would be
that these wage-earners and these people who draw salaries, and all
the different groups who have been deflated, will have their birth
pains again, in trying to get back to a normal relation with society.
Why do we not stop that now, before all that re.adjustment becomes
necessary1 That is what I have ip mind, and that is what is in the
Glass-Steagall bill. If it is not worth that, it is not worth an~hing i
it can not do anything, if its action does not result in the raising OY
prices.
Mr. W A.LLACE. Yes; I agree with you, compl-etely.
Mr. SmoNo. May I interject that every bill that we have passed
has been an attempt to create some inflation in this country, which
might not have been necessary if we had passed this stabilization
proposition five or six years ago. We did our best. !;o do so, did
we not9
Mr. WALLACE. Yes, Congressman Strong.
Mr.,Chairman, I think I have finished.
Mr. GowanooouGH. N-ow, Mr. Prall.
Mr. PRALL. I have no questions.
Mr. GowsB0ROUGH. Mr. Busby.
11144~2-PTl-5
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Mr. BuSBY. Speaking of Mr. Edie and his credit theory, any
kind of machinery that is set up by Federal law, in order to be
successful, would have to be admimstered by friends to the idea
intended to be carried forward by the credit machinery, would it
not'l
Mr. "\VALLACE. Administered by friends, did you say j
Mr. BusBY. Yes. If you did not get the question, he can read it
to you.
Mr. WALLACE. I did not quite get the wordin~ of it.
(Thereupon the stenographer read the question by Mr. Busby, as
before recorded.)
Mr. WALLACE. The criterion of the Edie bill is that there is a
strategic measure of the rate of increase of physical production,
which has been, in this country, up to 1929, about 4 per cent
annually.
Mr. BusBY. I do not care a thing in the world about that. That
is not my question at all. My question is this: That no matter what
type of credit machinery you set up, to be administered through an
agency, in order for that machin-ery to be successful, friends would
have to have it in hand and its administration in hand.
Mr. GOLDSBOROUGH. It would have to be administered by friends.
Mr. WALLACE. You mean a bank would have to administer it?
Mr. BusBY. No; friends to the idea, friends to the cause, the set-up,
or whatever it might be.
·
Mr. WALLACE. It is my observation of Government boards that
whenever the management or the members of those boards tend to be
fair-minded toward the intended purpose of the act-Mr. BusBY. I will ask you again, the third time, and see if you have
the question l am asking.
In order for credit machinery, set up by act of Congress, to be
effective for the people to be benefited, the first requisite would be
that the act, in its administration, would have to be in the hands of
friends or people administering friendly to the cause to be remedied,
would it not?
Mr. WALLACE. I begin to get your drift, and I believe you are
absolutely sound in that view. In other words, it would be a splendid
thing if we had more views like that from our part of the country.
Mr. BusBY. Do you not underst,and me?
I want to tell you, frankly, that my notion of those gentlemen who
come up from the Treasury is, that they are expert dodgers when it
comes to coming squarely to the point, and I do not want you to
get in that class. This is the thing that I want to ask you:
In order for credit to be properly apportioned to business, under
Mr. Edie's idea, or any other idea, the velocity of credit would have
a great deal to do with the convenience or its nonconvenience, at any
particular time, would it not?
Mr. WALLACE. Yes; and proportionately as to which one got that
credit allocation of it.
Mr. BusBY. I will tell you what I had started to say. I am trying
to get to the weakness of your position that a credit arrangement
will supply. Do you know whether or not the velocity of bank
credit and currency, that is, the turnover per month, at the present
time is about 2.4 to 2.5 times or not?
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Mr. WALLACE. The velocity has been very slow during the past
year, if that is what you mean.
Mr. BusBY. I think that is about the right figure. Now, then, do
you know about what the velocity of bank credit and currency was
during the middle part of 1929, when we had flush times, the turnover
per month?
Mr. WALLACE. I would write Professor Fisher, if that question
were asked me.
Mr. BusBY. Did you have anything to do with the publication of
the little book Honest Money?
Mr. WALLACE. Yes.
Mr. BusBY. Did you ever read it?
Mr. WALLACE. Yes.
Mr. BusBY. You have stated those figures here. I have taken
them from your own book.
Mr. WALLACE. All right, put them in.
Mr. BusBY. Now, .vou speak about the Federal reserve system
increasing the amount of buying power of the country by coming
out and purchasing Government bonds and securities, until the point
was reached where the mflation was satisfactory. You suggested
that that was the proper thmg to do, did you not?
Mr. WALLACE. I suggested it would have an effect on the price
levels, sooner or later.
Mr. BusBY. What is the Federal reserve system going to purchase
these bonds with?
Mr. WALLACE. Under the Glass-Steagall bill, they can purchase
bonds by issuing more bonds. You can sell to bankers, and have the
bankers bring them in .and issue Federal reserve notes, and keep
going.
Mr. Bu11BY. What is the gold reserve required on those bonds that
are issued; is 1t not about 40 per cent?
Mr. WALLACE. Yes.
Mr. BusBY. Now, you understand that the Treasury says we only
had about $450,000,000 of free gold at the time they were trying to
get the Glass-Steagall bill through, did you not? You remember that,
do you not?
Mr. WALLACE. I saw all of that in the newspapers.
Mr. BusBY. Do you regard that $450,000,000 of free gold sufficient to carry on the process that you alluded to; until a satisfactory
point has been reached,. in issuing or buying Government securities?
Mr. WALLACE. I think certain of the reserve powers that the
reserve system has will enable them to do that thing. There a.re
adjustments that could be made in the gold certificates, and so GD.Mr. BusBY. Do you think it is necessary to keep back bo:nc!s of
perhaps more than $450,000,000 of free gold, to meet the demands
of foreign countries who have credits lodged in this country?
Mr. WALLACE. The possible adjustments that can be made· inside
of the Federal reserve system, in my opinion, can meet all the possible
demands from foreign countries for our gold.
Mr. BusBY. No; that is a general statement, but the detail of it is
what I am concerned with.
Mr. GOLDSBOROUGH. If I may interject at this point, with this
Glass-Steagall bill in operation, there is about $1,400,000,000 of free
gold; then the reserve requirement, which the Federal Reserve Boar.d
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can do away with, if they see :fit, amount to $1,600,000,000 more, and
that is $3,000,000,000; and then the gold certificates which are out,
which could be called in, amount to $900,000,000, and that would
make $3,900,000,000; and none of that money belon~s to any foreign
country. The gold that France has is locked up m vaults, safety
deposit boxes.
Mr. WALLACE. It is earmarked, all right, is it not?
.
.
Mr. BusBY. I want to say that I am familiar with the details of
what you allude to, and I do not see the proposition that way. In
the first place, if you call in $900,000,000 of outstanding gold certificates, you would rob the currency circulation· of $900,000,000 of
currency to begin with.
Mr. WALLACE. You can issue Federal reserve notes, as you did
before. You have done it before. It only requires 40 per cent
reserve.
Mr. BusBY. I understand that; but you also understand that
Eugene Meyer, when he came before this committee, represented
that the Federal reserve only had $900,000,000 of eligible paper,
back of 60 per cent of the Federal reserve notes issued and that the
remaining part of the 60 per cent that might have been discountable
paper was gold because paper was scarce. You remember that, do
you not?
Mr. WALLACE. When was it that he made that statement?
Mr. BusBY. When we were having hearings on the Glass-Steagall
bill.
Mr. WALLACE. As recently as that?
Mr. BusBY. Yes; you knew that, did you not?
Mr. WALLACE. No, I did not.
Mr. BusBY. You knew that the bankin~ interests of the country
had absolutely frozen $3,500,000,000 of eligible paper that they would
not use; you knew that, too, did you not?
Mr. WALLACE. I knew that they had a very vast sum that they were
not using.
Mr. BusBY. And we have no assurance that, under the GlassSteagall bill, the paper made eligible by that bill will not also join
these $3,500,000,000 frozen paper, that is already locked up by the
banks, and which they refuse to use? Have you given any thought
to that?
Mr. WALLACE. I have given a great deal of thought to the possibility that the desire might be lacking on the· part of our very fearful
local bankers, who are out from the centers of population-that' the
desire might be quite completely lacking to take the chances which
~re necessary to take, to get this economic machine moving off of
dead center.
Mr. BusBY. You say out in the local places; how about bankers in
the big centers, are they n o ~
Mr. WALLACE. I would include Chicago as one of those local places;
they are still very fearful there.
Mr. BusBY. Chicago a local place? What do you mean when you
say ~'local"?
Mr. WALLACE. I rather think that the New York folks, as indicated
in my correspondence with certain individuals, are really getting to
the point of being sincerely desirous of rushing this thing along.
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Mr. BusBY. You mean they might use some of this eligible paper
they have been refusing to use up to now?
Mr. WALLACE. Yes.
Mr. BusBY. That is where you are going to get the eligible paper,
even with the Glass-Steage.ll bill working, connected with the other
e~ble paper that will fl.ow into the Federal reserve system, to back
this currency tha.t you are going to issue to buy these bonds with.
Mr. WALLACE. Well, now, that is something which can change in
the twinkling of an eye.
Mr. BusBY. I am not talking about that.
Mr. WALLACE. It can change very rapidly.
Mr. BusBY. But it has not changd, it has been around the comer
for about two years, but we can not get by the corner.
Mr. WALLACE. Yes,,I am getting to that.
Mr. BusBY. Let us go to another thing that might be involved.
You recognize that an issue of Government bonds or securities is e.
charge against the credit of a nation, a type of mortgage, so to·speak,
against the values there are in the country.
Is not that true?
Mr. WALLACE. Oh, yes; obviously.
Mr. BusBY. Now, that being a debt already, and an interest-bearing debt, you turn around and issue currency based on a debt, and
that currency is still another national debt, and does not even bear
interest? Are you not getting in· e. rather undependable position,
pyramiding debt issued by the Government, if you follow that course
to any great length?
Mr. WALLACE. I think you are rather inferring, Mr. ~usby, that
I am .standing primarily on certain provisions of the Glass-Steagall
bill. In my talk I was dealing with what I thought would possibly
take place under the Glass-Steagall bill.
Mr. BusBY. No, I knew you were not referring to that. I was
speaking generally.
Mr. WALLACE. As far as I am standing for a definite proposition,
I am standing for this bill here, and certain phases of this, but this
pyramiding effect to which you refer-there is a power which the
Federal reserve system possesses to reflate, to cause prices to go up,
if they so desire; and under this bill I suspect it would be necessary
to do some of that pyramiding, which would then bring you, in caso
that you come to the ultimate point which you apparently fear, of
our having.insufficient gold to invoke section 3 of the bill.
Mr. BusBY. Do you not know that the plea against hoarding that
is being made by the President and by organized e1fort is to g~t people
to bring that money in and put it in.the banks and take tlie risk of
having those banks break, in order not to have to issue more currency,
based on an additional amount of gold and credit; and that the real
purpose in antihoarding has never been disclosed to the public; and
1t is true that the more gold available against a possible run on this
country by foreign governments for gold shipments out of the country, in that a new issue of currency-, such as you have described, would
involve more gold as the backing for that currency? Have you
thought of that phase of it?
Mr. WALLACE. No; I had not thought of that particular phase
of it.
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Mr. BusBY. You can see some merit to it, can you not? That the
more currency there is issued, it would be very easy for the Government to do it, but it would also involve more gold, and the President
would rather the people would bring their money in-I will not say,
even if the banks go broke--but it would be bringing it from where
that man had put it. Now, you involve it in whatever risk is incident
in order to free this gold directly, or to keep it, rather, from tying up
more gold in issuing a sufficient amount of currency for circulation?
Mr. WALLACE. That is an interesting view that I had not thought
of.
Mr. BusBY. You can see that, to issue more money, would involve
more gold as the backing for that money.
Mr. WALLACE. It usually does, although there are certain adjustments that can be made in the Federal reserve system where that
would not necessarily follow.
Mr. BusBY. I do not understand what adjustments you can make.
· Mr. WALLACE. I was talking to Senator Owen yesterday afternoon
about that particular matter, and he will be testifying before you
either to-day or to-morrow, and I would suggest that you take it up
·
with him.
Mr. BusBY. I will be glad to do so. Now, there is another thing:
Do you have in mind any particular legislation, or statutory provision, involving any legislation, which would carry forward the
plan to a definite end, in any of the monetary proposals that you have,
or would we have to leave that to the good faith or sound administration of somebody like these credit systems?
Mr. WALLACE. Congress always has to leave the carrying out of its
laws to some commission of some kind, or some board, does it not?
Mr. BusBY. Oh, well, there is more or less discretion, and there is
more discretion in some and less in others. That is what I am driving
at. Then, do you have any other proposals than the ones you have
suggested here?
Mr. WALLACE. No further proposals. I would suggest that you
give this House bill 10517 the most serious consideration; and, secondly, that you also consider this so-called Edie bill as a possible alternative, in case of the necessary objections which will be urged by the
members of the Federal Reserve Board when they come before you;
and, third, that you favor the calling of an international monetary
conference.
Mr. BusBY. That has been provided by law since the nineties,
you know.
Mr. WALLACE. Since 1897.
Mr. BusBY. Yes.
Mr. WALLACE. At that time, you will remember, is when President
McKinley felt out the nations about the matter, and England, being
on the gold standard, was rather against the whole thing. England
at the present time is in a much more amicable frame of mind.
Mr. BusBY. Yes; let me ask you this: Do you regard the price
findings of the Bureau of Labor Statistics as dependable?
Mr. WALLACE. As the measure of the wholesale price levels; yes.
Mr. BusBY. The wholesale price levels is what you meant in the
center of gravity in trade, is it not? All of the commodities, taken
together, the wholesale commodity index, as fixed by the Bureau of
Labor Statistics-do you regard them as being dependable?
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Mr. WALLACE. Yes.
Mr. BusBY. Do you ·not believe that the currency evaluation
range, relating to the wholesale commodity index prices, would not
be more dependable than the credit systems that are manipulated
and juggled and badly administered?
Mr. WALLACE. I am more willing to take my chances on that.
Mr. BusBY. Do you regard any metallic base "that is not related
to the commodity prices along the lines suggested, as being wholly
dependable?
Mr. WALLACE. I look on gold and, to some extent, silver as a
relic of barbarism, but we are still barbarians.
Mr. BusBY. Do you not know that gold, or gold and silver, or
silver, either one, taken as a base for our currency and the measure of
our values, would .swing out of line with commodity prices from time
to time and cause periods of inflation and depression.
Mr. WALLACE. I am agreeing with you as to that. I think we
have got to have control, eventually, but as an emergency proposition
to restore the purchasing power to the people of the Orient there is a
lot to be said, if you put silver in.
Mr. BusBY. Is not your organization willing. to go forward to the
very basic proposition and begin to fight for it in a wholehearted way,
at the present time?
Mr. WALLACE. I am a rather humble member of the Farm Bureau
Federation, but I would say we are willing to go the limit on the thing,
we are willing to go the absolute limit. The only question is, when
you consider its intermediate steps-the only reason I have talked,
as some of you may have thought, a little bit academically on the
question, is, I want you to consider the nature of those intermediate
steps; but if you want radicalism, as expressed in the nature of our
spirit, we can express plenty of that.
Mr. BusBY. I do not understand that language. What do you
refer to now?
Mr. WALLACE. Well, we do not speak the same language,
apparently.
Mr. BusBY. Well, I understand-Mr. WALLAqE. You understood Mr. Beedy's langua~e.
Mr. BusBY. I understand the reasonable interpretation of English
words, but I do not know what you are applying to.
Mr. WALLACE. You asked how far the American Farm Bureau
Federation was willing to go on this money matter.
Mr. BusBY. I wanted to see where you are. So I want to know
how far or how much in earnest the representatives of the American
farmers are; and if they are not downright, dead in earnest, I want
them to let us go ahead and see what we can·do to help the masses of
the people. I do not want them to come in here with any halfhearted proposal and then say, "We are afraid to try to do the thing;
we know we ought to do, and that ought to be done," as that is
getting nowhere, in my opinion.
Mr. WALLACE. Of course, I have spent some 12 years, through my
paper, trying to educate folks on this thing, and I speak for my
folks in Iowa and the Middle West.
Mr. BusBY. I think they are ready for it, from what I hear from
them, because I get letters from all over the country.
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Mr. WALLA9E. Our folks are certainly ready to go; and the Farm
Bureau Federation went on record, in its resolution in December of
1930 in behalf of the appointment of a committee on stabilization of
the unit of value. Subsequently in 1931 such a committee was
appointed and prepared a report embodied in the booklet Honest
Money; and I would say that I have done a very considerable amount
0f education, and that would result in the membership standing
behind me on this general proposition. Now, we have not, as yet
brought forward any bill, and we have rather deliberately refrained
from bringing forward a specific bill; because you realize that, when
you bring forward a specific bill, fear becomes centered in the bill as
an educational proposition and later to deal with the thing in gen-
eral--
Mr. BusBY. Excuse me, but I have no patience with that way of
attacking an evil.
Mr. WALLACE. General advice is the best advice, I think you will
find, in the educational program.
Mr. BusBY. And I regard that move as standing absolutely in the
way of our progress, because we can not get people to listen to a proposition; because when they are feeling well, although they have a basic
ailment and they ought to have an operation performed, as long as
they are feeling well they will go along and defer the operation; and
so it is in finances, and if we are not going to deal with a question fundamentally, at the present time, because when we make some recovery,
after a degree of suffering, we are going to recur to it. What I want
you folks to do is stiffen up and come in here and say, "We stand for
something that is fundamentally right" and then we will get somewhere. I do not want these farmers' organizations standing in the
way and then hollering.
Mr. WALLACE. I think you had better have him at your next meet~ r . BusBY. Let us not get off of the subject. There is not any
more questions that I would want to ask. ·
Mr. WALLACE. I think we ought to know what a specific measure
contains.
Mr. GOLDSBOROUGH. Mr. Wallace, this committee has met for the
purpose of reporting a bill. That is what we are going to do. Now,
then, what we want is your hest judgment about the legislation.
This is not an educational campaign. The country is in a crisis, and
we are going to report a bill. I think that is the sentiment of the
subcommittee and will be the sentiment of the full committee. So I
think we ought to say to you that this committee does not consider
this to be educational, except as the general testimony given when
any bill is being considered is educational. We are going to report a
bill. -Now, Mr. Prall, you had a question.
Mr. PRALL. I want the gentleman, for my benefit, coming from
the lower part of Broadway of New York City, where we have not
many farms-I would like your opinion on this particular bill, as to
what its effect will be if we enact, within, say, two months, this bill;
and just where that effect will be felt, and just what its effect will be
on the unemployment situation.
Mr. GOLDSBOROUGH. Labor?
Mr. PRALL. Yes.
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69
Mr. WALLACE. That is in this bulletin, Farm Economics, which I
understand Mr. White is going to enter into your files. On page 167
a chart indicates the effect of the rise and decline of prices on employment. I would assume, from that chart, if prices could be held steady,
that employment would be stabilized to a very considerable degree.
Mr. STRONG. In other words, if industry could go along on an even
keel, without having inflation and then be ruined by deflation, that
it could continue to employ its labor.
Mr. PRALL. That is not the question. I want to know whether or
not this bill will do that, or whether this bill should have something
.added to it, or teeth put in it, or something of that kind? Will this
bill get us out of the mess we are in now? That is the point.
Mr. WALLACE. This bill, undoubtedly, if carried out, if you ca.n
ootually get this bill passed and signed, there is no question but what
this bill will carry out an enormous reflation of prices; there is no
question about that, if you go clear through. This section 3, for
instance, will do it.
Mr. GOLDSBOROUGH.. It will depend on the way it 'is administered.
Mr. WALLACE. Yes; on how faithfully it is administered.
Mr. BEEDY. That is what he wanted to know.
Mr. BusBY. That is what I was alluding to.
Mr. WALLACE. I wonder if I could make a remark to Congressma.n
Busby, that I am hoping he maintains his same sturdy attitude
when the members of the Federal Reserve Board appear.
Mr. GOLDSBOROUGH. You need not be disturbed about Mr. Busby
along that line.
Mr. WALLACE. This is my feeling on the thing, gentlemen: That
when you have technical men before you, you have to regard their
opinion, and that may cause you to make certain shifts here; but I
sincerely trust that your resoluteness will stay by you; and when it
becomes necessary and we farmer folks can not really be sure what
bill to set up before our folks until after you folks have disclosed, after
consultation with those technical people, what you are going to report
out-Mr. BusBY. You do not expect the president of the Federal Reserve
and that bunch of fellows to bring you what you are looking for in
the way of legislation?
Mr. WALLACE. No; but they put certain brakes on you as Congressmen as to what you will report out.
Mr. BusBY. Yes; I am sure they will put the brakes on us.
Mr. WALLACE. They may put legitimate brakes on you.
Mr. STRONG. Now, of course, you know that the Federal Reserve
Board now has the right to buy and sell Government securities and
regulate the discount rate; they do not require any more power to do
that? Therefore, if they chose to go ahead and buy Government
bonds, and take the bonds out of the market and put the money in
it, and lower the discount rate, they could bring about a tremendous
increase of commodity prices, could they not?
Mr. WALLACE. Undoubtedly.
Mr. STRONG. Then, the only purpose of our legislation here is to
require them and direct them by Congress to do the thing they could
do now, if they wanted to.
Mr. WALLACE. That is the chief end if it; yes.
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STABILIZATION OF COMMODI'.rY PRICES
Mr. STRONG. Well, then, of course, whether or not the members
of the Federal Reserve Board are friendly to this legislation, must
bring out the thought that, if they were friendly, they could do what
we want them to do; it is only because they are not friendly to this
idea that we are trying to pass legislation to direct them to do the
thing we want done, and that is, put more money in circulation at a
less price?
·
Mr. WALLACE. Yes7
Mr. STRONG. Well, now, carrying that thought out a little further,
when we direct them to use these powers to put more money in circulation at a less price, for the purpose of bringing about more inflation,
then you use those powers to stabilize the purchasing power of money;
at that point where we think the price level is just to all the people of
the Nation, ought we not give them a ,measure of value to do it by?
Mr. WALLACE. Certainly.
Mr. STRONG. That is, we ought to direct them, in this bill, to use a
measure of vaJue as to certain price levels, index numbers, I mean.
Mr. WALLACE. Yes.
Mr. STRONG. It is your idea that we should direct them to use a
fair measure of value or yardstick or what is termed an "index
number" of commodity prices.
Mr. WALLACE. Theoretically, the correct measure of that is the
point at which the average indebtedness was contracted, which was
estimated in this bulletin of Boren's at 150--that is, taking pre-war
as 100; that would be substantially the same as it is directed here,
which is the average of 1921 to 1929.
Mr. STRONG. We are directing them to use their powers to stabilize
the purchasing power of money; what measure of value should we
give them to use? In other words, do you think we should use the
price index numbers·of general commodities?
Mr. WALLACE. You mean the Bureau of Labor indexes?
Mr. STRONG. Yes.
Mr. W ALLAcE. The Bureau of Labor for what year?
I would say 1926, or, for the foregoing purposes, you can say the
average for 1921 to 1929, and that will give the same result, substantially.
Mr. STRONG. I want to say to you, after studyin~ this question for a
good many years, !'have arrived at the conclusion that the index
number we ought to use is the Bureau of Labor index; and in this_
connection I think it is only fair to say that one member of the Federal
Reserve Board seems to feel they ought to have their-own index number; and on exhaustive questioning he seems to think that the stockmarket prices and the real-'estate values should be in that index. In
other words, if we do not direct the Federal Reserve Board to use one
measure of value, then they may set up one of their own that might not
do the thing we want them to do. We are agreed that we ought to
use some index number, and you think the index number set up by the
Department of Labor is proper? You favor the wholesale mdex of
commodity prices?
Mr. WALLACE. Yes; because it is the most sensible, and as long as
you are using an index number, the most complete is the Bureau of
Labor's.
Mr. STRONG. Now, another question: Of course, in any opei:ation
under this bill, there will be times when they will have to buy bonds and
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lower th0 discount rate, or sell bonds and raise the discount rate;
what do you think about the proposition of giving them, in this bill,
some direction as to the publicity they should use? In other wordsr
there have been times, for instance, to make it exact, on the 20th day
of May, 1920, when a motion was passed through the Federal Reserve
Board which meant deflation, and we did not know much about it for
several months afterwards, and there are times since when they have
decided to buy or sell bonds, or raise or lower the discount rate, without any notice to anybody. Do you not think there should be that
publicity which would make it possible for any business man and other
person in the United States to know when that change of policy is
going to take place?
Mr. WALLACE. Yes; I am strong for that kind of thing, of course>
but startin~ on it suddenly-suppose in the early summer of 1929,
that publicity provision you refer to had been in effect, and it came
out all of a sudden, the sm_!tsh would have been trerific. It is hard to
start, but once started, it is a healthy thing.
Mr. STRONG. That is true, but the point I want to make is this:
That there always will be men who study this situation, who will
know, from the trend of things, what the Federal Reserve Board is
going to do, and they will have that knowledge in advance of the
general public. Therefore, in my bill, and I hope to put it in this
bill, I have a clause requiring the governor of the Federal reserve
system, when they start a change of policy, to give publicity to the
whole Nation.
Mr. WALLACE. I had not noticed it was omitted from this bill.
I noticed it in one bill, and it should be in here.
Mr. STRONG. I put into my bill the proposition that we use as a
measure of the value of the dollar, the general wholesale commodity
index price, as established by the Department of Labor; and then,
when any change of policy is decided on, that the governors of the
Federal Reserve Board shall ~ve immediate publicity, so that all may
know what the change of policy is that has been decided on.
Mr. WALLACE. Of course, it does not become so important if the
price level is held steady.
Mr. STRONG. No; but suppose we are going along and buying bonds
and reducing the discount rate, for the purpose of raising prices; and
then, when we reach the point where the board will say, "This has
gone far enough. We had better stop this policy." Should not everybody be advised of that?
Mr. WALLACE. Certainly.
Mr. STRONG. That is the point I wanted to make.
Mr. WALLACE. Yes, sir.
Mr. GOLDSBOROUGH. That is all.
Mr. BEEDY. No questions.
Mr. GOLDSBOROUGH: Mr. Wallace, we thank you, and appreciate
very much your statement. It has been clear and entirely satisfactory, and we are very much helped by it.
Mr. O'NEAL. Mr. Chairman, we have Mr. White.
Mr. GOLDSBOROUGH. Now, Mr. White, if you will give your name
to the stenographer, please, and whom you represent.
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STABILIZATION OF OOM:MODITY PRIOES
:STATEMENT OF CHARLES R. wmTE, PRESIDENT NEW YORK
STATE FARM BUREAU, AND MEMBER OF BOARD OF DIRECTORS
AMERICAN FARM BUREAU FEDERATION
Mr. WHITE. My name is Charles R. White, and I am president of
the New York State Farm Bureau, and I am a director of the American
Farm Bureau Federation.
Mr. GoLDSBOROGUH. Just proceed in your own way, Mr. White.
Mr. WHITE. I desire, Mr. Chairman, to go back a little bit in
monetary histroy. In the first place, I think we are somewhat
deluded by the idea that this is the greatest depression this country
ever had, because I started in a depression as a young business man,
and I was in Washington about 40 years ago-Mr. GOLDSBOROUGH. How old are you?
Mr. WHITE. Sixty-seven.
Mr. GOLDSBOROUGH. It is the worst one I have ever seen. Maybe
you saw one ahead of me.
Mr. WHITE. The fact. is that following the Civil War we had a
period of deflation quite similar to this. The inflation of the Civil
War was very different from the inflation of the late war in this
country, for the reason that, in the time of the Civil War, the Government was unable to buy gold with bonds, and the credit of the Nation
was cut into pieces, and greenbacks were issued. At the close of the
war, those greenbacks which had been issued were funded into bearer
bonds. The greenback, at that time, was worth about 50 cents on
the gold basis. The indebtedness of the farmers and the business
men were largely created on the basis of lawful money of the United
States, which was the greenback. The result of that was that
prices fell very rapidly, and in this bulletin that I have here, compiled
by Doctor Warren, the lines are absolutely parallel, showi~ practically no deviation in the falling of prices following the Civil War
and following the late war. Of course, the farmers were met with
the same situation as all business men were, and rearranged arid
adjusted their conditions.
In the late war, we had a gold inflation, most of the countries of
the world went off the gold standard, and remember that gold came
pouring into this country very rapidly; in fact, so rapidly that hundreds of millions of dollars were sterilized by the Treasury Department; bonds were accepted from foreign countries, rather than gold,
so :J?,rices would not go any higher. So our inflation at this time was
entirely a gold inflation, somewhat regulated by Government edict,
but it was on a gold basis at that time. Following the Civil War
we funded the greenback debt into interest-bearing bonds. We
were a great agricultural Nation,. with very little industry, and
England was the great creditor nation, who held a large proportion of
our bonds, and was a great industrial and commercial nation.. She
desired our low-priced raw materials, our low-priced cotton, and
low-priced food. It was during the period I speak of, that I happened
to have been in here on some occasions-Mr. GOLDSBOROUGH. When was that, sir?
Mr. WHITE. That was during the nineties, the early nineties;
There was the very strong belief that pressure was brought to bear by
English interests. A great deal of influence was exerted in Washington
for the purpose of demonetizing silver, so as to further deflate prices.
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If they could get our prices of food and raw materials down, that
placed them in a powerful position.
Now, we had one great major depression before that, the deflation
after the Napoleonic war.
One thing I want to bring out is, that we find in an examination of
these tables, going back to the statistics, that the gold production in
the world, and the commodity prices run absolutely along parallel
lines, except a deviation about 7 per cent for one short period, and
occasionally up to 8 per cent, for very short periods.
Mr. BEEDY. When was the 7 per cent period?
Mr. WHITE. I do not remember-I could find it-but we find the,
commodity prices and the gold prices run parallel. The English
statistics, which have been compiled for a period of 90 years, show
that situation, also the monetary commission of the League of Nations
have shown that whenever we fail to produce in the world 3.1 per cent
increase in our gold output compounded each year, the commodity
prices fall; and whenever we exceed 3.1 per cent increase, the commodity prices rise. When we exceed in the gold production 3.1,
prices rise; and when we fail to produce 3.1 per cent increase, compounded each year, then the prices will fall.
The little bulletin I have here is the same bulletin that Mr. Wallace
presented, and I would like to leave this bulletin with you, if you
desire it, because it has very complete tables and charts, showing all
of these facts; so that we would like to have it presented.
COMMODITY PRICES
With wars or political unrest in much of the world and many countries no
longer on a gold basis, the future of the general price level is very uncertain.
But farming is such a long time industry that every farmer, either consciously or
unconsciously, is adapting his practice to what he thinks the price level will be.
Since the most important problem that confronts agriculture is the future of the
general commodity price level, a large portion of this number is devoted to
commodity prices, physical volume of production, money, wages, and probabl~
future prices. Every plan of farm operation is based on the farmer's guess
about future prices. It is not possible to give a perfect answer to the problem,
but a knowledge of the basic facts will help. These facts are complicated, but
no more complicated than vitamins.
There are always variations in prices of individual commodities. To adjust
farming to these is difficult enough, but during the last 17 years, the major problem has been to forecast the general price levels because this rather than fluctuations in prices of individual commodities has been of overwhelming importance.
The movements of the general price level in the Civil War period .and the fluctuations in the price of hogs about the general level of commodity prices are
shown in Figure 1. The hog cycle was important, but the serious thing was.the
decline in the general level of commodity prices which dragged the hog cycle
down. The same comparisons for the World War period are shown in Figure 2.
The whole price structure has declined from 244 in May, 1920, to 100 in December, 1931. The major part of the decline in the price of hogs is not due to the
hog cycle but to a general collapse in all prices.
Similar comparisons for wheat during the Civil War period are shown in Figure 3.
Wheat prices fluctuate violently, primarily because of variations in weather.
Following the Civil War, these fluctuations were about a steadily declining base.
Wheat prices and all commodity prices for the World War period are shown in
Figure 4. Wheat prices are again fluctuating around a declining base. It is to be
expected that wheat prices will continue to follow the general price level and
fluctuate about it. There seems to be no fundamental reason for anticipating a.
·
change in these .relationships at the present time.
It is extremely difficult to imagine a fluctuating price fluctuating about a.
fluctuating base. The inability to imagine the conditions shown in Figures 1 to 4
leads to erroneous actions. It also makes it difficult to appreciate the underlying principles governing prices. Many persons imagine that a stable general
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STABILIZATION OF COMMODITY PRICES
INDEX
250
t
l~
,: I
:
1864
1868
1872
1880
1876
1884
FIGVRE 1.-lndex numbers of wholesale prices of all commodities and ofpricesofhogsat New York city,
1861H885. 1856-60= 100. The usual hog cycle continued but fluctuated about a declining base
INDEX
,e70
All commodif/q4
45~-'---'--.L--L..--l~..L...--1.-L.----L..--L-..1--L..-L.--....l---L---.i---L..--l
1914
1918
1931
1922
19.26
FIGVRE 2.-Index numbers of wholesale prices of all commodities and prices of heavy hogs at Chleago
1914-1931. 1910-14-100. As in the Civil War period, the hog cycle continues but ls dragged downward
by the decline of the whole price structure. It Is to be expected that hog prices will continue to fluctuate
about the general price level
22,,,-------r----,-:----r------.------......-------.
tNOEX
45~~-------"""".'"......_._...._..__._......_...__.__.___._...__.__,___.._.._..........._ ........__,
1(160
186'}
1870
187'}
1880
FIGVBB 3.-Index numbers of wholesale prices of all commodities and prices of winter wheat at New
York city, 1860-1885, 18/i6-60.. 100, Wheat prices fluctuated about the general price level, which
steadl)y declined
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75
average of commodity prices would mean stability in each commodity. It would
mean that the hog cycle would fluctuate about a stable base. Price changes
would therefore be due to changes in the supply of or demand for hogs rather than
to a crash in the foundations of the whole price structure. Violent changes in
r------r---..--------.------...------ --~
INDEX
310
1931
1919
1927
1923
4.-Index numbers of wholesale prices of all co=odities and price of No. 2 hard winter wheat
at Kansas City, 1910-1931. 1910-14=100. Wheat prices are again fluctuating about the general price
level. It is to be expected that this relationship will continue
!914
FIGURE
the general price level do increase somewhat the violence of price changes due to
other causes.
The statement is commonly made that prices are due to supply and demand.
This is a half truth. It has led to tremendous losses on the farms and in the
cities, and has led to the adoption of erroneous public policies. Price is a ratio
of the supply of and demand for gold to the supply of and demand for a commodity. In short periods of time credit may act independently of gold to in-
-
5.-Wholesale prices In the United States for 135 years, 17\l1'H931. 1910-14=100. During most
of the last 135 years, instability of the general price level has been the most important problem of agrt.
culture. The periods of rising prices have been periods of agricultural prosperity, and periods of fall•
Ing prices have been periods of agricultural distress
FIGURE
crease or decrease prices. Also in short periods of time, speculation may act
independently of the supply of or fundamental demand for the commodity.
But prices due to speculation are generally brought back with a jerk. Similarly,
if credit gets very far from its normal relationship to gold, it is brought back with
a jerk.
The movements of the general price level are primarily due to monetary
factors. Mere adjustment of the wheat acreage does not solve this problem.
The movements of the commodity prices due to monetary causes have been of
overwhelming importance for more than half of the time during the past 135
years (fig. 5).
The comparative price declines in the different war periods are shown in Figures
6 and 7. After each war, prices were cut in two. Both the rise and the decline
in the World War period were more violent than in previous war periods.
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STABILIZATION OP COMMODITY PRICES
PRICES IN DIFFERENT COUNTRIES
Prices in different countries since the World War are shown in Table 1 and
Figures 8 and 9. Prices in England in November, 1931, were 67 per cent below
the average for the year 1920, and 28 per cent below 1929. The long decline
followed by the crash since 1929, resulted in so much unemployment, business
failures, and other distress, that England discontinued the gold standard on
September 21, 1931. Rarely, if ever, has~ country stood a decline of 67 per cent
INDEX
FIGURE 6.-lndex numbers of wholesale prices, War of 1812 and World War periods. 1910-1014-100
in its price level, without a revolution or a currency change.
about 3,000,000 unemployed.
TABLE
1.-Comparative price declines
England
France
Statlst- Statlstl~ue
Sauerbeck Oenerae
Index 1
index I
1910-19i4 1910-1914
-100
=100
l>eak year ..........
• 618
440
320
-----------137
fr1
42
48
------------
28
33
27
Per cent decline
from peak ••••••••
Per cent decline
•Ince 11129•••.....•
Per cent advance •••
United
United
Italy
Germany
States
North
States
Riccardo
Statls•
all
com•
30-basic
China
Bachi
tlsches
modity
commodity
Index•
8
index• Reichsamt
Index•
1913
index•
1913
1913
1910-1914
1910-1914
-100
-100
--100
-100
•100
1709
617
412
7304
139
100
Year 1929•..........
November, 1931 ••••
England now has
107
22
'226
139
103
54
26
-·--·------- ------------ ·------·---- -------·---- ------------
'231 .
141
84
64
• 165"
171>
----------
......................... ----------8
40
1 The Statlst1 Vol. ex.Iv, No. 2812, page 80, Jan. 16! 1932. The index numbers on the ll•Year base 1867-1877
were convertea to tbe five years 1910-1914 by mult plying by 1.2107.
• Annuaire Statlstlque for 1928, Vol. 44, p. 115, 1929. To convert to the 1910-1914 base from the 1001-1910
base, multiply by 0.8726; from the July, 1914 base, by 0.9888; and from the 11113 base, by 1.0096.
• Monthly Labor Review, United States Bureau of Labor Statistics, Vol. 33, No. 6, p. 238, December,
1931. The November, 1931, index numbers were supplied by Ethelbert Stewart.
• Warren, O. F., and Pearson, F. A., Wholesale Prices In the United States for 135 Years, Farm Eco•
nomlcs No. 72, p. 1587, September, 1931, and table l, page 1634 of this Issue.
• Table 1, pa~e 1704, of this issue of Farm Economics.
• Nanka! University Statistical Service, Nanka! Institute of Economics, Nankat University, Tientsln,
China, Vol. III, No. 22, p. 100, June 2, 1930, Vol. IV, No. 49, p. 223, December 21, 1931,·
I 1920
I
1026
During the first six years of declining prices in England al).d the United States,
France inflated the currency. Prices roae, production was profitable, and there
was full employment. All the other condit.ions were such as accompany rising
prices. Instead of attempting a complete deflation as was attempted in England
and the United States, France reduced the weight of gold in the franc to one-fifth
of the pre-war amount on June 25, 1928. No serious decline in prices occurred
until 1930-31. Prices in November, 1931, were four times the pre-war level
(figure 8). Any debts incurred at pre-war prices or at four times pre-war prices
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could be readily paid. Farmland is, of course, worth much more than before
the war, and a house built before the war is valuable property. But France
was becoming adjusted to a price level of about six times pre-war. A price level
only four times pre-war is now a serious matter, and France has unemployment.
Italy revalued her currency on December 22, 1927, so that prices are far above
pre-war. But Italy was becoming adjusted to a price level of about four times
•
IN0£.X
l50~._,'8_
_.__.__._/8_64..,___...,
1914
l,!J64
liJtl!J
1918 /!JM /RO
l9ii'1
1'174
19.,0
187.!I
19.11
FIGURE 7.-Index numbers of wholesale prices in the Civil War and World War periods. 1910-1914 ..
• lClO. The price declines following the World War were similar to the declines following the Civil
War, but were more violent
pre-war so that a drop to an index of three times pre-war or a decline of 27 per
cent, since 1929 has resulted in about 1,0001000 unemployed, a record for Italy.
Since 1929, prices in Germany have declmed 22 per cent and it is reported that
5,500,000 are unemployed, the highest number ever reported.
In the United States, prices declined 54 per cent since 1920. No other important country that had such a large price decline is continuing without some
monetary change. Since 1929, prices have declined 26 per cent.
191.I
1gzo
19.11
FIGURE 8.-Index numbers of prices In the United States and prices In France, 1913-1931. 1910-1914•
100. France has been on a gold basis since 1918! but since the currency was revalued, prices are
about five times as high as In England or the Un ted States.
Prices of basic-commodities in the United States declined about 64 per cent since
1920, and 40 per cent since 1929. · These prices are the average at which farmers
and other basic producers must sell. They are a sufficient explanation of the
decline in freight-car loadings. The popular explanation of railroad difficulties
is that the trucks are getting the freight. The freight does not exist.
The unemployment in the United States is variously estimated at from six to
eight million.
Since 1929, the decline in prices in England, France, Germany1 Italy have been
very similar, France 33 per cent; England, 28; Italy, 27; Unitea States, 26; and
Germany, 22.
111442-32-PT 1 - 6
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Since 1929, prices in China have risen 8 per cent. China is on a silver basis.
In the same period, prices in gold using countries have declined from 22 to 33 per
cent. At the same time that other countries are feeling the effects of declining
prices, China is feeling the effects of rising prices (fig. 9). There is full employment and profits are large. It does not follow that the prices in the gold using
countries would have been the same as the prices in China had these countries
been on a silver basis. The use of any metal as money .ihanges the demand for it
and hence changes its value.
EFFECTS OF DECLINING PRICES
Every human relationship is affected by prices. It is sometimes said that lenders and those who live on wages or salaries profit by declining prices. Practically
every one loses when prices decline seriously. Production stops. Courage in
business is penalized. The physical property of the nation deteriorates. Declining prices do not merely transfer wealth-they destroy it.
EFFECTS OF DECLINING PRICES ON PRODUCERS' AND CONSUMERS' PRICES
When prices rise, producers' prices rise faster than consumers' prices. For
the year 1917, American grown food sold at 56 per cent above pre-war r~tail
INOEX
zz5
zoo
......
I
•
ISO
100
191,
1918
1gca
1928
FIGURE 9.-INDEX NUMBERS OF PRICES IN THE UNITED STATES AND IN CHINA,
.
1913-1931
Pre-war= 100 l
From 1913 to 1920, prices In the United States rose much more rapidly than In China. Since then, prices
In China have continued to rise and prices in the United States have fallen. Prices have been
extremely erratic In both countries, hut have been more stable In China than in the United States
prices. Farmers received 81 per celit above pre-war farmer prices. With declining p1ices, this same food sold at retail in 19j3 at 54 per c&1t above pre-war, but
farmers received only 24 per cent above ·pre-war. Iri these two ,years retail prices
were practically identical, but prices which farmers received fell from .an index
of 181 to 124. These relationships for other years are shown in figure 10. For
the year 1931, retail prices of American grown food averaged 135 when pre-war
is 100. The cost of distribution averaged 178. The farmers received prices only
89 per_ cent of pre-war. The same. relationship holds for other products. The
index for 30 basic commodities for 1931 was 90, but the cost of living index
averaged 151.
Farmers sell at wholesale and buy at retail. Jn a period of declining prices there
is a wide discrepancy between the prices at which they buy and the prices at which
they sell. This discrepancy has lasted for 11 years, and will continue so long as
prices decline. If prices rise above the cost of distribution, the situation would
be reversed. If the general price level should remain stable, adjustment would
ultimately occur, but this would require many years unless prices rise materially.
1 The wholesale prices for North China are those reported in the Nanka! Weekly Statistical Service,
Nankai University Committee on Social and Economic Researcht Tlentsln, China, vol. 31 No. 22, p. 109,
J'une 2, 1930. The index numbers are on the 1913 base. The inaex numbers of wholeswe prices for the
United States are those reported by Warren, 0. F., and Pearson, F. A., Wholesale Prices In the United
States for 135 years, Farm Economics No. 72, p. 1587, Septeml>er, 1931, and page 1634 of this Issue. The
Index numbers are on the 1910-1914 base.
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7fJ
How slowly the adjustment takes place is shown by the changes that occurred
from 1921 to 1929. In this period, the general price level was fairly stable. For
the year 1929, retail prices of food were 174 and farmers received 151. Had
prices remained stable another 10 years, the readjustment probably would have
been completed. For farmers who are not heavily in debt, this price discrepancy
is the most serious single effect of declining prices.
Manufacturers have the problem of hiring labor which has a high cost of living
to produce products at a low price. Farmers have the additional problem of
buying at retail and selling at wholesale. Manufacturers buy at wholesale prices
which are low and sell at wholesale prices which are also low, but the farmer buys
at high prices and sells at low prices. This is the reason that farmers are SJ
anxious to buy cooperatively at wholesale.
EFFECTS OF DECLINING PRICES ON DEBTS
Before the panic of 1920, relatively few debts had been incurred at the high
price level. By 1929, the whole international, national, and other public and
INOEX
i?1'5
80,_,...___._ _.__,__.,__.___._._...,_____..__.__.__.__._
19/0
1915
l9iE'O
_.__,__._.,__...J..___JL........L........J
19i?lj
1930
FIGURE 10.-FARM AND RETAIL PRICES fOF FOOD AND COST OF DISTRIBU•
TION 1910-1931
1910-14-100
When prices rise, costs of distribution rise less rapidly and Cann prices more rapidly than retail prices
When the prices decline, costs of .distribution remain high and farm prices decline more than retail prices.
private debt structure was adjusted to a commodity price level of about 150. In
fact, debts were somewhat high even at this level.
Commodities are the basis of most credit. Brazil expected to pay its debts with
coffee. Australia expected to pay with wheat and wool. The State of Georgia
and its farmers expected to pay with cotton.
Most of the security for debts is commodities, either movable ones or those
that have been built into homes or factories. Most of the taxes are raised by
assessing such property. If commodities drop in value, the movable commodities,
as well as the railroad ties, rails, el~ctric lines, and houses p.ecline in value. The
present public and private debts and taxes would not be particularly burdensome at the price level at which they were incurred, that is, at a wholesale commodity price level of about 150. A large part of the indebtedness can not be paid
at a price level of 100. It is commonly believed that lenders profit from declining
prices because they are paid back with dollars that have a higher value than the
dollars which were loaned. Lenders would profit if they were able to collect in
full, but the losses of principal are so great that few lenders profit. When the
farm or home is foreclosed, it means a total loss to the previous owner, but may
also mean a total loss to the lender. He may not be able to sell it-for enough to
pay taxes and costs while it is field waiting for a sale. Declining prices take property away from persons who want it and place it in the hands of those who do
not want it. A long time is then required to find persons who want the property
and are able to pay for it.
Rough approximations of certain debts are shown in Table 2. Most of the
indebtedness doubled since 1922, and is about four times the pre-war amount.
The most serious single unadjusted factor is not wages but debts. There is
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trouble enough in lowering costs of distribution, rents, and the like, but the
process of debt liquidation is even more serious. In many cases the best method of
handling debts is to write them down just as rents and commodity prices are
being written down~
TABLE
2.-Estimated public and private debts of various clasaea in the United States
(000,000 omitted]
Gross public debt Jess sinking fund assets
of all classes of government organizations
In the United 'States
Incorporated
places and Bil
other civil
divisions
Year
National States
Conn•
ties
Cities
over
All
other
Life
Insur•
Build•
ance
policy
Ing
Farm Corpo•
Bank
rate
mortloans
and
loan Ioa~J gages s liabill·
and
ties•
pre•
assets 1
mium
notes'
30,000 • places
1912•••••••••••••••
1922•••••••••••••••
1929•••••••••••••••
1930.•••••••••••••.
1931...••.•••••••••
I $1,029
122,156
I
$346
9 834
16,()()() I 1,662
i/J,{)()()
1,800
18,000
S,000
I $372 1$1, 809
1 1,273
3,281
5,530
11,374 $1, 138 $14,041 1$3,320
8,000
6,910
7,000
9,241
9,000
7,000
--------------S,000
s,roo
3,343
8,695
8,829
--------
27,684 107,858
41,782
40,510
35,211
-----$58S
--------
i1ii;ooo·
_____ ,.. __
1,141
2,379
2,807
-------- ---·---- s, 400
Figures in Italics are estimates.
Abstract of the United States 1930, fifty-second number, pp. 220 and 277.
J Comptroller of the Currency for 1930, reported loans and discounts as of 1930 for banks, pp. 737 and 745.
Statistical Abstract of the United States 1912, pp, 622-625, 1922, pp. 516 and 52i; 1924, p. 243; and 1930, pp. 267
and 271-273.
1 Yearbook of Agriculture 1924, p. 190 reports the farm mortgages for 1920, Later data by E. Englund
and D. L. Wickens of the United States Department of Agriculture.
• Furnished through the courtesy of E. White, chief statlstlcan, office of Commissioner of Internal Rove•
nue~ U. S. Treasury.
• msurance yearbooks of the Spectator Co., and furnished through the courtesy of W. A: Berridge, of the
Metropolitan Life Insurance Co.
• Financial Statistics of Cities Having a Population of Over 30,000: 1929, U. B. Department of Com•
merce, Bureau of the Census, p. 5.
1 StatisticaJ
IJ911,
I 1910.
Financial Statistics of State Governments: 1929. Bureau of the Census. p, 3.
111920.
1
Extremely rough estimates of the total indebtedness are shown in Table 3.
The total debt is approximately $1,700 per capita, or about one-half of the
national wealth in 1929. If the value of commodities-is to drop one-third and
remain at that level, the debt would become about 75 per cent of the value of
the property. So much of this can never be collected that it is probable that
the lenders would have a greater buying power if they were paid in full at a
price level of 150. The usual argument for reducing wages is that a dollar has
more buying power. This same argument might be applied to debts which are
the most serious result of deflation.
TABLE
3.-Rough approximation of public and private debts
(From Table 2]
Debt
Corporations. ••• J.......................................................
Urban mortgages
Bank Joans •••••••• · ••••••••••••••••••••••••••••••• ·.••••.•••••••••••••••.
~f~n~unty, and locaL-•••••••••••••••••••••••••••••••••••••••••••••••• ·
1........................................................
Farm mortgages•••••••• ·•••••••••••••••••••••••••••••••••••••••••••••••••
Life Insurance policy loans and premium notes•••••••••••••••••• _........
Retail !n.stallment·p11per •.. ••••••.•.••••••••••••••.••••••••••••.•••••••••
Pawnbrokers loans and unlawful loans of all kinds•.......................
T ot al ••••••••••••••••••••••••••••••••••••••• ·••• •••••• •• •• •••••• •• • •
$76
37
37. 4
l& 2
17. 3
35
1~ g
9
3
3
1
4. 4
1. 5
1. 5
.5
203
100. 0
{i
. $618
301
284
171
146
73
24
24
8
1-----+-----1--1,849
1 Based on eatlmates furnished through the courtesy of George Terborgh of the Brookings Institution.
• Based on reports of the N atlonal AS1Joclatlon of Flnanoe Companies,
• Ryan, F. ~ Family Finance In the United States, the Journal of Business of the University of
Chicago, Vol. 1u, No. 4, pt. 1, p. 404, October, 1930.
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Unliquidated public and private debts are the most serious problem in the
United States at the present time. These debts could be paid at the·price level
at which they were incurred. Many of them can not be paid at a pre-war price
level.
The decline in commodity prices has resulted in many business failures. During
the last two years 3,635 banks have suspended, with deposits of $2,624,000,000.
In the same period, 54,640 business failures have occurred, with liabilities of
$1,405,000,000.
EFFECT OF DECLINING PRICES ON HOME OWNERS
The home owner's security is in the value of a home. If commodity prices fall
so that the home ca,n be built for 25 per cent less than he paid, his equity is gone
,,vd£,I(
130
1872
1928
1880
19.36
18M
'"'
FIGURE 11.-Prices of white pine and brick for the Civil War
period and of yellow pine and brick, for the World War
period. In each case pre-war is 100. The course of prices
is similar in the two war periods but is more violent this
time. If the similarity continues, prices will rise In 1036
unless he paid more than 25 per cent down. But when all the bankrupt properties
are thrown on the market, buyers disappear as if by magic, and the multitude
of sellers depress prices so that an owner who paid 50 per cent down may see hie
equity disappear. In such a time it is well to remember that well-constructed,
well-located homes have a permanent value even if they are unsalable for a time.
The prices of white pine and brick in the Civil War period and of yellow pine
and brick in the World War period are shown in Figure 11.
City homes are much like agriculture in that they have a very slow turnover.
Most industrial and mercantile operations have a relatively rapid turnover so
that adjustment is completed before many years. Agriculture being a biological
industry has a slow turnover, and homes last for many years.
After the panic of 1873, building ·materials declined in price for six years.
Apparently building equities were then liquidated, for prices of building materials
rose. If the readjustment requires the same period of time in this depression,
home building would be expected to commence in 1936. House rents for five
large cities in the Civil War period and eight large cities in the World War period
are shown in Figure 12 and Table 4. Rents reach bottom and stabilize before
building starts.
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INOEX
190
1860
1914
l8G4 /9.Z0/864
/!,/8
1920
1868
1924
1876
187.c
1928
1880
19.32
FIGURE 12.-Rents In five large cities in the Civil War period and in eight large cities In the World War
period. In each case pre-war Is 100. Thmrfar the experiences of the Civil War have been repeated
TABLE
4.-Rents in large and small cities in the United States, 1860-1880 and
1914-1931
Civil Wart
Year
World War•
5 large
cities,
1860=100
Year
8 large 10 lesser
cities,
cities,
1914=100 1914=100
-----------------------1---- - - - - - - - - -
1860_____________________________________________________________ _
1861- ____________________________________________________________ _
1862-------------------------------------------------------------1863
_____________________________________________________________ _
1864 _____________________________________________________________ _
1865_____________________________________________________________ _
1866_____________________________________________________________ _
1868
_____________________________________________________________
1867-_- ---- _--------- -- -- --- -- --- -- -- --- ----- ____ -- _-- --- -- --- ---_
1869 _____________________________________________________________ _
1870_____________________________________________________________ _
100
101
101
123
168
175
187
167
179
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1871 _____________________________________________________________ _
187
180
1872-------------------------------------------------------------1873
_____________________________________________________________ _
173
1926
173
1927
1874 _____________________________________________________________ _
173
1875 _____________________________________________________________ _
166
1878
_____________________________________________________________
1877---------------- ---- --------- -- --- --- -- --------- --- - ------- --_
147
148
1876 _____________________________________________________________ _
1879_____________________________________________________________ _
1880_____________________________________________________________ _
162
1924
1925
1928
1929
1930
1931
100
100
103
108
114
128
155
165
167
175
179
179
177
100
97
95
94
111
128
146
151
149
149
147
146
145
172
168
140
165
130
125
118
159
147
133
152
148
151
1 The rents for 5 large cities from 1860 to 1880 Include Boston, Philadelphia, Cincinnati, Louisville, and
St. Louis. W eeks 1 J. D ., Report on the Average Retail Price of N ecessarles of Life in the United States.
Report on the Stat1Stics of Wages In Manufacturing Industries, Tenth Census of the United States, Census
Office, Department of the Interior, vol. 20, pp. 104 to 107. 1886.
• Cost of Living, Monthly Labor Review, United States Bureau of Labor Statistics, vol. 28, No. 2, p.
178, February 1929 and later numbers. The rents for 8 large cities from 1914-1928 include Baltimore,
Boston, Buffalo, Chicago, Cleveland, Detroit, New Yorki_!l,nd Philadelphia. The rents for 10 lesser cities
Include Houston, Jacksonville, Los Angeles, Mobill!,_ .Norfolk, Portland, Me., Portland, Oreg., San
Francisco and Oakland, Seattle, and Washington, D. v.
EFFECT OF DECLINING PRICES ON TAXES
Public debts incurred at a price level of 150 become extremely difficult to pay
with a price level of 100. Public debts take pre(erence over private debts,
because taxes are the first lien on the property. After the preferred creditor
has been paid in full, there are times when there is nothing left for the other
creditors. To make the tax problem still worse, taxes that are based on profits
are greatly reduced and many taxpayers ani unable to pay. This necessitates
new taxes or heavier taxes on those who can pay. To make matters still worse,
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falling commodity prices result in increased public expenditures for charity, and
the Federal Government is called on to assist banks, railways, and agriculture.
It would be desirable to have public reserves in times of prospertiy to be used
in periods of depression. The major portion of the difficulty could be remedied
if violent fluctuations in the general price level could be prevented. There io
much heated discussion about tax reduction. Public debts and fixed charg(!s
make reduction very difficult. The only way to provide real tax relief is to
continue the price level to which debts and business were adjusted.
OTHER EFFECTS OF DECLINING PRICES
The above are but a few of the innumerable effects of a declining price level.
Another serious result is the effect on buying. Losses of profits and unemployment of course check buying, but falling prices in themselves are a check on
buying. When year _aftiir year everything that is bought could have been purchased at a lower price at a later date, a philosophy of delayed buying develops.
If after a period of falling prices prices begin to rise, an abnormal demand develops. Buying is not only for current needs but to make up shortages.
Another effect of declining prices is on wages and employment, which are
discussed on pages 1671 and 1677.
A clear presentation of the method by which a decline in commodity prices
causes business paralysis is given in the Cleveland Trust Co. Bulletin. 1
" During the past two years the general levels of wholesale prices have dropped
both here and abroad by about one-third, and have fallen to their pre-war figures. The result is that business relationships and procedures all over the world
have been disrupted and partly paralyzed. As business everywhere slowed down,
the banks began to feel the pressure of curtailed activity. Credit was contracted
by the paying down of business loans, and bank profits were reduced. For a
time these developments were not serious, but soon bankers began to realize
that trade advances that had been amply secured by the pledge of marketable
commodities were no longer so fully protected when the market value of those
commodities was rapidly falling. As the banks brought to bear increasing pressure for the payment of such loans the prices of commodities fell still further
and faster.
"Then followed a long procession of declines in the market values of other
things in which banks everywhere were financially interested. If agricultural
commodities were worth less than they had been a short time before, then the·
farms that produced them were worth less, and farm mortgages were not so secure.
As the products of mines declined in value, the stocks and bonds of mining companies became less desirable, and the loans made by banks on such securities
were not so safely protected. As manufactured articles fell in price, industrial
stocks and bonds declined, and successive payments were demanded by banks on
loans secured by such collateral. As the volume of trade declined similar pressure
was brought against securities of shipping and railroad companies.
"During much of this year the banks of this country, and of all countries,
have been engaged in a race for liquidity. As the prices of commodities continued to sink, as stock prices fell, and as the values of real estate shrank, the
banks have been calling upon their customers to make payments on their loans.
Some banks moved in .these matters less promptly and less vigorously than
others. Soon bankers began to realize that the institutions which were falling
were largely those that had followed a lenient policy toward their borrowers
until collateral values had fallen so low that the loans could not be paid. In
banking parlance the loans were frozen.
"The resulting tendency was for every alert bankers to resolve to protect
his institution and bis depositors from the hazards 6f holding frozen assets, and
to do it by getting into the most liquid condition possible. The way to get liquid
was to get borrowers to make payments on their loans, and in order to do this·
many borrowers had to sell securities that had been deposited with the banks as
collateral for the loans. Each new wave of selling carried market prices further
down, and each new decline in market prices reduced the value of collateral behind
other loans and called for further sales. This was a vicious circle of deflation
that caused deflation. The individual institution bad no choice but to follow
the policy of liquidity. It was good banking in each separate case, for it protected
the bank and its depositors, but its general results tended to defer business
recovery * * *"
G. F. WARREN and F. A. PEARSON.
1
The Cleveland Trust Co. Business Bulletin, vol. 12, No. 12, Dec. 15, 1931.
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OF COMMODITY
PRICES
Mr. PRALL. I wonder if every member of the committee might
have a copy?
Mr. WHITE. Doctor Warren was with me in Syracuse yesterday
and I asked him to send me 50 copies, so they will be here soon. If
the other Members of Congress want it, we can procure them. This
bulletin is a recent publication. Doctor Warren has devoted a great
deal of time to this matter; in fact, it is his principal hobby-the study
of money. I tried to get him to come before the committee, but he
does not like to go before committees.
Mr. PRALL. It might be well to send a copy to each Member of
Congress.
Mr. WHITE. That can be done, I think. We will be very glad to
do it. This is bulletin 74, Farm Economics, Cornell University.
I wish to say, in this connection, that Doctor Warren and I are
very personal friends. I talked with Doctor Warren yesterday
purposely. Doctor Warren is of the opinion that the stabilization of
the gold unit is absolutely imperative. There are two theories-the
quantity theory of currency, which is the furnishing facility for
handling the product of the country, and the other the velocity
theory. Both are secondary in their effect on prices, and we may
get into positions where the gold factor is so much stronger than
either one of these that it is absolutely impossible for inflation, currency inflation, to overcome the increased value of gold, due to
falling supply and increased demand.
Mr. WALLACE. I think, perhaps, at that point it is well to just
visualize what we have done under the section of the Constitution
empowering Congress to coin money and fix the value thereof. The
Bureau of Standards, in working upon other standards of measures,
have gone to the extreme degree of perlection. In many instances
there are variables that they have to overcome, just as we have
variables here in our attempt to use a given quantity of a given
commodity on which to express the price. We have that variable
which is due to the amount of gold produced and the world demand
for it. We find it in the regulation of a clock, where we recognize
that the temperature will expand and contract the pendulum, and
then we place tubes of mercury, which will also do the same thing,
and just act as a counterbalance. We find in our watches, for mstance, there 1s an adjustment made so that no matter how cold or
warm 1t is, that the metal in its contraction and expansion have been
counterbalanced. We find m nautical mstruments the same thing
functioning. When we come to the question of the money unit, we
started in 1837 buying gold at $20.67 an ounce, and we have continued it ever since, regardless of the amount of gold in the world,
regardless of the demand for gold in the world. Therefore, we have
been using 22.23 grains of fine gold or 25.8 grains of nine-tenths fine
gold in which to redeem our dollar.
This is a peculiar situation: If you should take 100 old, worn silver
dollars over here to the Treasury and ask them to give you five $20
gold pieces, brand new ones, they would give them to you, but if
you should take five $20 gold pieces that are worn, they would not
give you back;our old silver dollars, but they would give you back
what your gol weighed out at 25.8 grains to the dollar. I had an
experience a number of years ago, in which I was paying for a carload of tile, and as I was near the express office, I bought an express
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85
order for $100 and sent for a car of tile. A few days afterward, the
express agent called me up and wanted to see me, and I went to bis
office, and he said he had sent that gold to New York and there was
a shortage of $2.40. In other words, when it got to the big bank in
New York, it was weighed, and worth just what the gold was worth
that was in the coin. It is what we express it in, and it does not
matter if it is a Federal reserve bank note, silver certificate, or Treasury note, it is convertible from one form into another, and its ultimate redemption is in 22.23 grains of fine gold.
There is one other thought that I would like to leave with you:
If you should ~ down through the history of currency, I think you
will find there 1S no place where you get an inflation of currency until
currency has left its redeemer; that is to say, the greenback left its
redeemer, because there was not gold to redeem it, and so there were
50-cent greenbacks instead of 100 cents. No matter where you place
your currency, the value of a dollar is going to remain at what the
gold is worth, until you have issued to the point where the people do
not regard it as safe currency, and then it begins to get cheaper, and
in terms of that currency, you will get inflation.
Now, Mr. Wallace spoke of what France did. As a matter of fact,
a number of foreign nations, when they went back on the gold standard, did not go back at the original amount. France went back on a
3.93 franc, as against 19.3. People say that was not honest, but a
repudiation. Well, France and Italy had been through a war, and a
very large proportion of their debts were created upon a value that
was comparable with our wheat at $2.20 a bushel, and their whole
war debt was on an inflation basis. France placed her franc right at
the same basis that her war debt was created upon, and that made it
possible for the people to pay their obligations in money of the same
value the debt was contracted in. It is a questionable thing in my
mind whether you should allow a contract to fix the value of your
dollar. Whether it is legal or constitutional is a question involved.
It amounts to the sa~e thing. Both of those countries have an ample
gold supply, because they have not exacted from their people an excess
of gold to meet their obligations over and above what their obligations
were, or the terms their obligations were made in.
England, contrary to the advice of economists, as I understand it,
insisted upon going back upon the $4.86 pound. She had her gold,
and she bought gold in this country and in France, and then had to
go off of the gold standard because her people could not buy gold
enough with their commodities to meet their obligations.
That is exactly our position. We are being deluged with every
kind of commodity to-day. There is a certain, definite amount of
gold, or its equivalent, and gold is so scarce aµd so dear that we can
not get enou_gh of it with our commodities to meet our obligations
and taxes. I am in perfect accord with Doctor Warren, and many
others, that the value of the .gold dollar should be brought into conformity with its true value; in other words, if the United States were
buying gold at its true value, we would be paying about $30 an ounce,
which would leave 15.5 grains to the dollar, instead of 22.23 grains.
Now we come to this question of the Federal reserve system.
I am from the State of New York, and I have heard some things in
New York City, as I am there quite often, that make me doubt
whether. the influences that could be brought to bear in New York
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would be such that would make the Federal reserve system inoperative in permitting expansion in the interest of the people. I want to
mention one other thing: T happened to be in New York City on a
State tax commission, that I happened to be a member of, about six
weeks ago, and in the evening, after we finished, I was in the New
Yorker Hotel, listening to the radio in the room, and I heard a gentleman there from New York University speaking to the Society for
Industrial Democracy, and he made the statement that prices in this
country were not too low, and should remain there, and that we should
not raise prices.
He said, to be sure, the farmers and business men would be sold
out, go into liquidation, but that they could start over again.
I saw a speech printed in the Rochester paper that the same gentleman made a week later, in which he said, going one step further, we
were about halfway through the liquidation period, and we should
continue. This professor is from one of the big New York City
universities; I do not know how much he knows about economics,
but I do not think he knows much about sociology, if he feels we
should sell out our farmers and business men and have them start
over again.
Mr. STRONG. He probably knows whom to depend on for his
salary.
Mr. WHITE. Yes; that may be true. I said to Doctor Warren,
after he got through: "I can't understand an economist making
such a statement." He said: "You must not be too hard on them.
The economist is like the old style doctor; if he is a general economist,
he doctors everywhere from tooth to toe. It may be this gentleman
has not made a special study of the monetary question, like some of
you gentlemen have."
I hope that that is so, because I can not conceive· of a man making
such a statement.
Mr. STRONG. Only from the viewpoint that I have suggested.
Mr. WHITE. In speaking of the amount of gold and what we buy
gold at, $20.67 an ounce, and thereby making the equivalent of 22.23
grains of pure gold to the dollar, we have arbitrarily taken a unit of a
commodity against which to measure other things. I think, gentlemen,
if we could get away from the dollar idea a little and just think of the
possibility of taking any specific unit of any commodity, how impossible it is to maintain the quantity and value at the same time. To
give a little illustration, suppose when wheat was worth $1 a bushel,
and we could not sell it, but could trade it, a man put up 100 bags of
wheat, with just $1 worth in each bag, so it would be convenient to
go and trade it. At $1 per bushel, he would have 1 bushel in each
bag, but if in a few months from that time, wheat had gone down to
50 cents per bushel, he would have to put in 2 bushels, if he would main
tain the value of his bag of wheat. If he had insisted upon keeping
the same amount of wheat in it, he would have a bag of wheat worth 50
cents, and if wheat had gone to $2 a bushel, he would have had to
reduce the amount of wheat in his bag to half a bushel. There is no
difference between wheat and gold, in the matter of the law of supply
and demand; they are both products, both used the world over, and
both subject to the laws of supply and demand. It would seem as if
we ought to introduce into our monetary system a scientific method of
holding the value constant. We predicate obligations, running over
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long periods of time, in ,terms of the unit of $1; and yet that dollar,
in its value, its purchasing power, may vary 50 or 100 per cent
during that time. There is no other measure that is comparable
with the dollar, so far as utility is concerned; it is something we are
using millions of times every day, yet it is not resting upon any
scientific basis whatever but it affects us more than anything else in
our business relationships.
·I know a young'man in my town who bought a farm right after the
war, a splendid farm. I do not remember what the price of it was,
but I know that he went to the widow from whom he bought it a
short time ago and told her she would have to reduce the mortgage
$8,000, or he would have to throw up the farm, because he just could
not produce the stuff 'to pay it. She did so. But that is not the
oase of a good many of them; they are sold out.
Now we come to the other question involving the Federal reserve
banks. We have, it seems to tne, three factors involved:
We have taken a body of men, that must have discretionary
powers, that must exercise judgment, that must measure trends, and
be competent to understand those trends and use their powers in
the open market operations, to either increase or decrease currency,
so as to stabilize prices. We do not give them any index by which to
do that. We do not tell them when they should stabilize prices.
While they do not need to lower commodity prices, -they can stabilize
them on the basis that will produce the original prices. If, in their
judgment, conditions are such that they should increase the prices
of commodities, then they can stabilize them, and they can increase
currency and raise prices. We have, and will have to, of couree,
in that measuring, give some discretionary powers. I have been in
the public· service, and I know that men in the departmental service
dread discretionary powers more than any other one thing, if they
are honest, because they have imposed on them the exercise of judgment sometimes under very difficult circumstances, and they are
liable to be blamed. Then, again, here is some possibility. I do
not want to even imply that there has not been absolute honesty in
the exercise of authority in the Federal reserve banks.
I have been told that if the Federal reserve bank had exercised its
power early enough in this depression, they might have avoided the
collapse; but you know what was in the minds of the American
people, and you know we thought we would never go into a period of
depression, we never thought we would have lower prices; and I know,
from my experience in New York City, there were thousands of men
in New York City that thought it could never affect New York City.
They had not studied the statistics; they had not studied these charts,
to see where things would go. When we were talking, three years
ago last fall, about stabilizing prices, when our farm prices were getting so low, they ridiculed the idea, when those who had some understanding of economics told them it would get them, and they said,
no, that it would never come down to New York. They did not realize
the fact that grain prices, meat prices, and those things, being lower,
even though it did not get to the consumer, would bring disaster to
them. They did not think it would affect them but thought it would
make greater profits to the trade. Temporarily it brought more money
into the cities in this case, as it has m every other similar case, to
inflate city values and stimulate a building boom through lower prices
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for the necessities of life. That only caused a more drastic deflation.
You can see what it is in New York City at the present time. That is
where we are hearing the worst cries about taxes in my State, right in
New York City.
I do not want to go too far into details with this, gentlemen, but
it seems to me that the United States can do what France did. Those
foreign countries never asked us what they should do1 whether they
should go on with t4e gold basis at full value, or whether they should
go on at a lesser value, or whether they should go off of the gold basis.
I think they did the right thing in France and Italy, when they let
their people off in terms of dollars valued as nearly as possible commensurate with the debt level. We can not act without somebody else
being hurt, but we can pay the debts of America in the value of commodities and labor and service as nearly as possible on the basis of the
major part of our long-term debt.
I went through that period, as I said, after the Civil War, early inthe nineties, and I remember a Bryan campaign, and I remember
what was said about it, that silver was a dishonest dollar. Debtors
do not want to pay their debts dishonestly. I can not understand
why the debtor should be accused of not wanting to pay his debts
honestly, when he was using a cheaper dollar, than it is for the creditor
to ask the debtor to pay him with a dollar that costs twice as much.
One is;·ust as honest as the other; and until this country gets on the
basis o scientific money there will be dishonest dollars.
The question is raised, "What about labor?" Mr. Ogg, here, of
the American Farm Bureau, and I recall other representatives of the
American Federation, went last fall and had a conversation with Mr.
Roberts, of the Feredation of Labor, and he said he did not know,
but they did not like the idea of changing values, and I said, "Mr.
Roberts, it is economically unsound not to bring your values up to
the price comparable with the value of the dollar. You may be an
employee, and you are going to be deflated, if commodities are deflated. Men in business, either on the farm or on the railroads can not
pay you if they get lower prices for their commodities. You will have
to come to it, if the commodities go down, and when your wages go
down, the same thing will happen to you that will happen to the
farmer; and all of your people who are in debt on their homes will be
forced out of their eguities."
Gentlemen, there 1s a great lot of people in every walk of life that
.will be affected. Doctor Warren was telling me how it affects their
university, and about a professor who came there a few years ago,
bought a home, gave a mortgage on 50 per cent of its value, and a
second mortgage, and was, called to another institution, and he had
offered his home to a friend of Doctor Warren's, who came to see about
what it was worth. Well, he had his first mortgage yet unpaid, and
$300 unpaid on the second mortgage, and Doctor Warren told him if
the owner would pay up the balance of the second mortgage of $300
he would be justified in buying the place and assuming the first
mortgage. In other words, that man had been there about 10
years, teaching in the university, and putting his savings in his home,
and when the time came to move away, he lost his equity and was
still in debt $300.
Speaking to this bill, I feel that the principles are right in all of the
bills. I think action ought to be mandatory with reference to the
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F1;1deral reserve banks. I believe, if the Bureau of Standards were
called upon to work out a dollar, a static dollar, with a static yardstick, they could do it, if you put scientific action back of it; and you
have got that, gentlemen, in these bills.
Now, as to the matter of the reserve banks taking care of the currency supply, that is one of the finest inventions that was ever made;
its poweN, as far as the regulatory powers are concerned, are comparable with the central banks of Europe. The Bank of England
has never been able to accomplish it; our banking institutions could
not do it before the establishment of the Federal reserve system; and
the Bank of France never accomplished it. In other words, with
those same prerogatives, those countries' banks have never been able
to stabilize price levels.
I do not know that there is anything more, gentlemen.
Mr. PRALL. Mr. White, did you discuss the merits of these bills
with Professor Warren?
Mr. WHITE. Yes, and I tried to get him to express an opinion. He
has n:ot studied the particular bill, except in these features, but he is
favorable, as the first move, to stabilizing the gold unit on a scientific basis, and he is rather of the opinion that you are going to have
a condition that is very similar to what the Federal reserve bank has
gone through, pausing for a few months, to enable you to cope with
the situation.
I want to ask you to consider this question: If the Federal reserve
banks, d1¥ffl~ the pas.t eight or 10 months, had the power and did
not exercise 1t, what 1s the matter? In 1920, they had the power,
and they did exercise it.
Mr. GOLDSBOROUGH. Exercised it in the wrong direction.
Mr. WHITE. Yes; and I know three men, personally, that appeared
before the Federal Reserve Board, protesting against what they did
in the way of handling prices; and the answer was that the cost of
living had to come down. We started right out after the war with
this thing, generally, in our great centers, that the cost of living must
come down. We started with it, and we are here now.
Mr. BusBY. That was the burden of the argument of Mr. Mitchell,
one of the big bankers of New York, was it not?
Mr. WHITE. I think so.
Mr. GOLDSBOROUGH. I may say to you, Mr. White, that I have
reason to think that Professor Warren is in favor of the principles
embodied in this bill.
Mr. WHITE. Yes, Doctor Warren does not undertake to try to
prescribe the form of the bill, at. all. I t:ried to get him to come down
here, and he said:
·
l want to do the research work and furnish the facts. It is not my idea to get
into hearings; it is up to you men to go to the hearings and work it out, but I
do not want to do it. I want to study the facts.
Mr. BuRTNEss. I would like to ask you this question, and I assume
it is not an easy one to anwser: Suppose that we had had the provision
in the Federal reserve act in 1929, when the present most serious
decline in price levels started, carrying the idea that the Federal
Reserve Board should conduct their operations in such a way as to
stabilize price levels, do you think they could have done it with just
that alone, and without the powers suggested in paragraph 3 of this
particular bill introduced by Mr. Goldsborough?
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Mr. WHITE. I suppose you refer to the inflation of the stock
market?
Mr. BuRTNESS. I referred only to the general commodity price
levels. I think the stock market feature is separate and distinct.
Mr. WHITE. I think, when it came to that, we were under a general
inflation, and there was a speculative mood on the part of our people;
we had simply gone crazy on speculatio~, and I do not believe theFederal reserve banks could have stopped it; in fact, I know that
men were putting money into New York, when it was 14 or 16 percent, that money was flowing from private sources into New York.
Mr. BuRTNESs. I think you misunderstood my question. I apply
it to something that occurred before the decline. The price levels
as compared to the period since July 1, 1929, was relatively stable;
and if there had been a mandate in the law to them to stabilize price
levels, would there have been any way in which they could have prevented the general commodity price levels from declining, on and
after July 1, 1929?
Mr. WHITE. Well, that brings us ri~ht back to the question whetherthe enhanced value of gold, the scarcity of gold in the world, and thedeclined production-the effect of that was strong enough to overcome anything that might have been done by secondary currency
measures.
Mr. GOLDSBOROUGH. I would like to insert the Edie proposal into
the record at this time.
(The bill referred to is here printed in full as follows:)
A BILL To prevent exce..ssive waves of Inflation and deflation and to maintain a more steady and orderly
flow of credit to meet the requirements of trade and production
Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled, That the a.ct approved December 23, 1913,
known as the Federal reserve act, as amended, be further amended as follows:
"Add to section 14 the following paragraphs:
"(g) For the purpose of utilizing more effectively the credit resources of theUnited States as a means of promoting the orderly development of industry and
of agriculture and as a means of curbing excessive fluctuations in employment,
the Federal Reserve Board and the Federal reserve banks shall establish as one
of their prime objectives of policy the maintenance of a rate of growth of bank
credit approximately equivalent to the average long-term rate of growth of production and trade of the United States.
.
"(h) To influence the volume of credit, the Federal reserve authorities shall
use their powers to buy and sell bills and Government securities in the open.
market as well as to raise and lower their discount rates. "
Gentlemen, the committee will now adjourn until 10.30 to-morrow
morning.
(Thereupon, the subcommittee adjourned, to meet at 10.30 o'clock
a. m., Thursday, March 17, 1932.)
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THURSDAY, MARCH 17, 1932
HousE OF REPRESENTATIVES,
SUBCOMMITTEE ON BANKING AND CURRENCY,
Washington, D. 0.
The subcommittee met pursuant to adjournment at 10.30 o'clock
a. m., in the committee room, Capitol Building, Hon. T. Allan
Goldsborough, chairman, presiding.
Present: Messers Goldsborough (chairman), Busby. Prall, Strong,
and Beedy.
Mr. GOLDSBOROUGH. The committee will come to order. Now,
g«;intlemen, if you will put on your first witness, we will be very happy
to hear him.
Mr. O'NEAL. Mr. Chairman, our next witness is Mr. C. A Ewing,.
of Chicago, who is a member of the Stable Money Association, and
head of the ~ ational Live Stock Producers Association.
STATEMENT OF C. A. EWING, DECATUR, ILL.
Mr. EWING. Mr. Chairman and gentlemen, my name is C. A ..
Ewing, of Decatur, Ill. I am connected with the National Live
Stock Marketing Association, but am not expressing their views of
this occasion, because I am not so authorized. I happen to be a.
member of the currency committee of the American Farm Bureau,
which I very greatly appreciate, and I concur in their report, but my
feeling about this matter runs further than their view in the report.
of the committ.ee, Mr. Chairman, and I believe that it might be.
necessary and desirable, as a mode of living, to do the things suggested
in their report, until you can go further and agree upon the real base
of this trouble. All I aspire to do now, briefly, is to bring you men
a word of encouragement, if I can, not as a representative particu-.
larly of any organization, but as a farmer who, through a long and
bitter experience, has learned that there is something radically wrong·
in our system of finances.
I was born, Mr. Chairman, in the hard times of the seventies, and I
started in business in the middle of the hard times of the nineties,
facing a very heavy debt. During the past 10 years, since the fall of
prices in 1921, we have not been able to earn 2 per cent on our invest-.
ment in lands.
Mr. GOLDSBOROUGH. Speaking of farming, now, are you?
Mr. EWING. I will get onto the currency matter in a moment.
Mr. GOLDSBOROUGH. I say, you are speaking of farming?
. Mr. EWING. Yes. I want to point out to you that, during that.
time, Mr. Chairman, for the money needed in carrying on this business,
I have had to pay a rate approximately 300 per cent higher than I
have been able to earn.
I own one of the best sections in McLean County, which is one of
the best in the United States. McLean always stands among the,
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first half a dozen counties in the country in the value of its output,
but taxes get 50 to 60 per cent of my income.
Mr. GOLDSBOROUGH. You mean net or gross?
Mr. EWING. Gross. ·The interest on the debt that has accumulated
in these years, the past decade, and the upkeep and taxes will exceed
my income by $2,500 on that farm.
Mr. GOLDSBOROUGH. For how many years?
Mr. EWING. That will be true this last year; with oats at 12 to
14 cents, corn from 16 to 25 cents, and srmilar prices upon other
products, the farmerMr. GoLDSBOROUGH. What is the size of the farm?
Mr. EWING. It is a section.
Mr. GOLDSBOROUGH. Six hundred and forty acres?
Mr. EWING. Yes. Now, Mr. Chairman, my father died from working in the calllJ.>aign of 1896, which was a money campaign. He wore
himself out in 1t, came home, voted, and died before the returns were
received. Tha-t attracted my attention to this currency question. I
am not speaking as an econoqust, but I am speaking out of experience
and observance and contact with it, that cover more than 30 years.
When Cresar lay cold in death and his friend, Mark Antony, came
to pay tribute to him, he said to those gathered about his bier:
"I come here to bury Cresar, not to praise him." I want to say
to you that I come not here to praise the gold standard, but to bury
it; itis dead, and it ought to die, because, throughout the whole hook up
of our Government there is not another case of cart before horse so
colossally wrong, and so iniquitous and so devastating, as the idea of
those who produce the wealth, and those who create the wealth, should
choose a measuring stick like the gold limit, out of their control, and
say we shall stabilize on this level, and interpret all values of our
properties in this thing that is entirely false. Look back over the ups
and downs since the depression of 1930, and you will find in each
instance, Mr. Chairman, that inevitably the result of currency is to
·
spread the relationship of creditor and debtor apart.
Mr. GOLDSBOROUGH. To whose advantage?
Mr. EWING. It has been to the advantage of the creditor.
Mr. GOLDSBOROUGH. Exclusively?
Mr. EWING. Yes; in that 100 years, you will find a few points so
brief as to be the exception that proves the rule, where it has been to
the advantage of the debtor.
I feel about this gold standard, Mr. Chairman, a good deal like the
man that got a wire announcing that his mother-in~law had.passed
on to her reward, and which inquired, "Shall we embalm, cremate, or
bury?" And he replied, "Embalm, cremate, and bury her; take no
chance." And I want, as a man speaking for the thousands of others
who have not had an opportunity to solve the reason why they suffered, but who are fully assured that something is radically and
drastically wrong-I want to tell you that man never created a
Frankenstein so terrible as the gold standard, nor one so heartless,
with which he is unable to keep up. Shylock only demanded a pound.
of flesh, but this thing will demand three or four pounds, if you let'
it, and then take a deficiency decree on your farm, and still be disEOatisfied .. What is responsible for most of the wreckage, most of the
heartbreak, and failure and defeat and bankruptcy, than any single
thing in our scheme of government?
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I am convinced, Mr. Chairman-and I came to this conclusion
long before I had the pleasure of knowing Doctor Fisher--that there
is only one safe measure that we can depend on to preserve the few
cyclic changes of commodities which are bound to occur, which are
as inevitable as the coming and going of the tides and the flight of
time, which the hand of man can not stay. We devised money
to serve us, and its first duty is to preserve the parity of relationship
and equities that exist between the debtor and creditor, as they
existed at the time the debt is incurred.
Mr. GOLDSBOROUGH. Right at that point, what do you think should
be done to preserve the proper relationship between debtor and
creditor? Do you think it can be done with substantial justice and
success by stabilizing the general commodity price levels?
Mr. EWING. Mr. Chairman, I hear mostly from financiers, and
they, to-day, are talking about stabilizing money at some fixed
point. My view of it is that if you are to preserve these equities,
you have got to ride not only some arbitrary level up here, but you
have got to keep the facts, accept the facts, and peg your currency
to these commodities, based on the proper index figure, with a wide
enough base to insure your representing these factors of values with
the wholesale commodity prices, and ride those waves up and down,
and preserve that adjustment in its proper and equitable relation•
ship; but when you say, "We will stabilize up here," you have lost
a very fundamental thmg.
The Stable Money Corporation, composed of the biggest financiers
in the country, and organized in 1927, has tried to evolve some way
that seemed feasible that it could present to do this thing, and what
has it found out? I dined with one of the financiers not so very long
ago, and the result was that they had not a suggestion to offer.
Why? Because you can not do it. You can agree on a commodity
base, and then do these things, and go along with that in the proper
adjustment on your index figure. That is wha.t I want to see done,
and I believe it should be done.
Mr. GOLDSBOROUGH. Have you any observation to make about the
soundness of the principles involved in this bill which is under discussion, this specific bill?
Mr. EWING. -As I said, this is a mode of living, nothing more, until
you can go boldly out and do this thing. Can you do it? I will
tell you here to-day, you are going off of the gold standard. Whether
you get off, or are pushed off, you are going off.
Mr. GOLDSBOROUGH. Have you considered carefully section 3 of
this bill?
· Mr. EwING. I can not say that I have. I did not know I was
going to -appear before you as a witness until last night, and other
engagements have made it impossible for me to study it carefully;
but it might be of interest ~ every man-.
.
Mr. GoLDSBOROUG-H, -I wish you would read the bill. Just s1t
d9wn and int~rrµpt you.rself for a moment and read this bill, and s~e
if, in principle, your ~ews are not embodied in the bill. This bill
is: :not supposed to be, teehnically, what it should be; it was not prepared for that purpose, but it was supposed to embody the correct
principle.
111442---82-P'l'
1-'1
. ..
.
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Mr. EwING. Speaking after that ha.sty examination, and making
allowance for that fact, I would say that as a citizen in business, I
would prefer not to leave to any board the question of what the pricelevel is; that I would prefer to leave it to. the arithmetical computation on the index figure.
Mr. GOLDSBOROUGH. What you mean is this-and let us see if we
are not together on it, anyhow-I think what you mean is this:
That you would prefer that the bill be amended so as to direct,
specifically, the Federal Reserve Board to use the particular index:
number, for instance, like the Bureau of Labor Statistics of theDepartment of Labor?
Mr. EWING. Yes.
Mr. GOLDSBOROUGH. That is what you mean?
Mr. EwING. Yes; that is good enough. I think you will find, as
the econ<;>mists tell me, that during the past 10 years that figure has.
been far more stable than either gold or silver.
Mr. GOLDSBOROUGH. All right; we have disposed of that, and I
think we are in agreement on it. That was left out, in order to promote discussion. Now, what is your view about section 3 of the bill~
which maybe provides for just what you have in mind.
Mr. EWING. Well, in the light of that previous explanation, I think
it is proper.
Mr. GOLDSBOROUGH. It provides a flexible monetary system?
Mr. EWING. Yes. Now, as to this thing, you recall there was an
international chamber of commerce meeting here last May, when I
had the pleasure of meeting some of the English dele~ates and discussing with them what England was going to do with her crisis.
I suggested: "Why don't you go off of the gold standard?" and theirleader, Sir Somebody, said, "Oh, no; that is too risky; we can not do
that." But another member of that commission, a man widely
.engaged in international commerce, pointed out that the index
figure found in English commerce had more stability than either gold
or silver; and it was not three months until England did come off it_
That leads me to this thought: In connection with this work you
are undertaking now, there is not a more crying need to save the
world to-day than international currency, and' an international
currency with which we can deal with some assurance. I can see no
other base that is safer or sounder for such currency than the commodity base. It would seem to me that it might be the obligation of
this country to invite a conference on such a proposition; there is'certainly nothing inhibiting it; because of the flow of foreign commerce during the past decade, and the disparity of the currencies of
the countries trying to engage in it with each other.
·
I do not wish to take more than my share of time, because there areother witnesses; but how deeply this runs in my thought, as to its.
importance, I wish I could convey. How great the opportunity
I believe is yours to bring the relief that has long been needed, I can
not express.
Mr. GOLDSBOROUGH. What you do have in mind, I presume, is.
that you think legislation of this kind, if it can be perfected and passed,
will mdicate that civilization is coming moi:e and more to the conclusion that, in order for it to be successful, it must be cooperative:
and just to all classes of people.
.
Mr. EWING. Justice is the corner stone of all government.
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Mr. GOLDSBOROUGH. And the bill, you think, points m that
direction?
Mr. EWING. If you don't have that, you have not a good government.
Mr. GOLDSBOROUGH. I am asking you, specifically, of whether you
think this kind of legislation points towards justice.
Mr. EWING. I am sure it does. I very much appreciate your
courtesy.
Mr. GOLDSBOROUGH. We enjoyed hearing you very much, indeed.
Mr. BusBY. I would like to ask a question.
Mr. GOLDSBOROUGH. I beg your pardon, gentlemen. Mr. Busby.
Mr. BusBY. You speak of international currency; do you have a
definite idea as to what it would be, or what it should be, or how it
would be formulated?
Mr. EWING. I do not assume to be an expert on things of that
character, but it seems to me that if it is practical to have a bankof
international settlement, it would be practical to have an international
bank of commerce, and let each nation take a share of stock commensurate with its contribution to the world trade, sufficient to revolve
that contribution to the trade, and have a perfectly sound institution.
Mr. BusBY. Of course, the Bank for International Settlements was
an agency to treat, primarily, with reparations.
Mr. EWING. Yes, sir.
Mr. BusBY. It would not be parallel, I believe, with your idea of
an arrangement for handling international currency.
Mr. EwrnG. Well, we struck a balance through it, did we not?
Mr. BusBY. We sold bonds forit and paid the money over to friends
and some of the reparation claimants, but we have not struck any
balance, if you go to gather up the bonds at the present prices; but
this is what I want to ask you, further, and that is, how would you
settle your international balances and in what commodities, and how
would you arrive. at an adjustment of the claims of one country
against another, as currency, unless you had some medium that would
be acceptable, or whether you would pay it in commodities, or
whether you would agreeMr. ·EWING. I see no reason why gold could not function; but
instead of interpreting things in gold, we can interpret gold in things.
Mr. BusBY. I see.
Mr. GOLDSBOROUGH. You, of course, realize the very great difficulty
of having an international currency, as·lon~ as the countries of the
world, civilized and semicivilized, have theu present tariff policies,
do you not?
Mr. EWING. I understand that the domestic values of the countries
would depend very_ la~gely on whatever the~ ta1;Uf poli_cy was.
Mr. BusBY. Followmg that same question.Just with one more,
perhaps, do you not think it would be very well for us to determine,
m this country, commodity values, with regard to wholesale--! mean
by using the commodity wholesale index price, as ascertained by the
Bureau of Labor Statistics, and then using a metallic base, gold and
silver, or silver or gold, and relating that to the commodity price in a
variable way, so that the commodity could remain reasonably stable;
and. that. gold 'Yould measure the.commodity, probably,fro~ time
to time, ID relation of one commodity to the other, and ID relation to
t.he fixation of debts and obligations. ·
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Mr. EWING. I think it might be possible, provided you arranged to
follow the trend of the commodity index prices.
Mr. BusBY. That is the world's salvation, as I see it.
Mr. EWING. I thank you, gentlemen.
Mr. GoLDSBOORUGH. Thank you very much~ sir. We will now
hear Mr. Hearst.
STATEMEN.T OF CHARLES E. HEARST, PRESIDENT OF THE
IOWA FARM BUREAU FEDERATION
Mr. HEARST. In appearing before you this morning as a director
of the American Farm Bureau Federation, as vice president of that
organization, as chairman of its legislative committee, and president
of the Iowa Farm Bureau Federation, I am impressed with the interest
of the members of the subcommittee in arriving at the features of a
definite bill which will secure what all of us desire in regard to stabilizing the unit value so that a dolJar in different decades will have
approximately the same purchasing power. It shall be my effort in
part to apply myself to the kind of measure we desire this committee
to report, after calling the attention of the subcommittee to certain
conditions that exist.
I desire to place into the record the resolution of the Iowa Farm
Bureau Federation, adopted at our last annual meeting, on the subject, "Money and credits."
Moneys and credits: While we realize that the evils of depression
have now become so pronounced and universal that they can not be
permanentl.y- removed by a:l>plying local remedies, yet we voice the
conviction that a sound policy of reconstruction should first seek to
make the foundation secure upon which national prosperity rests.
We maintain that agriculture which provides the necessaries of life
is that foundation. The prolonged and abnormal deflation of agricultural values has so impoverished our farm people as to imperil the
entire economic structure of our country. We-believe that mflation
in the value of the gold dollar, the fatal shrinkage in the availaole
supply of money and the concurrent contraction in the volume of
indispensable credit are the chief causes responsible for the deplorable
condition now prevailing. We urge that all necessary action be
promptly taken to insure a return to the honest dollar, to secure a
normal supply of available money and to bring about a sound and
·
sufficient expansion of credit.
We call .attention to. the statement of George Harrison, governor
of the New York Federal Reserve Bank, to the effect that the present
gold supply in the United States makes possible the expansion of
credit to the extent of $35,000,000,000. Inasmuch as the Federal
reserve system can at once bring about expansion of credit on a gold
basis without any action by Congress or the President, we call on the
Federal Reserve Board and the governors of the Federal reserve banks
to purchase Government securities in large volume and thus lay the
groundwork of the credit expansion which the present $2,000,000,000
Reconstruction Corporation so clearly contemplates.
We urge on President Hoover the advisability of calling an international. monetary conference to consider international action of
remonetizing silver either by the method of bimetallism or symmetallism as may seem most practical.
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We call on Chester H. Gra.y a.nd the legislative committee of the
American Farm Bureau to give special attention to ca.rrying out the
monetary resolution as adopted by the National Grange in its meeting
in November and the American Farm Bureau Federation in its
meeting in December providing for "reversing the process of deflation" to the point where general prices are returned to the average
price level at whieh the present long-time indebtedness was incurred
and stabilizing them there. We suggest to the American Farm
Bureau Federation that they keep in continuous close contact with
the members of the banks and currency committees of both houses
of Congress to the end that some fundamental effective bill may be
reported at this session of Congress.
We commend the Congressmen who, regardless of party, have
supported the program for expanding the financial resources of the
Federal land banks and launching the emergency-credit corporation.
We urge on these Congressmen the desirability in all measures of this
sort that they not only thaw out the frozen assets of 'the insurance
companies and banks, in the way of railroad bonds, and so forth, but
also of furnishing effective credit for the agricultural West and South.
This resolution in substance agrees with the position of the American Farm Bureau Federation and of the three national farm organizations, the statements of which groups have been already placed in the
record during these hearings. However, may I point out an aspect
or two in the Iowa resolution not contained in the other statements of
position thus far presented to this record by representatives of
agriculture.
,
The money question is not only a domestic one; it is international
in character, at least in some of its features. This may be particularly true in regard to the silver question which, being a prime
medium of exchange in many a foreign nation, properly should be
considered in our approach to the money question in its broadest
relationships. Whether or not our own Nation, without concerted
action on the part of other dominant nations, should act in any
certain way in regard to the silver question is a debatable question
at the present time. There seems, however, to be a growing thought
that an international monetal}' conference at which the silver question would be of paramount rmportance could be helpful in establishing a more definite international exchange of commodities, and
by so doing enlarge our foreign trade without sacrificing .the fundamental basis upon which our domestic trade is founded.
This question is approached in the Iowa resolution, and we urge
the consideration of international. action to remonetize silver either
by the method of bimetallism or symmetalism, whichever one may
seem to be most practical. In our Iowa resolution we also give
special attention to the monetary resolutions adopted by the national
farm organizations, of one of which, the American Farm Bureau
Federation, the Iowa Farm Bureau Federation is a member. We~
in Iowa, believe that the process of deflation should be reversed so
that general prices may be returned to that approximate level which
existed at the time when the present long time indebtedness was
incurred.
Some of the bills pending before this committee indicate that the
period 1926 to 1928 might be a period to take as being indicative of
a proper price level of all commodities. That is a question which
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I do not need to discuss at the present time, but I wish to say briefly
that with the monetary condition of exchange as· it is at the present
time, a person in Iowa, whether on the farm or in our cities, who. a
few years ago incurred an' indebtedness, now finds that to pay that
indebtedness he must produce and sell from two to five times as
many units of his commodity, agricultural or industrial, as the case
may be, as would have been required when the indebtedness was
incurred.
This statement leads me to remark briefly that things are happening in Iowa very disadvantageous to the farming population in
that State. Very harmful things are happening also to our largeindustrial and city population. Principally on account of the high
exchange value of the dollar, comparatively speakin&", farmers now
find approximately 4 bushels of corn no more effective in meeting
obligations than 1 bushel formerly had been. They find three head
of hogs of uniform weight necessary to be sold to bring an income,
measured in dollars, equal to that which only a few years ago could
have been secured from one head. We in Iowa are rapidly developing as a dairy State. We find our dairy products already shrunken
in exchange value much below where they were when not many
years ago the dairy industry began to advance rapidly in our State.
Our town population has found, also, that whether measured in the
remuneration for a day's ·labor or in the units of manufactured commodities sold in exchange for money, more labor and more units of
commodities are necessary to exchange for a monetary unit than was
true formerly. This has brought the citizens of the State of Iowa
to a position approaching bankruptcy.
The productivity of our State, agricultural and industrial, is as
great as ever it was. The net income is less than it formerly has
been, primarily because more of our commodities are necessary to
exchange in order to buy the dollar which has become too high in
value. We want the dollar value more nearly held in line with commodity values. Some have called this desire the commodity dollar.
Many other names are applied to it-some with reproach. However, we are not wanting to coin commodities into dollars, nor to
weaken the monetary system of our Nation. We want to retain the
national standard of money which we now have, but we do not wish
that standard to continue in future so dominant, so inflexible, that
as it becomes scarce or plentiful all other commodities exchangeable
for it fluctuate through wide swings of prices from low points of
value to high ones alternatively;
We see no logical reason why there should not be a sort of equilibrium between prices of all of our commodities and the price or prices
of whatever commodity constitutes the basis of our monetary·;system.
At the present time, of course, gold is the basis of our monetary system and as it, according to present laws and administration 'thereof,
is held inflexible and unchangeable in weight, naturally all other commodities exchanged for gold fluctuate widely in the process of exchange.
These considerations have led us in Iowa, as well as farmers all
over the Nation, and people in various activities other than agriculture, to conclude that legislation similar to that which is now pending
before the House Banking and Currency Committee should be
enacted.
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As I view the pending bills they classify under two general heads.
First, we have such bills as those introduced by Congressmen Strong,
Ramseyer~ and Keller, which seek to accomplish stabilization of
values by authorizing and directing the Federal Reserve Board to
use their discounting and rediscounting privileges and to change the
eligibil~ty rules so that wide flu,ctuations in value in the exchange of
.commodities for the dollar may be avoided.
Another sort of legislation is proposed and is now pending before
this committee contained in the original bill by Congressman Goldsborough and the measure by Congressman Burtness. This type of
legislation seeks to correlate commodity and monetary values by the
method briefly defined as changing the weight of the dollar as conditions in commerce change. According to the Iowa resolution,
which I have already presented to the committee, it is my belief that
both of these types of legislation will be necessary. Perhaps the
Federal Reserve Board, even if given the powers and authorities
designed to be given it by the Strong, Ramseyer, and Keller types of
legislation, would find itself either unable or unwilling to interpret
and administer those bills in ways to accomplish what the measures
so definitely indicate. This leads me to remark that whatever the
type of legislation results from these and former hearings on this
.subject, all of it must be lodged for enforcement, I assume, in the
Federal Reserve Board.
Perhaps it is not timely for me to suggest it at this time, but safeguards to secure the administration in the proper spirit of such legislation as we are advocating will either now or in time need to be drawn
.around the Federal Reserve Board. I mean that should Congress
enact the most helpful sort of legislation of the kind we are advocating,
and should that legislation depend for its success on the administration of an unsympathetic reserve board, our whole cause would be
lost either temporarily or permanently. The time must come in our
.American fiscal history when the Federal Reserve Board will be composed not exclusively of representatives of the banking fraternity but
,of representatives of all the groups of industry, agriculture, and labor
in our great nation. Fiscal affairs of a nation should be approached
in regard to their administration and solution from the point of .view
of serving the public_ welfare and not merely of serving and protecting
the welfare of concentrated wealth.
Therefore, mv hope is that the Federal reserve act, perhaps not in
the bills now pending but in separate legislation and in the not distant
future, may be amended so that our Federal Reserve Board will be·
more truly in its personnel a cross-sectional reflection of our entire
nation rather than as is now too much, or exclusively, the case, a
representation of banking interests alone.
Coming now to the specific measure pending before the committee,
may I call your attention to H. R. 10517, by Congressman Goldsborough. This measure, as I view it, is an effort to consolidate in
one bill the two ideas relative to monetary stabilization, which I have
already briefly discussed. First, the Goldsborough bill seeks to
.authorize the Federal Reserve Board and the reserve banks to maintain as much as possible a straight line of relationship between commodity and monetary value. Second, the measure in its last section
makes an effort to raise or lower the official price of gold if the provi:Sions in the first part of the measure are not wholly effective.
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H. R. 10517, therefore, is a consolidation of the ideas contained on
the one hand, as I view it, in the bills by Congressmen Strong, Ramseyer, and Keller, and on the other hand of the fonner bill by Congressman Goldsborough and the one of Congressman Burtness. It is
my firm conviction that both efforts should be incoIJ>orated into a
composite bill; that is to say, that e_very authority, along with complete directions, should be given the Federal Reserve Board to use
all the powers of the board in maintaining a more stable purchasing
power of the dollar.
· In doing this, however, it ma.Y be found indispensably necessary
that the dollar in value and weight be changed from time to time.
I fear that the pending bill by Congressman Goldsborough is not as
explicit in either of its provisions as it should be, but it is undoubtedlr
the type of bill which it is our hope and desire the committee will
report upon favorably in the near future.
In drafting the legislation along the line of H. R. 10517 I wish to
suggest that the committee use the thoughts in the Strong, Ramseyer,
and Keller bills, which will accomplish the purpose of putting a
responsibility on the Federal Reserve Board to stabilize the purchasing power of the dollar. I wish to suggest, also, that when it
comes to enacting_ legislation which will change the number of grains
of gold in the dollar, such as is suggested in the last section of H. R.
10517, more specific instructions and directions are needed.
In other words, I wish to recommend to the committee in writing
its soon to be reported bill a careful study of H. R. 800 by Congressman Goldsborough and H. R. 20 by Congressman Burtness. The
last two measures, when incorporated into the pending legislation,
will secure what some people call the commodity dollar. Others
refer to it as the variable dollar. It has been for years referred to as
the Fisher dollar. Whatever designation may be applied to it, the
le~slation when enacted will give us a standard of exchange which
will not be so dominant in dictating high and low values to all other
commodities, owing to its own fl.exioility.
In closing, I wish to recommend to the committee that the two
ideas relative to the general type of legislation pending should be
incorporated in:to one bill to be reported from this committee, and
the outline presented in H. R. 10517 is a worthy one to follow, with
further specifications contained in relation to the two methods of
approach to the general question of stabilizing the purchasing power
.of money.
Now, Mr. Chairman and gentlemen, I come from a big agricultural
State, and I want to give you, which perhaps is not necessary, the
conditions in our State in regard to the income of the people of our
State.
·
Mr. GcLDSBOROUGH. That will be very interesting, I am sure.
Mr. HEARST. In 1929, for all field crops-this is taken from the
United States Dep.artment of Agriculture-our fanners in 1929
received a little over $500,000,000; in 1931, the decline was over
one-half of what we realized on our products in 1929. We had to
take a decline of 55.2 per cent in income from those field crops between
1929 and 1931.
Mr. PRALL. How does that compare with other lines of trade and
.business, as between 1929 and 1931?
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Mr. HEARST. It falls below; the agricultural incomes fall below
the other lines of trade, that is, other lines of industrial pursuits.
Mr. PRALL. The percentage i,s greater?
Mr. HEARST. The percentage of decline is greater, although they
show a marked decline. Livestock is our chief product, and we produce between 25 and 35 per cent of all of the hogs produced in the
United States. We send to Chicago from 18 to 20 per cent of all of
the cattle that go there to be slaughtered. The corn, through which
we produce the livestock, also is an important industry. The value
of our livestock was a little over $500,000,000 on January 1, 1930, and
it shrunk to less than $250,000,000 by January 1, 1932, or a decline of
51.3 per cent. The corn, through which means we produce this livestock, had a value of $310,000,000 in 1929, and in 1931 it was $136,000,000, a decline of 56.1 per cent. So that, taking it all in all, this
thing has reacted terrifically against prosperity in the agricultural
States that have to endure these kinds of losses, and it is a loss, a
distinct loss.
Mr. PRALL. Did you raise as much corn, and produce as much corn,
in 1931, as you did in 1930?
Mr. HEARST. Yes; it varied the least little bit.
Mr. PRALL. And the price had shrunk for the same amount of
products; that is what I am getting at.
Mr. HEARST. The production was very near the same, and the price
had shrunk to the place where there is scarcely any price at all in
almost a year. To go a little further, when you come to this decline
in price, when you take a 10-cent drop per bushel in corn, you think
that is all the loss there is; but if this corn is to be marketed,- to go into
commerce and be sold upon the market, your 18-cent corn is just as
expensive to market as 35 or 50 cent COl"Ilc. Well, then, corn finally
gets to the place where you can not afford to take it to the market, or
ship it out, or deliver it for distribution.
Mr. GOLDSBOROUGH. Your State does not grow very much wheat,
does it?
Mr. HEARST. We grow between 9,000,000 and 13,000,000 bushels,
mostly in the southern part of the State.
Mr. GOLDSBOROUGH. Now, what I had in mind was this: When
your wheat falls from $1 to 40 cents a bushel, does the individual who
has to eat bread in Chicago and New York, and any other center of
population, get any benefit, any appreciable benefit from that loss in
price which the farmers secure for their wheat?
Mr. HEARST. A few years ago I made a study of wheat and pork;
the pork I produced on my own farm, and the wheat some of my
neighbors produced. I found that in a 12-month period most of my
living, or my food, dropped 100 per cent, or in other words, I got
one-half for the amount of pork that I grew. I have relatives and
friends in Chicago who pay practically the same retail price as they
were paying before. I think that was in 1924, along in there. I took
another 6-month period for wheat, and exactly the same thing prevailed, with the exception that bread did come down a little bit.
Mr. PRALL. Who made that profit on your pork?
Mr. HEARST. I would like to find that out myself, sir. I would
like to know all of the entities that dealt in it.
Mr. PRALL. You do not know?
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Mr. HEARST. No; and I would like to know that right now. The
first carload of hogs that I sold off of my farm this winter brought
$3.65 in Chicago, and they were the best you could raise, 225 to 240
pound Hampshire hogs, and when the check got back home it brought
a little over $3 a hundred pounds. The spread between what I
received and what the consumer paid was greater than the spread
on my pork that I sold some years ago for three times that price, or
two and one-half times that price.
Mr. PRALL. Was it equally divided among those who handled it,
after it left you?
Mr. HEARST. We are not able to tell in this type of market, becauseof the means people have of covering up costs, and so on.
Mr. BusBY. Let me suggest this, for your thought: Trade, of
course, is represented by the velocity that credit moves and that,
while a drop of one-half in the velocity of credit, or in the amount of
trade, so to speak ,would not be continuous, fixed overhead or business
tend to absorb considerable profit that there appears to be in the
difference between the former sale price of your wheat and $1, and
the low point of the sale of wheat and 50 cents? In other words, if
there is a thinning out of business, and a continuous overhead, would
not business trail, to some extent? I am not offering that-Mr. EWING. We realized there are fixed charges all along the line.
The farmer has fixed charges that he can not shirk.
Mr. BusBY. He goes under?
Mr. EWING. They are in his costs, whether he wishes them or not.
His costs of distribution are in there, and what it costs to make the
crop, plant it and gather it. They have that overhead; it is there.
They can not dodge it; and then they have an investment, which is
an overhead. So that, all along the line, there is a fixed overhead.
Mr. BusBY. In slowing down the trade of the world, the overhead
gets out of proportion to what it used to be, when they had more
volume and more trade, to some extent.
· Mr. HEARST. This appears to be a fact: The retailer takes advantage of the low prices for his commodities at the time, and there is
the desire to build up at that time against the time when the commodity prices may cost him a good deal more. We feel they are
laying up against too many rainy days.
Mr . .PRALL. You mean the packers are realizing a greater profit
now than they were in 1919, for instance?
Mr. HEARST. I think the packers are doing right well now. I just
noticed the other day reports coming in, and they have raised prices
to the retail trade 3 per cent.
Mr. PRALL. While your price is going down?
Mr. HEARST. No; our price just took a slight increase about 10 days
ago, as a result of which the packers, I am told, have advanced their
prices three-tenths of 1 per cent. We have had an advance on hogs
of about 70 cents a hundred in the past 10 days.
Now, Mr. Chairman, I do not want to go further with this situation; we do not know where it will lead next week, or next month.
Some of these reasons, I think, are the reasons our farmers have taken
this decided stand on this money question, and we realize it is a
difficult road. The handling of our finances is a difficult thin~ in
this deflation, and affects us more than any one particular thing.
We can not understand why a commodity should be taken as a.
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measure of the value of all other commodities when this commodity
itself has a fluctuating value of its own. If you had a token or symbol
of some kind to measure the commodity value, such as labor, interest
rates and all of those things, that were stable and did not fluctuate,
but stayed put, then there might be some cha.nee of going forward;
but with a commodity which, itself, has a fluctuating value, as we
have realized in the last two years, with which to measure all of these
other services and values, we just feel that something must be done
now to assure any prosperity to this Nation.
We are not talking from the farmers' standpoint alone, because we
do realize that, if this farmer buying power can be restored, that the
unemployed men in the State of Iowa-and we have a lot of industries there, after all-can be put to work to-morrow; because I need
on my farm, and my neighbor farmers in that State need, an adequate
supply of materials on our farms, which we have not been able to
purchase. Give us the buying power and those men in Iowa, and
those men in Chicago, and elsewhere, will be put to work. Here is
the situation, and I have taken only a few of our commodities that
are stable: When our income has been cut down over 50 per cent we
still, Mr. Busby, have our fixed overhead there, so that really any
lowering of our income runs into 75 or 80 or 90 per cent, when you
get down and figure it in toto.
Mr. BusBY. In cutting off this difference in price that you receive
at the present time, you cut off not only part of the profit, but all of
the profits, in your operation, in many instances, do you not?
Mr. HEARST. We have dug into our capital investment until the
capital investment is gone in many, many instances; and I told some
of our people that, if we can not stop the downward trend of commodity
price levels, "The closer you are to the edge now the better off you
are, because the fellow that is in fairly good shape now will have his
agony prolonged for three or four years longer, and then he will go."
Really, the fundamental difficulty lies in using an unmeasured commodity for the measure of value.
Just another thought, and I am not going to take any more of
your time: I had a very close friend, and a dear friend, on the Federal
Reserve Board, who passed away a year ago, and I talked with him
often in regard to this matter, and I found, I would say, that he was
working against a great many odds, but that he was very careful not
to disclose any confidences. I agree with Congressman Strong and
some of the other men here yesterday, when they suggested that a
change in policy should become public before it took effect, rather
than a change of policy being put across and the public waking up and
finding that a change of policy had been effective some time previous
to that time, and only a few insiders knew it earlier. But I want to
say, if we put into the hands of the Federal Reserve Board the option
to do certain things, that is not enough, to my mind; there should be
the direction there, the direction that the Wall Street bankers, these
big financial institutions, can not go to their friends on the Federal
Reserve Board and say to them, "You can't, or you must do this and
that." I would like to have some definite direction to them so ex'plicit, so definite, that, when you finally adopt a policy in Congress,
that group must be forced to do as the legislation specifies; and I.
would further like to suggest, as I did before, that the board be com-
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posed of not banking interests alone, but of agriculture and all other
mterestsi, and that it be a friendly group.
Mr. Cnairman, that is all I have to say.
Mr. GOLDSBOROUGH. We thank you, Mr. Hearst.
Now, just one minute, to discuss the phases of the situation that
you have in your department. The country is now in the midst of
a desperate emergency, I mean a deadly emergency. Are you familiar
with this legislation known as the Glass-Steagall bill?
Mr. HEARST. I have tried to familiarize myself with it, without
giving the study I wish. I could not be here when the hearings were
held.
Mr. GOLDSBOROUGH. Is it your impression that the purpose of
Congress in passing that legislation was easily understood and comprehended the implied direction to the Federal Reserve Board to
raise the price level, and the statement to them, legislatively, that
we are furnishing the tools for them to do it with?
Mr. HEARST. That was my understanding.
Mr. GOLDSBOROUGH. As far as you know, was not that the understanding of the farm people everywhere with whom you discussed it?
Mr. HEARST. May I go back Just a little for a moment?
Mr. GOLDSBOROUGH. Yes; you may.
Mr. HEARST. Last fall the bankers organized what they called the
National Credit Corporation, and the word went out throughout
the country that this was going to save the situation. As a matter of
fact, there was a group of bankers, who were all supposed to contribute
to the common pot, to help each other; and immediately, prices on the
stock market took a decided spurt, and then went down like a shot.
The last condition was worse than the first. People lost confidence
in that endeavor; and then the.Reconstruction Finance Corporation
came into being. We are favorable to it; we feel that it might be a
good idea; but we realized then, and realize now, that any aid to
agriculture would have to come trickling down through other sources.
In other words, that it was an aid to the bankers and the railroads
and the insurance companies. Then the Glass-Steagall bill came on,
and we hoped that it was directed .to the right thing, in a way that will
help to cure these things; but we do not believe the Glass-Steagall
bill will do the thing at all until this dollar is managed.
Mr. GoLDSBORouoH. Why will not the Glass-Steagall bill be
effective, in your judgment?
Mr. HEARST. My judgment is that the Federal reserve system will
take the powers they have-and they have had a lot of powers before
and have not used them-and they will use that power as, in their
judgment, they will see fit. I hope I am wrong, but unless it has
enough direction in it, so they must do it-Mr. GOLDSBOROUGH. I am going to ask this question, and I want to
preface it with this statement: During the passage of the GlassSteagall bill through Congress, it was said in the Senate, may times,
and broadcast throughout the country-it WaB never said in the House,
to my knowledge-that the measure was, in no sense, an inflationary
measure. That was not the purpose of it, at all. Is it your impression that statements of that kind, and the feeling which the public then
.. took that it was to be used for the purpose of raising prices, has had a
very detrimental effect on the efficacy of the bill?
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Mr. HEARST. Speaking now man to man, this effort, this terrific
effort that is being put over the whole country to keep from using the
word ''deflation"-or wearing out our dictionaries to find some synonym-has done a lot of damage.
Mr. GoLDSBOROUGH. What you mean is, we need a raise in price
levels, do we not?
Mr. HEARST. Yes. We may need restoration, if ;you want to call
it that, and we must have it.
Mr. GOLDSBOROUGH. Do you think that if the Federal Reserve
Board would come out and put in the press of the country a statement along these lines: "We have available vast resources, which we
had prior to the passage of the Glass-Steagall bill, and we have the
additional resources that were given to us by that legislation, and
when that legislation was passed it was an implied direction to us to
raise price levels, so that the debts of the country could be liquidated
and business resumed, and what we propose to do is to use all of our
powers to raise/rice levels to a given level," which they set in that
statement, "an we are not going to stop until we do it," do you not
believe that that assurance, that positive assurance, would have an
immediate effect on business throughout the country, and if it was
carried out, and the people knew it was being carried out, business
would recover in a very short time?
Mr. HEARST. Yes; if they knew it, but they have been told that
prosperity is around the corner until they have gotten cross-eyed
looking for it. They told us the Reconstruction Finance Corporation
would do it, but they have got to see the performance.
Mr. PRALL. When you say that, who do you mean?
Mr. HEARST. The press, the publishers that speak for the people,
Mr. PRALL. I thought you said the President.
Mr. HEARST. I say the press.
Mr. PRALL. May I ask the gentleman a question?
Mr. GOLDSBOROUGH. Yes.
Mr. PRALL. What effect do you think this will have on the unemployment situation-Mr. HEARST. The stabilization of the dollar-Mr. PRALL. This legislation, I mean.
Mr. HEARST. If you stabilize the dollar down on the basis we have
now, it is going to ruin labor and the farmer and every small business
man in the United States-that is, if you stabilize prices down where
they are now, if you stabilize the dollar at the height it is now.
Mr. PRALL. I say, with respect to this bill, if this. bill is passed
and should become law, what effect would that have on unemployment?
Mr. HEARST. To my mind, there could not be anything done so
effectively to assist labor, in relieving unemployment, as the stabilization of the price level where is belongs. People can not employ
labor now, and they could heretofore.
Mr. PRALL. Do you know whether the Federation of Labor ha.ve
taken any action on it?
.
Mr. HEARST. I understand they are backing this movement. A
part of our group met them this week, and they are backing this
movement. That· is hearsay; I have no connection with it, ·myself;
but I can see nothing that will stimulate employment so quickly as
the- immediate turning up of the price level.
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Mr. PRALL. Would it bein order, Mr. Chairman, to move that the
American Federation of Labor be invited to appear before the committee?
Mr. GOLDSBOROUGH. I think it would.
Mr. PRALL. I so move.
~r. GOLDSBOROUGH. I think we should take that up in executive
session.
Mr. PRALL. A)l right.
Mr. HEARST. I thank you, Mr. Chairman, if there is no other
question.
Mr. GOLDSBOROUGH. We are very grateful to you for your helpful
statement.
Mr. HEARST. I do want to say to you that since I have been in
Washington, I have gotten many letters and telegrams from business
men, chambers of,commerce, bankers, the governor, the Secretary
of Agriculture, and our Farm Bureau people which show the active
interest of the farming people, industrial people, and the business
people. I did not want to encumber your record, or bother you, with
them, but I can bring them over to you, but the drift of these communications, which just came in yesterday morning and this morning,
is that they insist ·that this commodity price level be stabilized, and
the _dollar stabilized, so they can not go shifting up and down.
I know the situation there, but consequently I can easily comprehend why all of these protests and requests came in this morning
and yesterday morning. They are watching Congress; I have never
seen our people watch Con~ess before as closely as they are now.
They know Congress has it m its powers to do some of these things,
and if you will do them you will have their support, I care not who
you are, or what political faith you have. You will have the support
of the people when you try to break up this thing, and bring up these
commodity price levels. I want to leave that with you, gentlemen.
STATEMENT OF L. J. TABER, COLUMBUS,
THE NATIONAL GRANGE
omo,
MASTER OF
Mr. TABER. I want to first compliment this subcommittee on the
bill here, and the work of the Banking and Currency Committee.
Speaking for t.he National Grange and its membership scattered
through 33 States in 8,000 local units and more than 800,000 members,
I desire to commend this committee and the Congress for· the constructive steps already taken to remedy some of our present-day
difficulties; in other words, I commend the Congress for the constructive steps seeking to rf'ach the situation, but organized agriculture recognizes that no amount of legislation to extend credit
facilities will solve the problem. This committee and this Con~ress
know so much about the bad condition of agriculture and busmess
that it would be foolish for me to take any of your time in discussing
what has hapJ?ened in that regard.
This committee understands as well as any ,other group the sad
effects of this depression and the world-wide ramifications and dislocations resulting from the losses of the World War.
·
We in America have been affected by the machine age, which has
accelerated speed and multiplied the power of human hands. Faulty
distribution of wealth has contributed in a marked degree to our
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present condition. Agricultural inequalities, which have taken
.$30,000,000,000 out of the capital account of agriculture, and many
.an additional billions from the farmers' income during the past
-decade, has been a factor equally ma,rked.
·
We have actually taken thirty billion dollars out of the capital
.account of American agriculture, and we have actually taken multiplied millions out of the annual income of the farmer. In addition
to all of these things, there had been an unsound standard of wealth;
.and speculative inflation and deflation have taken their direct toll.
But back of all that, the lack of monetary stability seems to us to be
the great problem that is affecting us in this land. The major factor
that can not be overlooked, however, is unsound standards of wealth
and unstable measures of value. Speculation, with its series -of
inflations, followed by deflations, has been serious; but the outstanding
fact remains that, as a nation, we have failed to provide a monetary
structure suitable to the age in which we live.
To go back a moment, if you will bear with me, I want to read a
statement from an American that all of us venerate, Abraham
Lincoln. The direct responsibility of government was well summed
up by Abraham Lincoln, when he said its purpose wasTo remove the obstacles from the pathway of all, to open the avenues of
honorable employment to all, and to give to all an unfettered start and a fair
chance in the race of life.
Discussing the monetary problem and the effects of deflation,
almost 75 years ago, Lincoln said:
When one hundred millions, or more, of the circulation we have now shall be,
withdrawn, who can contemplate without terror the distress, ruin, bankruptcy
and beggary that must follow. The man who has purchased any article--say, a
horse--on credit, at $100, when there are two hundred millions circulating in the
country, if the quantity be reduced to one hundred millions by the arrival of pay
day, will find the horse but sufficient to pay half the debt; and the other half
must either be paid out of other means and thereby become a clear loss to him, or
go unpaid, and thereby become a clear loss to the creditor. What I have he1e
said of a single case of the purchase of a horse will hold good in every case of a;
debt existing at the time a reduction in the quantity of money occurs, by whomsoever, and for whatsoever, it may have been contracted.
The general distress thus created will, to be sure, be temporary, because whatever change may occur in the quantity of money in any community, time will
adjust the derangement produced; but while that adjustment is progressing, all
suffer more or less, and very many lose everything that renders life desirable.
I think that quotation, in its honest relationship, at a time when
contraction was going-on, has a direct application to-day.
The monetary problem is not new to the organization I have the
honor to represent; in other words, I have the honor to represent an
organization that is not new to depression. Our grandfathers faced
the struggle of 1873; they strung the grange like wildfire across the
continent, and put the organization in action in 18 months. Our
fathers were interested in ·the problems in the nineties. So our
organization has lived through two great depressions, and we propose,
or at least we hope, to have the endurance to live through this one.
But this is what I want to point out: That in 1873 and 1893 the
:first ground swell of American agriculture, sometimes called the greenback movement, sometimes called free silver, and sometimes otherwi~e named, was but making articulate the protest of those who toil
against an economic structure· that did injustice to almost every
group (jf our citizens. We were against the contraction of 01irre:liey~
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Our organization was not directly on record relative to the silver issue
in 1890, but we were seeking a better banking system; we were struggling and did struggle for 40 years before we got a farm-loan system.
We are trying to correct ,the agricultural inequalities.
Now, I would like to read a resolution which the National Grange
adopted at Madison, Wis., last November, and which is as follows:
The deflation of the past three years has injured farmerf'f more than any other
class of producers in the country. While the average of all wholesale products
has fallen 30 per cent, the average of prices of farm products has fallen 45 per cent.
This means that the burden of debts, most of which were contracted more than
three years ago, and of which there is estimated to be $11,000,000,000 decured
by farm mortgages, has increased 60 per cent in terms of the products which
farmers sell.
"In view of this serious situation, we urge upon the Federal reserve system
and the Federal Government to take all steps possible to secure (1) restoration
as nearly as may be of the wholesale price average as computed by the United
States Bureau of Labor Statistics to the level prevailing in 1926, or the average
of 1923-1928, and (2) the stabilization of the price level as nearly as practicable
at that point.
Contributing to these ends, the National Grange recommends the following
measures:
1. An increased purchase in large volume of securities in the open market by
the Federal reserve banks.
2. Reduction of rediscount rates by the Federal reserve banks.
3. Reduction of the legal Ininimum gold reserve rates of the Federal reserve
banks to points materially below the present 35 and 40 per cent legal ratios, to
the end that the surplus gold in the United States may be exported without
endangering the gold standard.
4. An international monetary conference for the purpose of (a) stabilizing the
gold price of silver and (b) stabilizing the purchasing power of gold in terms of
the average of wholesale prices of commodities.
Now, there is not a Member of Congress that does not realize the
result, the serious result, of deflation, which has been augmented by
bank failures, hoarding, and other methods of contraction until
literally billions have been withdrawn from the currency and the
Nation's credit structure. It is not inflation-I am not afraid of the
word "inflation "-but restoration that agriculture demands.
I think it was the President who said, the other day, that we must
reverse the processes of deflation that brought about the present
conditions. I rejoice that organized agriculture sits in this room
almost united. Of course, you could not expect us to be an absolute
unit on the exact interpretation of a principle; but we stand here
to-day, representing 27,000,000 people, and are practically a unit
on the program of monetary stabilization and restoration, and we
hold that there is nothing sacred about currency.
A gold dollar or a silver dollar or a paper dollar is no golden calf
that we intend to worship. It should be the servant and not the
master of exchange. We want a currency with which to pay our
debts; we want a currency that will let the farmer pay his mterest;
and let the farmer live, and let ,him continue along the patient way
that he is trying to follow. I know somethi_ng about conditions down:
on the farm, where we milk Jersey cows. We are selling our milk at
the lowest price in 33 years; yet the taxes on that little old farm have
gone up 1,000 per cent, and they have to be paid, or somebody else
owns the farm.
Mr. GoLDSBOROUGH. That is besides the gasoline tax.
Mr. TABER. You are right. What agriculture means by re_storation is that we be permitted to pay our debts in the same kind of
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dollars we borrowed, and to pay interest on the same basis found in
the notes and mortgages that we signed. It is economically impossible
and morally unjust to compel the Nation to pay its taxes and its
debts with a different kind of currency than that upon which these
obligations were contracted. Agriculture has a lot of fixed charges.
It has been estimated that the farm debt is approximately
$11,000,000,000. It has been estimated that the farmers' freight bill
approaches $1,000,000,000, and that the interest on the farm mortgage
debts is more than $600,000,000. That is the charge in normal
years, to say nothing about a lot of other matters.
I had the great pleasure, as some of you know, of appearing before
a joint meeting of the House on this matter more than two months
ago. At that time I made a little statement under the heading of
"Iron debts and rubber money." At that time the agricultural index
was 66, but in the last 60 days the price index has dropped from 66 to
60. Now, that is an intolerable condition; it is a condition which
makes it impossible for agriculture to pay its debts. That statement
pointed out aipiculture's impossible position. The drop in the agricultural price mdex from 66 to 60 changes the figures then submitted,
and tells a startling story. The price index on February 15, stood at
60.
.
.
Mr. GOLDSBOROUGH. You are speaking about general commodity
prices?
.
Mr. TABER. The agricultural price index. Pardon me. I am trying
to record agriculture. In 1930 it stood at 80. Suppose a farmer
borrowed $1 during the depressed year of 1931, and in June, 1931, he
had to pay back $1.33 for every dollar he borrowed in 1931. Droppingon down, if he borrowed a dollar in 1924, he has to pay back $2.37.
If I borrowed a dollar~ 1919, and have to pay back m hogs, or in
milk, or in cotton, or in the average agricultural commodity, and I
have got to return to the market, $3.33 for every dollar I borrowed.
This table takes us into something else: On this 15-year average the
farmer has to pay back $2.48 for every dollar borrowed. There is
not any use to worry about what is the matter with agriculture; it is
told to you right there. You have got the mortgage on your farm,
you have got the fixed charges, and you have got to pay $2.48, on
15-year itverage, for every dollar you owe. That is something that
can not be done.
The table to which I refer is as follqws:
EquivIndex
Year
alent
payment
required
Year
Index
io-day
to:<111y
CIO 1••• •----·--·····-·-····-··-·-- 1932 J
80 I
·-•-•---•---••----•--•--•--•-
1931
m}:::::~:::::::::::::::::::::::
ii::
137••••• ________ , •••••••••• ______ 1~
138---·--·-·····----·----·····-1927
J211•••••• -·--··----·--·--··-····· 1926
148 .....•.. ··--·-·······-········
142 ••••• ·-·---·-··-··--··········
11126
1924
•
$1. 33
~:2, ~g29
2. 30
2. 16
2. 39
2. 37
132____________ --·-- ••• ··--····-- 1923
1~0 ···-···--···-··--·····-··-· 1922
1111 __ ·-------·-·· •••• -----. --···- 1921
152 ________ -- •• ···-. -----. --- •• -- 1920
220_________ --- --- ----· ---------- -1919
203 _______ • ____ ···-·· --·· -···-·· - 1918
192__ • ····--· ··-••••• ··-··- ------ 1917
146•••• ______ ··-·--·····-·--····- 1916
• Departmeut ol A,grlculture statistics. Other fflures from Yearbook.
111442---32--'-P'l' 1""""---8
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Equiv•
alent
payment
required
I
February,
'2.20
2.17.
1.98
2.63
3.0CI
8.37
8.20
2.'8
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STABILIZATION OF COMMODITY PRICES
Mr. GOLDSBOROUGH. I have said, a great many times in the last
year, that It thought the mortgages on the farms of the United States
would amount to more than the selling price of the land at the present
time, and. I firmly believe it.
Mr. TABER. You are correct. I imagine that if every mortgaged
farm in the United States went under the hammer to-morrow, they
would not satisfy the mortgages.
Mr. PRALL. Is not that true of all real estate?
Mr. TABER. I am not so familiar with city real estate.
Mr. PRALL. It is practically true of everything.
Mr. TABER. I think that is probably true; but, Congressman, if
you please, the price index as of February 15 issued by the Bureau of
Labor Statistics gives all the commodities at 119, and agriculture at
60. Consequently, the agricultural dollar is only worth 51 cents;
and an impossible and intolerable situation exists.
Mr. PRALL. We have just heard a witness say that, regardless of
the decreased price of pork, for intsance, the consumer is paying just
as much. Now, his general condition is just the same as agriculture,
so that if he is paying just as much with the smaller doll,1,r he is being
hit just the same way.
Mr. TABER. I do not think this is. confined to agriculture. I had
not tried to confine it to agriculture; but as a farm representative,
my purpose is to present the farm problems, primarily, and I have
tried to outline the present difficulties of the farmer.
Mr. GOLDSBOROUGH. As I understand it, you are merely using those
figures, with which you are familiar, to illustrate the varying value of
the dollar.
Mr. TABER. That is exactly right.
Mr. GOLDSBOROUGH. Not only in the case of agriculture, but in the
case of other economic influences in the country.
Mr. TABER. That is exactly coITect, Congressman.
My point is not to make a proagricultural story at all, but to point
out a~iculture'i;; place in this general picture, and place agriculture in
the picture on the wall before us.
Mr. PRALL. I think, again refeITing to the Federation of Labor,
that it is going to strengthen your cause, and the whole cause, if we.
can get them here, to show that the same conditions exist there that
exist in the agricultural sections.
Mr. TABER. I agree with you, ·and I hope that my distinguished
friend from Ohio, Mr. Greene, will testify, because he is one of the
level-headed men of America; and he is the chief spokesman for
labor.
I want to emphasize just one other thing about interest before I
pass to something else, to show why it is hard to do these things:
6 per cent interest is equivalent to 14.9 in commodities at present
prices; 7 per cent interest is equivalent to 17.33; 8 per cent interest
1s equivalent to 20.7 in commodities. This is an impossible situation.
The commodity price level must be raised to approximately the same
level upon which our debts were contracted. Unfortunately we all
know the banker to whom we pay our money receives no benefit
from the fact that we must give him more than $2.20, measured by
commodities, for every dollar borrowed. I pay my interest to the
banker,· because I am different from a ·congressman.
- . I. have debts,
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and they are burdensome. Of course, you can not understand that,
but it is real to us folks.
Mr. PRALL. We take exceptions to that statement.
Mr. TABER. I have to pay 6 per cent interest to the- bank, and
sometimes 7; and that, stated in milk, means you have got to milk
three and one-half old cows to pay the same interest you used to
pay with one.
Mr. PRALL. Is that true of upper New York State?
Mr. WHITE. Yes, sir. If I may be permitted to say that I happened to serve on a tax committee in New York and heard one member say that the liquidation of real estate debt would not leave any
equities.
Mr. TABER. I am just as afraid that is true in farm areas as in the
cities. I do not think it is quite as true, because agriculture has had
10 years of this. We have had 10 years of misery.
The Grange was for the passage of everything that you have
passed, and we commend you for any bill that we believe has been a
step in the right direction. You have served in mobilizing more
substantially the financial resources, and with the mobilization of
the legislative machinery, you will finally touch the heart of the
problem, and the heart of the problem is monetary stabilization.
The farmer is constructive rather than destructive in his program.
We desire to lift farm values, to increase farm purchasing power,
rather than to pull down the standards of other groups. It is apparent
to thoughtful individuals that in the long run either capital, transportation, commerce and labor will approach agriculture's level or farm
purchasing power will be lifted. It is time to think of America first.
We realize that the whole world is in chaotic condition, but the home
market -is America's best market. We are not compelled to wait on
the rest of the world to start the forces of recovery.
We are not destructive, we are constructive, and we hope and pray
that we do not have to pull down the other folks. We do not want to
pull anybody down to our level, but we are determined to get on a
higher level, and we have got to find, first, a method by which to get
on a higher level.
Mr. PRALL. We hope to help you.
Mr. TABER. We know that.
This is not the place to talk about debentures and other things. I
am discussing purely one step, because the equalization fee, or the
debentures, or any other plan for stabilization, or allotment, or any
of the programs yet suggested, will not eure the agricultural ills,
especially with a yardstick that has 18 inches in it to-day and 36
inches in it to-morrow. You have got to dig deeper, you have got
to go farther, if agriculture is to be lifted. No pump ever primed
itself; no depression ever cured itself. It is time to courageously
recognize that every influence of Government and of statesmanship
must be utilized in the emergency. Commodity values can be ]ifted,
bank failures have already been checked to a marked degree. The
forces of business stabilization are at work, but the whole program
will be of no avail unless labor can again be employed, unless farm
prices and commodity _Prices are such that the American people can
pay their debts, their mterest, their taxes, and have something left
to purchase the necessities of life and maintain our standards of living.
As I say, in human history, as I can read it, no depression ever cured
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OF COMMODITY PRICES
itself; but some things have helped to change the course of farming,
and can change the course of depression. I think we have checked
bank failures, and that gives us some courage. I say "we" because
I have some interest in this problem, but I mean the Congress and
the administration.
Mr. GOLDSBOROUGH. Congress can not do anything, unless it has
the public sentiment of the country back of it; so when you said
"we," you expressed it correctly.
Mr. TABER. All right, Congressman, we feel that you can determine
what is right. I am not pessimistic. We are not going to go to the
the dogs. We can get out, but we have got to fight our way out;
and in fighting it out we must have, first, governmental assistance.
Going right back to Lincoln, I am not afraid to say that the Government has contributed toward getting us in the shape we are in, not
only the Government of America, but the governments of the world,
and they can help us get out. However, business must reorganize;
agriculture must reorganize.
I got into a lot of trouble up in New York on the radio when I said
that a million farmers, organized, were better than a million speeches
in Congress; and the Senate did not like what I said. So I suppose
maybe I was wrong, and I will have to withdraw that.
Mr. BusBY. You did not hear from the House.
Mr. TABER. No. Now, my friends, the point I am trying to make
is this: That Congress, when it eliminated from the original Federal
reserve act definite instructions to the Federal Reserve Board, it
made a grievous error. It just said: "Now, be good boys, and be
wise, and do a great job."
In other words, the Congress, when it eliminated from the original
Federal reserve act the instructions to stabilize the general price level,
left in the hands of the Federal Reserve Board unlimited power and
no definite instructions to follow. Unless the Congress makes
definite provision by statute, no Federal Reserve Board can be
expected to assume the responsibility of checking the forces of either
undue inflation or unnecessary deflation.
The constitutional provision that Congress shall have the power
to coin money and fix the value thereof has never been fully exercised.
Under modern conditions, those who have the control of credit have
the power to directly- affect the value of money. Unless by definite
mandate, Congress mstructs the Federal Reserve Board to so regulate the volume of money and credits as to stabilize commodity values
at fair and reasonable levels, then it 4; guilty of violating a solemn
trust. Everything is fine, when prices go up, but after prices go
down, you hear people say it is speculation.· The constitutional
provision giving Congress the power to coin money, and regulate the
value thereof, has -never been. fully understood and exercised.
Mr. GOLDSBOROUGH. The difficulty was this: When the Constitution was written, it was not written by those who were interested,
primarily, in lending money; but after the Government began to
function, it gradually got into the control of those who loaned money:
and that is the reason, and in my judgment, the sole reason, why
that section of the Constitution has remained in a slumbering con•
dition .
. Mr. TABER. Well, Mr. Chairman, I am afraid you are right; but
be that as it may, Congress has not exercised its authority and can
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113
not exercise it, until it does something to stabilize commodity values;
and unless you do that, it seems to me that Congress is guilty of a
breach of a solemn trust.
Now, I want to pause and look over the group of hills before us.
These include bills of Congressmen Ramseyer, Strong, Keller, and
yourself, dealing with the quantitative idea of money, which ou~ht
to be commended. I feel that Mr. Strong's bill is not quite specific
enough, and the same is true of the distinguished Congressman from
Iowa; and I feel that you ought to go a little further than you have
gone.
The Keller bill comes very close to the resolution of the grange.
It has a feature that we would like to have in your bill, H. R. 10517.
Mr. GOLDSBOROUGH. That is the bill that is now under consideration.
Mr. TABER. Yes; and it has much to commend it, but I want to
eome back, in just a moment, and suggest what we think is a needed
amendment to that legislation. The distinguished Congressman
Burtness' and your bill, dealing with the qualitative theory-when
we have a profound philosopher like Doctor Fisher around, farmers
ought not to talk about it-but I hesitate to advocate legislation on
the q_uantitative theory of money, reducing the number of grains of
gold m the dollar. I am not sure about that. It seems to me that
wise statesmanship should act, first, on the quantitative theory, that
we should go the limit on that line of activity; and then, if we have
failed, Congress has the solemn obligation, or this committee has the
solemn obligation, to explore every angle for reaching a solution of
this problem. It seems to me that there may be ways of approaching
this matter on the quantitative, rather than the qualitative program,
because of the international difficulties and the legislative prohibitions and inhibitions, that that might cause us no little concern, if all
of our debts are to be pttid by a dollar of so many grains of fineness.
However, I suppose Congress could correct that.
Mr. BusBY. I would like to ask you some questions in connection
with the point to which you have referred, if you have no objection.
Mr. TABER. I have no objection.
Mr. BusBY. Well, the range of our prices, of course, is on a gold
set-up; is not that true of all of the countries of the world, that are
off of the gold standard to-day?
Mr. TABER. Yes.
Mr. BusBY. Notwithstanding they are off of the gold standard,
that there is a gold currency base through international exchange
rate fixation, from day to day, by the powers that fix it; that is true,
is it not?
Mr. TABER. That is correct.
Mr. BusBY. Notwithstanding they have not the gold to meet their
currency and redeem it, through the fixation created by the national
exchange rate, they are held strictly to the gold standard by the few
countries that yet remain on the gold standard basis.
Mr. TABER. You are correct.
Mr. BusBY. Now, is it not the fundamental trouble with the commodity prices in this country, and in all of the other countries of the
world, that are engaged in commerc~and I come to that because you
discussed the qualitative theory of money, and because I feel it is
fundamentally a sore spot that can be corrected-Mr. TABER. The qualitative phase of money?
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Mr. BusBY. The qualitative phase of money, and I do not believe
that the quantitative, which is a credit arrangement, ought to be a
contraction and a relaxation to redeem at the rate of the individual,
for private gain, rather than public benefit-that we would be making
a mistake to settle down and compromise by saying that we will take
the quantitative theory, and let it go at that, at the present time.
Mr. TABER. Congressman, I have every sympathy with your suggestion. I think the farmer is out of place when he has the fears
about changing the number of grains in the gold dollar. I think that
is a matter for the great minds and the international bankers, not the
kind we talk about.
Mr. BusBY. I wanted to call attention to that. Now, we de'l.l with
gold in settling international balances as a commodity, and sell by
weight, do we not?
Mr. TABER. Right.
Mr. BusBY. Now, the variable dollar, according to the domestic
range set up by us, would be controlled by this same international
exchange rate on that dollar, just the same as it is on the present dollar, would it not?
Mr. TABER. Yes, you are right .
. Mr. BusBY. And there would be no complications in getting an
adjustment with some foreign country that we owed, when we primarily supplied the quantity of gold, even though the international
exchange rate or fiat stamp of the dollar changes from day to day,
can you tell any complications that we do not have under the present
system, that would rise up if we dealt with money on the qu!tlitative
idea, rather than quantitative?
Mr. TABER. Well, of course, a dollar would cease to be just a dollar
in the exchange.
Mr. BusBY. Well, it is only that in theory, to-day, is it not; the
~old dollar is only a gold dollar in theory, because I do not believe,
m all of this room, there is a man with a gold piece in his pocket.
Mr. TABER. Yes; I have got two; but they are Jersey gold medals.
Mr. BusBY. I want to ask you just one question, and I will not
take any more of your time: Say, for instance, the United States,
Francei, Holland, Switzerland, which are practically the only countries
in the world-there may be some other small ones- on the gold
standard basis, their currencies are entirely out of line, according to
the international exchange rate, with the currencies of all ·of the
countries that are off of the gold standard basis.
Mr. TABER. That is correct.
Mr. BusBY. But their commodities, in the world trade field, are
not out of line with the commodities of the countries that are off of
the gold standard basis, are they?
Mr. TABER. No.
Mr. BUSBY. That militates against the countries that are on the
gold standard, in that their currency is tagged by this fixation out of
the reach of the trade coming from the countries which have cheaper
currency and a lower international exchange rate; is not that true?
Mr. TABER. That is correct, Congressman.
Mr. BusBY. Is not that militating very greatly against the trade
in our country, and of the few countries that are boasting about their
stabilized money, entirely backed by an amount of gold, making it
seem beyond question that they can remain on the gold standard?
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Mr. TABER. I quite agree with your conclusions in the main,
Congressman, and I am not afraid to say that I think I will live to see
the day that we will have the best of all measure back of our money,
and that is the commodity value; we shall sometime have a commodity value. I may not live to see it, but I think I will.
Mr. BusBY. ls not the commodity value what we are using to
measure our currency with, to-day?
Mr. TABER. Right.
Mr. BusBY. A piece of commodity, which is gold, and you are
casting aside consideration for all of the 784 commodities that go to
make up all our commodities, because the index commodity price as
ascertained by the Bureau of Labor Statistics-you are casting all
that aside and looking solely to the value of one commodity, which is
gold, and which varies extremely in value and purchasing power;
that is correct, too?
Mr. TABER. Yes; that is correct.
Mr. Bus.BY. Now, the supply and demand of a commodity usually
determines its price, does it not?
Mr. TABER. Yes; it determines its price, if the avenues of exchange
are open and free and not clogged up.
Mr. BusBY. Not clogged up by some fixation.
Mr. TABER. Yes.
Mr. BusBY. That is true as to gold, as well as to wheat.
Mr. TABER. Yes.
Mr. BusBY. No.w, if gold is in supply to the amount of say $11,300,000,000 in the entire world, and there is maldistribution and
$4,000,000,000 of that is sterilized by the United States and France,
that would be equivalent to a lack of supply, would it not?
Mr. TABER. Certainly.
Mr. BusBY. But the lack of supply can come by reason of the' lack
of production, or the lack of supply may come by reason of intentional
or wilful manipulation, or the maldistribution, particularly, of gold,
could it not; and is not that our trouble to-day?
Mr. TABER. That is largely our trouble, but I do not think it is all
of our trouble.
Mr. BusBY. I think it is almost all of our trouble, in that all of the
currencies of the world are tied on this little amount of gold, whether
they be on the gold standard basis or not; and they are tied on specifically by the international exchange rates, that are not fixed by the
Government, but by the international credit sellers. That is all I
have to say.
Mr. TABER. I have read some of your speeches, and you have gone
very thoroughly and very deeply into the matter; but 1 still believe
we should try the quantitative theory first.
Mr. BusBY. I do not want you to misstate me. I think that is a
very important element, but a quantitative element that relates to
money must always take into consideration the velocity of credit
and money, which you can not control> and which you have no power
over. I do believe that it ought to operate in the credit field, and I
think the Federal reserve system is a wonderful machine to operate
in that field; but I think it is mighty poor machinery to operate when
it comes to fixing the basic value of the commodity, the basic value
that a commodity ought to bear to the currencies that are measured.,
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Mr. TABER. I just wanted to give you my idea on that score. You
have given us a very illuminative picture of the problem.
I want to call attention to two phases of the Grange resolution,
which have not been emphasized a great deal. I am not going to try
to state that it would be great value to reduce the gold minimum
below the 34--:40 basis. We have, in the past 100 years, staved on
the gold standard most of the time, with a 5 per cent reserve. We
never dared to come closer to it, without having some trouble.
I think this committee, or this Congress, should call an international
conference to standardize the gold value of silver. Silver is the money
more than a billion people, and it has been that for more than a
thousand years; and while India and the Orient are temporarily
thrown from the silver standard, it is just because they can not
purchase with silver as unstable as it has been recently; and the gold
price of silver can be stabilized by international agreement; and,
second, we think this same conference should be called to stabilize
the purchasing power of gold in terms of commodities.
.
I do want to say, in this regard, while I am a farmer and in favor of
an international conference, I want us to realize that America does
not have to wait on the rest of the world. The home market is the
best market. We can put America to work and make America
prosperous and get ourselves out of the woods, regardless of the
terrible conditions of the rest of the world, because of our natural
resources, and because of our people, and because of our machinery.
I believe that criticism, complaint, and denunciation are valueless.
Never in history has as vast credit machinery been mobilized in so
short a time. In a nonpartisan manner the Congress and the administration have given a heartening example of patriotism, but failure
to touch the monetary problem mars this constructive program. It is
time ·to turn from gloom and despair. It is time to realize that
legislation, plus national organization and leadership, can put millions
back to work. and give assurance that stable conditions are ahead.
The farmer is not lost in doubt, confusion, and uncertainty. Equality
for agriculture, employment, and stability for labor and industry can
be secured, but monetary stabilization is the essential step in this
program. I repeat, the farmer is not lost; he is confused, but he is
not lost, because he knows where he wants to go. We want equality
for agriculture, and we want to put labor back to work. Monetary
stabilization is the first step, and-the most essential of all steps, leading
to prosperity and a better day.
Mr. STRONG. In directing the Federal reserve system to use its
~wers to stabilize the purchasing power of money-an<! I looked
mto the matter a great deal-I have felt that we ought to give them a
yardstick to use in valuing money, in measuring the value of money;·
do you think that should be done?
Mr. TABER. Yes.
Mr. STRONG. And would you say what yardstick you think might
be best, or what index number.?
Mr. TABER. I would say 23-28, the average of the 23-'.,?8 index
numbers.
Mr. STRONG. As put out by the Secretary of Labor?
Mr. TABER. The Bureau of Labor Statistics, yes. May I say
this: I think, Mr. Chairman, that your bill, in section 31, should
be more specific. I think the steps should be enumerated in section
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31, page 1, lines 7, 8, 9, and 10 of your bill. I think there should be
some specific instruction placed in there; because if there is not~
definite, and not placed in the bill, you will find yourselves baclr
where you are now.
Mr. GOLDSBOROUGH. I am very certain there will be something
put in the bill, before we get through with it.
Mr. STRONG. Now, there is another idea that seems to me to be
very necessary, and that is, when they do change their policies in
buying or selling Government bonds, or raising or lowering the discount rate, that publicity should immediately be given, and the
public notified of what they are doing.
Mr. TABER. Absolutely.
Mr. STRONG. You believe that should be published?
Mr. TABER. I believe it should be published, all of it, yes; we
farmer folks were caught three months late in 1920.
Mr. STRONG. I know that; so was the Banking and Currency
Committee.
Mr. TABER. We all know that, to our sorrow.
Mr. STRONG. That is all; thank you.
Mr. TABER. I certainly thank you, Mr. Chairman. I thank you
very much for your courtesy.
Mr. GOLDSBOROUGH. It has been very inspiring to hear you.
Mr. TABER. This is St. Patrick's day and I hope you will emulate
St. Patrick in seeing that there are no snakes in this bill.
STATEMENT OF JOHN A. SIMPSON, NATIONAL PRESIDENT OF
THE FARMERS' UNION
Mr. SIMPSON. Mr. Chairman, my name is John A. Simpson, and I
am national president of the Farmers' Union.
It seems to be the universal opinion that there is not sufficient
money to do the business of the country. Everybody now realize,s
that deflation was carried too far. Every money proposal at this
time is for inflation. Economists, statesmen, politicians, and everybody now agree that price levels of commodities must be raised, all
of which makes necessary an increased volume of money and credits.
The Farmers' Union is in hearty accord with these views. But,
we are against a money system based on liabilities. We are for a
money system based on assets. We are against a money system that
contemplates perpetual debt. We are against a money system that
involves the payment of interest.
The total mterest debt of the United States per annum is more
than $10,000,000,000. The total tax debt is more than $13,000,000,0Q0. This makes a fixed charge for the taxpayers of the Nation
of more than $23,000,000,000 each year.
Staggering under this load, the best wisdom of Congress and the
administration produces more interest-bearing bonds every time they
need. money. Evidently the philosophy of Congress is to put out the
fire by pouring oil on it. Evidently it is the philosophy of Congress
that a drowning_ man needs more water, and they pour it on.
Mr. BusBY. Why do you refer to Congress all of the time, in that
regard?
·
Mr. SIMPSON. Congressmen are the chaps that do it.
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Mr. BusBY. You are starting out to ·antagonize the bunch you are
~eying to work with.
·
. .Mr. SIMPSON. I am trying to wake them up. The Farmers'
Union is going to have a clear record here of advocating something
~orth while, instead of ·something that will prove worthless like
your moratorium and Reconstruction Finance Corporation have.
Mr. GoLDSBOROUGH. We are in entire sympathy with the general
purpose of what you are going to say; but let me suggest that an
-emotional statement is not going to be helpful. Of course, you know
the number of billions of dollars of bonds Congress has paid off since
the war.
Mr. Su1PSON. They have not paid off anything in the last two or
three years.
. Mr. GoLDSBOROUGH. Since the war, they have paid off something
like $13,000,000,000 of bonds.
Mr. SIMPSON. Under the present policy, you have increased bonds
$3,000,000,000 in the last three years.
Mr. GOLDSBOROUGH. Just proceed in your own way.
Mr. BusBY. I want to suggest that is begging the question; by
:not stating the facts fully and fairly might do over the radio, but it is
not going to get you anywhere here, or anywhere else.
Mr. SIMPSON. It gets me, Congressman Busby, just where I want
to be. I want the facts in the record.
Mr. BusBY. You are not benefited by it. Your statement is dis-credited before you make it, because it does not visualize the proper
:aeheme. We want the facts. We do not want a lot of insinuations
and arguments that are not founded on facts, and are solely children
of your own brain, and I want the record to show this: That we can
properly visualize your mental attitude when you come here to make
your statement, and you do not come with the facts; and when you
come with assertions of private sentiment, I do not believe the organization stands for it.
Mr. SIMPSON. I am here interpreting the resolutions of our organization.
Mr. BusBY. I want the record to contain all that I have said,
because it is fair to us.
Mr. SIMPSON. I do, too. I want to say to you gentlemen of the committee that the Farmers' Union is making a record here. I am saying
what Congress has done is of no avail; and you have just listened to
the master of the National Grange showing you it has been of no avail
and that price levels are lower than they were 60 days ago. The
Farmers' Union is here to-day telling you that the thing you have in
this bill is not worth a dime toward bringing about a return of prosperity to this country. I am not like the master of the grange; I do
not owe anybody anything, and I have some cash.
Mr. GOLDSBOROUGH. You are a very lucky man. Now, just·proceed in your own way.
Mr. SIMPSON. I am proceeding in my own way. When they said
the moratorium would cure things, I said it would not. It did not
cause me to invest my cash because I knew prices would not increase.
I kept my money, because I knew that .I could buy cheaper later on.
You passed your reconstruction bill, and I did not invest my cash,
and I am still glad of it, becaµse I can buy cheaper· than when you
passed your reconstruction bill. You may pass this bill and those
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who have ca.sh will still refuse to invest. You follow the Farmers'
Union program, and in 30 days cash will be seeking investment,
because our program will make money cheaper, and commodities
high_er.
Mr. PRALL. May I ask you if you are opposing this bill?
Mr. SIMPSON. I am saying you are not going far enough.
Mr. PRALL. I asked you if you opposed it?
Mr. SIMPSON. Sure. I am not going to stand for a bill that will not
accomplish anything.
Mr. PRALL. You are not in favor of this bill?
Mr. SIMPSON. No, sir; not as it is. I have that right, do I not,
Congressman?
Mr. PRALL. I understood you were here with these other gentlemen,
going to produce something constructive, and in favor of this bill.
Evidently, you are opposed to the bill.
Mr. SIMPSON. Yes, sir; I am opposed to anything that the international bankers of this country are not opposed to.
They were not supposed to be in favor of the Federal reserve act
when it passed in 1914, but it turned out to be all right for them.
There is a bill pending in Congress that will increase the volume of
money without cost to the taxpayers, without anyone receiving
interest, or without fear that a little handful of international bankers
will withdraw it from circulation some time in the future. The bill
to which I refer is the Evans-Wheeler bill, and provides for the remonetization of silver.
This bill, if made a law, would probably increase the circulating
medium of the country by $2,000,000,000. There is every reason to
believe it would bring to our shores half the population of the world
as buyers of our products, who are now barred from purchasing here
because of the high purchasing power of the gold dollar. You just
brought that out a little while ago, that under the present gold
standard, people of foreign countries are selling to us, but they are
not buying of us. Canada, to-day, is shipping in dairy products,
paying the tariff, and taking the gold dollar of the United States
back to Canada, changing it into their depreciated dollar and thus
making a profit.
Remonetization of silver, in my j:tidgment, would double the prices
of all farm products in 60 days. With gold and silver as our basic
money we can trade with every nation on the face of the earth.
With paper money based on public improvements there can never be
a panic created through withdrawal of credits. The paper of this
Nation, and the Government itself, under the present monetary
system and present credit system, are absolutely at the mercy of the
international bankers of Wall Street. They can extend or restrict
credits at their pleasure. They can inflate or deflate currency at
their pleasure. No public improvement can be made without paying
tribute to them.
Mr. GOLDSBOROUGH. Would you mind stating how the international
bankers of Wall Street can inflate and deflate currency?
Mr. SIMPSON. Sure. They deflate by telling the Federal reserve
l?ankR, and the Federal reserve banks tell the little banker, "You
have to pay," and the little banker tells the farmer, "You have to
pay." As 11otes are paid, Federal reserve currency is destroyed. I
used to be in the banking game.
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Mr. GoLDsBOROUGH. Your argument is that the reason for that is,
the Federal reserve system is under the control of the international
bankers of Wall Street.
Mr. SIMPSON. Congressman Goldsborough, the latter part of Jan•
uary, 1920, I was in Washington for my organization, and I went to
see John Skelton Williams, the Comptroller of the Currency-I
believe he came from your State.
Mr. GoLDsBOROUGH. No; he was from West Virginia.
Mr. SIMPSON. And I said, "Mr. Williams, when will deflation
begin?" Tears came in his eyes, and he said, "The other members
of the board voted the other day to have it begin about May 1."
That was when deflation commenced.
Mr. BusBY. May 28.
Mr. SIMPSON. Well, about the 1st of May. That is what he told
me at that time. He said, "I told the other members of the boa.rd,
'Do you not know that that will break lots of little country bankers?'"
And he said, "They cold-bloodedly answered me, 'They ought to
break; there are too many of them."' He told them, "Don't you
know it is going to ruin lots of farmers?" And he said, "They coldbloodedly replied to me, 'They ought to be ruined; they a.re getting
so prosperous they will not work.'" I can go into a court of record
and get 50 witnesses who will substantiate and corroborate this testimony of mine. I thought enough of what Mr. Williams told me that
I went to my home at Weatherford, ·Okla., and I made a public sale.
I sold everything I had. I sold registered shorthorn cattle and
registered livestock, that six months later ~ould not have brought
one-fourth of what I got on the 5th day of February, 1920.
Mr. BEEDY. Do you want that to go in the record?
Mr. SIMPSON. Sure.
Mr. BEEDY. You took advantage of your own people on inside
information?
Mr. SIMPSON. No, sir; as the editor of our Farmers Union paper,
I warned them.
Mr. BEEDY. Is not that what you are complaining about the
international bankers doing?
Mr. SIMPSON. Congressman, Ijust told you that, on February 1,
1920, in the Oklahoma Union Farmer, I _warned our members of
what I found out down there in Washington.
Mr. BEEDY. Was that before or after you got your money?
Mr. SIMPSON. I had my sale the 5th day of February, one week after
I returned home; I did not hesitate.
Mr. BEEDY. So the fellows did not believe your warning?
Mr. SIMPSON. Some of them did not, some did. There are a lot of
Members of Co~gress who will not believe the warning I am giving
you now, but you will find out it is true.
Mr. BEEDY. I think perhaps there is something in that, but I
think it is unfortunate you are putting it over in the manner you are
doing.
•
Mr. SIMPSON. I have been elected sixteen times to high official
positions in my organization, and that is sufficient proof that I am representing them. You have no right to discredit my authority
to represent my organization.
Mr. BEEDY. Some of us have been elected a good many times, but
we still keep in mind that we are servants and we are trying to be
courteous to each other. You can say whatever you want to.
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Mr. SIMPSON. Sure, and I shall.
Mr. BEEDY. I am sorry that you are showing so much animus.
Mr. SIMPSON. No, sir; I am not showing animus.
Mr. BEEDY. I do not show what you want to label it.
Mr. SIMPSON. I am showing a sincere, patriotic devotion to my
country, trying to save it, Mr. Congressman; that is what I am trying
to do.
Mr. BEEDY. We are all anxious to do that.
Mr. SIMPSON. I am telling you that you do not realize what you are
sitting over; I am here, telling you that, unless somethng is done that
is real, instead of what in three months you find out is nothing, some,.
thing will happen in this country. I am trying to avert that. I do
not have to he here. I am independent, as far as finances are concerned
I am here, away from my good home, because I believe it my patriotic
duty to be here.
Mr. BEEDY. There is nobpdy finding any fault with that.
Mr. GOLDSBOROUGH. Now, proceed.
Mr. SIMPSON. If the people of Nebraska decide to build $50,000,000
worth of roads they must vote interest-bearing bonds and pay in
interest as much or more than they pay for the construction of the
roads.
Gentlemen of the committee, I want you to know what kind o/.
company I am keeping in my position on the money question. That
you may know, I quote from an interview with the great Thomft,fJ
Edison given by him and published in the New York Times December
6, 1921.
This is not the first committee hearing that I appeared before and
put this in the record; I .expect to continue to do it throughout this
entire sesssion of Congress and you ought to get it and study it.
Now, here is Ford proposing to finance Muscle Shoals by an issue of currency.
Very well, lot us suppose for a moment that Congress follows his proposal.
Personally, I don't think Congress has imagination enough to do it, but let us
suppose that it does. The required sum is authorized, say, $30,0001000. The
bills are issued directly by the Government, as all money ought to oe. When
the workmen are paid off they receive these United States bills. Except that
perhaps the bills may have the engraving of a water dam instead of a railroad
train and a ship, as some of the Federal reserve notes have, they will be the same '
as any other currency put out by the Government, that is, the_y will be money.
They will be based on the public wealth already in Muscle Shoals, and their
-circulati.on will increase that public wealth, not only the public money but the
public wealth-real wealth.
When· these bills have answered the purpose of building and con:ipleting
Muscle Shoals, they will be retired by the earnings of the power dam. That is,
the people of the United States will have all that they put into Muscle Shoals,
and all that they can take for centuries-the endless wealth-making water
power of that great Tennessee ]liver-with no tax and no increase of the national
debt.
"But suppose Congress does not see this, what then?" Mr. Edison
was asked.
Then Congress must fall back on the old way of doing business. It must
:authorize an issue of bonds. That is, it must go out to the money brokers and
borrow enough of our own national currency to complete great national resources, and we then must pay interest to the money brokers for the use of our
own money.
That is to say, under t4e old way any time we wish to add to the national
wealth we are compelled to add to the national debt.
Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and
.so do I, that for the loan of $30,000,000 of their own money the people of the
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United States should be compelled to pay $66,000,000-that is what it amounts
to, with interest. People will not turn a shovelful of dirt nor contribute a pound
of material will collect more money from the United States than will the people
who supply the material and do the work. That is the terrible thing about interest.
In all our great bond issues the interest is always greater than the principal.
All of the great public works cost more than twice the actual cost on that account.
Under the present system of doing business we simply add 120 to 150 per cent.
to the stated cost.
Gentlemen of the committee, it is my opinion that you will have
the vision and the courage to establish a money system in this country
in the interest of the 120,000,000 common people instead of continuing
the system that forces the 120,000,000 common people to Eay tributeto the greed and avarice of a few ultrarich. I hope you will establish
a money system that does not depend on the Nation being perpetually
in debt.
Some time in the future we might have an administration that
would eliminate fraud and graft to the extent that the N ation'Sdebts would be paid. If such a thing should happen, under the
present money system, it would retire practically all the money we·
know have in circulation.
If the present money system is ri~ht, it is the duty of every citizen
to pray night and morning that this Government may never be able
to pay its debts.
As for the Farmer's Union, we oppose such a system at all times.
and in all places, and we do it unashamed and unafraid.
The money question is one of the things that must be settled; it
has got to be settled by an increased volume of money. We must.
have something that takes the place of credit. You have increased
the volume of money in the last three or four months, yet prices aregoing down. Why? Because credit is not available. A farmer
may have a good farm, free of debt, that will produce 60 bushels of
corn per acre, but he can not borrow a dollar on it. So you have got.
to furnish something that will take the place of credits, and not let.
the other fellow control everything through credits. Under thepresent credit system you might double, treble, the volume of money,.
and we would be in the same fix.
A system that places gold and silver as our international money~
our basic money, on which we do business with the world, and paper
money, based on public improvements, which is new wealth, will
solve the problem. The Farmers' Union advocates such a system.
Mr. GOLDSBOROUGH. We thank you very much, gentlemen.
Mr. PRALL. Mr. Chairman, I move we adjourn until 10.30 tomorrow morning.
Mr. Goi.DsBOROUGH. If there is no objection, we will adjourn, and
I want to say to the members of the committee that Senator Owen.
'will again appear before the committee at 10.30 to-morrow morning.
(Whereupon the committee adjourned to meet at 10.30 o'clock
a. m., on Friday, March 18, 1932.)
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FRIDAY, MARCH 18, 1932
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON BANKING AND CURRENCY,
Washington, D. 0.
The committee met, pursuant to adjournment, at 10.30 o'clock:
a. m., in the committee room, Capitol Building, Hon. T. Alan Gotds-borough presiding.
·
Present: Messrs Goldsborough (chairman), Busby, and Prall.
Also present: Congressman McFadden.
Mr. GOLDSBOROUGH. The committee will come to order, please ..
Senator Owen, you will kindly proceed in your own way, and when,
you get to the point where you would like to insert your charts, if you·
will just announce it, the subcommittee, I am sure, will order them_
inserted.
STATEMENT OF HON. ROBERT L. OWEN, FORMER UNITED.,
STATES SENATOR FROM OKLAHOMA, ON H. R. 10517; H. R.
128; H. R. 8246; ETC., PROPOSING CURRENCY EXPANSION BY·
RESERVE BANKS THROUGH BOND PURCHASE
Mr. OWEN. Mr. Chairman and gentlemen of the committee, your·
request that I appear I regard as imposing a public duty. The
country is profoundly interested in what you are doing. In my
humble opinion, you are attacking now a most vital question, which~
deeply affects both the present and future prosperity of the United
States. It should be perfectly obvious that, with a dollar that has
no stability of v:alue or purchasing power, manufacturers can not fore-..
cast their future, merchants can not know the value of their inventories; no business man in the country can rely on his own integrity,
intelligence, and industry to safeguard the future of his family and no .
contract has any dependable foundation. Nothing could be more destructive of the prosperity of the Nation, or of the people, than a
dollar fluctuating up and down, and down and tip, when that.dollar,
of necessity, measures the value of every contract and the relationship·.
between every debtor and creditor.
Therefore, your objective of stabilizing the dollar and bringing it ,
back to what might be called the normal of 1926, is a step of supreme
importance, in which the country is deeply concerned.
In order to realize the value of this proposed remedy appearing in House bill 10517, and other bills which are under consideration by
the committee, I think it is advisable to demonstrate what caused
the present depression with its destabilization of all commodity values
and the suddenly increased purchasing power of the dollar in stocks,
bonds, real estate, and so forth.
We have been given all sorts of confusing theories; some thirty or ··
more have been exploited in the press, but there is but one obvious.
adequate reason for this depression and it should be made to clearly ··
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appear in the record. It is most fully disclosed by the many charts
and tables gathered together by the Federal Reserve Board's statistical bureau, b1, the Bureau of Statistics of the Department of Labor,
and other similar organizations. I wish to point out, if I may be
permitted to take the time to do so, what the cause is, and how it
relates directly to the value of your proposed remedy.
Mr. GOLDSBOROUGH. Take your own time, please, Senator.
Mr. OWEN. I entered the United States Senate in 1907, and was
there 18 years. For 12 years, I was the chairman of the United
States Senate Committee on Banking and Currency. When I first
entered the Senate, I made an address on the 25th of February,
1908, on the Vreeland-Aldrich bill in which I pointed out what had
taken place in rno7, the cause which resulted in the disastrous panic
of 1907, when call money went to 125 per cent on the New York
Stock Exchange in October, 1907. I ~arefully analyzed that panic
in the Record, and I commend that Record now to you and to the
country, because it fully discloses what took place then, and it fully
discloses also the same principle which we subsequently discovered
and confirmed when we had again observed the panic and ruin following the contraction of credit and currency in 1920-1921 and in 19291931.
The panic of 1907 was caused by the deliberate contraction of
credit; the panics of 1920-1921 and 1929-1931 were due to the same
identical cause. There can be no doubt about that; the record fully
shows it; and those behind it went so far that they openly disclosed
to the country the _Plan. and puryose in a manner which forever put
the plan upon the mdehble public reco-rds. It can never be erased.
In May, 1920, Mr. Medill McCormick, a United States Senator
from Illinois, on the floor of the Senate, introduced and passed a
resolution asking for "information "-a resolution which-ordinarily,
is passed as a matter of courtesy-but this extraordinary resolution
wanted "information" as to "what the Federal Reserve Board was
going to do about the undue inflation of credit and currency." It
committed the Senate to a false policy. This resolution was instigated by those great financial forces behind the Federal Reserve
Advisory Committee and the Federal Reserve Board. At a secret
meeting this principle was approved by the Advisory Committee and
the Federal Reserve Board.
Mr. GOLDSBOROUGH. That was in 1920, you say?
. Mr. OwEN. That was in May, 1920, I think May 20. (There is
available a public document giving these-details.) I was riot on the
floor at the moment. I was then the chairman of the Committee on
Banking and Currency of the United States Senate and was not
consulted. When I came in, I immediately protested against it,
because it had committed the Senate of the United States to the
unsound doc.trine that we had had an "inflation" of credit and cur-·
rency. It is of supreme importance that this committee, meeting
here, and the country, s_hould get clearly in mind what "inflation 11 .
means, and what "deflation II means. We can onlY. have Cldefl.ation 11
as the consequence of "inflation," and "inflation" means an undue
issuing of currency or credit, against
inadequate foundation, and
as an unjustified expansion of credit. . The word is now frequentlyused in the press with a different significance, as if-it meant merely
contractlon or expansion, and as if there were no difference between
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inflation and deflation and contraction and expansion. This misuse
of terms probably arose from those who wished to confuse the public.
There is a vast difference. I told the Reserve Board then that when
credit and currency had been expanded, for the purpose of protecting
the life of the Government of the United States and protecting its
interests as a nation, that that was justified expansion and not
inflation; and that commodity values (which at that time had gone
far above normal), was due only in part to the expansion of credit and
currency; that it was also much more largely due to other factors
that entered in, such as the World War, when there was an extraordinary demand for the machinery and materials of war at a time
when the treasuries of all of the warring p.ations were wide open, with
purchasing agents told to "go get it." ·
Then, of course, prices went up, due to urgent demand for goods
and abundant supply of credit. And of course, when that war was
over, and there was no longer this urgency of demand for war materials, when the treasuries were then closed, when the accumulated
inventories of supplies which had been bought at high prices were
being sold at very low prices, when men who had been withdrawn
from productive purposes and thrown into destructive purposes,
were withdrawn from destructive purposes and put back into production, it was obvious that the condition would adjust itself, if they had
only let things alone for a little while. That was the prayer I
strenuously made, but in vain.
In July, 1919, W. P. G. Harding, the Governor of the Federal
Reserve Board, went to New York and got around the table the
presidents of the Chase National Bank, of the City National Bank,
of the First National Bank, of the Guarantee Trust Co., and of the
other great banking houses there, he told them they were borrowing
too much money from the Federal reserve system, that the system
was down to the point of 40 per cent ~old reserve-[as if that were a
serious ma.tter-we should have recogmzed the fact that the empire of
Great Britain went through the war with 10 per cent, and less, of
gold as reserve against currency and did it safely]-but we, poor
people, were in such alleged jeopardy after the war, when we were
approaching 40 per cent gold reserve that it was necessary to contract
the credit and currency of this country, and paralyze every industry
as was done by the imbecile and deadly deflation policy of 1920 and
1921. I made strenuous opposition on the floor of the United States
Senate to this destructive policy. Four times I addressed the Senate
against that evil policy; on four different occasions I inserted in the
Congressional Record elaborate letters addressed by me-three of
them to the Federal Reserve Board, and one to the President of the
United States. The President, Woodrow Wilson, was very ill, too
ill to fully exercise his normal-powers. I sought his support, but was
unable to obtain it, because he was not sufficiently well for me to
tax him, under the conditions of his physical health. I appeal now
to1,that record, and again call the attention of the country to it.
The McCormick resolution was followed by one of the great parties
writing into its platform a demand for "the courageous and intelligent deflation of the overexpanded credit and currency." (Republican platform, June, 1920.)
111442-82-P'l' 1---9
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I hope that no one will imagine that, in addressing this committee
and referring to that record, that I am doing so with any wish to
reflect on the Republican Partv at that time. I am not now disposed
to do that for the reason that I do not think enough of the leaders
of either party understood it sufficiently to establish moral responsibility for it or for its prevention; I do not think the Democratic leaders
understood it clearly, because they made no adequate party protest
although a few did do so; I went in 1924 to New York and personally
wrote a plank ad.opted as part of the platform of the Democratic
Party, a protest against the Republican policy of "deflation of credit
and currency," in 1920 and its consequences, but the Democrats did
not pay any very serious att~ntion to the issue in 1924. As Republican citizens and Democratic citizens suffer alike they should now
cooperate to help your bill.
I am calling attention to this because I want the committee to
understand that I wish merely to be of service, if possible, to an
intelligent comprehension of what has taken place, and what the
remedy is, and how to _inake the remedy safe and secure. After the
election was over in November, 1920, there was a contraction of
currency of one and a half billion dollars and more (see Exhibit 2a),
supporting a credit structure of about $15,000,000,000; there was a
withdrawal of credit on behalf of the Federal reserve banks, and the
member banks,_ of about $6,000,000,000. There was however a
duplication there. The withdrawal of credit from the reserve banks
was supplemented by the withdrawal of credit from the member
banks, so the matter should be regarded as about $4,000,000,000,
net, but the contraction had the most drastic effect upon the farmers
and stockmen of the country; whose properties had increased in value
because of the increased demand of the war.
Their property then worth (1920) $79,000,000,000, went immediately down (1922) to $58,500,000,000. That destructive contraction
of credit had the effect of bankrupting the farmers of the country,
because, in the meantime, they had bought land in addition to what
they had, had incurred debts in the war basis; then they found that
the value of their existing farms, and cattle which were used as part
security, had gone off in value $20,500,000,000. They found that
the war debts remained; they found that the commodities which
they produced on their farms had gone down to one-half or one-third
of what they had been getting before, leaving no margin of value
with which to pay their war-incurred debts. ·
From that staggering blow they did not recover until 1929 came,
and they had a repetition of this disaster to their complete ruin.
From 1920 the d.ollar rose in value nearly 75 per cent in 1922, and
about 50 per cent from 1929 to 1931.
I do not think it is advisable to blame individuals for what has
taken place in these matters. I do not think we should turn aside
from consideration of the economic questions to attempt to stigmatize individuals for having contributed to these panics or depressions. I hardly think that that will serve a useful purpose. They
were trying to serve their own interests as they understand them, and
to make money, "playing the .game as the game is played." What
are you going to do about it?
,
;.
Mr. McFadden made a very important S~l!.t~me;o,t_~_th~ morning
record, calling attention to the surpluses which had.been built up by
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the industrial companies, huge sums, $60,000,000,000 surplus $20,000,000,000 of cash $10,000,000,000 of tax exempt United States bonds,
and so forth. I think they were wise to build them up. They had
some hard experience in 1920 from lack of cash reserves and naturally
they did not want to repeat the experience in 1929 they had in 1921,
when they found themselves short of capital; so, between 1923 and
1929, they sold to some 15,000,000 stockholders their stocks for some
$50,000,000,000 in cash credit (not counting the refinancing of stocks
and bonds) and piled up such surpluses of cash and credits. Out of
$20,000,000,000 of cash or what 1s called cash there was loaned on
call to the brokers in Wall Street billions of dollars under the title
"On account of others." There are three of those accounts kept for
public information: "On account of New York banks," "On account
of outside banks," "On account of others." The New York banks
normally supply about $1,000,000,000 in call loans to brokers carrying
stocks for distribution or sale. I call your attention to the record of
the brokers' loans, (Exhibit 15 and 10) which are in very small type,
but they ought to be put in very large letters on one end of this room
to tell the world whence came panic, credit collapse, bankruptcy,
depression, and unemployment. There should be a box-car letter
record, giving the brokers' loans for the week of October 23, 1929,
then you would know whence came a cessation of normal credit,
pessimism, loss of property, stringent economy, diminished consumption, production, and unemployment.
What happened that week? The stock market had been skyrocketing by modern methods of high-powered salesmanship, skilled
advertising, 10 to 30 per cent of the columns of the press employed,
regiments of trained youths organized in groups, sent out over the
country to sell stocks to the people. These sales withdrew $50,000,000,000 of capital from 15,000,000 stockholders and from the savings
of the Nation for stocks.
Such stocks went higher and higher in price from 1924 to 1929-until
they were selling, in very many cases, twenty, thirty, forty, fifty times
their net income. Many were selling at high figures which had no
income at all, like Radio, which went up to 550, having no dividends,
and having been subdivided five times such shares are down to about
$7 a share. Inte:r;national Combustion Engineering, selling for $103
in 1929, with great enthusiasm on the market and its. future value
declared unlimited, is now selling at $1 a share or less. The effect of
this thing that happened in the latter part of October, 1929, was to
bring down values of all stocks and bonds of this country, to from a
third to a hundredth part of their previous market price.
What took place on the last week of October, 1929, was this: There
was withdrawn in si.,c days from October 23 to October 30, $2,300,000,000 of brokers' loans on account of ou:t-of-town banks and on account of
others; within three months, $4,500,000,000 of net credits were pulled
out from under that market; and over $8,000,000,000 of call loans
have been withdrawn down to date. There followed a shrinkage of
some $60;000,000,000 of values in the stocks listed on the New York
Stock Exchange alone, distributed among 15,000,000 stockholders
(not to mention many other exchanges: Boston, Chicago, Frisco,. a:r;id
a: huQ.dred more), .whioh caused a spirit of profound: pessimism_ to
.sw0ep ,;tqe .. riountiy, ca.used a :ces~tion of corurumptiori, stringem.t
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.economy, and necessarily a like cessation of production, and resulted
in the unemployment of 8,300,000 people.
When you do not produce, you do not employ. It necessitated .a
going down of "carloadings," railroad revenue, State revenue, city
revenue, United States revenue, and of individual and corporate
incomes; and of course interfered with the "balancing of the budget//
The effect was that the people of this country lost, in what they thought
they had, somewhere around $150,000,000,000; and yet, strangely
enough, all of our lands, our forests, our fisheries, our factories, our
skilled workmen, our industries, our intelligent people, are all here.
Only one thing has happened: The stability of our credit system
has been smashed by the operations on the New York Stock Market,
entailing every.economic evil.
,
Until you control the power to pile up billions of stock-market loans,
subject to call in 24 ·hours, you will never have permanent stability
in the purchasing power of the dollar or in the value of commodities
or of human employment. Here is the weak spot. Here must be
an aaequate remedy. I urge you to give it attention. I beg you
to study the tables and charts submitted herewith.
Gentlemen, to restore the price level, as this bill proposes to do, is
a matter of supreme importance. Nothing could be more important.
We are going to have difficulty in doing that. To get money out in
circulation, although you provide a way, is not so easily done.
My good friend, Mr. John Simpson, gave you a very quick way
to do it, an_~ a very practical way, if it were not for well-known
human weaknesses of Government. The remedy is as· SJ.mple and
easy as taking a drink of strong hquor; but there is great danger of
wanting another drink soon afterwards, and then another, and your
friends must take you to the- hospital for convalescence. If we had
dependable self-control the remedy would be perfect.
I was in Switzerland the day the death of our former President
Harding was announced (1923) on the way to Germany. I bought
German marks at the rate of 500,000 per dollar. They had been
issued in just about the way some now want to issue money, to wit,
to pay for Government debts. The next. day in Stuttgart I bought
a million German marks per dollar; in Berlin a week or two later
6,000,000 marks per dollar; and three weeks \ater, at Cologne,
120,000,000 marks per dollar. Before the year was out (1923) the
rate was a billion and more marks per dollar. When the pojnt came
that the paper and ink was worth more than the money they quit
printing such money and established the renten-mark on a gold basis
of 23.8 cents per mark. There it stands to-day. That is an illustration of what can take place, if money be emitted without adequate
control. There was some control in what Mr. Simpson said, because
he was proposing to issue it only against actual work done, work
looking to the service of the people of the country and creating real
value, but it would open a door to inflate the currency and a door
without adequate control, a door hard to close.
I want to call your attention, gentlemen, that in stabilizing the
dollar you must be thoroughly well apprised as to what you mean
by the dollar.
We have had much talk about the gold dollar. I want to put in
-this record something on the question of the gold dollar, which I
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approv;e1 a ~tatement made by_ Gustav!'1 Cassell, who is one of the best
authonties m the world on this question.
After pointing out that the American dollar, the Federal reserve
note, is issued against commodity bills, only using gold for redemption purposes, he justly holds that this system changes the old gold
standard (where gold was used as pocket money) and speaking of
the old gold standard says (Postwar Monetary Stabilization, p. 70):
All this has disappeared. We now know that the value of gold can be con-·
trolled by suitable regulation of the world's monetary demand for gold. Thie
alters the whole relation between currency and gold. Our ultimate purpose ie
now to give our currency a fixed value in terms of commodities. We regulate the
value of gold with a view to .making it correspond to that fixed value of our
currency.
On page 73 he says:
Thus gold exports need not cause a fall in the American price level, nor need
gold imports cause it to rise. Under such circumstances the United States
are in a position to exercise an independent control over the value of their currency; the value of the dollar is simply the result of the way in which the monetary authorities of the United States choose to regulate the general supply of
means of payment in the country. As the United States, in the way I have
explained, is always able to buy and sell gold at fixed prices in the dollar so
determined, the value of gold is bound to adjust itself to that of the dollar.
The result is that the monetary policy of the United States determines the
value of the currency of every other gold-standard country.
The Federal reserve authorities therefore control not only the general level
of prices in the United States, but also the price level of all other gold-standard
countries in the world.
You are not legislating for the United States alone, gentlemen;
you are legislating to fix the prices of commodities throughout the
world. The United States is leading in finance throughout the world.
It shocked the whole world by the debacle of October, 1929, and
deeply wounded the stability of credit all over the world. It drove
many Nations from the gold standard in self-defense-You can and
.s};iould make speedy amends.
There has been a great hoarding of gold in the world for monetary
purposes above the demand and use for industrial purposes.
Men talk about gold being taken away from -the United States to
our injury. The outside world owes us $20,000,000,000, and we
could demand payment, and get additional gold, if we should need it,
but we do not need to take gold from any source. What we have was
in large part because of the productive power of the United States,
which in times of war, sent to Europe unlimited supplies at war prices,
and was compelled to give them credit when the world's surplus of
available gold was exhausted. The total supply of gold in the world
is about $11,000,000,000 of which we hold about $5,000,000,000 and
France about $3,000,000,000. The amounts required for industrial
purposes are about $2 a thousand on the_ entire volume of gold or
about $22,000,000 per annum for the world. The annual average
production of gold in the world is about $28 a thousand on the volume
of gold or $289,000,000 absorbed for monetary and industrial purposes.
Mr. GOLDSBOROUGH. Are you referring to annual production.
Mr. OWEN. Annual, yes. The demand for monetary purposes is
what gives value to the additional ~old which is being produced now
above industrial uses. For industnal purposes, it is only about onef.ourteenth of what is annually producednow; and totheextentthatwe
can do away with the monetary demand for gold, we will increase
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the prices of commodities, and we will also increase the prestige and
power of the United States. I •am not speaking from the standpoint of the United States alone, when I suggest limiting the monetary
demand for gold.
·
For that reason we should take the gold certificates out of circula:tion and put them in the vaults as gold. That can be easily done.
All you have to do is instruct the Federal reserve banks to exchange
Federal reserve notes for gold certificates as they pass over the counter
-and redeem them. _ They can soon take them all up. There is
-about $1,000,000,000 of them.
Mr. GOLDSBOROUGH. $900,000,000, as I am told.
Mr. OwEN. The last statistics I saw was about $1,000,000,000,
but that is immaterial.
I am speaking to the bill. I am not speaking outside of the purposes of the bill under consideration when I say a provision should
go into the bill that these certificates should be taken up by the
Federal reserve banks and put into the United States Treasury as
gold bullion, to the credit of the Fedreal reserve banks, as security
to the United States for the one billion, more or less, of Federal reserve
notes that would be furnished to the reserve banks for such exchange
purposes.
Another way in which the monetary demand on gold can be diminished is to strike out gold as a part of the 35 per cent reserve against
about $2,000,000,000 of reserve deposits now secured by "gold or
lawful money." I suggest that the word" gold" be stricken from this
provision of the reserve act so the reserve shall be limited to lawful
money, which is perfectly good for the depositing banks, and just as
stable as the Government itself. These reserve deposits do not
change substantially because they are on percentages fi..xed by law,
and there is no real need of any gold reserve against deposits, which
do not change in volume. These deposits can be safeguarded by
35 per cent of "lawful money," and that would release a monetary
demand on gold of about $700,000,000.
On the bookkeeping side of the Federal reserve banks the country
was under the impression there was only about $400,000,000 of gold
in the Federal reserve banks now available as a basis of new credits
or new reserve notes. The bookkeeping was correctly done, but it
had the effect on the country of not enabling the country to clearly
perceive that the reserve banks really had $1,000,000,000 more of
gold available for reserve credit or reserve notes than the country
thought. I mean the uninformed country, and I do not mean those
who knew about it. There was nothing presumably intentionally
misleading about. it and I do not wish to imply that.
However, there was available for credit and reserve notes
$1,400,000,000 of gold; add to that another $900,000,000, for gold
certificates obtainable and add another $700,000,000 not needed as
deposit reserve and there is about $3,000,000,000, of available free
gold.less 40 per cent of the gold certificates already used against the
reserve notes exchanged. If you take the $3,000,000,000 of gold,
you see what can be done, under the authority of the law as it exists,
that you can use that $3,000,000,000 on the 35 per cent basis to
increase• the reserve approximately three times, or increase the reserves of the banks to over $8,000,000,000 additional, against which
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the banks, under their normal practice of emitting credits of 10 to
1, could emit credits -of $80,000,000,000, which is of course twenty
times any probable need.
Mr. GOLDSBOROUGH. May I interrupt you right at that point?
Mr. OwEN. Yes, sir.
Mr. GOLDSBOROUGH. On January the 19th I introduced a bill, H. R.
8026, for the purpose of taking care of the situation which you have
just described. Will you read those two sections, sections 2 and 3,
and see if they about approach what you have in mind? I want to
make this suggestion before you continue: This bill was sent to the
Secretary of the Treasury, and the Comptroller of Currency, and each
member of the Federal Reserve Board, with a covering leetter, and,
as I understand it, it was from sections 2 and 3 of this bill that the
Glass-Steagall bill was finally framed. Now, the purpose of the GlassSteagall bill was to do the very thing that you have been discussing.
Mr. OwEN. Yes.
Mr. GOLDSBOROUGH. And it does do it, in part.
1fr. OWEN. Yes.
Mr. GOLDSBOROUGH. Now, will you proceed?
Mr. OwEN. The reason why the Glass-Steagall bill, perhaps, has not
yet functioned as efficiently as the country had hoped or expected,
although it has the power, is that unless member banks want to borrow the power is not used and the Reserve Banks are not using their
independent power to buy United States bonds and expand credit
and currency as they should do by order of Federal Reserve Board.
But I want to go back to "the dollar" and its true meaning in
finance. I was speaking the "gold dollar" a minute ago. Nobody
carries gold in their pockets any longer .. Gold is no longer a pocket
money. People are perfectly satisfied with Federal Reserve notes, or
national bank notes, or with any of the various kinds of money which
are being circulated now. It is very important for this Committee
and for Congress to realize what the dollar is that they are trying to
stabilize. It is not gold, and it is not the pocket money, either, although they would be included. We have got about $5,500,000,000
of currency, of which $4,500,000,000 are pocket money, with from a
third or more of it in hoarding. All of the banks combined have in
their vaults less than $1,000,000,000 of cash, against which they have
a credit structure of about $50,000,000,000 of deposits. Fifty times,
as much deposits due as the cash they have in their vaults in their
banks. It is any wonder that they feel apprehensive, when the dear
people come in and say: "I want my money." It does not take but
2 per cent of them to get "my money" out and leave the balance of
"our money" invisible and unavailable.
What is it that is actually functioning in this country as the
"dollar"? It is the check, which was made current at par by the
Federal reserve act, and the check that passes as money in this
country. I give a check for $100 to my hotel; they treat it as money,
they put it in the bank, and it goes through as money, and it functions
as money; "it is money." It is a "means of payment." As Gustave
Cassell says, "it is a means of payment", in effect money. It is a
check upon deposits subject to check. Make no mistake about that.
What was the volume of these checks or exchanges in 19.29? Seven
hundred and thirteen billion dollars. In other words these checks
exceeded the cash in every bank in the United States, more than
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twice, on every average working day. That is the "dollar" you are
stabilizing. The dollar of the check against the bank deposit.
When you stabilize that dollar the deposit dollar, the check dollar
and keep it stabilized, you will have rendered a service equal to that
of any men that ever occupied a public place. This brilliant accomplishment will give this country its place in the world as the leader in
finance and commerce, and the stabilizer of world commodity values.
In order to stabilize this "dollar," you have got to stabilize credit,
and you have got to deal with and prevent those who know how to
destabilize credit for profit, and you do not need to treat them as
anything else except your own thoughtless or selfish children.
They who inflate or wrongfully contract have destabilized credit;
those who are hoarding are destabilizing credit, although they do not
realize it at all, much less do -they realize that they are doing any harm
or any wrong.
But the people go to the bank and say, "John, I have come for my
money. Here is my check for $275 of my savings, and I want it."
John says, "Of course, Charlie; here it is." And he ·keeps on doing
that, unable to protect the other depositors until John has no more
money for his other depositors and poor John goes into bankruptcy,
and may be a suicide.
We have had about 4,000 banks going into bankruptcy since
1929 from this cause largely. There is one banker down in
Mississippi, a Mr. Clark, at Tupelo, who had the fine courage to
tell "Charlie," "No, Charlie, I am not going to pay you your money.
I am not going to pay any depositors any money, except for the
transactions of his daily ordinary routine business. If he wants to
P.ay his taxes, here it is; if ljte wants to pay for groceries, here it is;
if he wants to pay for his current bills, here it is; but to take out our
common reserve of currency and lock it up and thus deprive every
single one of my other depositors of their equal right of participation
in the use of this currency, and leave this bank broken, and my
name discredited, no, I won't do it," said Mr. Clark, of Tupelo. Mr.
Clark, of Tupelo, was a man of splendid courage, of sound character,
and of very high common sense. He appealed to the people and his
depositors through- the public press and they sustained him fully.
The bankers of New York showed equal sense when they issued
clearing-house certificates, and cashiers' checks and other tokens for
money in grave emergencies. These devices worked all right. So far
as these deposits are checked on for business exchange or for current
expenditures, they are within the implied contract. You must always
realize that you are dealing with the "dollar" as credit, and you must
realize that those who desta.bilize credit by overexpansion or by overcontraction are destabilizing the value of the (credit) dollar and of
all commodities, which is surely against a wise public policy and
ruinous to the social welfare.
In order to accomplish your real obiective fully, I think you will
finally come to the point where you will need to restrict the interest
rates of call loans on the New York Stock Exchange, so that that
great market place may not, against its will or purposes, be used as
an instrumentality for breaking down the credit structure of the
United States, bringing on a huge industrial depression, causing
untold millions to be unemployed and miserable.
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Mr. GOLDSBOROUGH. That is intended to be covered by the Glass
bill.
Mr. OwEN. Yes; I understand there is some provision there for it,
and I hope it may be effectively drawn with as little interruption as
possible to liberty. The New York Stock Exchange is a wonderful
market place, whose great benefits should be carefully conserved and
safeguarded; they are efficient in the highest possible degree. It is a
great machine, but a market place not charged with anylawfulduty
of stabilizing the credit of this country. That is not their business.
That, if I may say so, I think is your business.
Now, a number of these bills which are here-they are of like purpor~direct the Federal Reserve Board and the Federal reserve banks
to use all of their powers to bring back the purchasing power of the
dollar to normal, or bring back the commodity values to the general
commodity index levels of 1926. I think that the general commodity
index levels of 1926 .should be estimated on 550 commodities. I
think you should require the 784 commodities to be stricken out as a
matter of law, and prohibit the Labor Department from using 784
commodities, because using 784 is against the public interest, because
it wastes the public's money and is not a whit better than 550 commodities.
Mr. Stewart is in charge of that bureau. Nobody in this country
is better advised than he, and if you want the last word in expert
advice on the general commodity index of the purchasing power of
the dollar, he is the· man. Those records disclose what has taken
place in this country with absolute precision and clearness.
We are told, and our own honored President has been misled into
believing, that our disastrous condition in this country is due, in far
la~er part, to the conditions in Europe. Mussolini, I think, was
qmte within his rights and the truth when he said that the distress
in Italy was due to the New York Stock Exchange smash. The
violent credit contraction on this stock exchange was a credit shock
to Europe and to the world and the records prove it.
I remind you that the raising of the discount rate of interest of
the reserve bank for the purpose of controlling speculation on the
New York Stock Exchange, did not control it at all. It merely laid
a foundation for serious reaction. Your attention is called to the
study made by Owens and Hardy on the influence of interest rates
over speculation on the stock exchange. This is a vecy able work
done under the auspices of the Brookings Institute, established under
the Carnegie Foundation, available to anybody who wants to study
it. They say and they clearly and fully prove that high interest
rates do not stop speculations, and low interest rates do not restore
life to a broken down market. You have recently, yourselves, seen
that a very low interest rate has had no effect on the restoration of
the price of stocks or commodities in two years. The value of a low
rate on call is to prevent a high rate attracting into this market
money needed elsewhere.
I call attention to the importance of considering this matter from
the standpoint of credit, because there is the "dollar" which you
have to stabilize; in this bill, I suggest certain additions which I
will give to the reporter, as a suggested bill.
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(The matter referred to is here printed in full as follows:)
That the Federal reserve act, approved December 23, 1913, as amended, be
further amended, as follows:
Add to section 14 the following paragraphs:
" (g) The Federal Reserve Board, the Federal reserve banks, the Comptroller
of the Currency, and all persons under their supervision or control, shall use all
their lawful powers and authority to restore the purchasing power of the dollar
to the normal of 100, as established by the Bureau of Labor Statistics for the
United States Department of Labor for the year 1926; and thereafter maintain
it at that approximate level. In the accomplishment of this objective, the
Federal reserve banks are authorized to receive, and the Federal reserve agents
are authorized to deliver, Federal reserve notes against the obligations of the
United States at par in amounts from time to time designated by the Federal
Reserve Board, and to discount the notes of member banks for periods of sixty
days when secured by the obligations of the United States, or by bonds of good
repute and readily marketable, issued by any county, city, or State of the United
States. The Federal reserve banks are instructed to exchange Federal reserve
notes for gold certificates passing over their counters, to redeem all gold certificates held by them and to have such gold placed to their credit in the United
States Treasury. They shall hereafter use lawful money in lieu of gold as a
reserve against their deposits.
"(h) It is hereby declared the public policy of the United States that the banks
chartered or operating -in the United States and using its facilities, or charged
with the duty of using the resources arising from the deposits of the people to
stabilize credit and commodity values, to promote economic justice, to steady
industry, agriculture, commerce, and employment, and in such services are
entitled to the full cooperation and assistance of the United States Government."
When you give certain of these powers to the Federal Reserve Board,
it seems better to make them not merely permissive, but mandatory,
because the board is of a conservative view, and may not think it
wise to act on your permission. I called the attention of the administration on May 27, 1Q29 to what was going on befo;re that panic took
place, five months before it took place, and pointed. out 10 different
ways in which credit and currency were being contracted under the
reserve board and the reserve banks and how such policies would
make the unavoidable bear reaction worse instead of less drastic.
Gov. W. P. G. Harding (former governor of the Federal Reserve Board) confessed some years after the panic of 1920-21 that the
Federal Reserve Board and the Federal reserve banks put on a
"drastic" deflation (contraction) in 1920-21.
The memorandum submitted by me May 27, 1929, as to tp.e methods
employed by the reserve system in contracting credit currency at that
time was as follows:
(1) By refusing or failing to replace the $500,000,000 of gold released to Europe
in 1927 by substituting therefor Federal reserve notes as Gov. Roy A. Young
very honestly stated on March 16 last at Cincinnati, Ohio.
(2) By selling Government securities and thus- withholding money from the
open market where it would be normally used for commerce, as Governor Young
also stated.
(3) By ceasing to buy open market paper and thus absorbing money from the
market by allowing these bills to be paid to the bank without reinvesting, as
Governor Young also stated.
(4) By passing out gold certificates as a circulating medium in lieu of Federal
reserve notes and thus diminishing their own powers of emission of reserve
notes (money).
(5) It retired $214,000,000 of reserve bank notes issued against bonds. ·
(6) It is now interfering with the rights of commerce and busi_ness to sell corporate stocks as a means of getting money and doing this by obstructing the
credits required by members of the stock ex.change for the orderly selling of stocks
and bonds.
· ·
·
(7) They raised the rate of interest on rediscounts in 1928 three separate times,
knowing that raising such rates of interest would exercise, did exercise, and does
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exercise a dominating influence on acceptance rates, on prime commercial paper,
on time collateral loans and on call rates to the serious injury of business throughout the country, compelling business men to pay artificial rates without cause,
and submit to very excessive reorganization charges and commissions.
(8) By a 5 per cent rate for rediscounts, they well know that banks borrowing
at 5 per cent have an overhead charge of $1.35 per $100 for handling loans, and
that banks lending money at the legal rate of 6 per cent must suffer loss and are
thus denied the accommodation the law intended.
(9) They are freezing national credit by a vast publicity of the unsound claim
of a great strengency of credit, when there is no stringency.
We are actually extending foreign credits to the extent of $2,000,000,000 per·
annum, while the Reserve Board makes this unreasonable claim.
The reserve banks having nearly three billions of gold could expand their golcf
holdings six hundred millions in a few months by the simple process of exchanging:
reserve notes for gold certificates passed over their counters and against three and'
one-half billions of gold they could emit reserve notes to the extent of two and
one-half times, without going below the 40 per cent gold reserve, thus creating an
available primary credit of over eight billions, and a secondary credit based on
such currency very much larger. The fiction of .the sellers of credit that there
is a credit stringency in this enormously rich country, and with a banking system
capable of extending all the credit commerce could possibly require, should deceive
n_obody.
(10) The reserve banks are brow-beating the member banks and interfering
with their right to make call loans or time loans on New York stock collateral
which is a usurpation of power not authorized by the reserve act,
The circulation of the country should have increased 4 per cent per
annum from 1920 to 1929 at the rate of the increasing volume of production in order to maintain the commodity prices. This was not
done, but the circulation went slightly down from 1926 to 1931.
The effect of this was neutralized by the public inflation of credit
and bank deposits during this period up to 1929-by the member
banks, public building programs, and high-pressure stock and bond
selling campaigns. The conservatism of the reserve system was in
part useful but not to the extent of penalizing legitimate business.
They were fully justified in trying to stop the unwise speculation; I
sympathize with the purpose but the remedies were worse than the
disease. It did not serve the Nation or its producers to raise the rates
of interest upon those who were creating valuPs in this country;
because it discouraged them, and it weakened their productive power,
and in a measure it threatened to diminish the values of all inventones.
The reserve banks kept raising the Federal reserve discount rate until
they raised it to 6 per cent, a ruinous rate. When a banker borrows
such 6 per cent money and uses it (he has an overhead charge of $1.35),
he has got to lend that money at 7.35 to break even. When you put
an 8 per cent rate on those who are producing, you. are taxing them
with severity, and some of them out of existence, and you are laying
such a foundation of business depression as to compel a severe bear
reaction.
They allowed $500,000,000 to go to Europe and did not replace it
with Federal reserve notes. They retired the Federal reserve bank
notes of $214,00V,000 to practically zero. By selling Government
securities, they withdrew money from circulation, and their market
operations served in the same way of withdrawing circulation; they
cut down credits being extended by the reserve banks; they passed
out gold certificates, and diminished their own powers of credit, in
that way. They advised the country that stock market collateral
even the choicest securities should not be taken by any of the banks
as security, when that bank was borrowing anything from the
Federal Reserve Bank.
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Now, they were quite right in saying the reserve banks should not
be used as a medium for speculation; but to announce a new sweeping
rule, that impressed itself upon everyone of the member banks, that
they ought not to recognize stock-market collateral as security, when
such a system had been built up under the law, obviously left no
place of escape when the collapse came, for those "in the market"
and made the collapse just that much worse.
My great respect for the patriotism and high purposes of the
Reserve Board makes it distasteful to publicly differ with their
policy, but such public questions should be discussed with openness
and sincerity.
I have been only speaking of what would naturally ensue under
such policies. If you do not allow the banks to extend credit against
the best stock-market collateral, that would leave no place of escape
for those who have been buy41~ on margin, on call loans held by
foreigners or by companies not m the banking business, and whose
managers might have had an adverse interest as lMge bear operators or affiliates, who profited by the calling of loans in 1929. In
this matter you are dealing with "credit dollars," with deposits and
checks, and that is the thought that I wish to impress on the committee. Your invitation to appear, I appreciate, and thank you for
the courtesy.
I want to put into the record the tables and charts from which the
statements that I have made are drawn, so as to show the committee
that I have endeavored to speak accurately and that my statelll.ents
are based upon actual statistical facts.
All of the evils which flowed to this country ensued immediately
after the stock-market crash. That is a case of cause and effect,
both as to time and place and reason; and when you clearly understand what has destabilized this credit system of ours, and what has
caused this depression, I am quite sure that public opinion will support you in any wise steps that you may take to safeguard the fut~
direct system of the United States.
The powers of the Federal Reserve Board and of the Federal reserve b!),nks were abundantlY. ~eat to have checked th~ co~apse of
values 1f they had had the vision to employ the authonty given by
law.
Instead of expanding their credit when credit was being contracted
and correcting the dangerous evil they contracted their own credits
from December, 1929, to June, 1930, about $700,000 1000 and only
expanded it by Federal reserve notes when the depositors in banks
were driven by fear to wholesale hoarding in August, 1930. Since
January, 1932, they are again contracting credit (see chart, Exhibit
25).
Clearly what the authorities of the Federal reserve system should
have done was to buy United States bonds and bills in the ope11
market and emit Federal reserve notes to the extent necessary to
stop the depression as far as it was due to the contraction of credit
and currency. They were so advised by the experts of the Royal
Bank of Canada and by others. They should have needed no advioo
for a remedy so self-evident. Unfortunately the existence of th~
depression, and its own speedy self-determination was asserted by
high authorities in the administration and so we went from bad to
worse until the whole country was led to the vecy edge of bankruptcy
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and over 8,000,000 were unemployed and in misery. I call your
special attention to the great meeting of the industrial leaders called
by our honored President (p. 1, New York Times, December 5, 1927)
when the country was given the assurances referred to and which
proved so utterly unsound.
Now, I shall be glad to answer any questions that any of you gentlemen care to ask me.
Mr. GOLDSBOROUGH. First, Senator, without objection, you may
insert the charts and tables that you have in the record. I would suggest that you try to get them to the clerk of the committee as soon as
possible.
Mr. OwEN. I will give them to him immediately, and will place the
.exhibits as an appendix to my remarks.
Mr. GOLDSBOROUGH. Mr. Prall, any questions?
Mr. PRALL. I have no questions.
Mr. GOLDSBOROUGH. Mr. Busby?
Mr. BusBY. I hesitate to ask you any questions after the fine exposition on the subject that you have made. You speak of the regulation
of the power of the dollar being based on the regulation of the credit of
the country, and that that is the primary point to which the legislation should point when dealing with the emergency situation facing
us now, or a like situation that might recur.
- Mr. OWEN. Yes, sir.
Mr. BusBY. Of course, whatever credits are outstanding are assumed to be reckoned in regard to the true values back of those credits,
or the credits could not exist, and that was the answer that I had in
mind in directing your attention. In regulating the credit used in
trade, or outstanding in this country, what relation would the credits
bear to the true values, or to the commodities on which it might be
based?
Mr. OwEN. We speak of the exchanges (that is interbank checks)
being $731,000,000,000 in 1929. They are now about $400,000,000,000, and they have been cut down about one-half because of the
diminishing demands of business. About four-fifths of the exchanges
were due to stock-market transactions, and about one-fifth of it was
due to industrial transactions; so that we would have a great abundance of credit, if the depositors and banks had the sense of perfect
security and safety.
I think bank deposits and credits may be fairly assumed to be based
on actual value though not always liquid, but credits in brokers' loans
in September, 1929, had three-fourths of the market value suddeply
destroyed and a market value of all property impaired by about
$150,000,000,000 as a result of credit contraction. You should note
this.
You have pending here a number of bills proposing to guarantee
bank deposits. If you had a guarantee of bank deposits, you would
give great additional stability to credit. I do not speak of that from
the standpoint merely of depositors, or of the bankers; I am speaking
of it from the standpoint of employment in the United States, and
from the standpoint of our nat10nal interest, and the happiness of
the whole country.
Mr. BusBY. When you speak of $713,000,000,000 ·of bank credit,
do you speak-Mr. OWEN. No, no; of bank checks; of so-called exchanges.
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Mr. BusBY. Of the clearings?
Mr. OwEN. Yes.
Mr. BusBY. I remember it to be $702,000,000,000, with a correction
made the next year, reducing it to $691,000,000,000, which is immaterial.
Mr. OwEN. Quite immaterial.
Mr. BusBY. But the bank clearings-Mr. OWEN. Taken altogether, they were probably near a thousand
billion in 1919, including intrabank checks and obviated checks.
Mr. BusBY. Not the substantial long-term or outstanding credits
that might have some relation to stabilizing my debt, or my contract,
or my obligation-Mr. OWEN. The outstanding long-term credits are quite stable
in terms of dollars but not in value. You will notice, in the table
which I will exhibit here (Exhibit 2), that time deposits did not fluctuate very much; they were more in 1930-31 than in 1929. The violent fluctuation was in the demand deposits, which fell off over
$3,000,000,000 from 1929-31.
Mr. BusBY. Well, now, the action on those clearances that had to
do with transactions on the stock exchange, the economic actions that
took place with regard to them, also undermined the long-term
credits?
Mr. OWEN. Well, the collapse of credit, and especially in so far
·as it affected values, as it affected the values of all stocks, property,
rnortgages, and real estate of the country, which means that it
touched the pocketbooks of every individual in the country; and you
are also touching the citizen's value as a borrower, his solvency as a
borrower, and it therefore affects every bank in the country, 'and
affects their depositors, directly and indirectly.
Mr. BusBY. The reason I am asking you these questions is because
the farm credits are usually of comparatively longer term than a
great many types of credits; and through the upheaval that has come
about, and the sinking of price levels, the farmers have been very
greatly affected, so much that they are unable to meet their obligations, and are being sold out of house and home by the thousands, all
of them; and the other type of credit that you mentioned, while
interesting, would not concern me so much as the type of credit which
would call for the sale of all of this type of substantial properties to
meet a long term type of obligation.
Mr. OWEN. I know that the Stock Exchange panic and its consequences did hit the farmer, whether he had short time or long
time obligations when farm products fell 50 per cent and many farm
lands to zero. There is no doubt about that.
Mr. BusBY. They began· with the trouble with these immediate
transactions, and have blasted every means of credit that relates back
to the type which I am calling to your attention just now, did they
:not? What is your opinion as to thf!,t?
Mr. OwEN. My opinion is, the ordinary source of credit available
for the farmer, and is the demand deposits of the banks of the United
States, from which alone he can get loans from the bank, or from
some depositor out of the moneys held by the bank, if the banks
were not frightened, and if the depositors were not frightened; but
the banks and the depositors are now more or less disturbed by
fear, for the reason that the banks have only a small amount of
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currency to meet a large amount of demand deposits, or time deposits
which may be converted into demand deposits, if the people are
sufficiently disturbed. Moreover their quick assets if sold would
cause them loss on the present market.
Mr. BusBY. Now, one other phase all credit, of course, must have:
The situation being related to the true value of things, or the values
that are placed on things men desire to own and possess, by reason of
an impelling desire of the individual to buy, possess, or control those
things; and so credit being based on substantial things, what would
you have to say with regard to the control of this situation through
the control of credit, independent of the relation of the currency
system to the value of the intrinsic commodity?
Mr. OWEN. In the early days of Utah, Brigham Young used little
slips of paper issued by the Mormon Church as trade tokens, and
he kept the scrip at par with gold, simply by not making an overissue. He would give them so many dollars in scrip for their butter
and eggs and wool or gold dust or whatever they brought in, and they
would use that scrip for the purpose of buying from the stores. It
served a better purpose than bartering, it served the purpose of money;
and since they did not issue it, except against actual value just as you
say, they were based on value, it served the purpose, although they did
not have any practical United States money circulation at that time.
They would buy gold dust with this scrip of paper. The slips of
paper were just as good as the gold dust, because the paper could be
converted into merchandise. Our currency system is well founded;
it is all right. The only thing weak about it has been, that we have
conditions prevailing under our complex banking system that have
destabilized credit at times and have frightened the people who hold
the volume of available credit for lending purposes, that is, the banks.
The banks have been frightened, they have been really -frightened so
they did not want to make any loans, for they did not know where
this market was going, or when contraction and hoarding would end.
They were afraid it would get worse.
Mr. BusBY. I do not quite get my question over to you. What I
have in mind is that, in order to issue credit, whether between individuals or by the Government, to its people generally, you must have
value.
Mr. OWEN. That is right.
Mr. BusBY. And when the system of evaluation of commodities
causes the prices of those commodities to so drop that credit is out of
proportion to them, you have the condition we have now, and gold
which is the basis---,Mr. OWEN. You mean the measure of commodities is the means of
pavment?
Mr. Busny; That is what I am coming to.
Mr. OWEN. Whether it is with gold, or silver, or paper money, or
barter, it conies back at last to value-Mr. BusBY. And credits is a means of payment, as long as the
credits will stand up.
Mr. OWEN. We have built up that structure in this country by
establishing over 20,000 banks, and these banks have $21,000,000,000
of demand deposits arid $29,000,000,000 of time deposits, and they
have all been issuing credit against value. You see, a bank starts
out with a certain amount of money, and it makes a loan, and it is
entered as a deposit.
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Mr. BusBY. What constitutes value, Senator?
Mr. OWEN. Value is necessarily controlled by supply and demand,
and when we have a sudden stringency, usually a change· in the
supply of "means of payment," by the paralysis of the banking
system and the credit system, and by the fear of the banks and the
fear of depositors, you have a paralysis of business, because these
values, upon which you originally relied, are no longer available,
since the measure of those values, through the lack of supply of
credit, has changed because of credit stringency artificially created,
or created by any other means.
Mr. BusBY. The plan you have in mind for legislation-Mr. OWEN. You have got the plan in mind before you in your own
bills.
Mr. BusBY. We are considering it for legislation looking to some
remedy for this situation; would you say that it would tend very
largely to cure this recurring cycle of inflation and depression that has
been experienced?
. Mr. OwEN. Yes; but I would go further. I think that Congress
should stabilize the exchange and provide security of bank deposits;
I think that could be done with ease.
Mr. BusBY. You spoke of your idea of a commodity basis, relating
currency to it, instead of to something else.
Mr. OwEN. The dollar ought to be measured by its purchasing
power in commodities, and you need not have any gold, at all, besides
the currency we have, when you have $14,000,000,000 of annual
demand for the dollar through fixed charges now existing for taxes~
That demand would take the dollar and keep it at a current figure
where you have such demand, and you have also an enormous consumers' demand. Checks now run into $400,000,000,000 that are
recorded as exchanges and intra.banks checks are not recorded-a
vast number of checks are abbreviated by bookk.e_~ing. The obviating
system of the internal structure of the New York Stock Exchange
clearing house obviates checks going into the billions of dollars.
These checks represent demand for dollars. The demand for dollars
will sustain the value.
Mr. GOLDSBOROUGH. Senator Owen, I gather from what you have
said, that you consider the 1926 price level as being the fair level to
which we should return?
Mr. OWEN. Yes.
Mr. GOLDSBOROUGH. Well, now, it is going to be testi.fi,ed to before
the committee, I am certain, that we should not go back to the 1926
level, that it is too far and unjust to the creditor. My own jud~ment
entirely agrees with you, but in view of the fact that we are gomg to
have this testimony, I would like for you to give your belief or reason
for saying that 1926 level is, in your judgment, the fair level.
Mr. OwEN. I would say this, Mr. Chairman: That the levels
preceding that, caused by war condition, when commodities went up to
two and one-half times what they were before, was obviously unjust
to creditors in. the main, ~lthou._gh I _remind you that tJ:i.e hug;e estates
and values which were built up m this country, were built up m dollars
of that nature at that time (1917-1920). Do not forget that when
these gentlemen offer you plans to bring this down below 1926.
.Another thing that is perfectly obvious and we might as well see it
aboye the, tabJe as belo:w the table is that here is a conflict between
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those who owe money and those who have money owing them; that
is where there is this conflict, between the debtor and creditor.
I have great· respect for the magnamity of the very wealthy men
who gave away $2,000,000,000 or more last year and $2,000,000,000
or more the year before, because they are very generous in that
respect, and they are also wise, because they can not carry it with
them when they leave this mundane sphere, and they had better use
it for the sake of their fellowmen when they have the opportunity.
I commend and admire their generosity; but when you come to this
standard of 1926, let us look at it. Here were commodity values selling in 1919-20 for approximately two and one-half times what they
sold for in 1913, due to war conditions and to the increased credit
facilities of the Federal reserve act but the new credit system justified
a change to the level of 1926 of about 140 as compared to 1913.
Mr. GOLDSBOROUGH. One hundred and forty-six I think, would be
accurate.
Mr. OWEN. One hundred and forty-six, and this price level was
established after a crucial experience in the form of contracting credit
and currency, to the extreme extent that the country could bear it.
Then, from that condition, the country slowly rose back under normal
conditions~ until the condition of 1926 was the average between 1922'
and 1928. Why should not that be the standard? There is no good
answer that I can conceive.
Mr. GOLDSBOROUGH. The answer that will be attempted to be
made will be this: That most of the contracts between the debtor
and creditor have been made, based on lower levels than 1926; and,
therefore, it would be unfair to the creditor class to have the level
go back to 1926. I do not disagree with you; I want you to understand _that; but I want to anticipate that kind of argument orreasomng.
Mr. OWEN. It is true that contracts made now might be affected
by going back to 1926 level, but you have got to balance all the
accounts in these matters, and the volume of debts are not new.
You have got to take into considertion also the general welfare,
although constantly being renewed, the standards of living. The
people of this country have got to get enough for their labor and forthen- supplies upon which to live; and the measure of value of 1926
appears to have afforded that and to have enabled the people to live
fairly well, except the farmer. The farmer did not get enough even at
that time to give him a fair standard of living, and for his sake it
ought to be still higher, instead of lower. The country probably
would be content to compromise on 100, but I think it should be on
the basis of 550 commodities as a measure of value; because that
means, relative to 784 commodities an index of 103 instead of 100.
Mr. GOLDSBOROUGH. Now, Senator, do you not think also that one
reason for reestablishing this 1926 level, as soon as it can be done, is
that there is a process of disint~ation, wages are being lowered,
standards of living are being changed? Do you not think, if we could
get a reestablishment of the 1926 levels, and stabilize it right at that
point, we would stop this very unfortunate reorganization among the
masses of the people?
Mr. OwEN. To be sure. It would be better for the folks who have
great wealth that the masses of men should be employed, much
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better for them, and better for the stability of securities and better
for the safety of capital as well as the employment of capital. Capital
is unemployed as labor is unemployed in a period like this, except
where capital is squeezing weak debtors. They get a very low rate
of interest, and are not making money. Take the New York banks,
and since the panic took place, they are not mttking any money, and
many have lost money.
Mr. BusBY. Along that line, I have some questions, but I think
Professor Fisher wants to ask a question.
Doctor FISHER. Yes; because I want to hear the whole statement.
I agree with practically everything Senator Owen has said, with the
exception of this particular point in regard to what is the normal
price level.
Mr. GOLDSBOROUGH. Professor Fisher, if you have a question, we
ce.n interrupt the regular order long enough for you to ask the question; but if you desire to make a statement, I am afraid that would
disturb the committee.
Doctor FISHER. I wanted to ask a question, and inaS'IIllUch as you
were referring to what you expected me to say-Mr. GOLDSBOROUGH. The others will say the same thing, I have no
doubt.
.
Doctor FISHER. I wondered whether you would have me make part
of my statement while the Senator was here?
Mr. GOLDSBOROUGH. Well, suppose you do that, if Senator Owen
has no objection.
Mr. OwEN. Not at all.
Doctor FlSHER. If not out of order.
Mr. GOLDSBOROUGH. You can do it, all right.
Doctor FISHER. It seems to me, on the basis of such fragmentary
knowledge as I have of the existing situation, that 1926 would, on
the whole, be going back too far. From the standpoint of the farmer,
I take it that it would not; that, perhaps from the standpoint of the
farmer, we ought to go back still further. The farmers' debts are on
a long-time basis, and they have been frozen, and there has been very
little liquidation, except through bankruptcy, since 1922 or thereabouts; but we have to consider many other classes in this country
besides the farmer. We do not want to go on the principle that two
wrongs make a right, and we must not go too far back. The creditor
is to be considered, just as much as the debtor. There is a question
in my mind what the true, fair average is. I do not want to be
dogmatic about it, and it may be that the ideas of the Senator are
entirely right; but while he is here, if I may be permitted, I would
like to bring up the question and see what he has to say. So after
all, it is a sort of a question, rather than a statement, that I am
me.king.
First, as to principle, it seems to me the principle on which we
want to select the price level, if we are going to select one, at all,
which we.regard as just, as the average, or the center of gravity of
debts, with respect both to the creditor and debtor, debts which are
now ·outstanding, and those debts, those mortgages, that have been
contracted since the crash of 1929, when we begin to fall from the
level of 1926 in any substantial degree, those debts must be considgJred exactly a.s much, and they bulk very large. The debts prior
to l929 JltJ.d been. largely liquidated, whether in the normal due
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course, or by bankruptcy. We can not consider the debts of 1920
on the same basis as the debts of 1930, because there are very few
now surviving. We can not resurrect and can not help the losses
that have already occurred, after liquidation, because it is impossible
-to reach them; any law would affect only the outstanding debts.
I tried, some years ago, to make an average, to get that center of
:gravity, and concluded at that time, which was before the war, the
average outstanding debt was about one year old. There are so
many phases you have got to take into account now, when we have
-so many Liberty bonds outstanding, starting in 1918, the average
would go back further; and the frozen loans of the farmers and
others now still outstanding, having been carried on a sort of moratorium, you would perhaps carry it back still further, perhaps two
-or three years. I am not a dogmatist, because I have made no
-calculation; but I wou1d like to ask Senator Owen whether he has
tried, through any statistical apparatus, to find out what is the aver.age. My impression is different from his; and if the facts should
,show that he is right, of course I would favor 1926; but if 1926 was
right before 1929, it is certainly not right now, because there has
been a drop. His answer, perhaps, is that it was not right, and that
it should have been higher. Maybe that is true, but it seems to me
that it is possible, instead of our sitting here using offhand figures as
to what is the average-:..-it might be possible to have a real expert
-study, which would get the results correctly.
Mr. GoLDSBOROUGH. Professor Fisher, do you not think there are
,other elements to be considered, in addition to the arbitrary elements
-of debtor and creditor? Do you not think that this is a very neces-sary consideration, the fact that our people have not yet readjusted
themselves to this changed condition. Do you not think that this
is a very serious consideration, that this price level should be raised,
in order that this complete readjustment may not be necessary, the
<lomplete readjustment of wages and standards of living? It seems
to me that is really more important than any technical relation
between debtor and creditor, which, as a matter of fact, the creditor
class does not perceptibly feel. Do you care to comment on that?
Doctor FISHER. Yes. The creditor class, of course, does not mean
simply the rich; because, in fact, the rich are generally in the debtor
class; it means, among others, the savings banks depositors. So I
do not think, we should consider the debtor entirely; I do not think
we sho.uld consider the creditor less worthy. of attention than the
debtor.
Mr. GoLDSBOltOUGH. I certainly had no such intention.
Doctor FISHER. I just wanted to make that clear, in view of what
you have said; but in answer to the question as to the effect of this on
industry and employment, it seems to me it should go right back,
Mr. Chairman, to the very same thing; for, if we should -stabilize
at the present level, what would be the reason why it would not be
just for business? Simply because it has debts-- Mr. GOLDSBOROUGH. It would take 20 years to readjust the country to the present price levels, and then it would be all right; but what
is the use of going through all of that deadly period?
Doctor F1s:e:E:a. Exactly; but I think it is clear that a rising price
level is absolutely necessary. I am just as strong for that as yourself,
or the ex-Senator. It is only a question of how far to raise it. But,
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taking an hypothesis, suppose we did do the unjust thing of stabilizing
at the price level just where it is now, I ask you what would be the
reason that that would be unjust to business? It would be just the
very same reason I have been discussing, because it would go right
back to the debt proposition, the business proposition; and I say the
reason that it would take 20 years,·as you say, is that so many business men now have that tremendous millstone of debt around their
neck. If you can wipe out the debt, and consider just the future, if
there were no debts carried over from the past, the proper place to
stabilize is just where we are; but because of these left-over debts
of the business men and the farmer and everybody else, you have got
to go back; and in going back you have got to take account of all of
the debts.
Mr. GOLDSBOROUGH. We will be glad if you will comment on
Professor Fisher's statement. ·
·
Mr. OWEN. My answer is this: That it is true that the creditor is
often the debtor also, so that one account would balance the other.
It is true that the interest of the savings account, in mutual savings.
banks, might be affected by this; ~mt sm~e it_is _on both sid~s of t~eaccount, ·and on the security agamst which 1t IS held, obviously it
would not do any harm because they are on both sides of the ledger;.
but this is not merely a question of individual debtors, or individual
creditors, but it is a question of restoring the purchasing power of
the people of the Umted States to the point where we can have
normal conditions of living; and the best standard we have got iswhat actually occurred when 550 commodities were measured, one·
by one, for 365 days a year, through 1922, 1923, 1924, ,1925, 1926,
1927, 1928, and 1929, It was at 98 in July, 1929. You can raise·
the technical question against anything which involves a large numberof people, and show that policy would be unjust to some particular·
case. You have got to deal with this in a national aspect, and from
national figures, nationally collected, and give the answer; and I
regard that as more dependable than my own opinion could possibly
be, or even the opinion of one who is as highly esteemed and valuable·
in this field as Doctor Fisher is. Even if there were an error the·
creditor would not be so ~eatly harmed as the weaker debtor. The
case is more than a question of statistical data by experts. It deals.
with flesh and blood and life. That is my answer.
Are there any more questions?
Mr. GOLDSBOROUGH. Now, Senator Owen, I have advocated in this.
committee, and in speeches, and· in the press that in this period of
terrible fear and stress that the Federal reserve system, the Federal
Reserve Board would be justified in announcing to the country its.
tremendous resources, as were available before the Glass.:.steagall bill
was passed, and which have been made available by that measure,
and that they proposed to go into the market and purchase securitiesuntil the price level was raised to a given point.
Mr. OwEN. Yes.
.
Mr. GOLDSBOROUGH. ls not that justifiable?
Mr .. OWEN. That is what they ought to do. I can not believe you
will get them to do it unless you command them to do it; because the·
board is of a "conservative" temper, and they wo11,W. probably think
such action would be "radical," They would probably be told it
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was "radical" by advisors in whom they have confidence, so that
nothing but a legislative mandate could secure such action.
In dealing with legislative mandates, it ought to be cautiously
·used, because, after all, we must depend upon administrative integ-rity
and the wisdom of those whom we engage to carry out our policies.
When you have laid down a policy, as in this bill, it is assumed they
would carry it out. in substance; but if they were to use all of the
enormous powers they have got, which are unlimited to all intents
and purposes, and aganist the $1,400,000,000 of gold, which they
have now, they could establish over $4,000,000,000 of reserves and
enable the banks to support a credit structure of over $40,000,000,000.
They could buy United States obligations and pay for them with
Federal reserve notes to $7,500,000,000 when $2,000,000,000 would
be more than enough; $1,000,000,000 I believe might suffice. The
general commodity index would prove what was enough. There is
no lack of available means of credit in any sense except fear. Regardless of member banks the reserve banks could buy bonds of the United
States and correct conditions.
I think what is troubling the country is that the local banker does
:not want to ask any credit from the reserve bank, and the individuals
who want credit, locally, are unable to get it, because the bankers
·are afraid they might get a run on their banks by their depositors,
:and for that reason they hesitate to make loans. That is a difficulty
-that is psychological, for the larger part because the banks with
mutual support could pay off desposits in any probable run. The
run never seems to exceed 35 per cent of the deposits.
Mr. GOLDSBOROUGH. If this statement of fact and statement of
policy were made by the Federal Reserve Board, that they were going
into the market, and were going to buy $25,000,000 worth of Government securities each business day until the price level reached a
-certain point, do you not believe that the effect of that positive
statement of what they were going to do, would be almost magical?
Mr. OwEN. I think it would have a powerful beneficial effect.
Mr. GOLDSBOROUGH. A very prompt effect, would it not?
Mr. OWEN. It would have an immediate effect, in my opinion, and
the:y should do that very thing. That is precisely what I have been
urgmg. Professor Fisher has told you he agrees with my contention.
Doctor FISHER. May I ask a question? This time it is a real
-question.
Mr. GOLDSBOROUGH. Yes.
Doctor FISHER. I would like to know what Senator Owen's answer
would be to an objection of a friend of mine who talked with me
recently. I have my own answer, which I will give at length, later,
but I would like to know what his answer is, while he is here. He
says that the powers of the Federal reserve system are great enough
to do this. I think that many of them would deny 'it, as this friend
-denied, who said they only had the right, to this extent: That the
powers of the Federal reserve system would not suffice, without the
-cooperation of the member banks, and that you have got to get
thousands of banks in the United States to cooperate, to get any
result. You said, yourself, a moment ago, that they would have
psychological difficulties.
Mr. OwEN. I have just explained that.
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Doctor FISHER. Can those powers be exercised, despite that
difficulty, in your opinion, and how?
Mr. OWEN. Their powers of lending are open to be exercised upon
demand and can be exercised in buying bonds and bilJs regardless of
member banks. I have already explained that the member banks
must make demand, and I have explained this morning why they
were not making demands; so the question has already been fully
answered, but in buying bonds with reserve notes you ::.re adding·
directly to the circulating medium which would favorably affect.
commodity prices.
Mr. GOLDSBOROUGH. Senator Owen, it is also going to be contended
before this subcommittee that, if we raise the price level in this
country, it will immediately let in cheap foreign goods, and thereby
tend to lower the price level, and then that more money will have·
be put into the banks by the Federal reserve system, in order to raisethe price level again, and that it will be a continuous process, until
the price level is raised in foreign countries. I want to say first that
I do not agree with that at all, but I want to get your reaction to that.
kind of question.
Mr. OwEN. The extract that I read from Gustave Cassell answered.
that fully; I opened my remarks with that quotation.
Mr. GoLsDBOROUGH. I want you to go more into detail.
Mr. OWEN. You will fix the commodity values of the world, iswhat you will do. Of course, other people will benefit by it, who are
on the gold standard or gold basis. You are not on the old gold
basis. The gold basis that we were formerly acquainted with was
when gold was pocket money. The situation to-day is a totally
different thing. You are now on a basis in which the volume and
activity of checking accounts measures the means of payment." Of
course, we can.redeem in gold, yes; but you are making or confirming
a commodity dollar under this bill. We have already got a commodity dollar; we have already substituted for gold a commodity
value. That was done by the Federal reserve act, validly, distinctly~
and intentionally. We emit these Federal reserve notes against
commodity bills, and we can emit enough of them to supply all the
needs of commerce, and measure the value of all commodities in
process of manufacture and distribution.
Mr. Reginald McKenna, formerly Chancellor of the Exchequer of
Great Britain, and for a long time chairman of one of the London
banks, the London City and Midland Bank, having over $2,000,000,000 of deposits, and one of the biggest banks in the world with
over 3,000 branches, said, not long ago, that the world no longer is
on the gold basis, but it was on the Federal reserve dollar basis.
What he meant by that was that we have got a dollar which is
measured 100 per cent by commodities. That is what it is measured
by, and you will fix the standards of the world for commodities. Of
course, the commodities abroad will have higher values when you
do this, and ought to have. I would like to see the United States
furnish them with enough money, enough gold, to give them the
currency stability that they may require.
Mr. GOLDSBOROUGH. We would be benefited equally with them1
would we not?
Mr. OWEN. Of course we would. The idea that trade is a one-_
sided matter is perfectly false. When I sell 1,000 bales of cotton to
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Liverpool, I ~et its equivalent to my satisfaction, and if you multiply
that transact10n a million times, you do not change the principle. Our
so-called balance of trade is merely an econonnc or arithmetical term
that does not mean what it seems, to say. The reason I say that, is
this: When I sell a thousand bales of cotton to Liverpool, I get the
equivalent to my satisfaction. Any balance of trade there? Two
and two makes four. It balances itself. I bring back my equiva:lent
of the cotton in one form or another; it may be in merchandise, it
may be in gold, it may be in diamond earrings, but whatever 1t is, it is
to my satisfaction, and there is no balance about it. This transaction
multiplied a million times leaves no real balance. The balance of
trade is merely an arithmetical calculation, to describe the relative
condition between the recorded exports and recorded imports of
merchandise. There are certain invisible factors which will enter,
which will make the accounts a genuine balance; for mstance, there is
$500,000,000 or $600,000,000 invested by Americans abroad in
exchange for service in hotels and agreeable entertainment. Marine
freights, insurance, interest charges, and so forth. You can not enum,..
erate it in statistics, but it is an equivalent return. You will :fix the
commodity values throughout the world, when you fix the dollar as
measured by commodities, and commodities as measured by the dollar. When you have done that, you could abolish gold and silver, too,
which are mere commodities, at last, but which have been given an
special status by the worlds monetary demand.
As I said a few moments ago, the industrial demand for gold is about
one-fourteeth part of the annual production. Besides the industrial
demand for gold, there is no other demand for gold, except to transfer
it as international balances. We have no pocket money demand for
gold. We should diminish our own monetary demand for gold by
taking the gold certificates out of circulation and striking out the use
of it as a reserve against member bank deposits.
Our excessive accumulation of gold (with France also following suit)
is causing many countries to go off the gold basis-Chile was the last
announced to-day. It is a ~ood thing to let up on the dema.nd for
monetary gold, and as it 1s done commodities will be favorably
affected-that is, commodity values will rise.
Mr. McFADDEN. Mr. Chairman, may I ask a question?
Mr. GOLDSBOROUGH. Yes.
Mr. McFADDEN. I would like to ask a question to clarify my own
mind and perhaps the point at issue here, in connection with gold.
The statement was made earlier that there was $900,000,000 of gold.
The Treasury' statement shows there is issued and outstanding of
gold certificates $1,600,000,000. The difl'erence between the $900,000,000 that was referred to the chairman and the $1,600,000,000, I
am assuming is held now by the Federal reserve; is that true?
Mr. OwEN. Yes; about $700,000,000 by the Federal reserve agents
and about a billion in general circulation.
Mr. McFADDEN. They are holding it as part of their legal reserve?
Mr. OWEN. Yes, sir.
Mr. McFADDEN. Now, did I understand you to suggest that the
Federal reserve system buy the present free gold of the Treasury-Mr. OwEN. No, sir.
Mr. McFADDEN. With Federal reserve .notes?
Mr. OwEN. No, sir.
·
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Mr. McFADDEN. What was your suggestion?
Mr. OwEN. My suggestion was that they should sequester the gold
certificates as they passed over their counters, and replace them with
reserve notes, and then redeem the certificates and have that gold put
to the credit of the reserve banks in the Treasury of the United States.
Mr. McFADDEN. That would mean that the Federal reserve would
acqmre the $1,600,000,000 of gold certificates and hold them?
Mr. OWEN. Yes, sir; in lieu of Federal reserve notes.
Mr. McFADDEN. I notice, in the past few months, that" the Treasury has received between $200,000,000 and $300,000,000 of gold
certificates. What effect has that had?
Mr. OWEN. It has had the effect of retiring this gold from circulation, and ultimately, expanding commodity values.
Mr. McFADDEN. What is the purpose or aim of the Treasury in
doing that?
Mr. OWEN. I would not venture to say what the purpose of anybody is; I would simply say what would seem to be the effect of the
transaction.
·
Mr. McFADDEN. Is not that quite in conflict with the present
·
hoarding program?
Mr. OWEN. Yes.
Mr. McFADDEN. To get the people to stop hoarding, and the
Treasury operation is taking gold certi;ficates out of circulation.
Mr. OWEN. No; they are taking the ~old certificates out of circulation, but what they are doing is diminishing the monetary demand
on gold, and leaving the gold in the Treasury.
Mr. McFADDEN. I recognize that.
Mr. OwEN. Yes, sir.
,Mr. McFADDEN. Increasing the free gold supply.
Mr. OWEN. It will have the ultimate effect of increasing the commodity values, which I am sure the administration would like to do,
because it has its economic value, as well as a political value.
Mr. McFADDEN. If I may ask you one other question, I was
interested in your reference to the fact that we are issuing a commodity dollar now. Have not we changed the plan a bit by the
Glass-Steagall bill, and did not we change the plan-Mr. OwEN. Slightly, yes.
Mr. McFADDEN. By permitting the Federal Reserve Board, itself,
to go into the open market and buy paper, and issue money, rather
than have money going up and down, and the notes of the Federal
reserve going up and down?
Mr. OWEN. It would be much better to have a system based upon
the flow of commodities; but when you have your credit system paralyzed, as at present, it is worth while to use the credit powers of the
Government to correct what has been done, temporarily, at least.
Mr. McFADDEN. With the increased use of Government bonds to
secure the issuance of Federal reserve notes.
Mr. OWEN. The Glass-Steagall bill authorized a limited use of
Government obligations for the issuance of reserve notes.
Mr. McFADDEN. The point I was making was that their commodity
prices are not the controlling factor entirely in the issue of Federal
reserve notes to-day.
Mr. OWEN. No, not entirely but the reserve notes are now contracting.
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Mr. McFADDEN. To the-extent that we place Government securities back of the Federal reserve notes, are we increasing or diminishing the value of the dollar?
Mr. OWEN. To the extent that we emit notes and put them in
circulation, it would have a tendency to increase commodity values.
Mr. McFADDEN. And decrease the value of the dollar?
Mr. OWEN. Yes, unless hoarded.
Mr. GOLDSBOROUGH. Now, I want to make this statement for the
record: The $900,000,000 of gold certificates that I referred to were
$900,000,000 which were-in circulation, and not now in the vaults of
the Federal reserve banks.
Mr. OwEN. Yes; I understood the statement, I understood distinctly.
Mr. GOLDSBOROUGH. Now, Senator Owen, have you any further
statement?
'
Mr. OwEN. No; I think I have nothing further.
Mr. GOLDSBOROUGH. The subcommittee, Senator Owen, has been
very much inspired and helped by the wonderful explanation that you
have made of the Federal reserve system and the present condition in
which we find ourselves, and on behalf of the subcommittee I extend
to you our most profound thanks.
Mr. OWEN. I am deeply obliged to the committee for its courteous
invitation to comment on the bill. I wish to say, in this connection,
that I have done so as an American citizen exclusively, and as a friend,
a true friend, of all of our interests, the biggest banks in the country
as well as the smaller banks in the country, and for our people, and
whether they are Democrats or Republicans, because we are all suffering alike from the economic condition, although comparatively only a
few thousands know how it was brought about, and about which there
has been very general confusion in the public press. As I say, I
have seen the enumeration of thirty different reasons given, but there
is only one subsantial great reason, and that was the excessive expansion of credit in the stock market (1927-1929) and the tragic
"smashing" of credit on the stock market, by calling broker's loans
by the billions of dollars, the violent shrinking in the values of stocks,
bonds, and all property throughout the country, which_ imposed its
devastating effect everywhere as between debtors and creditors.
Many creditors have suffered greatly as well as the debtors. Most
business men are both debtors and creditors.
Mr. GoLDSBOROUGH. Do you not, as a matter of fact, think that,
if the 1926 level of prices was resumed, that the creditors of this country, taken as a whole, would be just as much relieved as the debtors
would?
Mr. OwEN. Possibly more so. You can look at the values of the
securities held by the savings banks, and by the insurance companies,
our great insurance companies, wonderful institutions as they are;
look at their bonds, look at the farm mortgages and mortgages on real
estate; look at the effect upon our great· batiks, magnificent institutions, but look at the effect upon their securities, look at the effect
upon their stocks; look at the effect upon the value of the stock of the
National City Bank, for example, diminished to one-tenth of what it
was. It was overvalued, in the first place, of course, and now undervalued; but they have suffered too, and they are only human beings
like the farmers, of course; and the thing to do is try, seriously and
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earnestly, to understand what it is that has happened, and take the
needed steps to make sure that it can not happen again.
Think of the future. This country ought to have complete stability
in credit at low rates, and when it has, our manufacturers in this country, with their mass production; our industrial populations, with its
skill and industry; our great railways and our farmers, will all make
this country blossom like a rose and we will, indeed, lead the world in
every way, financially, commercially, and spiritually; but you can not
have spiritual progress in the face of deadly misery. It is enough to
turn a heart of stone to tears, to see what is transpiring in this country.
(The charts and tables referred to are as follows:)
1. Resources and liabilities of all banks reporting, June 30, 1931.
2. Resources in comparison for 1927-1931.
2a. Specified resources Federal reserve banks.
3. Circulation statement United States money.
3a. Gold and silver in United States and in Europe.
4. Imports and exports, 1914-1931 merchandise.
5. Purchasing power of the dollar, 1913-1931.
Exchanges by checks.
5a. Chart showing purchasing power of the dollar, 1914-1931.
6. Paper currency of United States by denominations, new issues.
7. Stock and bond averages, 1929-1931.
8. Stock price index chart, 1922-1931.
9. Wholesale prices chart, 1924-1931.
10. Brokers' loans, 1926--1931. Chart.
11. Volume of manufacturing production, 1927-1931.
12. Factory employment and pay rolls, 1920-1931.
13. Comparative earnings, 550 industrial companies, 1927-1931.
14. Freight car loadings, 1924-1931.
15. Brokers' loans in detail-Table, 1926--1931.
16. Brokers' loans in detail-Table, 1926--1931.
17. Reserve bank credits and factors, 1917-1932.
18. Building contracts, 1919-1931.
19. New corporate issues, 1919-1931.
20. Transactions daily New York Stock Exchange October, November, 1929.
21. Loans reporting member banks and investments, 1919-1931.
24. Gold surplus chart.
25. Reserve bank credit chart.
26. Physical volume of Industrial Production.
27. Price level chart.
These tables show bv chart (Exhibit 10) and in detail (Exhibit 15) the brokers'
loans on call and how "they were contracted October, 1929. The fact that coincidently with the calling of these brokers' loans, bank credits, deposits, and discounts went down in billions (Exhibit 2) i,.,.stock prices violently fell (Exhibit 8),
and within two years fell 75 per cent (.1!.ixhibit 7), that wholesale prices then
steadily declined (Exhibits 9 and 27), that the volume of production then fell
(Exhibits 11 and 26), that factory employment and pay rolls then fell (Exhibit 12),
that corporation incomes fell to one-third (Exhibit 13), that freight-car loadings
then fell (Exhibit 14), that building contracts then fell heavily (Exhibit 18).
That then the purchasing power of the dollar violently rose in terms of stocks
(Exhibit 7) and in terms of commodities (Exhibit 5 and 27) proves the cause and
effects of credit contraction.
The gold surplus appears, chart 24, and the reserve bank resources are shown
(Exhibit 25; 2a, 17).
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
151
STABILIZATION OF COMMODITY PRICES
EXHIBITS TO THE REMARKS OF ROBERT L. OWEN BEFORE SUBCOMMITTEE OF'
BANKING AND CURRENCY COMMITTEE ON STABILIZ.ATION BILLS MARCH 18,
1932
EXHIBIT
1
Principal items of resources and liabilities of all reporting banks in continental
United States as compared with similar data for member banks of the Federal
reserve system, on or ,.about June 30, 1931
[P. 140, Report of the Comptroller of the Currency]
Member banks
Items
All report•
lngbanks:t
22,007
banks (000
omitted)
iLoans '·--··-········-····-----·-Investments_
••••••• __ -·-·_. ______
-Cash_.-·-·-·······-----···------ __
·Capital ••• ·-······-----·---------·
.Surplus and undivided profits. __ ._
:Deposits
time>-·---•• _____________
.Aggregate(demand
resourcesand
35,006,019
20,006,732
864,434
3,637,826
5,783,884
50,260,409
69,853,483
1
2
Mutual
Per cent
Private
to all
savings
banks: 2
banks:
1
reporting
284
banks
Per
cent
7,782
banks, 1 600 banks
(000
to all
banks (000 reporting
except
(000
omitted)
omitted)
omitted)
banks I mutual
savings
and
private
21,816,243
12,106,279
519,135
2,620,606
3,545,550
30,137,692
45,288,588
62.32
60.ol
60.05
72.04
61.30
59.96
64. 83
75.46
78.03
62.96
72.17
76. 35
75.03
77. 31
6,051,133
4,475,169
38,229
-----------1,133,538
10,034,842
11,191,788
44,581
16,934
1,656
6,842
6,429
59,083
82,145
Exclusive of banks in Alaska and insular possessions.
Included in all ,reporting banks in column 1.
a Including overdrafts.
EXHIBIT
2
Resources and liabilities of all reporting banks on or about June 30, 1927.:...1931
[P. 139, Report of the Comptroller of the Currency]
[In thousands of dollars]
1927 (27,061 1928 (26,213 1929 (25,330 1930 (24,079 1931 (22,071
banks)
banks)
banks)
banks)
banks)
RESOURCES
Loans and dlscounts(including redlscounts)_ 37,270,378
Overdrafts_________________________________
43,450
Investments_______________________________ 17,255,093
Banking house, furniture and fixtures ______ 1,580,105
Real estate owned other than banking
house ______________________ -------- --- - -399,473
·Cash in vault ______________________________ 1,007,896
Reserve
with
Federal
reserve
banks
or
other reserve agents •• ___________________ 2,932,954
Due from banks ___________________________ 3,967,448
Exchanging
for clearing house and other
cash Items_______________________________
2,181,167
-Other resources _________________________ • __ 1,494,594
Total •• -.--·--------------- ______ . ___ 68, 132, 558
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
39,542,067
50,407
18,771,814
1,663,696
41,376,269
56,857
17,348,738
1,754,454
40,460,670
49,438
17,944,728
1,810,367
35,164,850
45,650
20,060,153
1,808,264
403,967
887,845
390,816
819,928
425,151
865,970
446,488
884,327
3,105,840
3,616,408
3,192,200
3,567,525
3,433,102
3,994,325
3,402, 189
4,133,720
1,753,098
1,779,186
1,691,772
1,973,946
2,884,635
2,161,748
1,946,709
2,316,809
I n, 574, 328 ! 12. 112, 505
74,020,124
70,209,149
152
STABILIZATION OF COMMODITY PRICES
Resources and liabilities of all reporting banks on or about June 30, 19S7-1931-Oon.
1927 (27,061 1928 (26,213 1929 (25,330 1930 (24,079 1931 (22,071
banks)
banks)
banks)
banks)
banks)
3,525,522
4,145,529
1,226,361
(1)
3,796,978
4,611,698
1,097,386
. 161,483
3,889,419
4,968,999
1,154,804
268,276
3,669,9984,792,851
1,010,128
358, lOZ
I 83,753
649,095
4,081,028
142,776
649,452
3,629,197
122,737
652,339
4,337,120
97,839·
639,304
4,828,741
a 882,519
24,306,651
837,430
24,350,164
1,615,277
24,098,516
1, 083, 003.
21,326,211)
29,159,361
448,189
19,W
56,864,744
457,620
312,335
938,407
1,067,821
LIABILITIES
Capital ____________________________________
stock paid in ______________________ 3,376,498
Surplns
3,764,527
Undivided profits-net_------------------- 1,131,206
Reserves for dividends, contingencies, etc__
(')
Reserves
for Interest,
taxes, and
other expenses accrued
and unpa1d
______________
1 70,326
N atlonal-bank circulation ____ - ____________
660,946
Due to banks______________________________
4,289,337
Certified and cashiers' checks and cash
and
travelers' -checks
letters of credit
outstanding
___ ---______________
_____ - 11,205,821
23,784,702
28,538,109 28,787,617 29,465,361
¥r:::m~p~~:iiii:t<i1niiicisiiifsaviniisi:::
United
States deposits _____________________ 26,381,693
194,024
222,816
286,112
213,722
20,121
117,199
895,730
399,938
Deposits not classified•-------------------158,
431,
061
856,
751,
307
57,910,641 59,847,195
Total payable
depo,lta and
---------------------------Bills
rediscounts ______________
665,817
829,508
1,566,146
1,630,703
1 7,217
1 3,529
Agreements to repurchase securities sold___
55,523
47,678
Acceptances executed for customers________ I 248,184
1411, 763
449,917
585,969
Other liabilities__________________________.__ I 1,306,627 11,527,881
1,665,948
1,816,891
Total _____ --- -- ____ ---- --____ ---- __ -- 68,132,558 71,574,328 72,172,505
74,020,124
70,209,149
t Included In undivided profits.
• For national banks only; figures for banks other than national Included In undivided profits.
1 Revised to include cash letters of credit sold by national banks and outstanding.
' For banks other than national.
• Includes cash letters of credit sold by banks other than national and outstanding.
In addition there are:
Bank resources above cited ______________________________ _ $70,209,140,000
The Federal land bank resources _____________________ _
1,286,988,000
The joint stock and bank resources ___________________ _
616,620,000
The Federal intermediate credit resources _____________ _
170,220,000
Building and loan association resources (number, 11,767;
members, 12,336,754) _____________________________ _
72,282,971,000
8,828,611,000
Total____________________________________________ 81, 111, 582, 000
It will be observed that loans from 1929 to 1931 fell over $6,200,000,000 and
that demand deposits fell over $3,000,000,000 following the stock-market panic.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
EXHIBIT 2A
CHART
J.
ALL FEDERAL RESERVE BANKS
MILLIONS Of DOLLARS
ltOOO
1922
1921
1923
1926
1928
1918
1919
1920
1'2S
1927
1929
1930
1931
1916
1917
1915
Figures for 1914-1918 are for last report date of each month; beginning with 1919 they are daily averages. Deposits are net through February, 1921, total after that mnnth.
Reserve notes and bills and securities fell after stock market panic of October, 1929.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
EXHIBIT
3
Circulation statement oJ United States money June 30, 1931
[P. 146, Report of the Comptroller of the Currency, 1931]
Money held in the Treasury
Kind or money
Total amount
Total
Money outside of the Treasury
Amount
Reserve
against
held in trust
Held for Fedagainst gold
United
eral reserve
and silver
States
and
certificates notes (and banks
agents
(and Treas- Treasury
ury notes of
notes of
1890)
1890),
In circulation
All other
money
Total
Held by Federa! reserve
banks and
agents
Amount
Population
ofcontinenta! United
Per States (esticapita' mated)
1.:.-
Gold coin and bulllon __________ $4, 955, 921, 258 $3, 696, 078, 099 $1,701,514,389 $156, 039, 088 $1, 776, 690, 378 $61, 835, 014 $1, 259, 842, 230
Gold certificates ________________ (1,701,514,389)
1,701,514,389
Standard silver dollars __________
41,461,046
539, 958, 327
498, 497, 281
494, 588, 776
-------------3,908,505
Silver certificates _______________ (493, 349, 026)
493, 349, 026
------------------------Treasury notes of 1890 __________
(1, 239, 750) -------------1,239,750
-----------Subsid!a:rY silver _______________
308,619,365
302, 926, 500
5,692,865 -------------5,692,865
Minor coin _____________________
4,607,053
122,
980
126,887, 033
4,607,053
-------------- 3,523,480 343, 279,
United States notes _____________
346, 681, 016
3,523,480 -------------- _.,. __________ -------------157, 536
Federal reserve notes ___________ 2, 101, 578, 450
1,402,130 2, 100, 176, 320
1,402,130 -------------- ------------ -------------Federal reserve bank notes _____
42,487 -------------- ------------ -------------42,487
2,931,475
2,973,962
National bank notes ____________
17,890,685
679, 113, 761
697, 004, 446
17,890,685
------------
$2.93
8.03
.28
3.04 -----------.01 _______ .,. ____
2.20
• 95
2. 41
13. 77 -----------.02
5.22
98,902,219 7, 047, 992, 013 2, 226, 058, 715 4, 821, 933, 898
38.86 124, 076, 000
------------ --------------------------- --------------------------- ----------------------- --------------------------- ------------------------- ------------
Total June 30, 1931. _. ____
Comparative totals:
May 31, 1931.. _____________
· June 30, 1930________________
Oct. 31, 1920 ________________
Mar. 31, 1917•• _____________
June 30, 1914 _______________
Ja,;i.• 1, 1879•• ---~-----------
8, 782, 098, 264
8, 306, 564, 064
8, 479, 620, 824
5, 396, 596, 677
3, 797, 825, 099
1, 007, 084, 483
1 Per capita Oct. 31, 1920, was $52.:M.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
--
9, 079, 623, 698 4, 227, 734, 850 2, 196, 103, 165 156, 039, 088 1, 776, 690, 378
4,199,237,014
4, 021, 936, 763
2, 436, 864, 530
2, 952, 020, 313
1, 845, 569, 804
I 212, 420, 402
2, 192, 766, 980
1, 978, 447, 640
718, 674, 378
2, 681, 691, 072
1,507, 178, 879
21,602, 64C
156, 039, 088 1, 760, 532, 278 89,898,668
156, 039, 088 1, 796, 239, 235 91,210,800
152, 979, 026 1, 212, 360, 791 352, 850, 336
152, 979, 026
117, 350, 216
150, 000, 000
188, 390, 925
100, 000, 000
90,817,762
----------------------------------------
$896, 822, 030
705, 004, 841
7,135,008
116, 200, 102
-----------------------------·----
$363, 020, 200
996, 509, 548
34,326,038
377,148,924
1,239,750
273, 147, 018
117, 393, 016
299, 427, 291
1. 708, 428. 782
2,929,378
648, 363, 353
------------1
------------
-- -----------29,779,482
4,886,964
43,730,245
391,747,538
2,097
30,750,408
6- 775, 628, 230 2, 073, 352, 798
6,263,074, 941 1, 741, 086, 979
6, 761, 430, 672 1. 063, 216, 060
5, 126, 267, 436
953, 221, 522
3,459,434, 174
816, 266, 721
---------------------------
4, 702, Z15, 432
4. 521,987,962
5,698,214, 612
4, 172, 945, 914
3,459,434,174
816, 266, 721
-----·--------------------------------------------------
37.92
36. 71
53.21
40.23
34.93
16. 92
124, 002, 250
123, 191, 000
107, 096, 005
103, 716, 000
99,027,000
48,231,000
155
S'rABILIZATION OF COMMODITY PRICES
EXHIBIT
3A.
Amount of gold and silver held by the United States and various European countries
Gold
In 1929, the United States (total) ••••••••••••••••...•••••...•.•.••.•••••... $4, 283, 923, 000
In 1930, the United States (total) ••••••••.•••.•....••..••.••... : ••••••••.•• 4, 593, 488, 000
Inl9~
France..................................................... •·•·••·••••
g~~:~t1an:::::::::::::::::::::::::::::::::::::::::::::::::::::::::1
Russia ••••••••••••••••••••••••••••••.•••••••..••••....••... ···••••··• In 1930France
................................................................
Germany •••••••••••..••..•. · .•.....•••.•.•••••.•.••••••••••.••.••••••
i:-:1aBritlan:::::::::::::::::::::::::::::::::::::::::::::::::::::::::
Silver
$855, 498, 000
851, 665, 000
1, 003, 402, 000
559; 533, 000
711, 303, 000
147, 019, 000
8,675,000
218, 064, 000
260, 000, 000
17,810
2, 105, 363, 000
543, 494, 000
718, 422, 000
248, 883, 000
23,034,000
229, 843, 000
259, 722, 000
11,454,000
The per capita circulation in paper currency backed by gold, silver
credit is approximately as follows, in terms of dollars:
The United States __________________________________ -- . ___ - _. __ . _
France _________________________________________________________ _
Germany ______________________________________________________ _
Great Britian___ __ ___ __________________________________________ _
Russia _________________________________________________________ _
China ________________________________________________________ _
and/or
$33. 39
64. 90
20. 35
40.62
1. 31
1. 18
Total gold and silver in world and United States imported net gold over
exports from 1914 to 1931.
Total gold in world _____________________________________ _ $11,522,579,000
Total silver in world ____________________________________ _ 4,781,741,000
From
1914
to 1931, United States imported. net gold over_
exports
_____________________________________________
3,600,744,275
EXHIBIT
4
Imports and exports of merchandise, calendar years 1914 to 1930, inclusive, and
from January 1 to September, 30, 1931
[P. 148, Report of the Comptroller of the Currency, 1931]
Imports of
merchandise
Exports of
merchandise
Excess of
exports over
Imports
1914 .•••••••••••.•••••••.•.•.....•.•.•••••••••••.•.•.•.• $1,789,276,001 $3,113,624,050
$1,324,348,049
1915.................................................... 1,778,596,695
3,554,670,847
1,776,074,152
1916.•• -................................................ 2,391,635,335
5,482,641,101
3,091,005,766
6,226,255,654
3,273,789,699
1917 .••••••••••••••••••....•...•.••.•..••••..•.•......•. 2,952,465,955
1918.................................................... 3,031,304,721
6,149,241,951
3,117,937,230
1919.................................................... 3,904,364,932
7,920,425,990
4, 01"!1, 061, 058
1920.................................................... 5,278,481,490
8,228,016,307
2,949,534,817
1921.................................................... 2,509,147,570
4,485,031,356
1,976,833,786
1922.................................................... 3,112,740,833
3,831,777,469
719,030,636
1923.................................................... 3, 79~, 065, 963
4,167,494,080
375. 427, 117
1924. ····························-······················ 3,609,962,579
4,590,983,845
981,021,266
1925--··················-······························· 4,226,589,263
4,909,847,511
683,258,248
1926.................................................... 4,430,888,000
4,808,660,000
377,772,000
1927 ••••••••••••.•••••.•.........••..•••••••••••...•••.. 4,184,742,000
4,865,375,000
680,633,000
1928.................................................... 4,091,444,000
5,128,356,000
1,036,912,000
5,240,995,000
841,634,000
1929. -·················································· 4. 399,361,000
1930.................................................... 3,060,908,000
3,843,181,000
782,273,000
1931 (9 months) •••••••••••••••.....•....••• 7 • • • • • • • • • • • • 1-'-l_,6_1_9,_28_1_,_000--4_1_1_,8_4_2,_509_,000_4 _ _, _22_3_,2_28_,_o_oo
Total, 17 years and 9 months..................... 60,163,261,337 88,389,085,161
1
28,225,823,824
Preliminary, subject to correction.
Following the panic October, 1929, exports fell off about $3,000,000,000; imports
fell off over $2,000,000,000 from 1929 to 1931.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
156
STABILIZATION OF COMMODITY PRICES
EXHIBIT
5
Purchasing power of the dollar expressed in terms of wholesale prices
[1926~$1.000J
Year
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Average
for year
------ -1913_ ------------- $1.422 $1.433 $1. 431 $1.435 $1.451 $1.449 $1.439 $1. 435 $1. 416 $1. 420 $1.427 $1.447
1914_ ------------- 1. 458 1.464 1.471 1.479 1.484 1. 484 1.486 1. 437 1.425 1.471 1.481 1. 486
1915_ ------------- 1.458 1. 458 1.466 1.456 1.499 1. 464 1.443 1. 458 1.464 1.425 1.395 1.351
1916 -· _-- ---- -- -- __ 1.299 I. 274 1. 244 1. 224 1. 212 1.206 1.199 1.175 1.151 1.098 1. 027 1.008
1917 _ ------------- .979 .957 .929 .876 .829 .820 .813 .801 .810 .818 .814 .814
1918_ ------------- .800 • 815 . 791 • 779 • 781 . 775 • 758 .745 • 727 • 734 • 734 . 734
1919_ ------------- • 744 .770 . 762 . 752 • 739 .737 .709 .693 • 709 • 706 .692 .664
920_ ------------- .634 .637 . 631 .604 .598 . 601 .603 .620 .644 .693 .750 .829
1921. ------------- .877 .953 .977 1.011 1.040 1.071 1.071 1.070 1.071 1. 063 1. 062 1.076
1922_ ------------- 1.094 1. 076 1.078 1. 073 1.041 1.038 1. 006 1.014 1. 007 1.004 .995 .993
1923_ ------------- .980 .968 .957 .962 .981 .997 1.016 1. 022 1.003 1.006 1.016 1.019
1924_ ------------- 1.004 1. 003 1.015 1. 028 1. 043 1. 054 1. 046 1.031 1. 030 1.018 1.009 .985
1925_ ------------- .972 .962 .960 .981 . 984 .971 .959 .962 .967 .965 .957 .967
1926_ ------------- .965 .979 .996 .999 .995 .995 1.055 1.010 1.003 1.006 1. 016 1. 021
1927 _ ------------- 1.035 1.043 1.058 1.067 1. 067 1. 066 1.063 1. 050 1.036 1. 031 1. 034 1.033
1928_
------------- 1.038 1.037 1.042 1. 027 1.014 1. 025 1.017 l.011 .999 1. 022 1. 034 1. 034
1929 ______________
1.029 1.034 1.026 1.033 1.044 1.037 1.020 1. 024 1.026 1.038 1. 059 1. 062
1930_ ------------- 1.071 1. 086 1.101 1.103 1.122 1.152 1,190 1.190 1. 188 1.211 1.244 1.276
1931 _ ------------- 1. 299 1.325 1.342 1.364 1.403 1.429 1.429
$1. 433
1.468
1.439
1.170
.851
.762
.722
.648
1. 025
1.034
.994
1.019
.966
1.000
1.048
1.024
1.036
1.169
------ ------ ------ ------ ------ ---------
EXCHANGES
The total exchanges of interbank checks as shown by reports of clearing houses
were: In 1929, $713,000,000,000; in 1930, $628,000,000,000; in 1931, $462,000,000,000-over 40 times all the gold in the world.
The velocity of the dollar and the efficiency of the banking system and the use
of checks is thus exhibited.
It will be observed that these transactions fell off from 1929 to 1931 by $250,000,000,000, or over 35 per cent.
There was an adequate cause.
The following chart shows the fluctuations in the purchasing power of the
dollar in the wholesale markets, based on the general commodity index of the
daily wholesale prices of 550 commodities, each one weighted in accordance with
its relation, volume, and importance.
This table is the exact reverse of the chart of the general-commodity index.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
EXHIBIT
I-'
I-'
I-'
f
PU-RCHASING POWER OF THE DOLLAR EXPRESSED IN TERMS OF WHOLESALE PRICES
(1926= $1.00)
200
200
180
180
r
I
....
5A.
rn
~
t,:j
~
160
160
140
-
-
-i--,,...._
'
120
/
\..
\
100
80
r' i'..
I
\_
j
~
PR[PAAEO BY
U 5. DEPARTMENT or LABOR
60 I- BUREAL
or LABOR STATISTICS
~ ~}
r-,,1'
...............
~
-
-
V
J
/
I
140
>
!2l
0
l,;j
120
C
0
is:
is:
~
100
0
t:j
H
H
~
80
;
@
60
1921
1922 1923 1924 1925 J 1926 1927 1928 1929 1930 1931 •••
1919 1920
1917 1918
1914
1915
1915
40
40
The dollar fell from over 140 to 60 following the expansion of credit during the war and rose again to 140 plus following contraction
of credit in 1929-1931.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
IS
t-3
H
0
WASHINGTON
I
H
l'll
158
STABILIZATION OF COMMODITY PRICES
Ex_HIBIT
6
Total paper currency issued 1930-31
Outstanding November1-------c------i
Denominations
s1.. ••••••••••••••.•.•.•.•••••••.•••••••••••••••.•.•••.•.•••
$2 •••••••••••••••••••• •••••••••••••••••••••••••••••••••••• ••
$5..........................................................
$10.........................................................
$20.........................................................
$60. .••••••..•••••••••••••••••••••••••••••••••••••••••••••••
$100... ••• •...•••••••••••••••.•••..•••••••••••••••••••••••••
$500.•• ••••·••••••••••••••••••·•·•·•••••••••••••••••••••••••
$1,000
~:ronal parts............................................
Tot al.................................................
1931
1930
$487, 779, 136
49, 704, 228
778,794,053
1,465,588, 737
1,691,836,616
466,398,300
652, 178, 120
171,613, 500
320,707,500
$481,647, 106
li6, 794,080
824,197,726
1,364,167,637
1,434,504, 186
200,371,940
347, 466, 120
78, 624, 000
168,670,500
~~~
~ ~~ :l
Change (In
millions)
+o
-7
-45
+101
+257
+176
+306
+93
+102
+~&
f-------+------1---6, 208, 606, 989
5, 164, 009, 855
+ 1, OM
It will be noticed that the new issues are in large denominations suitable
for hoarding.
EXHIBIT 7
Stock and bond averages, December 17,_1931-19/89-1930
STOCKS
50 Indus•
trials
20 ralla
To-day•••.•••••.•••••••••••••••••••.•••••••••••••••••••
Previous day•••••••••••••••••••••••.•••••••••.•••••••••
Week ago ••••••••••••••••••••••••••••••••.•••••••••••••
Month ago •••••••••••••••••••••••••••••••••••••••••••••
Year ago ••••••••••••••••••••••••••••••• · •.•••••••••••••
3 years ago ••••••••••••••••••••••••••••••••••••••••.•.•.
5 years ago •••••••••••••.•••.•.•.•••••...•••.•••.•••••.•
161.6
I 32. 2
67.8
80. 7
112. 9
35.2
Low, 1930••.•••.••••••••••••••••••••••••••••••••.••..•.
112.9
252. 8
63.3
190.4
High, 1931. •••••••••••••••••••.••.••••••••.••••.•.•....
Low, 1931 ••••••••••••••••••..••••••••.••.••.•••.•.•••.•
High, 1930••••••••.•••••••••••••••••.•••••••••••••••••• -
106.8
140.2
61.6
202.4
f~~· 1~·::::::::::::::::::::::::::::::::::::::::::: .
141. 3
33.2
46.4
86.4
128. 4
105. 8
100.2
32. 2
141.6
86.4
167.8
117. 7
20 utilities Total {00)
95.0
96. 4
107.1
122. 6
146. 5
182.0
104. 4
203.9
94. 9
281.3
146. 5
353.1
156. 3
I
63. 0
64.5
69. 7
82.8
114. 7
178. 8
106. 2
144. 3
63.0
205.8
114. 7
253.5
140. 2
BONDS
20 Indus•
trials
To-day •••••••••••••••••••••••••••••••••••••••••••••••••
Previous day•••••••••••••••••••••••.•••••.•.•.•••••••••
Week ago ••••••••••••••••••••••••••••••••••••••••••••••
Month ago •••••••••••••••••••••••••••••••••.•••••••••••
Year ago ••••••••.••.•••••••.•.•••••••••••.•••••••••••••
2 years ago •••••••••.••••.••••.•.•••••••••••••••••••••.•
3 years ago •••••••••••••••••••••••••••••••••••••••••••••
High, 1931.••••••••••••••••••••.••.•••••••••••••••.•••.•
Low, 1931. •...•••.••••••••••..•.•••••••••••••••.•••••••
High, 1930•••••••••..••••.••.•.•••••••••••••••.•••.•••••
Low, 1930•••••••••••••••••••••••••••••••••••••••••• · ••.
High, 1929•• -•••••••••••••••••••••••••••••••••••••••••••
Low, 1929••••••••••••••••••••••••••••••••••••••••••••••
1 New
1931 low.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
163.6
64. 2
69.2
76.4
84.3
92.2
94.8
90. 4
64. 2
94. 9
83.3
95.3
90. 4
20 rallB
I
62. 3
63.6
70.3
83.5
97.6
105.2
104. 9
106. 7
62. 3
109.8
97.3
106. 0
100.8
20 utilities Total (60)
181.2
82. l
86.5
91. 7
96. 9
98. 4
99. 7
101.5
81.2
10L4
96. 6
99.8
96. 0
169.0
70.0
75.3
83.9
92. 9
98. 6
99.8
98. 7
69.0
101.9
92. 6
99.9
96. 3
159
STABILIZATION OF COMMODITY PRICES
Here appears the evidence that dealing with the leading industrial stocks,
rails and utilities, the average high in 1929 was 253.5 and the price to-day,
December 17, 1931, was 63, a fall in market price in two years of 75 per cent to
one-fourth of the high value in 1929.
In other stocks. the fall was still greater, going down to 90 per cent, 95 per cent,
and zero.
-r<
!
L......,,,"'
____. r
!
< ........__
-....~
n._
§
ci.
IN
~
.
E-<
=
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z
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h 'a
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0
..e
~
~
;:
fa;l
i
§ .s
"'
00
Pl
....
0,
l
:!~
J <3
.......
: ~ :~
~
I
.: c::
0.t
\
.s
1
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0
D
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! .; =
~
ol
f
Cl)
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Cl)
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ii
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00
~
~
.,i::
;f:;
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~
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0
Cl)
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Cl)
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C:
Cl)
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;,
Cl)
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Cl)
c:..,
~
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0
i:I
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
~
.,
!:
!!
!!
§
ie
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
EXHIBIT
CHART
H.
Pe, Cent
1'ZO
0
9
WHOLE.SALE PRICES
INDEXES OF U.S.BUREAU OF LABOR STATISTICS, 1926,100
Per Cent
Monthly basis
120
~z
"'0
....
~
0
:aCD ::t
c:,
,_, CD
CD 0
"' ....
~z
CD CD
p.
110
110
:a
0-><:
'<
0
0..,
~i,;'
.=
0
....1-30
:aCD
0
i,;'
100
I>'
"'=
90
90
=
~
~
..,
:a::,"'
CD
=
~
::,CD
60
192.1+
1925
1926
l'l27
1'328
60
1'32.9
19~0
l'3~1
Notice the sudden declines following the call of brokers' loans in October, 1929.
0
§:
=
p.
I>'
70
l,;j
0
"d
l;d
g
70
!2l
s·::::
I>'
60
>
ts:
ts:0
....e,
1-3
'O
60
....
....t:"'N
~ 0"'I>'
100
rJ1
~
1:,:1
..,
00
i,;'
CD
....
"'
~
....
@
rJ1
161
STABILIZATION OF COMMODITY PRICES
EXHIBIT
CHART L.
MILLIONS OF DOLLARS
71100
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
10
BROKERS' LOANS
MILLIONS
or DOLLARS·
7000
162
STABILIZATION OF COMMODITY PRICES
EXHIBIT
CHART f.
11
VOLUME Of MANUFACTURING PRODUCTION
DAILY AVERAGE AGGREGATES IN P'. R. BOARD INDEX
ADJUSTED FOR SEASONAL VARIATl<JI
100~----.--~...:...:.-,------r------.--- ---,,00
90 --- -
90
All Manufactures
--+-~-=---+------+-----f80
~i-::.----Olii;;::--t:....--.,,,,=-ir----\---t-::---::~--1'------7~
oo1-----+-----+--------'P+---4.--+- ---~~
40 - - - - - + - - - - . . . . . . - j - - - - - - 1 - - - - - 1 - - - - ~ 4 0
Steel. Automobiles. etc.
10
10
9
9
Foods and Tobacco
8
8
7
7
6
6
5
5
I+
4
1927
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
1928
1929
1930
1931
EXHIBIT
CHART
12
FACTORY EMPLOYMENT AND PAYROLLS
D.
INDEXES OF F. R. BOARD, 1923-25 =100
Per Cent
130
Per Cent
Without Seasonal Adjustment
130
,,,• 1'\,\
120t----t-t1--"'-+-t-----+----+---'--+-----+------l----.1---- 1----l------1---------ll-------l120
I
\
J~
\
Ji~ \
Payrolls
,,., ,.,
' t•
,
A,
'!h\
\
I
,,d
iI
I
I
go \._I
\
t~ ~VI
A
J' 'l\ \
J,..,.'ii.I'\.
•. ·1 In.\
/t'V'-.\Jl\ 1 i \r:\ ,\.,./_ ~
r, ~ ➔
V/ '\,, /
-t--------1H:t-----+---/;---,/l-'t----l<-~-,v.---,H1.y-~·
100 i------t-,
,
,r·
,~, 'i
110
f \I t
''
f
/ '-'
\
IIO f,-l/,---1-,,~"'.~,•...
' +---'\-'-\-',,+----+------lM--,.--'1--+----1--------l-A- '>, A
;t\\'
100
,, ,·\
➔\'/"-I
I
\
~ \,
Employment
\
V
90
\
i:➔' h
80 1-----1----+'--'."''-\l''---l------l.-i--'-+----+----+-----+-----+-----+---+-- -+-- ..~,\+------180
~\
l'f
\,.., " lj
\ I t, y
tYi/
'/\
701-----+----1---------N---1--------1------1-- ----1------l-----+----l-----+--~----l-+-~70
\
\
60~•-,_,___ _J___ __ L_ _ _i___ __J__ _ _J___ _....J__ _ _J___ __ L_ _ _J___ __J__ _ _i___ _.....L._
1919
1920
1921
1922
1923
1924-
1925
1926
1927
1928
1929
1930
",\
__,.,_,.,
1931
The fall of pay rolls and employment followed immediately the contraction of credit and currency in 1920 and 1929.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
60
164
STABILIZATION OF COMMODITY PRICES
EXHIBIT
13
Comparable data available on 650 corporations (industrials)
[Source: Standard Statistics Co. (Inc.), New York City]
[In millions of dollars]
1927
Net profit __________________________________________ _
Fixed charges ______________________________________ _
Net income _________________________________________ _
Preferred dividends ________________________________ _
Common dividends ____ ----------------------------BB!ance after dividends ____________________________ _
1928
2,559
257
2,302
260
1,383
659
3,227
259
2,968
254
1,519
1,195
1929
3,683
225
3,458
273
1,870
1,315
1930
2,112
240
1,872
277
1,754
1159
1931 (es•
timated)
1,365
260
1,105
244
1,382
I 521
[In relatives (1929=100)]
:i~~~rg:!-ges _______ ------------------------ -- -----Net
income
______ ----------------------------------Preferred
dividends
________________________________ _
Common
dividends
____ ____________________________
-----------------------------_
Balance after dividends
1
69
114
66
95
74
50
88
115
86
93
81
91
JOO
57
37
100
107
115
100
54
32
100
104
89
100
93
74
JOO --------•- --------··
Decrease.
[Senate Hearing, NationBI Economic Council]
The CHAIRMAN. How much of a fall is that from 1929?
Mr. SLOAN. The net income of those corporations was just about divided by
three. They will make about a third this year of what they made in 1929.
Senator SHEPPARD. Normally the price decline would cause an increased
demand under the operation of economic law, would it not?
Mr. SLOAN. Yes; it would; and that is one thing that has been relied upon
to put an end to this depression, but it just has not worked that way.
Senator SHEPPARD. What is the difficulty from your standpoint?
Mr. SLOAN. People are still in such a state of fear that they are holding their
purchases down to the absolute minimum."
EXHIBIT
14
fREIGHT • CAR LOAO IN&S
~(ICFcr,t;....._ _- , - - - - - . - - - - ~
•:j~t!° {.;,~"f-~!:t-=oo
,., C,nt
130
1201-----1--------+----1-----+-----+-----+-----1120
10 '°"".....,.,,924=---'---1"'m:-:--"--,,-:c92"'&--'---,.,,..,2"'1_.,__-=19"'2s=---'--.,,,92"='9:---'---::m::-:o:---'--i,~~__.•o
Car loadings immediately fell in 1929 with the contraction o_f credit and the
calling of brokers' loans.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
165
STABILIZATION OF COMMODITY PRICES
E"lCHIBIT
15
Brokers' borrowings, 1926-1929
[Net borrowing on co\lateral In New York City as reported by members of the New York Stock Exchange]
[In millions of dollarsJ
Date
Total
From
New
York
banks
and
trust
companies
From
private
banks,
brokers,
foreign
banking
agen·
cies, etc.
On time
On demand
On demand and on time
Total
From
New
York
banks
and
trust
companies
From
private
banks,
brokers,
foreign
banking
agen•
Total
cies, etc.
From
From
New
private
York
banks,
banks,
foreign
trust banking
com•
agen•
panies,
cies, etc.
etc.
- - - - - - - - - - - - - - - - - - --1926
Jan. 30.•••••••••••••
Feb. 27 .••••.•••••.•
Mar. 31. ••••••••••••
t/',r· 30 •••••••••••••
ay 31. .•••••••••••
June 30 •••••••••••••
July 31. ••.•••••••••
Aug. 31. ••••••.•••.•
Sept. 30 •••••••••••••
Oct. 30••••••••.•••••
Nov. 30••..•.•.•.•••
Dec. 31. ..••••.••••.
365
379
398
365
397
414
701
715
778
800
822
800
751
920
958
875
770
690
657
665
713
724
743
704
676
96
90
43
50
65
76
78
96
76
996
1,041
967
866
2,998
2,553
2,468
2,392
2,509
2,583
3,142
3,219
3,111
3,129
3,293
2,698
2,745
2,668
2,636
2,804
470
455
447
367
375
417
415
444
474
444
493
489
1927
Jan. 31. .••••••••••••
Feb. 28 •••••••.•••••
Mar. 31.••••••••••.•
t/',r. 30 •••••••••••••
ay 31 •.•••••.•••••
June 30 •••••••••••••
July 30 ••••.••••••••
Aug. 31. .•••••••••••
Sept. 30•••••••.•••••
Oct. 31. .••••••••••••
Nov. 30•.•••••.•••.•
Doo. 31. ••••.•.•.•..
3,139
3,256
3,290
3,341
3,458
3,569
3,642
3,674
3,915
3,946
4,092
4,433
2,670
2,757
2,790
2,865
2,968
3,065
3,145
3,170
3,340
3,363
3,519
3,812
469
499
500
476
490
504
497
504
575
583
573
621
2,328
2,475
2,505
2,541
2,674
2,757
2,765
2,746
3,018
3,023
3,134
3,481
1,964
2,085
2,112
2,146
2,254
2,316
2,343
2,330
2,539
2,549
2,675
2,963
365
391
393
395
420
441
421
415
479
475
459
518
810
781
785
800
784
812
877
928
897
923
958
952
707
673
679
719
713
749
802
840
801
814
844
849
104
108
107
81
70
63
76
89
96
108
113
103
1928
Jan. 31. .........•..
Feb. 29 .........•...
Mar. 31. •••......••
Apr. 30 ..••......••.
May 31. .•...•••••••
June 30...•...•••.•.
July 31. ..••........
Aug. 31.. •.......•..
Sept. 29 ••.•....•...
Oct. 31. •...•.•.•••.
Nov. 30.•••..•.•..•.
Dec. 31. .........•..
4,420
4,323
4,640
4,908
5,274
4,898
4,837
5,051
5,514
5,880
6,392
6,440
3,805
• 3, 737
3,947
4,246
4,568
4,169
4,150
4,260
4,647
4,994
5,412
5,401
615
585
693
662
707
730
687
791
366
886
979
1,039
3,393
3,294
3,580
3,739
4,070
3,742
3,768
4,094
4,690
5,116
5,614
5,722
2,882
2,807
3,016
3,201
3,455
3,122
3,183
3,420
3,939
4,360
4,771
4,810
511
488
564
537
616
619
585
674
751
756
843
913
1,027
1,028
1,060
1,169
1,204
1,157
1,070
958
824
764
777
717
923
931
931
1,045
1,113
1,046
967
840
709
634
641
591
104
98
129
124
91
110
102
116
130
136
126
1929
Jan. 31. ••.••.......
Feb. 28 ....•.•••....
Mar. 30 •••••.......
Apr. 30 .............
May 31. ...•••...•..
June 29 ••.•••••••...
July 31. •.•••••.....
Aug. 31. ...•........
Sept. 30 •••.......•.
Oct. 31. •.•.•...•.••
Nov. 30..••..••••••.
Dec. 31. .....••....•
6,735
6,679
6,804
6,775
6,665
7,071
7,474
7,882
8,549
6,109
4,017
3,990
5,664
5,619
5,713
5,580
5,482
5,797
6,154
6,942
7,077
5,313
3,432
3,370
1,071
1,060
1,091
1,194
1,183
1,275
1,320
1,390
1,472
796
585
620
5,983
5,948
6,210
6,204
6,100
6,444
6,870
7,162
7,832
5,043
5,034
5,231
5,154
5,061
5,333
5,705
5,962
6,543
4,639
2,873
2,883
939
914
979
1,050
1,039
1,111
1,165
1,200
1,289
599
424
494
621
584
482
427
422
464
449
530
534
674
559
487
132
146
112
144
144
163
155
190
183
197
161
126
3,513
3,536
3,000
2,836
2,767
2,926
3,043
3,080
2,517
2,495
2,033
1,970
1,987
2,225
2,123
2,364
2,419
2,289
2,330
2,542
2,123
1,678
1,699
1,703
1,852
1,918
1,984
2,021
1,924
1,932
2,128
2,283
5,238
3,297
3,376
394
372
356
271
285
374
780
752
730
594
571
565
627
604
720
717
871
719
6131
76
83
92
117
Back _ligures.-See Annual Report for 1927 (Table 47) for figures for 1918-1922; figures for 1923-1925 nol
available.
A fall of $1,559,000,000 in these loans from Oct. 1 to Dec. 31, 1929.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
166
STABILIZATION OF COMMODITY PRICES
These exhibits show that in October, 1929, and months following, there was
a sudden fall.
1. In security prices, down from 70 to 90 per cent.
2. In wholesale prices, down to 68 per cent from 98 per cent.
3. In the volume of production, down from 80 to 48.
4. In factory employment, down from 105 to 75.
5. In factory wages, pay rolls, down from 112 to 62.
6 .. In car loadings, down from 108 to 68.
7. In brokers' loans, over 7,000,000,000 credit withdrawn.
8. Net earnings corporate fell over 60 per cent.
The dollar rose to 45 per cent additional purchasing power in the wholesale
markets, and in taking over collateral or mortgaged property rose still higher in
settling many debts.
Wholesale bank failures followed as in the panic of 1920-21, when 6,000 banks
·were closed.
The charts and tables all show that the country was prosperous from January
to October, 1929.
Commodity prices were stable at 98 in July, 1929.
Factory employment and wages above normal, volume of production high,
car loadings above normal.
. The cause could not have been any .sudden contraction of currency or of
Federal Reserve credit for the tables submitted show there was no serious contraction at that moment.
The following chart of the reserve bank operations show. there was no sudden
contraction of reserve credit or currency:
ExmBIT 17
NllonurDII•
RESERVE BANK CREDIT OUTSTANDING AND PRINCIPAL FACTORS IN CHANGES
//
j
I
7 ""
I
\
I
ltOOO
\. ,V
-
~,
,~
If-I
3000
,v
/
~
'
"-"'
,......_
17 1\---+GoldS!och
\
r---,-..
M<mbr il<lnKRa<Ml!al"1m
/ 1',...
~ 1./"'
) rJ
,u~
~ r---v-
DJ
m
""
1916
1919
mo
u
V
i\._ vi/
LI
'
...
,/
. u·
0
i
J
}v
-
NIIIDnlrl . . . .
Mmcy" Crcu~iao
)Ir
IOOO
~,
(Mom!MyAvt.,,!IDatyf,,....)
6000
.
-
I
_)
_J V
Rr1<rwl!anl\Otdlt
~ I'--'\
I
V
\.
.
1000
I
0
1921
1922 1923 1924 1925 1926 1927
1926 1929 1930
1931
1932
The stock of gold was increasing and continuing to increase and has continued
to increase. The Federal reserve had all power necessary to expand the currency
or legitimate banking credit.
There must have been other factors that destabilized credit and caused the
collapse that took place. The available evidence to show what occurred is
above set forth.
Exhibit 17 shows that it was not the fall of reserve bank credit in the crisis of
1929 that caused the panic for it was rising.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
167
STABILIZATION OF COMMODITY PRICES
EXHIBIT
18
Building contracts awarded, by groups, adjusted for seaaonal variations 1
Year ·and month
Total
1919 ••••••••••••••••••••••••••••••••••••••••••••••.•.••. $3, 102, 000, 000
1920•••••••••••••••••••••••••••••••••••••••••••••••••••. 3, 108, 000, 000
1921 ••••••••. ·••••••• •••••••••.••••••••• •••••••••••••••• 2, 756, 000, 000
1922••••.••••••••••••••••••••••••••••••••••••••••••••••• 3,875,000,000
1923 •••••••••••••••••••••• ••••••••••• ••••••••• •••••••••• 4, 130, 000, 000
1924 .•••••••••••••••••••.••••• ••••••••••·••••••••• ••• · •• 4, 656, 000, 000
6, 006, 000, 000
1925••••••• ••••••• ••••.•••••••••••••••.• •••••••• •••••• •
1926••. •••••••••••••• ••••••• •••••••••••• •••••••••••••••• 6, 381, 000, 000
1927.••••••••••• •••••• ••••• ••••••••••••••••••• •••••••••• 6, 303, 000, 000
1928 •••••••••••••••••••••• ·••••••••••••••• •••••••••••••• 6, 628, 000, 000
1929 ••• •·•·••••••• ••••••••.• ·••••••••• ••••••••••.•.•.••. 5,751,000,000
1930 ••••.....••.••••••.•.•••.•••••••••••••••••••••••••.• 4, 523, 000, 000
1931-January ••••••.•••••••.•••••••••••••••••••.•••.•••
291,000,000
February •••••••••.•....••••••••••••••••••••••..••
323, 000, 000
March ••.•••••••••.•.•.•••.••••.••••••••••••••.••.
314, 000, 000
April •••.•••••••••••.•.•.•.•••••••••••••••••••••••
298,000,000
May••••••••••••••••••••••••••••••••••••••••••••••
265, 00, 0000
June ••••••••••••••.•••.•.•••••••••••••••••••••••••
259, 000, 000
July••••.•••••••••....•...••.•••••••••••••••••••••
251, 000, 000
August ..••••••••••••.••.•.•.•••••••••••••••••••••
243,000,000
September••••••••.•.•••.••••••••••••••••••••••••• 1 240,000,000
Residential
$970, 000, 000
651,000,000
991,000,000
1, 506, 000, 000
1, 788, 000, 000
2, 116, 000, 000
2, 748, 000, 000
2, 671, 000, 000
2, 573, 000, 000
2, 788, 000, 000
1, 916, 000, 000
1, 101, 000, 000
82,000,000
87,000,000
87,000,000
81,000,000
73,000,000
68,000,000
65,000,000
60,000,000
158,000,000
All other
$2, 132, 000, 000
2, 457, 000, 000
1, 765, 000, 000
2, 368, 000, 000
2, 343, 000, 000
2,540,000,000
3, 259, 000, 000
3,710,000,000
3, 730, 000, 000
3, 840, 000, 000
3, 835, 000, 000
3, 422, 000, 000
210,000,000
235,000,000
227, 000, 000
216, 000, 000
192, 000, 000
190,000,000
186,000,000
183,000,000
1182,000,000
1 Annual figures, actual yearly totala In 37 eastern States as reported by F. W. Dodge Corporation;
figures for 1919 to 1924 partly estimated by Federal Reserve Board. Monthly figures are 3 months moving
averages adjusted for seasonal variation by Federal Reserve Board. For description, see Federal Reserve
Bulletin for July, 1931.
1 Preliminary.
Exhibit 18 shows that a vast building program was in progress when the calling
of brokers' loans reduced it by half and almost destroyed residential building.
ExHiBIT
19
Corporate issueB in United States, eulusive of refunding
[Source: Commercial and Financial Chronicle]
Year
Total
1919. •••••••••••••••••••••••••••••••••·•·•••·•·•·•••••·• $2,303,000,000
1920. •••••••••••••••••••••••••••••••••••••••.••••••••••• 2,709,000,000
1921.. •••••••••••••••••••••••••••••••••••••••••••••••••• 1,824,000,000
1922. ••••···••••·•••·•••••••••·•••••••••••••·••••••••••· 2,336,000,000
1923. •·•••••••·•·•••••••••··••·••••••••••••••••••••••·•· 2, 703, 000, 000
1924 .••••••••• ••·•••••••·•·•·•••••·•••••••·••····•••·· •• 3, 322, 000, 000
1925 .• ·•·•••·•·•••••••••••···•••••·••••••••••••••••••••• 4,099,000,000
1926. •••·•·•·•·•••·•·•••·•·····•········•·•·•·••·•·•·· .. 4, 358, 000, oco
1927. •••••••••••••••••••••••••••••·•·••••••••••••••••••• 5,393,000,000
1928 .• ·•·•·•·•·····•··•·•••··· '························· 6, 080, 000, 000
1929••••••••••••••••••.•...•.....•.•••.•••..••...••. ·••• 8,640,000,000
1930. •••••••••••••••••••·•·•·•·•·•·•·•••••••···•·•••·• •• 4, 945, 000, 000
1931. •••••••••••••••••••••••••••••.•••••.•••••...••••••• I 1,946,000,000
I
Bonds and
notes
$848,000,000
1,674,000,000
1, 654, 000, 000
1, 761,000,000
1, 955, 000, 000
2, 492, 000, 000
2, 888, 000, 000
3,177,000,000
3, 384, 000, 000
3, 009, 000, 000
2, 551, 000, 000
3, 400, 000, 000
I 1, 67 5, 000, 000
Stocks
$1, 445, 000, 000
1, 035, 000, 000
270,000,000
575,000,000
748, 000, 000
830,000,000
1, 211, 000, 000
1, 181,000,000
1,509,000,000
3,071,000,000
6, 089, 000, 000
1,545,000,000
I 271,000,000
• Estlm11ted by Federal Reserve Board on basis of 9 months' figures.
The CHAIRMAN. Could you give me the total figures for the period of new
corporate security issues?
Doctor GoLDENWEISER. It is $50,658,000,000.
Here we have over fifty billions of new stocks and bonds sold to the public.
These stocks were sold to some 16,000,000 American citizens.
The total shares listed on the New York Stock Exchange alone rose from
220,753,423 shares in 1920 to 433,448,561 shares in 1925, to 757,301,677 shares
in 1929, to 1,296,794,480 shares in 1931. (See New York Stock Exchange
Bulletin of August, 1931.)
These vast issues required ,larger and larger supplies of money to carry the
undigested or unsold stock and stocks carried on margin for the infatuated public.
To get this money the call rates were raised up as high as 20 per cent, and the
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
168
STABILIZATION OF COMMODITY PRICES
high call rates attracted the money from domestic banks and from foreign banks
and from private individuals, who had made millions on the bull market. .
By October the brokers' loans had reached eight and one-half billions, subject
to call (mostly).
By this time there had grown up a grave distrust of the actual value of these
stocks. Many of them were selling at 20, 30, and 50 times their net incomes.
These issues absorbed all the available free capital the country could supply
even by the free use of credit.
The Reserve Board had for a year or more been advising against any use of
reserve bank credit for speculative loans and using its influence to keep the member banks from lending on New York Stock Exchange collateral stocks while
borrowing from the reserve banks.
•
To deprive the stock exchange brokers of this credit, they attempted in vain
to check the orgy of speculation by raising the rate of interest.
This penalized business, compelled Europe to follow suit to protect the gold
underlying its currency, and penalized business throughout the world and became
a major factor in_ the unavoidable reaction and in the major bear movement
that ensued.
The inflated credit which the public had thus reposed in the preposterous
values of these stocks and bonds exploded in the last week of October, 1929,
with a violence that reached the end of the :financial world.
During the week of October 23 to October 31, credit was withdrawn from the
brokers by calling about $2,300,000,000 on "a/c of others" and out-of-town
banks and the New York City banks were compelled to suddenly advance about
$992,000,000 to prevent a collapse of the exchange.
During October, November, and December the brokers' loans were reduced
from $8,549,000,000 to $3,999,000,000, a net cancellation of credit in 90 days of
$4,559,000,000.
The total of brokers' loans have now been reduced to less than a billion, a
cancellation of credit of over seven and one-half billions.
The effect of calling these brokers' loans was the forced sales of the stocks held
on margin at a time when a wholesale calling of credit was taking place. It was
selling under the conditions of panic, and -afforded a great opportunity to the wise
and powerful operators who knew how to sell short, cover, and sell again on the
precipitous declines that were necessarily taking place.
EXHIBIT
20
Transactions on the New York Stock Exchange, 1929
Number of Index of
shares
stock
sold I
prices 1
Number of Index of
shares
stock
prices •
sold I
Oct. 14 _____________________ _
Oct. 15 _____________________ _ 2,755,850
Oct.
0ct. 16---------------------17 _____________________ _
Oct. 18 _____________________ _
Oct. 19 _____________________ _
Oct. 21 _____________________ _
Oct. 22 _____________________ _
Oct. 23 _____________________ _
Oct. 24 _____________________ _
Oct. 25 _____________________ _
Oct. 26----------------------
3,107,050
4,088,000
3,864,150
3,507,740
3,488,100
6,097,870
4,129,820
6,374,960
12,894,650
5.923,220
2,087,660
1 New York Herald Tribune.
1 Standard Statistics Co. index
242.6
240.6
232.2
235.8
229.0
222.4
220.2
224.5
211. 2
204.5
207.4
206.0
Oct. 28---------------------0ct.
29 _____________________ _
Oct. 30 _____________________ _
Oct. 31. ____________________ _
Nov. 1. ____________________ _
Nov. 2---------------------4_____________________ _
Nov. 5_____________________ _
Nov. 5_____________________ _
Nov. 7_____________________ _
Nov. 8---------------------Nov,
9_____________________ _
9,212,800
16,410,030
10,727,320
7,149,390
(•)
(8)
6,202,930
(B)
5,914,760
7,184,060
3,214,660
(')
180. 6
162.2
182.6
191.8
(')
(8)
181. 7
(')
163. 7
169.7
168. 2
(B)
of 90 stocks, 1926-100.
• Closed.
Total val~e !)f stocks listed on New York Stock Exchange as reported by Standard Statistics Co.: Oct. !,
1929, 87.07 billion dollars; Nov. 1, 1929, 71.75; Dec. 1, 1929, 63.59.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
169
STABILIZATION OF COMMODITY PRICES
21
EXHIBIT
Index of factory employment, without aeaaonal adjustment
1919
1920
1921
105. 2
101. O
7
102.
102. O
102.
104. 8O
106. 6
109. 0
111. 2
110. 4
111. 5
113. 4
114.0
113.1
115.2
113.9
111.7
110.9
108.4
108. 6
107.1
103. 5
97.5
90.3
106. 7
107. 9
1922
1923
1924
81.3
82. 7
83.1
82.1
82.2
81.3
79.9
81.4
83.3
84.0
84,2
83.3
82.6
84.4
85.6
85.4
87.6
89.5
87.0
90.3
93.6
96. 4
98.5
100.0
100.6
,102.4
104.9
105.2
105. 3
105.9
104.8
105.5
105.9
104.8
103.4
101. 3
99.9
101.1
101.4
99.7
96.3
93.4
90.5
91.8
94.3
95.1
94.6
95.9
96.4
98.2
99.5
99.3
98.4
98.2
98.1
99.8
102.0
102.4
101.9
101.6
82,4
90.1
104.2
96.2
99.6
1928
19291
1930 2
1925
---------------- --- --- ------ --------January_------------------------------------February
----------------------------------March________________________________________
April_________________________________________
June
May _________________________________________
·---------------------------------------July__________________________________________
August_______________________________________
SeptembAr ----------------------------------October_------------------------------------November__________ - ------------------------December_----------------------------------Annual index___________________________
1927
1926
1931
January ______ ____________ __________________________ 100. 8
94. 2
97.4
93.2
76.4
98.1
95.7
93.3
99.7
February_____________ -------------------------------- 101. 9
99.8
77.3
93.1
100.4
96.6
101.4
78.1
March_-----------------------------------____________ 102. 6
April__________________________________________________ 101. 9
99.8
96.0
102.1
92.6
77.9
99.1
101.9
90.9
95.7
77.1
May-------------------------------------------------- 100. 9
75.0
102.0
99.0
96.2
88.8
June_-----------------------------------______________ 100. 7
July___________________________________________________ 99. 3
102.1
98.0
95. 7
85.5
73.8
August________________________________________________ 101. 1
85.1
104.0
99.2
98.3
74.2
100.3
86.4
106.4
74.6
100.6
September_------------------------------------------- 103. 4
100.2
103.3
99.3
84.3
October_____________ ---------------------------------- 103. 2
81.0
96.9
98.8
98.9
November-------------------------------------------- 101. 2
98, 1
96.4
95.2
78.8
December__ ·------------------------------------------ 100. O
f----l----+---t---+-----1--Annu aI index___________________________________ 101.4
97,2
87.8
98.8
101.1
1 For description see Federal Reserve Bulletin, November, 1930, and November, 1929,
• Figures for 1929 and January-August, 1930, revised sligntly October, 1930.
EXHIBIT
22
Indexes of freight-car loadings
[Federal Reserve Board Indexes based on average number of cars loaded per day, Source of original data,
American Railway Association. Monthly average 1923-1925=100]
TOTAL ALL CLASSES
Month
1919
Without seasonal
adjmtment
January _____________
February____________
March _______________
April __________ -----May_____________ . ___
June _________________
July _________________
August ______________
September___________
October _____________
November ___________
December ___________
Year___________
January _____________
February____________
March _______________
April ________________
May_________________
June _________________
July _________________
August_ _____________
September___________
October _____________
November___________
December ___________
80
99
86
82
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
87
85
81
81
81
80
90
87
90
86
83
91
1924
1925
1926
1927
1928
1929
72
72
71
72
78
80
83
80
89
95
81
72
74
79
84
77
77
88
87
88
98
100
100
88
90
91
95
94
90
95
93
94
99
111
112
104
93
94
95
96
96
103
102
104
110
115
113
109
97
94
96
99
98
106
109
110
112
121
122
113
98
96
88
94
96
_102
104
105
106
111
110
104
88
102
99
106
105
104
109
116
114
101
88
92
94
97
96
105
101
105
109
119
119
109
94
95
99
98
102
109
110
111
115
121
118
102
89
99
97
86
74
91
79
87
100
97
103
106
106
92
94
91
95
84
79
79
75
77
79
80
81
77
80
83
77
77
80
86
99
81
78
85
83
84
88
89
96
101
104
102
102
102
101
99
98
99
97
99
102
100
96
94
91
93
95
99
100
99
101
103
102
101
103
102
100
102
105
102
102
105
107
104
103
105
105
105
. 107
107
107
108
108
109
108
108
107
105
108
107
108
107
107
106
104
102
102
100
99
96
97
96
93
92
89
87
86
84
81
87
76
88
95
96
99
103
103
94
82
83
00
91
102
84
1923
1921
75
72
71
73
With seasonal
adjulltment
1922
1920
- - --
=
88
92
91
94
91
90
91
90
-- - - - - -- - -
88
96
97
99
103
=
106
107
109
106
103
104
102
104
103
101
98
98
103
=
102
102,
103
101
103
100
102
103
105
106
107
106
--
1930
1931
- - -89
91
90
93
97
95
95
96
84
84
74
74
76
77
79
77
78
76
78
-------
---------------=
82
80
80
80
79
77
76
72
co
---------------
170
STABILIZATION
OF COMMODITY PRICES
EXHIBIT
23
All member banks-loans and investments on call dates, 1919-1931
[Source: Federal Reserve Board]
Call date
'fotal
loans and Loans
ihvest•
ments
1919-Mar. 4......•
June 30.......
J\ov. 17 ......
Dec. 31.. .....
1920-May 4.•.....
June 30.......
Nov. 15 •.....
Dec. 29.......
1921-Apr. 28 .•.....
Jw1e30 ......
Dec. 3L. .....
1922-Mar. 10 ......
June 30..... .,
Dec. 29 .......
1923-Apr. 3.......•
June 30.•.....
Sept. 14......
Dec. 31.. ....•
1924-Mar. 31. .....
June 30.......
Oct. 10..•.•.•
Dec. 31.. ..•.•
1925-Apr. 6•.••.•..
June 30••.••..
21,484
22,242
24,187
24,778
25,418
25,559
25,769
25,531
24,390
24, 121
23,482
23,278
24,182
25,579
Z6, 141
2(),507
26,319
26,487
26,663
27,167
28,311
28,746
29,046
29,518
1
13,877
' 15,414
'17,423
' 18,149
19,198
19,533
19,852
19,555
18,487
18, 119
17,394
17,080
17,165
17,930
18,419
18,750
18,719
18,842
19,045
19,204
19,713
19,933
20,176
20,665
2
Invest•
ments
7,607
6,827
6,765
6,630
6,220
6,026
5,917
5,976
5,903
6,002
6,088
6,198
7,017
7,649
7,722
7,757
7,600
7,645
7,618
7,963
8,599
8,813
8,869
8,863
Call date
1925-Sept. 28 •....•
Dec. 31. .....•
1926-Apr. 12......•
June 30..•.•.•
Dec. 31.. .....
1927-Mar. 23 ......
June 30.......
Oct. 10......•
Dec. 31.. .....
1928-Feb. 28 .......
June 30.......
Oct. 3 ........
Dec. 31.. ..•..
1929-Mar. 27 ...•..
June 29.......
Oct. 4...•.•..
Dec. 31. ......
1930-Mar. 27 ......
June 30...•...
Sept. 24......
Dec. 31.. .....
1931-Mar. 25 .•....
June 30•......
Total
loans and Loans
invest•
ments
30,176
30,884
30,819
31, 184
31,642
31,949
32, 756
33,186
34,247
33,688
35,061
34,929
35,684
35,393
35, 711
35,914
35,934
35,056
35,656
35,472
34,860
34,729
33,923
1
21,285
21,996
21,785
22,060
22,652
22,327
·22, 938
23,227
23,886
23,099
24,303
24,325
25,155
24,945
25,658
26,165
26,150
25,119
25,214
24, 738
23,870
22,840
21,816
Invest•
ments
8,890
8,888
9,034
9,123
8,990
9,622
9,818
9,959
10,361
10,590
10,758
10, R04
10,529
10,448
10. 052
P, 749
9,784
Q, 937
JO, 442
10, 734
10,989
11,889
12,106
'Includes recliscounts and overdrafts; excludes acceptances of other banks and bills of exchange sold
with indorsement.
• Includes small amounts of bills sold with i!ldorsement.
Exhibit 23 shows a contraction of loans from December 31, 1929, to June 30,
1931 of over $5,200,000,000 by the banks following the calling of brokers' loans
in 1929.
Exhibit 24 which follows is a chart showing the huge stock of gold in the
United States over and above the gold held as legal reserves of the Federal reserve
banks.
Mr. GOLDSBOROUGH. Now, gentlemen of the committee, and those
who e,re interested, Mr. Prall has to go to New York. He is deeply
interested and he is necessary to the subcommittee. We feel that
we have to have him, and we are going to close this hearing after we
have had one member of the Farmers Union, whom we promised to
hear to-day. We will hear him, and we are going to close the hearings
until Monday morning at 10.30, when we will hear, I hope, Mr.
Ethelbert Stewart-will we, Mr. Stewart?
Mr. STEWART. May I ask what you care me to speak on?
Mr. GOLDSBOROUGH. Any lines you want to speak on.
Mr. STEWART. The Secretary told me that I could come down here
and at least sit in as an observer and answer any questions you might
want to ask me. I did not understand that I was to make a formal
statement or give formal testimony. Understand I have no
objection-Mr. GOLDSBOROUGH. Mr. Stewart, could you come back to explain
to the subcommittee the way that your index number is made up?
Mr. STEWART. Yes.
Mr. GOLDSBOROUGH. That would be very interesting to th~ subcommittee.
·· Mr. STEWART. Yes; I can.
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Mr. PRALL. I telephoned to Secretary Doak-I think it was to his
department-requesting that he have a representative here to listen
to this testimony, and, if called upon, to verify any figures that were
the technical result of the gathering of them by his department, and
Mr. Doak sent Mr. Stewart fol' that purpose, to attend all of the
hearings, with the end in view that, if at any time we wanted to
verify these figures or get. more, Mr. S~ew!-1-rt would give them.
Mr. BusBY. I would like to say this, m regard to Mr. Stewart:
I have, of course, been on this committee and in touch with this
proposed legislation, discussed the question of the commodity price
level a great deal with members of Congress and others, and there
seems to be a great lack of understanding of just what the wholesale
commodity index price means, how it is arrived at, and its impor.tance
in our scheme of things, in dealing with the values of commodities,
and commodities in their place in the commerce and trade; and I am
specially interested in having Mr. Stewart here, in order that he can
give not only this committee, but th_e whole country, the benefit of
his testimony in connection with these hearings.
Mr. STEWART. In that connection, Congressman, I take it that you
would not want me to come here and work out on a blackboard just
how we do this thing?
Mr. GOLDSBOROUGH. We thought it would be informative to the
subcommittee and the full committee, and especially to Congress as
a whole, if yeu would explain broadly just what your understanding is.
Mr. BusBY. In an easily understood way, what your understanding
is, and how it works, and how it applies; that is what I had in mind.
Mr. STEWART. Very well.
Mr. GOLDSBOROUGH. Now, on Monday the subcommittee will hear
Members of Congress and economists, who will be here Monday, and
Tuesday perhaps, and of course, if it has to go over until Wednesday,
that will be perfectly all right. Governor Harrison of the Federal
Reserve Bank of New York called me over the phone this morning
and said that he was anxious, very anxious, to come in accordance
with the invitation that had been extended to him, and he wanted to
get ready for it, so as to be of as much service as possible, and that he
thou~ht he would rather come week after next. So I have the
definite engagement that the subcommittee shall hear him on next
Monday week, which is the 28th of March, beginning at 10.30.
Now, we will hear the Farmers Union representative, Mr. Talbot.
We will give you whatever time you desire to make your statement.
STATEMENT OF C. C. TALBOT, JAMESTOWN, N. DAK., PRESIDENT
OF FARMERS UNION OF NORTH DAKOTA
Mr. TALBOT. Mr Chairman, my name is C. C Talbot, from
Jamestown, N Dak. I am president of the Farmers Union of that
State, and a lifetime farmer.
Mr. GOLDSBOROUGH. Will you proceed in your own way, and when
you get through the subcommittee will question you.
Mr. TALBOT. I have been very busy and unable to prepare any
statistical statement, but which probably would have been of very
little value to the committee, in view of the highly technical testimony
that they have·already received, and will receive from the economists.
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I feel that I am possibly somewhat prejudiced as a witness, because
of the interchange that was had with my superior here yesterday,
Mr. Chairman.
Mr. GOLDSBOROUGH. Let us forget that. Go right ahead.
Mr. TALBOT. I have been intensely interested in the testimony of
Senator Owen, because of his prior connection with the financing
of the country. I have also been interested in the statement of
shifting the price level to the basis of 1926. I want to call the attention of the committee to the fact that the overhead on the American
farmers was contracted during the war, .and has not been paid off
subsequent to that time, but only renewed in such cases when there
was equity sufficient left out of the toil of an entire family, in most
casest to run; and that, in literally hundreds of thousands of cases,
that equity has been wiped away and the family and the home gone
into the channels of trade.
Mr. GOLDSBOROUGH. Right at that point, I want to say that is, in
my judgment, an eminently fair statement. Proceed, sir.
Mr. TALBOT. I want to call the attention of the committee to
another fact: That a basis of credit on farnis in the Mississippi Valley
was not allowed in banks after 1922-l mean, the real estate; that they
were taken out of the banks of the Middle West as a basis of credit;
and almost consistently, subsequent to that time, the farmer who did
not own the real estate and who had good personal property, free of
debt, was a better risk than the farmer with 160 acres of fine land,
because that was a liability. Now, these are known facts to everyone
who is acquainted with the agricultural situation.
I feel that we have no inconsiderable part in the scheme of things
in this Nation, for one outstanding reason, and that is: That the
farmer really operates a factory, and this buying power and buying
means are substantially greater than any other family in America, as a
unit. So, certainly, we are tremendously concerned with anything
that affects this.Nation as a whole.
I want to point out that my information is, that the German reparations, amount to $500,000,000, spread over 60,000,000 people; and
that the reparation of the farmers of this country, with only
27,000,000, amounts to $600,000,000. So, there is a disparity
there that is working harder on the American farm home, after the
war, which was supposed to make us all rich, than affects the whole
of the German people, which the war was supposed to bankrupt and
make poor.
I do not want to say I am against your bill-Mr. GOLDSBOROUGH. Well, you say it, if you feel it, because we
want all of the information and help we can get from you, sir.
Mr. TALBOT. I want to make this statement, that I do not think
that it goes far enough. I do not think any foundation or basis of
credit structure of this country has ever been fair to all of the people,
that has been built for more than 100 years in the i.qterest of credit,.
rather than of the common people. I say that with profound feeling
on the question. I feel that we can only patch up, in such a bill as
yoms, the tremendous harm that has been done to the common people
of this country throughout many, many decades, because we have not
lived up to the Constitution of the United States.
We have farmed out-I say this with deep feeling-we have
farmed out a function that I firmly believe, and have believed for
nearly a quarter of a century, should belong to the Government, to a
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173
private bank of individuals who have been almost conscienceless, -at
times, in the expansion and contraction of the blood of life, which is
the currency that these people exchange their commodities for.
And another outstanding thing that I want to leave with this
committee, and in this record, is this fact: That in 1921 the farm
commodity price began to fall, and at such a tremendous rate that, at
that time, and in a period of 12 months, I will say, in just that short
period, we bankrupted the total agricultural industry of this country,
and they have been living on their future resources ever since that
time. Now, let me point out what has happened: The manufacturing·
interests of this country were only induced to lower their prices, orable, I might say in all fairness, to lower the prices of their commodities since the war, only on the ratio on which they bought the cheaperraw materials from the agricultural interests of the country, cotton,
wheat, everything that goes into the manufacture of these commodi-.
ties, raised from the soil, and their prices have only been lowered in the
ratio that they get them on a lower base from the source of supply;
and, therefore, the load has been carried by 27,000,000 people,
practically all of the load, since 1921 until 1929, when the average.
people in the East believe that the calamity first struck this country.
I am telling you, we have suffered under this load since 1921, and
we have been holding on in the hope that something would happen
that would relieve the situation, but our credit structure has been
endang~red, and frozen for more than a decade. Because of the fact,
gentlemen of the committee, that the manufacturers, through gettingthese raw materials below cost of production from farmers, were able
to ke~p up their price structure, that kept labor employed; and,_
therefore, prosperity seemed to be universal in this country; but we
were sapping the foundation of prosperity in this country for 10 long
years, and we have completely destroyed agriculture at this time.
If we put the rich farms of the Mississippi Valley between the Rocky
Mountains and the Allegheny Mountains, to-day, on the block,
they would not sell for the indebtednesses against them by several
hundred millions of dollars. That sounds like a radical statement.
Mr. GOLDSBOROUGH. I made the statement yesterday that I
thought that the farm lands of this country would not, at this time,.
sell for enough to pay the indebtedness against them.
Mr. TALBOT_. There is no question about that in my mind. I
have driven, in my car, for practically 250,000 miles in the last.
seven years, and mingled with the farm population of the Mississippi
Valley very intimately and closely.
Mr. BusBY. The condition you describe is true, at the present.
time, and with the further effect that, if these farms should be placed
on the market, it would be a tremendous disaster, because there.
would be no competitive demand at all.
Mr. TALBOT. That is true. There is not any buyers for them, as a
matter of fact.
Mr. BusBY. Even without them being offered, but if you threw a.
_substantial portion of them into the market, there would be a panic.
Mr. TALBOT. Absolutely; it would break down everything, if they
were offered for sale. Nobody offers there, because there is not any
buyers. We have known that, for years, there were no buyers for
farni lands in the richest part of the agricultural belt of this country;_
111442~2-PTl-12
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My honest thought, in this discussion that I think is pertinent, is
that I am convinced, gentlemen of the committee, that as long as we
maintain a system of credits and finance that we have had, even
·though we bolster it up by such measures as yours-and I am for itif we can not get something more radical, shall I say-Mr. GOLDSBOROUGH. Something better, from your standpoint, as
you understand it.
· Mr. TALBOT. Yes, sir; certainly. I want everything done that
.can be done, even temporarily, to save this Nation, and that is
.exactly what we need. We have got to do something, and we are
not going to wait 12 or 15 months or two years to save this Nation,
gentlemen, that is on the verge of total collapse; and in spite of all
-Congress is undertaking to do, that can not be averted. The facts
,are, we have not the remedy, with all of the work Congress has undertaken to do in the two bills; we have not changed the position of the
.commodity prices, only they have gone down slightly in the meantime, and that is evidence to us that we have not restored confi.dence-Mr .. GOLDSBOROUGH. You think, do you not, that the Glass·Steagall bill does give the Federal reserve system the power to raise
·.the price level?
Mr. TALBOT. There is not any question about that, not a question
:in the world, but I want to point out this-I think it would be a
,repetition of some of the testimony since I have been listening hereto expect the bankers-I am going to speak from the standpoint of
·the farmer in the farm areas in the Mississippi Valley, because I am
.only superficially acquainted with the credits and structures of the
industrial centers-to expect the banker to lend to the farmer, on the
,collateral that he has, with the selling prices to-day, is just crazy.
You can put $100,000 of free money in any bank in my State, and
-you can not induce that banker to take the collateral he can get in
·the community and loan any money on it.
We are either going to raise the price levels of commodities-if that
,can be done under your bill, then I am for it-but are you going to,
through the Glass-Steagall bill, induce the banker to loan me money
on something that does not exist; and I can tell you that literally
thousands and thousands of cases where there are farmers owning
farms in the Mississippi Valley, that have renewed their paper, where
·the bankers have stricken off their interest and have begged the farmer
·to stay on those farms, beca.use they did not dare to settle with that
man, because that would affect the assets of the bank to the point of
-of explosion of the b~nk.
I have the very uncomfortable position of looking every day for an
,assessment on my bank stock in my local bank, that lived for the last
10 years, while 15 out of our 17 banks went into bankruptcy in my
home county. There are 2 left, out of 17 banks, and they were not
wildcat banks, they were banks that were doing substantial business,
with not less than $150,000 of substantial depositors. That was a
.county where they diversified, where they raised corn, hogs, alfalfa,.
wheat, every commodity known to that area, and my bank was,
within the last six weeks, one of the last three to expire. In 1920,
we had $360,000 of deposits in two little country batiks in a town of
250 people, almost equally divided. In 1927, a year after you want to
,stabilize· commodity prices, we had to consolidate those two banks,
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which, both together had less than the amount of deposits in either
one of them in 1920; and, six weeks ago, the last one expired, in spite
of the most conservative banking by its directorate and its cashier.
Now, that is one of the best counties in my State, rich in diversification area.
We have lost, out of 850 banks in my State, since 1920, over 675
banks, and we can not keep track of them, only from day to day, or
get the record. I could not tell you how many we have got now,
but less than 220 banks in the entire State, where there are 34,000,000
acres of land in farms, besides 10,000,000 acres of waste land, the
second largest wheat producing State in the Union, the State that
produces 60 per cent of the flax of the United States, fourth: in the
production of turkeys, producing 50 per cent of the Durum wheat
m the United States, first in the hard spring wheat in the United
States; and that is its financial condition in the year of our Lord
1932, with less than 225 banks left, and not a single one of them
loaning a dollar to anybody.
So I have to say that I am for any measure that will even temporarily bolster up the situation, because I can see absolute collapse
and ruin to the entire Mississippi Valley within less than 24 months.
This again may sound like a radical statement, but I happen to know
from Kansas and Oklahoma north to the Canadian line, the conditions of the average farmer, and when their production is higher,
relatively, their taxes and their debts are higher, so the ratio runs
almost identical almost straight through that entire area.
I do not think I could add anything further to my statement here.
I want to say that I would prefer the Wilson bill to your bill. I
believe that we ought to have a larger volume of money as the standard. I believe that the restriction of our monetary standard to such
a thing as gold as the basis of credit and the volume of money is
dangerous to the people in any country, other than the creditor class.
I agree very thoroughly with Senator Owen in saying that the creditor,
under each conditions as this, is jeopardized.
I am not going to make a confession, I am going to state a fact,
that I deliberately gave away a $40,000 farm in 1927, with over $7,000
worth of improvements that I built myself. I gave it to the insurance
company, because I knew that l could not beat the game with these
kind of conditions. I might say that I was smarter than my neighbors, but I discussed it with them, and I said: "Boys, you can't stay.
I am going to beat you out. I am going to start to make my earning
power protect my wife in her old age." I surrendered one of the finest
farms m my county to the insurance company for less than $40 an
acre, and I was called crazy and foolish by a lot of people, but I am
told now in my community that I was the smartest one of them,
because I got out five years ahead of the rest of them.
But I was not so smart, as I took all of the cash that I could get
together, after I had settled my personal obligations, and invested
it in life insurance. Now, the life-insurance company has the tit.le
to our land in the Mississippi Valley, and the land is no good; the
stock market went rotten in 1929, and jeopardized their investments
in stocks and bonds in the East, and now my life-insurance po1icy is
no better than my land was; so I am just a fool, anyhow.
This is not a joke; it is a tremendously dangerous fact to my wife,
in her old age. I am not a young man. I may look like it, but 1
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am getting up toward the sixties. My children are better equipped
with the mental capacity and education than I ever waa, so I do not
worry so much about them, because they are getting along very welL
But I say again, I was not so smart as I thought I was. I surrendered
my farm, well improved, because I knew I could not beat the game,.
and invested in life insurance, and now I do not consider that was.
very much more than the farm.
Mr. STEWART. In your statement that you objected to 1926 as
the basis, after all, the farm products, which of course are the lowest,
in February, 1932, and were 50.6 per cent of what they were in.
1926-in other words, 1926 would practically double the farm prices,.
I mean' the prices of the farm products.
Mr. TALBOT. Yes; I understand.
Mr. STEWART. Whereas all commodities are 66.3 per cent. In
other words, all commodities, including the farmers', would be increased one-third and the farm products would be increased one-half
on the basis of 1926.
Mr. TALBOTT. I do not question that at all. My statement is.
that so far as one-third of the population is concerned, and that is
quite a substantial amount, they would have been completely bankrupted prior to 1926, and the only way that I can see to get a fair
distribution of this and give the people who have lost their property-leaving the workingman still earning and putting aside income
reserves up until 1928 or 1929 and paying for his home, and so on27,000,000 people, the farmers of this country, not only were bankrupted, but they have not received $1 for their labor, includingthe wives and three or four children in each family, in the production of the foodstuffs of this country because of the fact that
their indebtedness was made and their overhead was not brought
down, because of the prosperity in the factories of this Nation, the
high wages, to which I have no objection, of course; and becausethey were paying overhead that sapped their entire ability to earn
on these farm units since 1926, as well as prior.
Mr. BuRTNESs. In view of Mr. Stewart's question, might I make,
one observation that I think is very pertinent?
·
Of course, the increase in the commodity price le:vel would be an
average increase, if you went to 1926, and would not drop the increase in the price of farm products, at all; that is, it would still be,
simply an increase from 66.3, at where all commodity levels stood in
February of this year, back to 100, where they stood in 1926, and that
substantiates what Mr. Talbot has said.
It might be well to mention, also, here, that with hrm commodities arbitrarily placed at 100 in 1926, under the new plan adopted by
the Bureau of Labor Statistics, if it is compared, for inst<i.nce, with
the price for farm commodities at its high in the latter part of 1919,
or 1920, when a lot of these debts that Mr. Talbot has referred toand _he c<?mes from my State. That is why I felt Nstified _in interruptmg him-the average for 1919 on farm commod1t10s, for instance>
was 157.6, and the high in 1920 was 169.8 in May, 1920, and thedecline in farm commodities started a year earlier than you probably
mentioned in your statementMr. TALBOT. I know they did, but I wanted to be conservative,.
Mr. Burtness.
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Mr. BuRTNESS. Because the farm commodities dropped from the
high in May, 1920, down to 104.6 by the time December of that year
-came around.
Mr. TALBOT. How I know it, Congressman.
I am through, unless there is some question.
Mr. BusBY. I think you made a complete and fine statement.
Mr. GOLDSBOROUGH. You made a very interesting statement, and
l must say, certainly as far as the facts are concerned, I think you
are sound. I do not know of a farm.er who has made anything at all
in the last 10 years. I do not know that I know a farmer who has
not gone back in the last 10 years.
Mr. TALBOT. That is my experience with them.
I thank you.
Mr. GOLDSBOROUGH. We will now adjourn until 10.30 o'clock
Monday morning.
(Thereupon, the subcommittee adjourned to meet at 10.30 o'clock
a. m., on Monday, March 21, 1932.)
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MONDAY, MARCH 21, 1932 ·
HousE OF REPRESENTATIVES,
SUBCOMMITTEE ON BANKING AND CURRENCY,
Washington, D. C.
at 10.30 o'clock
adjournment,
The committee met, pursuant to
a. m., in the committee room, Capitol Building, Hon. T. Allen
Goldsborough, presiding.
Present: Messrs. Goldsborough (chairman), Busby, Prall, Strong,
and Beedy.
Mr. GoLDSBOROUGH. The committee will please come to order. I
think the subcommittee has agreed to hear first this morning Professor
King of the University of the City of New York.
STATEMENT OF WILLFORD I. KING, PROFESSOR OF ECONOMICS,
·
NEW YORK UNIVERSITY
Mr. KING. My name is Willford I. King, and I am professor of
economics of the New York University.
Mr. GOLDSBOROUGH. I think you told me you had not seen this
particular bill we are now considering.
Mr. KING. I have not seen it yet.
Mr. GOLDSBOROUGH. Now, take your time and look at the bill,
Professor King.
l\fr. KING. Yes, sir.
Mr. GOLDSBOROUGH. Now, will you not just make any statement
that you think will be of assistance to the subcommittee in any way,
and when you get through the subcommittee will probably want to
ask you some questions, Professor King.
Mr. KING. Yes, sir. I have just read over the bill, but have not
~one into the minutire of it; but in general, it seems to me that the
idea is absolutely sound.
I feel that we have suffered, during the last two years, primarily,
from the deflation of currency, and the fall in price levels; but I do
not believe that was where the trouble started,. or that that caused
the difficulty.
Back in 1929 we had gone into debt too much as a nation; we had
been too optimistic, and when people are optimistic they are inclined
to go in debt; they buy things on time--radios, houses, and automobiles, and other things; and whenever a nation buys more commodities, or places orders for more commodities, than the income_of
the nation as a whole, it is getting in debt deeper and deeper.
That, as I see it, was what happened during the period preceding
.
1929.
Now, a nation is made up of individuals, and these individuals are
acting as individuals, or as representatives of business concerns, and
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STABILIZATION OF COMMODITY PRICES
each individual or business concern has a limited amount of credit,
not an unlimited amount. The result is that, if they keep on buying
more than their incomes, some of the people who do· so will run out
of credit, not all at once, but one by one. That, I think, makes a
crash inevitable, whenever you have a beom. I think that was what
happened in 1929, that the people had overbought in comparison
with their incomes, not only of consumers goods, such as automobiles,
refrigerators, radios, houses, but also of stocks.
As we all know, stock scales were absurdly inflated. I do not
believe any kind of legislation could have prevented the crash in stock
prices; it was inevitable; but stocks went down before the end of 1929
to what I should say were reasonable levels; that is, they had been
selling at 20 to 30 or even 40 times their earnings. By the end of 1929,
aside from a few of the blue chips, they were down to 10 to 12 times
their earnings, and that is not an unreasonable level for stocks. That
is, that much deflation was necessary and desirable and could not be
helped; the people had gotten m debt too deeply, and they had to pay
off their debts.
We commonly hear it said that the Nation was suffering from overproduction at that time. I believe that Mr. Carl Snyder, of the
Federal Reserve Bank of New York, and Doctor Warren and Doctor
Pearson, out at Cornell, have thoroughly exploded the overproduction
fallacy. There are no statistics available, so far as I am aware, that
there was any overproduction, ·except for a few limited fields; and those
limited fields were, in as many cases, advantageous to the United
States. Mr. Snyder has brought out the theory very well that if we
had overproduction of wheat in this country, there was also an overproduction, we will say, of rubber abroad, that is, we sell wheat and
we buy rubber, and the two things sometimes balance each other; and
so, with the few commodities which were overproduced, and they were
very few, they were offset by the overproduction abroad of things
that we wanted to buy. That was known pretty well. The result to
the country was, if there was an overproduction of some of these
commodities for several years before 1922, that had not hurt our
prosperity noticeably. I believe that we can say that the overproduction was not the cause of the present difficulty that we are in.
We are also told, very frequently, that we were suffering greatly in
1929 from a maladjustment of business, that business was in an
unsound condition. I do not believe there is anything in that theory.
I think business is always, to some extent, in an unsound condition;
that is, weaker businesses are continually being forced out by stronger
businesses, and that goes on in good times and in bad. It is the
depression that is accentuated, but I do not belie'2:e that business in
1929 was in a weaker condition than normally. I think it was in a
much stronger condition than normally, because most of the big
concerns had adopted very conservative policies and built up very
large reserves, and they have weathered the storm surprisingly well, for
that reason. I do not believe that we can say that the present unusual
depression is due to the fact that business was in a weakened condition.
Most of the theories as to why this depression has been so bad,
point to some slowly developing causes; but the depression did not
come on slowly; it came on very, very suddenly.
If you will look at the new orders for goods as given in the survey
of Current Business, you will find that, between June of 1929 and the
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first of 1930, new orders in most lines had fallen off from 10 per cent
to 50 per cent, a terrific drop. That must be explained by something
very sudden. I think we have the explanation in the fact that a good
many of the individuals and firms had run out of credit; they had
used their credit, and they had to curtail purchases, and that reduced
the orders to the manufacturing concerns.
As soon as orders begin to fall off, naturally the stocks, the prices
of stocks begin to decline, and when the prices of stocks began to decline then a great many people wanted to get out from under. That
caused the great crash in 1929. I do not believe that that necessarily
should have brought business down to anything like the present level,
because, as I say, business was sound.
I believe that when President Hoover called his conference along
in the spring of 1930, and when the business men of the country and
the economists assured him that business was essentially sound
throughout the United States, and there was no reason for another depression, they were stating facts accurately and correctly. People
think that was not true now, and there has been great criticism of the
President for having brought out these statements. I think that was
perfectly correct; but it is difficult, when you get deflation started,
people become pessimists, and they became pessimistic then; and
prices of securities have fallen, the prices of real estate have fallen,
and the people were pessimistic. Therefore, they did not buy even
even up to their incomes, they bought less than their incomes, and
that caused the orders to fall off of the manufacturers still more, and
that caused people to be laid off at the factories; and whenever you
have people laid off, that means that the income of the country is
diminished, because those people do not have any incomes, and they
can not proceed to buy goods.
Furthermore, the prices of stocks and real estate fell, and people
were compelled to sell, and when they sold they lost money. That
made them still more pessimistic than they had been before, and
that caused the stocks to fall still further; and as they fell still
further, that forced more people to sell that did not sell before, because they wanted to get from under, and also, they sold because the
brokers compelled them to sell, or suffer very largely; so you had a.
decline accentuated, and you usually do.
Now, this has been accompanied by another phenomena, and that
I think has a v·ery material bearing upon the purposes for which this
committee has met. That has been accompanied by a rapid decline
in the prices of commodities. Now, the prices of· commodities fell
at the start, partly because, as I say, the people could not buy up to
their incomes any more, and did not buy up to their incomes; and
it was necessary to have some contraction in the prices of commodities, such as we had, for example, in 1924 and 1927; but it was en. tirely unnecessary to have this very large contraction in the prices of
commodities which has occurred since 1929; that is, it seems to me to
be entirely unnecessary. Only a moderate contraction would have
been sufficient to cover the decline in business and adjust the total
output of goods to the lessened purchasing power of the people. But
there is a reason for this decline in the prices of commodities, and I
think that is best brought out by the bulletin that has been recently
published bv Professor Warren and Professor Pearson out at Cornell
University Ill the February issue, in which they show that there has
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been, for a number of years now, a shortage in the gold supply;
that the output of gold has not kept pace with the volume of business.
During the boom between ·1925 and 1929, the fact that gold was
becoming scarcer, as compared to the volume of business, was not
apparent, because of the fact that we had the great wealth of bank
credit. If you will look at the volume of deposits subject to check,
which is the principal media of exchange in the United States, you
will find that it ran up very, very rapidly, so that it became something like double as great as it had been in 1923 and 1924; that is,
in creating the great volume of bank money, that obscured the fact
that, from 1925 on, our gold supply was not keeping pace with the
demands of business. But when the crash came, people lost confidence, and they began to pay off their debts at the banks, and this
bank currency, these bank deposits, with which we do business,
simply faded away; and now, in place of having twice as much as it
was in 1923 or 1924, it is less than it was then. We got rid then of
this banking currency, and had to fall back more upon gold; and
when we fell back upon gold, we discovered that the gold supply was
not what it used to be; in other words, that the units of gold had
become more valuable; and when the units of gold, the ounces of gold,
became more valuable, that means a decline in prices, because prices
are merely the ratio of the commodities to gold, as we see it, in the
United States, because we are on the gold standard.
Now, as I say, I think that business was essentially sound, and a
recovery should have begun in 1930; but, as we all know, it did not
begin, but we kept right on going down the hill; and it is my opinion
that one of the prime reasons why we went on down the hill is that
the price level of commodities was falling. In fact, it has been very
often observed that business does not prosper when prices are falling.
If a manufacturer, for example, buys his labor and his raw materials
at a high price, and when the goods are completed he is able to sell
them only for a low price, sell the finished product for a low price,
he does not make any money.
Furthermore, the price of that one commodity, labor, is fixed
largely by custom and contract. It is very, very difficult to lower
the price of labor to correspond with the lowered prices of raw
materials, as we all know. Labor does not wish any wages cut,
because they fear then it would be very difficult to get them up again.
Salaries add to the relative stability. So, you have this very important commodity, labor, which is an extremely lar~e factor in the prices
of any of the commodities, and which is relatively fixed. With it
relatively fixed, the manufacturer can not cut the prices of his product readily and mark them down to the new price levels. We have
seen that painful process that has been going on during the last two
years. If the manufacturers could have cut all of their costs rapidly,
especially their labor cost, they might have been adjusted to this new
price level, but they could not do that, and they have been selling
them in very reduced amounts on the old price level. The automobile industry, for example, of course, somewhat reduced the prices,
but not so very much, and they are only selling one-third as many as
they did before of this device; and in most of the other industries
they have workers being laid off, and the workmen being laid off has
tremendously reduced the purchasing power of the commodity.
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The fall in the price level, then, to my mind, has been responsible,
in the main, for the continued decline of business since the middle of
1930. I do not think it was responsible before that time, but I
think it was responsible since then. Now, a fall in price level brings
with it not only unemployment but also other evils. When the
prices of commodities fall, when the earnings of corporations fall,
obviously the prices of land will fall, and the prices of other commodities will fall. We have. seen that throughout the United States, the
great shrinkage in the value of real estate and real-estate mortgages,
and we have seen the great shrinkage in the value of bonds, railway
bonds, for example.
Now, it is a well-known fact that the banks of the country have
been encouraged to invest in such securities, railway bonds and
mortgages on real estate have been the backbone of the portfolios
of the savings banks of the country and the life-insurance companies,
and we have seen these shrink in value tremendously, because of
this increased value of gold, because of the amount of bank deposits,
subject to check, falling away, in other words, because of the fall in
the price level; and so we have seen bank failures all over the United
States, not because the banks were unsound, not because the bankers
were not wise, but because this price level had fallen, something over
which they had no control, and which they could not foresee. Bank
failures, of course, have accentuated your difficulty.
Now, if the price level keeps on falling we shall undoubtedly see
not only more bank failures, but we shall also see life insurance companies going to the wall, one by one. It can hardly be otherwise,
because they have entered into contracts to pay certain amounts of
dollars, and if this price level keeps on falling they will be unable to
fulfill these contracts; and, one by one, they will fall. In fact, all
concerns that have agreed to pay a fixed number of dollars will
eventually be driven out of business, forced to the wall, if the price
·
levels should continue to go on down.
I am not predicting, understand, that if nothing is done, the price
level will go on down indefinitely, because I do not think that is true;
but I am merely pointing out how we have come to the situation we
are in now, where we hav.e had failures; and I understand that a great
many of the banks which are, nominally, solvent are only solvent
because of the fact that the examiners do not rate the securities upon
real estate at the present time at their present value; but if that were
done, many of the other institutions, banks and insurance companies,
would be hopelessly insolvent.
So we have been brought to a very serious pass by the fact that we
have this falling price level, that that has fallen too far. Now, it
seems to me that we should recognize that our price-control system in
the United States is very antiquated. We are still operating on very
much the same type of currency that they had in ancient Rome;
that is, we depend upon gold and silver, gold primarily, and the value
of our money is dependent entirely upon the chance fluctuations of
the value of gold. If we discover a lot more gold mines in some other
part of the world, then the value of our money falls, and prices rise.
If we do not, the other thing happens. That is, we have no regulation
for our currency, no regulation for the value of our money. Congress
was given the power to regulate all the weights and measures, and they
have regulated such things as the length of the yard. We have a
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very accurate measure of that kind, so we can always tell how much a
yard is.
As Professor Fisher has often pointed out, originally the yard was
the girth of the king, and if we had a fat king the yard got longer, a
slim king, it got smaller. A foot was the length of the king's foot,
and that varied with the size of the foot of the king. We think that
is rather crude, but, after all, the variation in the yard and the foot,
at that time, was probably considerably less than the variation in
the value of our dollar at the present time; and, after all, we do not
ordinarily measure everything in yards, because some things we
measure in tons and some things in other weights. It would not be
as bad to have a variable yard as it is to have variable money, because
we measure everything that we buy and sell in money, and that affects
all of our transactions; so that vanable money is worse than a variable
yard.
My opinion would be, therefore, that long since the time has come
when we should have regulated the value of our money, fixed it at a
definite price in terms of commodities; that is, we should have a
commodity standard of value, rather than this chance standard of
one commodity. As Professor Fisher has pointed out, the gold standard has not been a good standard, it ha'S been a poor standard, but it
is true that we could have worse standards than the gold standard.
I would not say it was the worst one we could have, by any means,
for it is much better than some things we could choose, but it is a
poor standard at best. What we should have would be a fixed
standard in terms of a large basketful of commodities, so we could be
assured that $1,000 at one time would be approximately the same as
$1,000 at another time.
When a man takes out a life-insurance policy, to be paid many years
in advance, he should have the assurance that when his life-insurance
policy is paid, it will be something like the amount of goods that he
had in mind when he bought the policy. I do not think there is any
possibility of making it be exactly the same amount of goods; that
would not be possible; so we have frequently made inquiry among
economists and statisticians as to what kind of index numbers of
prices should be used. That seems to me to be relatively unimportant;
you can only approximate those at best. Almost any reasonable
index number would be better, as far as stabilization is concerned,
than the standard we have at present.
I think the index number picked out by Mr. Snyder, the president
of the Federal Reserve Bank of New York, would be an excellent
index number, exactly as it stands; but the particular type chosen is
not a matter of major inportance. Practically every index number
of commodity price has fallen sharply during the last two or three
years, and I do not know of any individual commodity that would
not show about the same thing as the other.
In general, retail prices are somewhat more stable than wholesale
prices. If you wanted an index number that did not fluctuate much,
you would use the retail prices. If you wanted one that fluctuated
more with the business cycle, you would use the wholesale prices;
but either one of them would give you a fair degree of stability.
Now, what we need is not inflation. What we need is stability of
prices. Inflation, of course, is much worse than deflation, because, as
some one has said about the stock market, there is a bottom, but no
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top; and so, when currency is inflated indefinitely, as it has been. in
most of the countries in the world, there is something wrong, and
everything runs wild. We do not want inflation, then. Deflation
kills business. Inflation starts out by making business boom, but as
it goes further, it also kills business. Either way will destroy business. What we want is to regulate the price level and at a definite
figure.
Now, the price level has declined very sharply during the last
two years, and it seems to me that it should be restored to the old
level before we can stabilize.
That is a matter where there would be differences of opinion.
The scientific basis for restoration should be this: It should be
restored at a point which would give justice to the greatest number
of people, or the greatest volume of payment. Supposing you decided
on a price level at the level where we are now. If you stay there long
enough, most of the debts and liabilities will have been contracted
on this new level; and then to restore the level to what it was at some
past time would be unjust. On the other hand, if you have had a
sharp fall, then justice would be best served by restoring the price
level promptly to the old level; because relatively few of the debts
and obligations have been contracted at the new level; and most of
them at the old level.
We have in the United States such a vast volume of life insurance
and bonds of all kinds, long-time securities outstanding, that my
feeling is that the maximum of justice, at the present time, would
probably be secured by restoring prices, say, to the level prevailing
between 1923 and 1929, when .we had then prices on a plateau for a
considerable period of time; but I realize that some others would prefer to restore to some other level; but I think there can be no question
at all that the elevation of the price level at the present time would
make for the maximum degree of justice. I also feel that it would
be entirely probable that the restoration of the price level to a higher
level than that now prevailing would stop this business decline and
cause a prompter business recovery. It ~ertainly would stop the
bank failures; certainly it would make the savings banks and the lifeinsurance companies solvent, and restore confidence; and it certainly
would ease the difficulties which the farmers are in who can not pay
their mortgages that they have obligated themselves to pay; it would
certainly help the business man; and the wage earner, who has had a
steady job all of the time, might say that it would hurt him, but
there are so many of the wage earners that have not had steady jobs,
that I think the great majority of wage earners would be benefited,
because they would get more work. Their dollars would not buy
quite as much as they do now, but if you do not have a dollar it is
not very advantageous to have it buy more. So, my feeling is that
it would be entirely probable that business would recover promptly
if the price level were restored promptly.
I have looked over the statistics of the various countries recently
to see what the effect is in restoring price level upon business. I find
that, in most cases, not in every case but in most cases, when prices
are raised sharply, that business recovers promptly. There are a few
exceptions, but in a great many of the cases that holds true.
Mr. GOLDSBOROUGH. Will you _illustrate, please, the countries
th1:1,t you have in"mind?
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Mr. Krna. Well, I do not know that I can give you the list right
now. We took the European countries, the principal European
countries, in the period since 1914, and we charted our movement of
prices in those countries, and the movement of employment, that being
the best gage that is available in those countries, where they do not
have production index, and they have slid it up and down; and in
about two-thirds of the cases I should say that, when there was a
sharp rise in the price level, employment rose promptly. I do not
believe I could give you the dates,and so on; I have not the charts here.
Now, the question then is, If we should wish to restore the price
level, which to my mind would be highly desirable, can it be done?
I believe there is no difficulty at all about restoring the price level,
except political difficulty; that is, I think there is no economic
difficulty about it whatever. If you put more money into circulatio!l,
in sufficient quantity, prices will rise, and you can put the price level
to any point you wish. There is not any doubt about that in the
world.
We have also been studying European reports in that regard, and
in every case where money was put into circulation in considerable
amount, the price level has risen; when the money is taken out, it
falls. Now, the question may be asked as to how much money will
raise the pricelevel? Well, on the statistics thatwe haveinvestigated,
we can not answer that question, because that raises the question of
too many different factors; and to say that, if you double the amount
of money in circulation, you will double the price level, does not
necessarily hold, because sometimes you raise the price levels a certain
amount, and sometimes more and sometimes lescJ; but I do not foel
that is a question which should bother you gentlemen one way or the
other. It seems to me it is very much as I pointed out some time ago,
like the problem of getting up the hill in your automobile, when you
are down at the bottom of the hill and want to get to the top. Suppose you were asked, before you started up the hill, how many gallons
it was going to take to get you to the top of the hill. If you are like
I am, you would probably be a month before you found out; but
you can step on the accelerator and you can get to the top of the hill
without any difficulty, because you put in merely as much gas as was
necessary to get to the top of the hill. That is exactly the situation
with regard to the price level. If you want to get to any specific
level, you put in as much money as necessary to get to that point; but
you must have a device on it that will stop when you get to that
point, that is, you must determine in advance where you are going.
The danger of putting up the price level is that when we get started
we will not be able to stop; and there is very much historical evidence
oh that side. Once an inflation movement is started, it tends to go
wild; and as I said a moment ago, there is a bottom but no top; so
when inflation goes wild, it is very much worse than deflation. Deflation is stopped automatically; and in inflation there is no stopping
point until the money is reduced to zero, such as happened in Germany
and several European countries. So you must· have an automatic
curb before you start to raise the price level. If you do not have an
automatic curb, you will cause more damage than you will do good.
So far as I am aware, no country has ever tried to regulate its prices
scientifically; so if you should decide to pass a me~sure of the type
which we have before us, you would be blazing a new trail. If you
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are unduly fearful, you should not adopt such a measure, because that
will be something more. Now, that would not appeal to me as a
measure for not adopting anything. Of course, the first man that
ever went up in an airplane was something new; and if you never
begin, you never get anywhere. Certainly we have not been getting
along in a very ideal fashion in the last year or two; and I think that
it is worth taking some little risk to try to improve matters.
Now, as to the methods of putting more money into circulation:
If you wish to raise the price level, you must put more money into
circulation, and that can be the actual coins, paper money, or it may
be deposits subject to check, any one of these three things. Now,
there are various ways that you can put money into circulation, and
one way would be simply to print greenbacks and put them out with
nothing behind them. That is, of course, not the method that is
most favored, for the reason that it becomes such an easy way of paying Government expenses that it tends to go on indefinitely, and it is a.
dangerous method. ·
If you are going to regulate the price level scientifically, I feel that
it is essential that any money that is put into circulation, any paper
money put into circulation, that the Government should get something tangible and salable in return for that paper money; if not, it is
in a bad way. What can the Government buy that would be tangible? Why, it can buy gold, that is one thing it can buy, with the
paper money. It could buy Government bonds, as there are some
$18,000,000,000 or $19,000,000,000 worth of those outstanding. If we
substitute paper money for Government bonds, we would substitute
circulating credit for noncirculating credit. Bonds do not circulate;
bonds do not affect the price level; but paper money does circulate
and does affect the price level. If the Federal reserve banks should go
out and buy Government bonds with Federal reserve notes, they would
have the bonds and the public would have the money, the notes; and
the notes would be a circulating medium of credit and would tend to
raise the price level.
Now, we have heard, over and again, that the Federal reserve
banks have been doing everything possible to meet the present emergency, because they have lowered the interest rates, and nobody
wants to borrow. They have lowered the interest rates and the
people do not want to borrow. That is one thing that has been found,
in times of depression, not to work, and that is to try to get people
to borrow and expand the volume of bank currency; and if people do
want to borrow, the banks will not aocept their collateral. So it has
not worked; and they have said, "We can't do anything about it."
I think the only way you can put money into circulation, is to buy
something. If they buy Government bonds, the man that get the
money does not have to worry about it. He got his money for the
the bonds, he has the money, and he is going to do something with
it, and he is going to buy something else with it, in most cases. Suppose that he does not buy all of the time, but he will buy in most.
cases; you do not have to worry about that man that sells a Government bond and buys something else. If you get enough men of that
kind, you will raise the price to any place you want to it go. So it
is a matter of putting out a circulating medium and taking out a
normal circulating medium, if you exchange any kind of Government.
paper money for bonds.
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Now, you could have the Secretary of the Treasury do the same
thing by issuing Treasury notes and buying bonds; that is, he could
convert more or less of the Government debt into circulating notes,
noninterest bearing, or interest-bearing bonds; merely substitute one
for the other; and by so doing, he could put these levels up and down,
at will.
There is another method, a third method, which has been proposed
lately, that is being advocated by the silver people, and that is to have
the Government buy silver, not to establish a fixed ratio of 16 to 1,
but to buy it as bullion, and then to redeem the notes in gold or
silver, at the option of the Treasury Department. That would
merely be a tangible commodity, a justifiable commodity. That
would put the money into circulation.
I do not think it makes any particular difference which particular
commodity you agree on, or take, you get something that the value
is not likely to run away from, just so you get enough of the commodity that you will have enough to sell when you want to bring
the prices down again, because you must be prepared to stabilize
end keep the prices here. If you do not have any stability, you had
better stick to the gold standard as it is, if you are not going to get
stabilization.
Now, section 3 of this bill, I note, prescribes that the board is
authorized to raise the official price of gold, or to lower the price of
gold. Any kind. of stabilization scheme should have that proviso in
it. If you do not have that proviso in it, it probably will break
down and everybody will say "Well, here, you tried this experiment
and it would not work." That would be just like starting out to fly
across the Atlantic Ocean in an airplane that you knew would not fly
very well when you started. This proviso is absolutely necessary, if
you are going to be assured that the scheme will work through thick
and thin; because, otherwise, if you require a reserve of 40 per cent
behind the Federal reserve notes and the people get a little doubtful
about the currency situation, they will draw down the hold, pull
down the reserve to where it will disappear, and they will not be able
to keep out the amount of money that they should. You want to
protect the Federal reserve banks, or whatever authority that you
wish to put behind your currency system-you want to protect them
against that sort of thing; so that outsiders, foreigners, or Americans,
or anyone you wish, can not wreck th!:) system by pulling out the gold
from under it; and this proviso here to change the official price of gold
would protect the system adequately. That is, one country could
always change the price of gold. If people begin to draw out the gold
too rapidly, they could lower the amount of gold they were going to
give him, or raise the price, and then the people would not want it
so badly. If you need more gold in the Treasury, or less gold, they
could lower or raise the price. So that simple proviso, I feel should
protect the Treasury and the Federal reserve banks against that
difficulty.
I see no reason, except conservatism, why we should not fix the
price level at any level that we think is most desirable, and keep it
there indefinitely at all times, in war time and peace time. I do not
think we want to make any exception. You can not conduct a war
without great distress to the people, as we found out; but at least
you have the price lf'vel stabilized. In other words, inflation causes
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more trouble to the American people than all of the cost of the war.
You want a system that will work at all times. I do not believe that
there is one reason why such a system can not be made to work in war
times, as well as in peace times. We also have opponents of stabilization in many cases saying: "Well, we do not want the United States
to stabilize alone." I should say that is the same as saying that we
do not want the United States to stabilize at all; because if you are
going to go out and get an agreement with all of the nations of the
world, you might just as well quit. That is, we run our affairs our
own way, and we had better run our own money system and let-them
run their own.
Some people might wonder about the question of the foreign
exchange rate. They sa;r the foreign exchange rate will vary. Of
course, they will; they will say: "Foreign exchange rates will vary."
They will vary, or are varying now, most of the world being off of the
gold standard. They say that variation in the exchange rate hurts
trade. I do not believe that you can find a shred of evidence to
show that the variation in the exchange rate hurts trade. One will
say that it helps trade, another that it does one thing, and another,
the other thing. You can always tell afterwards which it does.
I do not believe you can tell before.
In looking over the statistics of trade between the United States
and European countries during the times when there was inflation
and deflation, which sometimes come rapidly; and in the 1920's I
could not find a trace of evidence to indicate that either one tended
to make trade better or worse; sometimes it was one way, and sometimes the other; it seemed to be a toss-up. So let us not worry about
what the foreigners want to do with their money systems; but go
ahead and fix our own to suit ourselves, and let them do the same,
and I think that we can save a lot of worry about our being unable to
restore prosperity because they have not got prosperity in some other
country. They did not have prosperity in England during the time
that our prosperity was at its height, and that did not hinder us at all.
They were very hard up in Germany and in most of Europe during
the time when our prosperity was at its height, and it did not bother
us then, and should not bother us in the future. You have heard
that you can not be rich and have a poor neighbor, but that seems
to be without merit.
,
Therefore, I would say that I would be heartily in favor of the
principles of the bill here which Congressman Goldsborough has
introduced, and I hope that you will proceed to adopt it, or something
along the same line, in the near future; and I believe that you are serving the United States better by that than by any other single measure.
This will no-t do everything everybody wants to do, but this will
probably do more good to the business and economic life of the
country than a:hy other single measure that is before Congress.
I will be glad to answer any questions.
Mr. PRALL. I would like to !l,Sk Mr. King if he thinks the bill
covers the needs of the situation?
Mr. KING. I would have to think about that considerably before
I would want to be very sure as to any details of th9it kind. As I say,
I just looked at it since _I came in here, but it seems to me that the
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essential idea is here, that seeks to give the power to the Federal
Reserve Board, and authorizes them and directs them-Mr. PRALL. It authorizes them, but do you believe it should be
mandatory?
Mr. KING. I think it should be mandatory; yes. It says, "authorize and direct," and I think it should be mandatory, undoubtedly.
I think if it is not made mandatory, they will do nothing whatever
about it.
Mr. GOLDSBOROUGH. You understood this to be mandatory?
Mr. KING. That would be my reading of it: "They are hereby
authorized and directed," and I suppose that is mandatory.
Mr. PRALL. What would be your idea of the effect this bill might
have on the unemployment situation?
Mr. KrNG. I would suppose that the chances would all be in favor
of it improving the employment situation very rapidly. I think we
now have unemployment because the lowest price of labor is above the
price which an employer is able to :pay; whenever you have your commodity listed at a figure that is higher than the market wil~ pay, it
remains unsold, and that is t.he situation at the present, when the employers are losing their employees-when the employees are holding
their employers to higher levels than they can pay; and if the employers could get prices for their products, or if the consumers had more
money to buy their products, the result would be that they could
afford to pay labor and to pay the price labor is holding out for at the
present time, and unemployment would tend to disappear. At the
present time, they can not sell their products for enough to pay those
prices. Labor must be cut all along the line, before they can get jobs;
so I would say it would increase employment very markedly.
Mr. BusBY. A while ago, in speaking of the United States taking
care of its own monetary question and going ahead, independent of
what the other nations of the world might do, you believe that it is
not necessary for us to wait on them to cooperate at the same time, in
regard to their money, for us to delay with 0urs?
Mr. KING. I do not think there is any reason why we should worry
about what they do, at all.
Mr. BusBY. Then we should go ahead and use our best efforts to
scientifically stabilize the buying power of our country. Could not
any system we set up be related properly to the moneys of the nations, of the other countries, through the international exchange
arrangement?
Mr. KING. Well, the international exchange arrangement, if this
bill were enacted into law, would go on much as they do at the present
time.
Mr. BusBY. That is what I say.
Mr. KING. Gold would settle the international balances as it does
now; but the exchange rate on your pound or dollar would vary, as
they do now.
Mr. BusBY. That variation would be largely determined by the
amount of gold in the dollars, and if the Federal reserve bank should
change the quantity of gold in a dollar, the exchange rate would vary
so as to take that change into consideration? That is all the change
there would be in the present condition a:qd the condition created
then?
Mr. KING. That is all the difference there would be.
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Mr. BusBY. And there would be a natural and automatic adjustment, that would involve nobody, or any puzzling situation to adjust
our currencies to the currencies of the rest of the world, even under
such a set-up as this bill proposes.
Mr. KING. It would be just exactly like. it is at the present time,
because our currency is not on the same parity with gold that the
other money currencies are at the present time, as most of the
countries have g.one off of the gold standard, except France, and there
would be no difficulties with us.
Mr. BusBY. Those countries which have gone off the gold standf!,rd, through this exchange arrangement, are held responsible, still,
to the gold standard of that country?
Mr. KING. They may have obligations that are payable-Mr. BusBY. I am not speaking of contractual obligations, but the
rate at which money is appraised in the national exchange arrangement is related not to the fiat declaration of their country, but to the
gold standard.
Mr. KING. To the gold base, right.
Mr. BusBY. So the few countries, if there be four or five, that ·are
on the gold-standard basis, are still carrying the weight of the currency
of all of the other countries, to this extent: That those countries are
still related to this gold, and our country and France, on obligations
owing to them, buy their currency at the international exchange
rate, fix it?
Mr. KING. That is right.
Mr. BusBY. Even though they have not got the gold, at all, to
buy back their currency, we appraise their currency, through this
arrangement, and agree to buy all of those currencies just as we agree
to pay all of our money in gold, on demand.
Mr. KING. Yes; but it is a changi;ng rate, from day to day.
Mr. BusBY. Yes, I understand; as it is changing from day to day.
Mr. KING. Yes.
Mr. BusBY. Really, does it not make a heavier condition for the
~old that exists in our own country, in that it has the responsibility,
mdependent of and added to that responsibility that exists in our own
country?
Mr. KING. Well, the gold supply of the world flows back and forth
to whichever country wishes it the most, aij I see it, and all the
countries of the world base their foreign exchange on gold, and we
still would do it. I do not think that it casts any more particular
responsibility on one country than another; it merely means that we
deal in that commodity of gold as we do in other things.
Mr. BusBY. On the basis that those rates are fixed?
Mr. KING. Yes.
Mr. BusBY. Well now, you spoke a while ago, of a supply of gold
from the mines having been controlled-Mr. KING. Well, it has not kept pace with the amount of business
that is being done; that is, in order to keep the price level constant,
the supply of gold available for monetary purposes ought to keep
pace with the amount of business done and that it apparently has
not.
Mr. BusBY. If the supply from the mines has not kept pace,
would not the retirement from the monetary use, that we call "sterizing gold "-would not that have the same effect as it would if it
were not in existence, largely?
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Mr. KING. If he used the gold for jewelry or something of that
kind-Mr. BusBY. I am talking about that; but, for instance, if you
locked it up in the Treasury and placed it back out of use and out
of access for monetary purposes, as I believe France and the United
States have done with practically one-third of the monetary supply
of gold, does not that have the same effect as if the gold were not
produced, or like when you retire wheat from the market, in order
to raise the price?
Mr. KINo. It would have the same exact effect, unless some
arrangement was made to equalize it.
Mr. BusBY. Which we did not do and refused to do.
Mr. KING. Otherwise, if you take it and lock it up, it is exactly
the same as if you took it out of circulation.
Mr. BusBY. That is what this country and France have done with
a large portion of the gold, is it not?
Mr. KING. Apparently, we have gotten a large portion of .the
monetary gold of the world's available supply locked up in France
and the United States.
Mr. BusBY. To further your answer awhile ago, I understand
that your opinion is it would have the same effect on the price of gold
as if the gold were cut down to the supply that is used for monetary
purposes?
Mr. KING. I think that I would put it this way: That France and
the United States have, for certain reasons not entirely intentional,
absorbed a large part of the gold supply of the world. Now, other
countries of the world have tried to get on the gold standard during
the last •four or five years, and they really tried to get this gold, but
it has gone to the United States and France, and there has been a
great scarcity of monetary gold for the rest of the countries; and that
has helped to raise the value of the gold in terms of commodities.
Mr. BusBY. And necessarily that distribution comes about by
reason of the trade relations among the several nations, as I understand it.
Mr. KING. Yes.
Mr. BusBY. I notice this: That always, when there is a great use
of money or credit of any type or kind, through our present inonetary
set-up, including, of CQurse, our national banking arrangement, which
provides for the issuance of currency, and the Federal reserve system
at the later date, that the after effect, such as followed the Civil War
and the World War, is exceedingly disastrous to business. I have
come to the. conclusion that, under our present monetary and credit
set-up, that it is not capable of the extraordinary use, or extraordinary
strain, without dislocating business following that time.
Mr. KING. That seems to be true.
Mr. BusBY. I have come to the conclusion that it is not necessarily
incident to war or the destruction of goods; it is incident to the using
of the system out of proportion to what it reasonably can stand.
Mr. KING. I should think that you are correct in your statement.
The countries that put large amounts of paper money into circulation during the war and used it to inflate price levels gradually for
a long period after the war, they tried to get back to the old gold
standard, and they caused great distress to business.
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Mr. BusBY. About 1837 to 1840 there was a great inflationary
period in this country; if I remember right, when there was no war,
and trade became general and banks were established on nothing,
and the system that was in existence at that time was put to very
great use. The result was that, notwithstanding the fact that there
was no war and no destruction of property, the collapse in property
values was generally destructive to business and business institutions.
That is true, is it not?
Mr. KING. Yes.
Mr. BusBY. I call attention to these things bec;ause I hear so many
cloakroom arguments about the war destroyed so much property,
that we are needing a reaction from the destruction of property that
was destroyed during the war.
Mr. KING. My opinion would be-if you want it.
Mr. BusBY. Yes.
Mr. KING. That the destruction of property in war has nothing
whatever to do with the things that have happened since.1929. There
is no connection whatever.
Mr. BusBY. That is the conclusion I had come to, but I never
had heard anybody else in authority-I mean, who could speak with
authority or unusual knowledge-discuss it. Now, it seems to me
that if great destruction occurred during the war that there would
be a scarcity of goods, consumable goods, as the result of that
destruction.
Mr. KING. Yes.
Mr. BusBY. It seems to me, also, that instead of labor being put
out of employment, if there was the question of the destruction of
goods in the war, that labor would be called on to set everything in
motion to reproduce the things that have been destroyed; but we find
the result here, since 1929, exactly the opposite.
Mr. KING. You had, during the period immediately after the war,
in France, a beautiful illustration of the effect of the destruction of
property, and it resulted in the French people having to work very
hard to restore propertr for the next three or four years. It took them
about that long to do 1t.
Mr. BusBY. Yes. You would not regard the unem:ployment at the
present time as being the result of war or destruction of propei:ty
during the war?
Mr. KING. I should think that the only effect that the war has had
on unemployment at the present time is that, through the inflation
of the. currency that went along with the war, and the fact that we
have tried to get back to the old system again. That is the only connection that I can see.
Mr. BusBY. There is one other question: You suggested that, to
restore the price level, currency could be put into use in one of several
ways, and thereby bring the commodity price up .to a higher level
than they are now?
Mr. KING. Yes.
Mr. BusBY. You also suggested that something should be brought
in, in issuing that currency, that could be sold to serve as a depressing
influence at the proper degree that the deflation had reached.
Mr. KING. That is right.
Mr. BusBY. I am asking this question largely by request. There
seems to be outstanding as the obligations of the Government some
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$2,000,000,000 in soldiers' bonus certificates. It has been frequently
suggested that, by redeeming those, and placing the currency in the
hands of all of the people who now hold those claims agamst the
Government-that that currency would reach the proper place to
do a good deal of good at the present time, and also be no heavier
than paying the outstanding obligations that were redeemed. I
wonder if you have any suggestion on that line.
Mr. KING. I should think it would put the currency into circulation and would tend to raise the price levels the same as in the other
currency put into cir<;ulation; but unless7ou get so:mething in return
for them, then you have more danger o creating a dangerous precedent, and you start in to pay off everythinf else by the same method.
That is the chief danger of that device. I you have something that
has a real value behind it, gold or bonds or silver, and if it were left
in the hands of some responsible authority, like the Federal Reserve
Board or the Secretary of the Treasury, you can manipulate it to
sell again when necessary; but if you buy labor or something that has
no tangible value, then you are putting yourselves into a much :more
difficult position.
Mr. BusBY. Well, now to issue this $5,000,000,000 credit loan and
purchase labor and let it go into commodities and construction that
are not needed, that would have practically- the same effect as having
nothing to refer back to, to depress the mflation, if it should co:me
about, would it not?
Mr. KING. That is correct.
Mr. BusBY. Well, now to buy Government bonds would simply
be buying up the debts of the Government, and issuing a noninterestbearing date against the Government?
Mr. KING. Yes.
Mr. BusBY. In money, in the form of money, based on these
securities?
Mr. KING. Yes.
Mr. BusBY. But it is your idea that, if we reach a condition of
inflation, we can reissue the obligations or bonds which we purchased
with the outstanding, noninterest bearing currency?
Mr. KING. Yes.
Mr. BusBY. And take up those currencies by replacing them with
bonds, when the inflation had reached the proper position?
Mr. KING. Yes; because very likely, if you get the thing going and
restore confidence, your price level will go right on up through the level
you are shooting for, and it ought to be allowed to go that distance;
but if you have bonds, they could be issued very promptly and the
currency pulled in.
Mr. BusBY. I suggest that, if we should receive $2,000,000,000
of veterans' certificates outstanding, you could not replace them
again with bonds.
Mr. KING. That would seem to be very difficult, I should say.
Mr. BusBY. It would have to be by selling to somebody else,
instead of the veterans. That is all.
Mr. STRONG. Doctor, are you not the rather noted man who
made an estimate of the loss to the Nation by reason of the period
of deflation?
Mr. KING. I made an estimate once upon a time of the loss during
the inflation after the war. Is that what you refer to?
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Mr. STRONG. Yes.
Mr. KING. I estimated that it caused about $40,000,000,000 to
change hands in two or three years, when they inflated prices without
any basis of justice, at all.
Mr. STRONG. Have you made any calculations on the cost of this
inflation and deflation?
Mr. KING .. No; I have not made any calculation on that, but it
must run into a very great number of billions of dollars that have
changed hands.
Mr. STRONG. More than the last one?
Mr. KING. Probably more than the last one, I should think.
Mr. STRONG. I notice you say the inflation caused the losses; you
mean the deflation following the inflation, or do you regard the
inflation-Mr. KING. The inflation caused the loss, and then the deflation
caused the loss again.
Mr. STRONG. To whom does that inflation and deflation belong;
who is the loser by it?
Mr. KING. Well, in the ca.se of inflation, there is a little difference
from what it is in the case of deflation. In case of inflation of a
moderate amount, all of the people that have fixed obligations lose;
that is, the bondholders and holders of mortgages and life insurance,
and that sort of thing, lose; and salaried people lose, temporarily,
and holders of stocks gain, and business men usually gain during
inflation. In cases of deflation, it is a little different. I made a
study recently and tried to figure out who gained in the case of the
present deflation; and so far as I can figure out, practically nobody
has gained. There have been a few, of course, who have gained.
You would think there was some class of people that would gain very
largely; ordinarily, the textbooks will tell you that is true; but I think
it is true that no one has gained from this deflation, because we are
all recipients of income from different sources, and what we gain in
one way we lose in another.· There was a weakening and falling of
incomes in the country, a great shrinkage in the national income, and
a great shortage of goods. It is not necessary that anyone gains
when the other one loses, as we are all losers. What we are suffering
from is very distinct underproduction; these factories are shut and
are not producing anything near the amount of goods we ought to,
and we are having very severe losses from underproduction, so
everybody will lose.
Mr. STRONG. Even the man who has gold has no place to invest it
safely.
Mr. KING. No; most of us have investments of one kind or another.
Mr. STRONG. Do you think that we ought to have in any bill of
this kind a section providing for a medium for the measuring of the
height of the price level?
Mr. KING. I should think it might be a desirable feature. I would
suppose that you could either provide for some medium, or provide for
some organization to make an index number, with some general
instructions. Either one would be satisfactory.
Mr. STRONG. It has been suggested that we permit the officers of
the Federal reserve system to have their own index.
Mr. KING. Well, that is possible. I would not suppose there
would be much difficulty about it.
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Mr. STRONG. There are men on the Federal Reserve Board who
believe they should have in a price index, stocks and bonds, and that
they should be weighted in the index number the same as anything
else. Some of us do not feel that would be very fair to the public
at large. Have you any thought on that?
Mr. KING. Why, my own feeling would be that the. best type of
index number would be made up primarily of commodities ready, or
approximately ready, for consumption; so that the amount of goods
that the laborer would get for his wages and the ordinary consumer
would buy, would be kept stable in value; but I will say, however, if
you take a rather inclusive index like Carl Schneider's, and the Federal
Reserve Bank of New York, and put it up against the consumer index,
they are practically duplicates of each other; so it makes very little
difference which you use.
Mr. STRONG. You do not think it is necessary to have an all-commodities index number?
Mr. KING. I think that the consumer's index would be the best,
not nec'essarily the goods on the merchants' shelves, but manufactured
ccmmodities, ready for consumption. I think that would probably
be the best index; but I would not stand out particularly for any type
of index. I think that, obviously, stocks and bonds ought not to be
indexed, and I do not think you could put them intrinsically in the
index with any success. I think they should be out, for that reason.
Mr. STRONG. The Department of Labor, I know, now put out an
index of all commodities monthly, and they hav increased them from
504 now to 784, I believe.
Mr. KING. Yes.
Mr. STRONG. Do you think they have improved it by increasing
the number of articles?
Mr. KING. I should think it made it more inclusive, probably, or
representative of commodities at wholesale, than it was before.
Mr. STRONG. Do you think that their present price index would be
a proper measure with which to measure the price level?
Mr. KING. I think it would be a very good measure of the prices of
commodities at wholesale, but not a very accurate measure of the
prices of commodities in general, because it- does not take in any
prices at retail.
Mr. STRONG. Well, is not the United States commodity price level
at wholesale more accurate than it is liable to be at retail? For
instance, in some cities retail prices may be considerably higher than
others, but the wholesale price is generally the true price, as being
the amount that the retailers pay.
·i Mr. KING. I have never made up a large index number that way,
but I am told that even in the case of wholesale prices, you would
not always get the true prices; that many sales are being made at
prices other than the quoted ones, especially in such things as steel
and copper and so on.
Mr. STRONG. And in cases where the large purchaser gets a discount greater than the small one, of course.
Mr. KING. Yes. If you will permit me to say just a word about a
few more prices, I think that all prices are the reflection of the prices
of goods to the consumers, that is, all prices come from that source.
Those ar~ the only prices which depend upon supply and demand
of the article at tho moment things that people want to buy and con
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sume, such as shoes and suits of clothes, and so on; and the exchange
that is going on depends on the supply on the market, but all of the
other things are anticipated. The manufacturer of clothing anticipates the price that the merchant is going to be able to sell the clothing
to the consumer for, and the manufacturer of cotton yarn anticipates
the price of cotton and finally the goods sold to the consumer and the
raw cotton is the anticipation of the price of the cotton yarn, and so
on; and, finally, you get back to the stocks in the cotton mills, and
those are the anticipations of prices of all of these other things. All
prices look to the future, except the prices of the consumable commodities now ready for the consumer to consume; and, hence, these
reflections, being somewhat indefinite, are more influenced by opinions
than the prices of the consumable commodities; and the more layers
of opinion you put in, the more fluctuation you get; so that the prices
at wholesale fluctuate more than prices at retail, and the prices of the
raw material fluctuate more than the prices of similar manufactured
goods; and the prices of the stocks in the corporations fluctuate
more than the prices of the wholesale commodities, all the way back.
That is, the more anticipation you put in, the more uncertainty and
the more fluctuation you have; and I rather prefer-Mr. STRONG. The more anticipation, or the more weight?
Mr. KING. Yes. And I prefer to get close to the consumer's cost,
rathei than the other way, but I do not think it makes a great deal of
difference, as long as in your index you leave out the stocks and bonds;
I think the rest of it will take care of the thing pretty largely.
Mr. STRONG. That is all.
Mr. BEEDY. Mr. King, you suggested some other method of
injecting noninterest bearing circulating medium for any interest
bearing debt, the purchase of bonds by the Federal Reserve Board.
Mr. KING. That would be one method.
Mr. BEEDY. Of course, as they increase their purchases of such
bonds, through the further issuance of Federal reserve notes, they will
gradually reach the point where they must stop, because they will be
getting where they will have funds out to the full limit of the 40 per
cent reserves; and if, at that time, they have not had inflation enough,
the price level has gone up, as you say, it is necessary for them to raise
the official price of gold?
Mr. KING. Yes.
Mr. BEEDY. Now, compared to that continuing automatic check,
which is always in the offing in that operation, what do you say about
the method of purchasing bonds by the Secretary of the Treasury
through the issuance of Treasury notes?
Mr. KING. I think it would be equally good, provided that he were
given definite instructions as to stabilizing the price level. I see no
particular choice between the two methods.
Mr. BEEDY. That is, your thought is that, as the Secretary of the
Treasury continues to issue more Treasury notes, the relation between
the actual gold which we had in the country and the outstanding issues
of paper obligations would vary about the same as it would through the
issuance of Federal reserve notes?
Mr. KING. I should think it would be about the same thing.
Mr. BEEDY. Notwithstanding there is no law compelling the Secretary of the Treasury to have a certain gold reserve behind the notes
which he might issue?
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Mr. KING. It would be desirable, however, to keep all notes at
par with the gold, so that the Secretary of the Treasury could have
the same power to vary the weight of gold in a dollar as the Federal
reserve, or else you will probably be arriving at the place where some
of your money would circulate at one level and some at another, and
that would be a very bad thing.
Mr. BEEDY. That is what I wanted to bring out. So that, in this
bill, if you give the Federal Reserve Board the authority to raise and
lower the official price of gold, inasmuch as the Secretary of the Treasury is ex-officio member of the Federal Reserve Board, there would
be no variation presumably between the price of the notes that he
issued, or the value of them, and the notes that the Federal Reserve
Board issues at any time?
Mr. KING. I suppose that would equalize them under those circumstances, but somebody has got to have authority to vary the
price of gold.
Mr. BEEDY. Have you anything to say to us about the effect on
the international exchange of the right to raise or lower the official
price of gold in this country, beyond what you have said? Would
there be possibly a tendency to widen the fluctuation in these exchange
rates, through the existence of such power or not?
Mr. KING. As far as the action of the United States was concerned,
I would suppose that it would have no tendency to make the fluctuation wider than it would be otherwise. We are not proposing, under
a bill of this type, to introduce some kind of erratic currency; we
are proposing to introduce a currency that i$ exceedingly stable, in
terms of commodities, something that is more stable than gold has
been before. That kind of currency would not tend to produce an
erratic fluctuation in exchange rates. If there were erratic fluctuations, they would come from other countries; because here you are
putting in something that is very stable. It is true the price of gold
would vary from time to time, but those fluctuations would be slow,
and I would expect the changes to be very slight, I think that our
action, th~refore, would not tend to accentuate the fluctuation in
the exchange rate.
Mr. BEEDY. What bearing upon the successful operation of such
a law do you think the question as to the proportionate part of the
world's gold supply we hold, at any time, would have? Suppose,
for instance, that we instituted such a policy, that we pass this bill
and it becomes a law, and that the moment we did not have a major
portion of the world's gold, due to the fact that France has more
gold than we-if you did not adopt such a policy, would the fact
that France has more gold than we have any effect upon the successful
operation of our policy 'here?
Mr. KING. I would not say that it would be a matter of any importance at all. The only object in a reserve is to have the ability
to pay on demand in gold, and have gold enough to facilitate those
exchanges. It does not mean that we have got to have most of the
gold in the world. We would need a moderate amount, and we
would ~et it in the ordinary course of trade; but I see no particular
desirability in trying to impound the larger part of the world's gold
any more than the biggest part of the world's trade.
Mr. STRONG. If, under the existing system, we should continue
to hoard gold, before we could pass such a bill and thereby officially
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decree its value, the tendency would be for more gold to flow in, and
we could meet our needs in that way.
Mr. KING. I think it would undoubtedly be true.
Mr. GOLDSBOROUGH. Professor King, can you give any opinion
as to why the price level has fallen to the extent that it has? You
have said, I think, several times, that the business depression was
due to falling prices, and that the falling prices were much more
than would have been indicated by conditions, as I understood you, as
I interpreted what you said. Now, can you explain that, or enlarge
upon it?
Mr. KING. Well, the fall in the prices has been partly occasioned
by the fact that the gold supply has not kept pace with the volume
of business, but that has only been one feature of it. The biggest
cause for the very sharp decline in prices that we have had in the
United States is the great contraction in the volume of bank credit
outstanding, in other words, your deposits subject to check. Those
have been contracted tremendously, and those have been contracted tremendously, and those have been contracted because
people lost confidence, optimism gave way to pessimism; and
the stock-market loans disappeared, and we had enormous volume
of credit out on stock-market securities, and the stocks failed
until they did not have much value. So, you have had an
enormous contraction in bank credit, and people have had less money
to spend; so that you have had those two sources of suffering. The
fall in prices pulled down the stock-market structure to an unreasonably low level, and that pulled down the volume of bank loans, and
that tended also to stop business, and that tended to pull down the
volume of bank loans further. So you have had an accumulated
effect on the volume of bank loans outstanding.
.
Mr. GOLDSBOROUGH. Now, Professor King, there is a word used
in this country many thousands of times a day, that to me has caused
a great deal of unsound public opinion, and that is the word "over.;.
production." As I understand, your view is that, except in Some
very exceptional cases, if you keep up. the buying power of the
people, there is no such thing as overproduction?
Mr. KING. I think that is, in a broad way, true undoubtedly.
Mr. GOLDSBOROUGH. And that, instead of issuing $5,000,000,000
worth of bonds for construction and adopting means of a similar
character, your view would be that, by raising the price level, you
would tend to restore confidence and put everybody into the market,
and the situation would soon adjust itself.
Mr. KING. I think it would be much wiser to get the people back
to work in their normal lines than to try to give them relief work of
some sort. Besides, when you issue a bond and sell a bond, you take
money away from some classes of people to buy the bond, and they
can not hire people, and the Government hires them, and it is doubtful whether you have increased employment at all or not.
1fr. GOLDSBOROUGH. Now, you are aware, I am sure, that under
the Glass-Steagall bill, there was made available to the Federal
reserve system a vast amount. of gold-I will not go into the figures
for the moment, because I do not want to confuse the issue. There
will be many who will be afraid of this section 3 of this bill that we
are discussing now.
Mr. KING. Yes.
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Mr. GOLDSBOROUGH. Thev will say that that means that we have
gone off the gold standard, and while a great many know what that
means, most of the people who speak of it do not know what it is, but
the sound of it is ominous and makes people fearful. Now, with our
gold reserves and with the business which we have, world-wide business
which we have, do you not think it is very doubtful whether, through
the years, we will have any necessity to use section 3 of this bill?
Mr. KING. I really do not know what the answer is to that question.
I think that would be a very hard thing to predict.
·Mr.GOLDSBOROUGH. I want you to understand, thoroughly, that
I am not afraid of section 3. I am not afraid of section 3, myself.
Mr. KING. Yes; I understand.
Mr. BEEDY. But you do think that, to make this law efficacious, we
must embrace not only the quantitative theory of money but the
qualitative theory, as well, do you not?
Mr. KING. Well, I am·not quite sure that I get the meaning of your
question.
Mr. BEEDY. If we were to confine our proposed legislation wholly to
dealing with the quantitative theory of money, do you not think that
our chance of being successful would be much less than if we also
considered the qualitative theory, and put in such provision as you
find here in section 3 of this bill?
Mr. KrNG. Well, as I said before, I feel that, if ·you are going to
make this law one that will work, year in and year out, when you
really need it most, it should have that provision in it. You never
will know, otherwise, when you ll.re going to run up against a situation
that will make the law unworkable; and that is like trying to fly an
airplane when something is going to go wrong at almost any minute.
Now, you do not want anything to go wrong at any minute; ycu
want it to work all of the time, if vou are going to come out safelv.
Mr. GOLDSBOROUGH. And you ·think, as I understand it, that~ tl:e
principle involved in section 3 would cover that situation, in any
situat10n, including war?
Mr. KING, It seems to me there is no reason why it should not
work just as well in war time as in peace time. The idea that you
must have inflation in war time is purely fallacious, and is only true
because we have had unsound currency systems in all of the countries;
but if you had a sound currency system, it would seem to me to be
entirely unnecessary, because you do not lessen the cost of the war
by inflation, but you cause a great deal of trouble.
Mr. GOLDSBOROUGH. Now, Professor Kin~, the opponents of this
measure will say before this committee, I thmk, that with the lower
price levels, such as they are in foreign c'Ountries, as soon as the
price level in this country is raised, foreign goods will be dumped in
here, and the level will be immediately lowered again, so that we will
be confronted with a continuous effort to raise the price leveh::i and
the depletion of our supply of gold. "\Yhat have you to say to that?
Mr. KING. I would say that the international price level, as pointed
out a few minutes ago, is the gold price level. The exchanges are made
in gold, and they are going to be made on the gold basis. You can
not keep the price of a commodity where it is, where there is a freetrade difference in two different countnes, when measured m gold,
except by the amount of the freight charges; that is, if wheat is
moving from here to England, in England it will be worth as much
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more as the freight charges are in England, in terms of gold. That
will still be true. The effect on trade, therefore, will be negligible,
because the international balances will be settlecl in gold as before.
There will be differen~es in the exchange rate that, the bankers and
exchange brokers deal in, but they will be the only ones who will
notice the difference, but it will not affect trade one way or another,
because they will be on the gold basis as long as you use gold as the
international basis.
Mr. GOLDSBOROUGH. Suppose a Congressman says on the floor
of the House that the price level of shoes or gloves is mu<:,h lower in
Czechoslovakia and France, in Czechoslovakia in the matter of shoes,
and in France in the matter of gloves. Now, you raise the price level
of shoes and gloves m this country, and that will cause shoes and gloves
to come in. from Czechoslovakia and France, and will interfere with
our labor situation and, as said before, tend to depress the price levels
again. What will be your answer to that specific statement? Understand, I do not think there is anything in it, but I want to know what
would be your answer to it.
Mr. KING. My answer would be that the people in Czechoslovakia,
who are trying to sell the shoes, would be interested in the price in
terms of their money, the price that they got for the shoes, because
they would be selling in terms of their money, not our money; and
if we raised the price level here and changed the value in terms of
gold in order to do that, then in that case they would not get as much
money for $1 of American money as they did before; but what they
got in their own money would be exactly the same as they got before.
It would not make any difference, but they would get more of our
money; but if they did not know it, they would only think in terms
of their own money.
Mr. GOLDSBOROUGH. That may not be clear to some member.
Mr. KING. The exchange rates would change; that is, if they used
the florin, or whatever they use over there, if the exchange rate
changed, they would not get as much for one of their florins; that is,
they would get more dollars, but they would not get any more florins.
We would be paying a higher price, but the whole thing would be
based upon gold. If the gold value changed, in that case they would
get the same amount of gold they did before, but the ratio between
the gold and the paper in this country and the gold and the paper over
there would be the thing that would be affected. They would be
getting the same amount of gold they would get before, and they would
be interested only in how much gold they got, in regard to their
money, and it would not make any difl:'erence to them, because the
international commodities would still be billed on the basis of their
values in gold. It would be just the same thing as it was before.
Mr. GOLDSBOROUGH. Now, there is one more question I would
like to ask you, and I want to say, if you prefer not to answer it,
it is perfectly sati'lfactory; it may be a delicate question. I understood you to say, Professor King, that, without some specific direction,
you did not believe that the legislation would be effective in raising
the price level, without some specific direction to the Federal Reserve
Board, if that is the power that is to act.
Mr. KING. Yes'; I was merely judging by observation. They do
not seem to have been particularly interested in stabilizing the pri,·e
level during the last two or three years, and I do not suppose that
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they would change their views in that regard.
My impression is,
I do not think the Federal Reserve Board has any feeling that that
was one of its functions. 'l"'hey are bankers, and they look at the
thing from the banking standpoint, and they think of it just as the
bankers thinks of banking in general. They want the credit conditions sound, but they do not think it is one of their functions. They
feel that this is something the people are trying to pull on them, and
they do not want it. They have said so repeatedly. If they do
not want i~ .some one else should take it that does want it, or else
they should be instructed to take it. This is a most important
function, and there are other functions, and if they do not care to
exercise it, I should say give it to some one who does eare to exercise
it. They have adopted the attitude that they do not want to give
it to anybody else, they prefer to have it there, but do not want to
exercise it.
Mr. PRALL. Your idea is that their action depends on the banker's
mind-Mr. KING. Yes.
Mr. PRALL. Rather than on the mind of the needs of the country?
Mr. KING. I think that the needs of the country in a monetary
way-that is, my feeling is that bankers are very expert in their
line, and they think, because they deal in money, that it has to do
with the monetary needs of the country. I really think there is no
more connection necessary between being a good banker and being a
good money economist, and being a good shoemaker and being a good
monetary economist. I think these things are not related. These
men are experts in banking, but they are not interested in monetary
economics; but the monetary system of the country has turned over to
them something they are not interested in, and that it ought to be
put in the hands of monetary economists, or else they ought to be
instructed to do something in the way of learning something about it.
They have plenty of good men and they can learn about it.
Mr. STRONG. They ought to be taught the science.
Mr. KING. Yes; they have some very good men that they could
use, but they are not interested. Right in their own organization
they have some excellent men, but they do not care about this.
Mr. GOLDSBOROUGH. Professor King, the subcommittee all agree
with me, that we have been tremendously enlightened and helped by
your fine statement. You have not only expressed views that showed
great learning and sound judgment, but you have expressed them in
language which is easy to understand, and it is going to be very helpful
to the subcommittee and the full committee and to Congress and to
the country, and we certainly thank you very much.
Professor FISHER. I suggest that you ask Mr. King to speak about
the debenture feature of this bill.
Mr. GOLDSBOROUGH. I think he has already done that, sir.
Professor FISHER. Then he did it before I came in. I am sorry.
Mr. GOLDSBOROUGH. I think, in your discussion with Mr. Busby,
you agreed that the reserve system of course, when the inflation or
rise in prices had reached the desired point, could stabilize the price
level either by selling the bonds which had been bought up, if they had
not matured in the meantime, or new bonds could be issued.
Mr. KING. That would be the same; yes.
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Mr. GOLDSBOROUGH. And you think that is. taken care of, do you,
by section 2 of the bill?
Mr. KING. I think that that is exactly what they should do.
Mr. GOLDSBOROUGH. Is that what you had in mind, Professor
Fischer?
Professor FISHER. Yes; I knew he had referred to the Government
bonds, but these are special debentures of the Federal reserve system.
Mr. KING. It seems to me that would be an excellent provision.
Mr. GOLDSBOROUGH. Thank you very much, sir.
Mr. KING. I wsnt to thank you gentlemen for taking up your time,
and I hope I have not bored you too much.
Mr. WHITE. Mr. Chairman, I think I spoke to you about the introduction of a portion of Doctor Warren's and Doctor Pearson's
bulletin, pages 1659 to 1703, referring to the price level, in which
statements are made and very elaborate graphs are incorporated, and
I think it desirable for you people to have the detailed information,
and I would lilrn to get it in the record, that portion of it.
Mr. GOLDSBOROUGH. Without objection, it is so ordered.
Mr. WHITE. This is the bulletin that Professor King referred to.
Mr. GOLDSBOROUGH. Yes.
Mr. PRALL. Was not that offered the other day?
Mr. WHITE. We spoke of it, but we failed to include it. There
was in just the little that Mr. Wallace referred to.
Mr. GOLDSBOROUGH. That may be inserted.
(The pamphlet above referred to is here printed in full as follows:)
COMMODITY PRICES
With wars or political unrest in much of the world and many countries no
longer on a ~old basis, the future of the general price level is very :uncertain.
But farming 1s such a long time industry that every farmer, either consciously or
unconsciously, is adapting his practice to what he thinks the price level will be.
Since the most important problem that confronts agriculture is the future of the
general commodity price level, a large portion of this number is devoted to commodity prices, physical volume of production, money, wages, and probable future
prices. Every plan of farm operation is based on the farmer's guess about future
prices. It is not possible to give a perfect answer to the problem, but a knowledge
of the basic facts will help. These facts are complicated, but no more complicated than vitamins.
There are always variations in prices of individual commodities. To adjust
farming to these is difficult enough, but during the last 17 years, the major problem has been .to forecast the general price level because this rather than fluctuationi;i in prices of individual commodities, has been of overwhelming importance.
The movements of the general price level in the Civil War period and the fluctuations in the price. of hogs about the general level of commodity prices are
shown in Figure 1. The hog cycle was important, but the serious thing was the
decline in the general level of commodity prices which dragged the hog cycle
down. The same comparisons for the World War period are shown in Figure 2.
The whole price structure has declined from 244 in May, 1920, to 100 in December,
1931. The major part of the decline in the price of hogs is not due to the hog
cycle, but to a general collapse in all prices.
Similar comparisons for wheat during the Civil War period are shown in
figure 3. Wheat prices fluctuate violently, primarily because of variations in
weather. Following the Civil War, these :fluctuations were about a steadily
declining base. Wheat pri<!es· and all commodity prices for the World War
period are shown in Figure 4. Wheat prices are again :fluctuating around a
declining base. It is to be expected that wheat prices will continue to follow
the general price level and :fluctuate about it. There seems to be no fundamental
reason for anticipating a change in these relationships at the present time.
It is extremely difficult to imagine a :fluctuating price fluctuating about a
fluctuating base. The inability to imagine the conditions shown in Figures 1
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INOEX
.?50
50....._..._.,__.,__.,__+_.,_.,__.,__.,_.,_.,_..,_..,_..,_..,__.__.__.___.__,__,__,_...._.......~
1860
1864
187,?
(876
1868
1880
'884
FIGURE 1.-Index numbers of wholesale prices or all commodities and of prices of hogs at New York
City,1860-1885. 1856-60=100. The usual hog cycle continued but fluctuated about a declining
base·
·
INOEX
Z70
All commodlttea
195
45'--L..-1-.J....--l...--l-...l----L--1--1--l.-.J....--1...-1-...L--'---'---'--'
1914
1918
1922
19.26
19!11
FJGURE 2.-lndex numbers of wholesale prices ofallcommoditiesandpricesofheavfhogsatChlcago,
1914-1931. 1910-14= 100. As in the Civil War period, the hog cycle continues but 1s dragged downward by the decline or the whole price structure. It is to be expected thathog prices will continue to
fluctuate a.bout the general price level
INOE.X
225
1.95
IG5
1!5
,.,
75
454""''h-.J......I..-L.-JL......I-.J......I.....L-JL......I-.J......I.....L-JL......I-.J......1..--1.-L......l-..1-...1.....I.~
1860
186?
1870
187?
1880
FIGURE 3.-lndex numbers or wholesale prices of all commodities and prices of winter wheat at New
York CitYt ..1860-1885. 1856-60=100. Wheat prices fluctuated about the general price level,
which steaaily declined
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205
to 4 leads to erroneous actiom. It also makes it difficult-to appreciate the underlying principles governing prices. Many persons imagine that a stable general
average of commodity prices would mean stability in each commodity. It
would mean that the hog cycle would fluctuate about a stable base. Price
changes would therefore be due to changes in the supply of or demand for hogs
rather than to a crash in the foundations of the whole price structure. Violent
FIGURE 4.-Index numbers of wholesale prices of all co=odities and price of No. 2 hard winter wheat
at Kansas City, 1910--1931. 1910--14=100. Wheat prices are again fluctuating about the general price
level, It Is to be expected that this relationship will continue
changes in the general price level do increase somewhat the violence of price
changes due to other causes.
.
The statement is commonly made that prices are due to snpply and demand.
This is a half truth. It has led to tremendous losses on the farms and in the
cities, and hos led to the adoption of eProneous public policies. Price is a ratio
of the supply of and demand for gold to the supply of and demand for a commodity. In short periods of time credit may act independently of gold to
increase or decrease prices. Also in short periods of time, speculation may
FIGURE 5.-Wholesale prices in the United States for 135 years, 1797-1931. 1910--1914-100. During most
of the last 135 years, Instability of the general price level has been the most Important problem of agri-
culture. The periods of rising prices have been periods or agricultural prosperity, and periods or falling prices have been periods of agricultural distress
act independently of the supply of or fundamental demand for the commodity.
But prices due to speculation are generally brought back with a jerk. Similarly,
if credit gets very far from its normal relationship to gold, it is brought back
with a jerk.
The movements of the general price level are primarily due to monetary
factors. Mere adjustment of the wheat acreage does not solve this problem.
The movements of the commodity prices due to monetary causes have been of
overwhehning importance for more than half of the time during the past 135
years (Figure 5).
111442-32-PT 1--14
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The comparative price declines in the different war periods are shown in Figures 6 and 7. After each war prices were cut in two. Both the rise and the
decline in the World War period were more violent than in previous war periods.
PRICES IN DIFFERENT COUNTRIES
Prices in different countries since the World War are shown in Table 1 and
Figures 8 and 9. Prices in England in November, 1931, were 67 per cent below
the average for the year 1920 and 28 per cent below 1929. The long decline followed by the crash since 1929, resulted in so much unemployment, business failures, and other distress that England discontinued the gold standard on Septem-
10,e,~
1!/14
1814
l!116
18~5
18/S
/9ZOl!IZO
,no
FIGURE 6.-Index numbers of wholesale prices, war of 1812 and World War periods, 1910-1914=100
her 21, 1931. Rarely, if ever, has a country stood a decline of 67 per cent in its
price level without a revolution or a currency change. England now has about
3,000,000 unemployed.
TABLE
!.-Comparative price declines
England, France,
GerStatistStatisItaly,
many,
Sauertique
Riccardo Statisbeck
Generale Bach!
tisches
index,
Index,
index,
Reich1910-1914 1910-1914 1913=100' samt,
=100 1
=100'
1913=100 3
------------,----
United
States,
all-commodity
index,
1910-1914
=100 •
United
States,
North
30-basic
China
,commod- index;
1ty index, 1913 =lOO•
1910-1914
=100 •
---- ---- ---- ---- ---- ----
Peak year______________________
7 304
, 709
, 618
, 226
, 231
Year 1999_______________________
139
617
440
137
139
141
November, 1931..______________
Hl0
412
320
107
103
84
Per c,int decline from peak______
67
42
48
54
64
Per cent
cent advance
decline since
1929______
28
33
27
22
26
40 _
Per
__________________________________________________________________________
165
179
8
1 The Statist, vol. cxiv, No. 2812, p. 80, Jan. 16, 1932. The index number~ on the 11-year base, 1867-1877,
were converted to the 5 years, 1910-1914, by multiplying by 1.2107.
• Annuaire Statistique for 1928, vol. 44, p. 115, 1929. To convert to the 1910-1914 base from the 1901-1910
base, multiply by 0.8726; from the July, 1914, base, by 0.9888; aud from the 1913 base, by 1.()096.
8 Monthly Labor Review, U. S. Bureau of Labor Statiqtics, vol. 33, No. 6, p. 238, December, 1931.
The
November, 1931, index numbers were supplied by Ethelbert Stewart.
• Warren, G. F., and Pearson, F. A., Wholesale Prices in the United States for 135 Years, Farm Economics
No. 72, p. 1587, September, 1931, an,1 Table 1, p. 1634, of this issue.
• Table 1, p. 1704, of this issue of Furm Economics.
'Nankai University, Statistical Service, Nanka! Institute of Economics, Nanka! University, Tlentsin,
China, Vol. III, No. 22. p, 109, June 2, 1930; Vol. IV, No. 49, p. 223, Dec. 21, 1931.
11920.
11926.
During the first six years of declining prices in England and the United States,
France inflated the currency. Prices rose, production was profitable, and there
was full employment. All the other conditions were such as accompany rising
prices. Instead of attempting a complete deflation as was attempted in England
and the United States, France reduced the weight of gold in the franc to one-fifth
of the pre-war amount on June 25, 1928. No serious decline in prices occurred
until 1930-31. Prices in November, 1931, were four times the pre-war level.
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(Fig. 8.) Any debts incurred at pre-war prices or at four times pre-war prices
could Ue readily paid. Farm land is, of course, worth much more than before the
war, and a house built before the war is valuable proverty. But France was
becoming adjusted to a price level of about six times pre-wo.r. A price level only
four times pre-war is now a serious matter, and France has unemployment.
Italy revalued her currency on December 22, 1927, so that prices are far above
pre-war. But Italy was becoming adjusted to a price level of about four times
IN0£X
50,""''8_ _,___._.l,-:,864,,...._., 1864
1914
1918 192'0 192'0
166!1
19?!;
1884
187.9
1874
19$0
1940
19$5
FIGURE 7.-Index numbers of wholesale prices in the Civil War and World War periods. 1910-1914=100.
The price declines following the World War were similar to the declines following the Civil War, but
were more violent
pre-war so that a drop to an index of three times pre-war or a decline of 27 per
cent since 1929 has resulted in about one million unemployed, a record for Italy.
Since 1929, prices in Germany have declined 22 per cent and it is reported that
five and one-half million are unemployed, the highest number ever reported.
In the United States, prices declined 54 per cent since 1920. No other important country that had such a large price decline is continuing without some monetary change. Since 1929, prices have declined 26 per cent.
~5or----------,---------.-----------,
~,\
II
''
,' '"°''\/...._...,·\,.
'' ''
,..!
/\
' "'\
\ ,....,
\
.
France~.....
4751----------+--+,----1-~--+-------=-.--;
/
,~#..., .. _,..
100
i--..c:-...··-19~.3
\
'""'\
~--,/
\
\
-----
_,.:
,-•,•·~·
_.,,,
l9ZO
19.31
.FIGURE 8.-Index numbers of priees in the United States and prices in Fmnce, 191&-1931. 1910-1914=100.
Frauce has been on a gol<I basis sinee 192~, but since the currency was revalued, price~ are about five
times as high as In England or the U nitec:I States
Prices of basic commodities in the United States declined about 64 per cent
since 1920, and 40 per cent since 1929. These prices are the average at which
farmers and other basic producers must sell. They are a sufficient explanation
of the decline in freight car loadings. The popular explanation of railroad difficulties is that the trucks are getting the freight. The freight does not exist.
The unemployment in the United States is variously estimated at from six to
eight million.
Since 1929, the· decline in prices in England, France, Germany, Italy, have
been very similar, France 33 per cent; England, 28; Italy, 27; United States, 26;
and Germany, 22.
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PRICES
Since 1929, prices in China have risen 8 per cent. China is on a silver basis.
In the same period, prices in gold using countries have declined from 22 to 33 per
cent. At the same time that other countries are feeling the effects of declining
prices, China is feeling the effects of rising prices (fig. 9). There is full employment and profits are large. It does not follow that the prices in the gold
using countries would have been the i,ame as the prices in China had these countries been on a silver basis. The use of any metal as money changes the demand
for it and hence changes its value.
EFFECTS OF DECLINING PRICES
Every human relationship is affected by prices. It is sometimes said that
lenders and those who live on wages or salaries profit by declining prices. Practically every one loses when prices decline seriously. Production stops. Courage
in business is penalized. The physical property of the nation deteriorates.
Declining prices do not merely transfer wealth-they destroy it.
EFFECTS OF DECLINING PRICES ON PRODUCERS' AND CONSUMERS' PRICES
When prices rise, producers' prices rise faster than consumers' prices. For
the year 1917, American grown food sold at 56 .per cent above pre-war retail
INDEX
225
zoo
150
100
1918
19,2.!J
19.!JT
FIGURE 9.-Index numbers of prices In the United States and In China, 1913-1931. Pre-war=IOO •. From
1913 to 1920, prices In the United States rose much more rapidly than in China. Since then, prices in
China have continued to rise and prices In the United States have fallen. Prires have been extremely
erratic in both countries, but have been more stable In China than in the United States
prices. Farmers received 81 per cent above pre-war farmer prices. With declining prices, this same food sold at retail in 1923 at 54 per cent above pre-war, but
farmers received only 24 per cent above pre-war. In these two years retailprices were practically identical, but prices which farmers received fell from an
index of 181 to 124. These relationships for other years are shown in Figure 10.
For the year 1931, retail prices of American-grown food averaged 135 when prewar is 100. The cost of distribution averaged 178. The farmer received prices
only 89 per cent of pre-war. The same relationship holds for other products.
The index for 30-basic commodities for 1931 was 90, but the cost of living index
averaged 151.
Farmers sell at wholesale and buy at retail. In a period of declining prices
there is a wide discrepancy between the prices at which they buy and the prices
at which they sell. This discrepancy has lasted for 11 years, and will continue
so long as prices decline. If prices rise above the cost of distribution, the situation would be reversed. If the general price level should remain stable, adjustment would ultimately occur, but this would require many years unless prices
rise materially. How slowly the adjustment takes place is shown by the changes
1 The wholesale prices for North China are those reported In the Nanka! Weekly Statisti<',al Service
Nanka! University Co=lttee on Social and Economic Researrh, Tlentsln, China, Vol. 3, No. 22, p. 109
June 2, 1930. The index numbers are on the 1913 base. The index numbers of wholesale prices for the
United States are those reported by Warren, G. F., and Pearson, F. A., Wholesale Prices in the United
States for 135 years, Farm Economics No. 72, p. 1587, September, 1931 and page 1634 of this Issue. The
index numbers are on the 1910-1914 base.
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STABILIZATION OF COMMODITY PRICES
209
that occurred from 1921 to 1929. In this period, the general price level was fairly
stable. For the year 1929, retail prices of food were 174 and farmers received 151.
Had prices remained stable another 10 years, the readjustment probably would
have been completed. For farmers who are not heavily in debt, this price discrepancy is the most serious single effect of declining prices.
Manufacturers have the problem of hiring labor which has a high cost of living
to produce products at a low price. Farmers have the additional problem of
buying at retail and selling at wholesale. Manufacturers buy at wholesale prices
which are low and sell at wholesale prices-which are also low, but the farmer buys
at high prices and sells at low prices. This is the reason that farmers are so anxious
to buy cooperatively at wholesale.
, EFFECTS OF DECLINING PRICES ON DEBTS
Before the panic of 1920, relatively few debts had been incurred at the high
price level. By 1929, the whole international, national, and other public, and
80_,,..__._.,___.__._..,__.__.__,__._.__.___._.,___.__.t__.J_....L_,jL-..I-....J
1910
19I~
1920
1930
FIGURE 10.-Farm and retail price!' or rood and cost of distribution, 1910-1931. 1910-14=100. When prlres
rise! costs of distribution rise Jess rapidly and farm prices more rapidly tban retail prices. When the prices
dee lne, costs or distribution remain high and rarm prices dedlne more than retail prices
private debt structure was adjusted to a commodity price level of about 150.
In fact, debts were somewhat high even at this level.
Commodities are the basis of most credit. Brazil expected to pay its debts
with coffee. Australia expected to pay with wheat and wool. The State of
Georgia and its farmers expected to pay with cotton.
Most of the security for debts is commodities, either movable ones or those
that have been built into homes or factories. Most of the taxes are raised by
assessing such property. If commodities drop in value, the movable commodities
as well as the railroad ties, rails, electric lines, and houses decline in value. The
present public and private'debts and taxes would not be particularly burdensome
at the price level at which they were incurred, that is, at a wholesale commodity
price level of about 150. A large part of the indebtedness can not be paid at a
price level of 100. It is commonly believed that lenders profit from declining
prices because they are paid back with dollars that have a higher value than the
dollars which were loaned. Lenders would profit if they were able to collect in
full, but the losses of principal are so great that few lenders profit. When the
farm or home is foreclosed, it means a total loss to the previous owner, but may
also mean a total loss to the lender. He may not be able to sell it for enought to
pay taxes and costs while it is held waiting for a sale. Declining prices take
property-away from persons who want it and place it in the hands of those who do
not want it. A long time is then required to find persons who want the property
and are able to pay for it.
Rough approximations of certain debts are shown in Table 2. Most of the
indebtedness doubled since 1922, and is about four times the pre-war amount.
The most serious single unadjusted factor is not wages but debts. There is
trouble enough in lowering costs of distribution, rents, and the like, but the process
of debt liquidation is even more serious. In many cases the best method of
handling debts is to write them down just as rents and commodity prices are being
written down.
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210
STABILIZATION OF COMMODITY PRICES
TABLE
2.-Estimated public and private debts of various classes in the United States
(000, 000 omitted]
Gross public debt less sinking fund as•
sets of all classes of Government organlzations In the United States
Year
Na•
tional
Life insurBnce
Incorporated BuildCorpo. policy
places and all ingBUd Bank Farm
mort' ratelia- loans
other civil divi- loBU loBUS 3 ga!!"es
Bnd
• billtles• presions
assets 1
Conn•
mium
States
ties
notes•
Cities
All
over
other
30,000 I places
.
- - - - - - I- - - --- - - - - - - --- - - - --1912.••••••.•......•.
1922.••.•.••••..•· .••
1929.••••••.•.•....••
1930...••••••••••..••
1931. ••.•••..••.••.••
•$1,029 '$346
• $372 ,8 $1,809
7 834
• 22,156
.16,000 71,662
16,000
1,800 •••...•• 8,000
18,000
S,000
8,000 ! 9,000
.·.~~:'.~.1
i: ~
$1,874
s,eoo
6, f/10
7,000
7,000
--------------- ---------------
$1,138 $14,041 '$3,320
3,343 27,684 10 7,868
8,695 41,782
9,241
8,829 40,510
35,211
--------
$76~00ii"
$58S
1,141
2,379
2,801
S,4()()
Figures in italics are estimates.
1 Financial statistics of cities having a population of over 30,000: 1929, United States Department of
1 Statistical Abstract of the United States 1930, Fifty•second number, pp. 220 and 277.
Commerce, Bureau of the Census, p. 5.
.
.
a Comptroller of the Currency for 1930, Reported loans and discounts as of 1930 for banks, pp. 737 and
745. Statistical Abstract of the United States 1912, pp. 622-25, 1922, pp. 516 and 521; 1924, p. 243: and 1930,
pp. 267 and 271-3.
.
• Yearbook of Agriculture 1924, p. 190. reports the farm mortgages for 1920. Later data by E. Englund
Bnd D. L. Wickens of the United States Department of Agriculture.
·
• Furnished through the courtesy of E. White, chief statistician, office of Commissioner of. Internal
Revenue, United States Treasury.
· ,
.
0 Insurance Yearbooks of the Spectator Co., and furnished through the courtesy of W, .A. Berridge of
the'Metropolitan Life Insurance Co.
7 Financial Statistics of State Governments: 1929. Bureau of the Census, p. 3.
81911.·
• 1910.
10 1920.
Extremely rough estimates of the total indebtedness are shown in table 3. The
total debt is approximately $1,700 per capita, or about one-half of the national
wealth in 1929. If the value of commodities is to drop one-third and remain at
that level, the debt would become about 75 per cent of the value of the property.
So much of this can never be collected that it is probable that the lenders would
have a greater buying power if they were paid in full at a price level of 150. The
usual argument for reducing wages is that a dollar has more buying power. This
same argument might be applied to debts which are the most serious result of
deflation.
TABLE
3.~Rough approximation of public and private debts (from Table 2)
Debt
Amount, Per cent Perc.,piti.
billions
--- --Corporations •......•...•...•...••.••••.•.••••••.•••••.......•..••..••....
Urban mortgages'·························-·-····························
Bank loans ..•.••••.••..•••••••..•••.•••.•.•.••..•.•.•••.••..•.•.••..•.•.•
State, county, and local. •..••...••••••..•••.•••.••..•••.•••...••.••.•.•..
National._ .• ········-·······-•· •••..•.•.•••.••..••..•.•.•...•••.• -· ..••..
Farm mortgages.•......•...•.•.••......••••••.••••••••.•••••••••••••••••.
Life insurance policy loans and premium notes .•••.•••.•••.•••.•••.••..•.
Retail Installment paper•- .• -·······················-·······-············
Pawn brokers loans and unlawful loans of all kinds •.•..•.......•..•..••.•
$76
37
35
21
18
9
3
3
1
37. 4
18. 2
17. 3
10.3
8. 9
1. 5
.5
171
146'
73
24
24
g,
Total ••••••••••• --···-···-·-·· ••.•••••• ·--••••••••••••••••••••••••••
203
100.0
1,649'
4. 4
I.Ji
$61S
301
284
Based on estimates furnLshed through the courtesy of George Terborgh of the Brookings Institution.
Based on reports of the National Association of Finance companies.
Ryan F. W., Family Finance In the United States, the Journal of Business of the University of Chicago,
vol. III, No. 4, pt. 1, p. 404, October, 1930.
1
1
8
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Federal Reserve Bank of St. Louis
211
STABILIZATION OF COMMODITY PRICES
Unliquidated public and private debts are the most serious problem in the
United States at the present time. These debts could be paid at the price level
at which they were incurred. Many of then can not be paid at a pre-war price
level.
The decline in commodity prices has resulted in many business failures. During
the last two years 3,635 banks have suspended, with deposits of $2,624,000,000.
IN0£K
33or---,
r----..------.-----,--,
11.-Prices of white pine and brick for the Civil
War period and of yellow pine and brick, for the World
War period. In each C8lle pre-war is 100. The course of
prices is similar in the two war periods but is more violent
this time. II the similarity continues, prices will rise in
FIGURE
1936
In the same period, 54,640 business failures have occurred, with liabilities of
$1,405,000,000.
EFFECT OF DECLINING PRICES ON HOME OWNERS
The home owner's security is in the value of a home. If commodity prices fall
so that the home can be built for 25 per cent less than he paid, his equity is gone
INOeX
190
War
' ',, _,_ ____ .......... , __
1860
19/4
1864 19.201864
1920
1918
1868
1924
1872
1928
1876
19.32
1880
12.-Rents in five large cities in the Civil War period and in eight large cities in the World
War period. In each case pre-war is 100. Thus far the experiences of the Civil War have been
repeated
FIGURE
unless he paid more than 25 per cent down. But when all the bankrupt properties
are thrown on the market, buyers disappear as if by magic, and the multitude of
sellers depress prices so than an owner who paid 50 per cent down may see his
equity disappear. In such a time it is well to remember that well-constructed,
well-located homes have a permanent value even if they are unsalable for a time.
The prices of white pine and brick in the Civil War period and of yellow pine
and brick in the World War period are shown in figure 11.
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STABILIZATION OF COMMODITY PRICES
City homes are much like agriculture in that they have a very slow turnover.
Most industrial and mercantile operations have a relatively rapid turnover so
that adjustment is completed before many years. Agriculture being a biological
industry has a slow turnover, and homes last for many years.
After the panic of 1873, building materials declined in price for six years.
Apparently building equities were then liquidated, for prices of building materials
rose. If the readjustment requires the same period of time in this depression,
home building would be expected to commence in 1936. House rents for five
large cities in the Civil War period and eight large cities in the World War period
are shown in figure 12 and Table 4. Rents reach bottom and· stabilize before
building starts.
TABLE
4.-Rents in large and s211,all cities in the United States, 1860-1880 and
1914-1931
Civil Wart
World War•
Five large
cities,
1860=100
Year
1860_ •. ·--- ·----·-- ·-·-·----------1861 •• _-· _-- --- ---- _. ·- -- ___ --· ••••
1862_. -·- ·--·----·-·-·----·--·-·-··
1863. _-·. -- __ ----· •••••••••••••••••
1864 ••••••• _•••••••••••••••••••••••
1865 ••••••• ····-·-····-···· ••••••••
1866. _····-······-· ••••••••••••••••
1867. ••••••••••••·•••••••••••••••••
1868_. ····-······· •••••••••••••.•••
1869_ ••••••••••••••••.•••••••.•••••
1870•••••••••••••••••••••••••••.•••
1871 __ •••••••••••••••••••••••• ·-· ••
1872. ·····························1873. ·········-···· ••••••••••••••••
1874. --··-·························
1875. •••••••••••••••••• ••••••••••••
1876 •••••••••••••••••••••••••••••••
1877 •• ···-················-········
1878•• ·•••••••••••••• ••.••·········
1879 •••••••• ·············-········1880. ···················-··········
100
101
101
123
168
175
187
167
179
187
180
173
173
173
166
162
147
148
152
148
151
Year
Eight
Ten lesser
cities,
large cities,
1914=100
1914=100
1914...........................
1915...........................
1916.-·········-··· ···········1917-····-·····················
1918 ·-························
1919..•• ·-········-············
100
100
103
I 08
114
1920•• _•• __ ····-----····-······
128
155
1921. ••••••• ·-·········-·······
1922·-···········-·-···········
1923...........................
1924...........................
1925...........................
1926...........................
1927•••••.•• ·-·····-·······-···
1928•••• ·-·······-··········-··
165
167
175
179
179
177
172
168
1930-..........................
1931.. ·-········· ·············-
159
147
1929...........................
166
100
97
95
94
lll
128
146
1/il
149
149
147
146
146
140
133
130
125
ll8
t The rents for 5 large cities from 1860 to 1880 Include Boaton, Philadelphia, Clnclnnotl. Loulsvllle1 and
St. Louis. Weeks, 1. D., Report on the Average Retail Price of Necessaries of Life In the United States.
Report on the Statistics of Wages In Manufacturing Industries, Tenth Census of the United States, Census
Office, Department of the Interior, vol. 20, pp. IOI to 107. 1886.
• Cost of Living, .Monthly Labor Review, United States Bureau of Labor Statistics, vol. 28LNo. a, p.
178, FebrUBl'y 1929, and later numbers. The rents for 8 large cities from 1914-1928 mclude ·Haltlmore,
Boston, B.uffiifo, Chicago, Cleveland, Detroit, New York and Philadelphia. The rents for 10188!18r cities
Include Houston, Iacl<sonvllle, Los AngelesL~oblll!l Norfolk, Portland (Maine), Portland (Oregon), San
Francisco and Oakland, Seattle, and Washmgi;on, u. C.
EFFECT OF DECLINING PRICES ON TAXES
J;'ublic debts incurred at a price level of 150 become extremely difficult to pay
with a price level of 100. Public debts take preference over private debts because
taxes are the first lien on the property. After the preferred creditor has been
paid in full, there are times when there is nothing left for the other creditors.
To make the bx problem still worse, taxes that are based on profits are greatly
reduced and many taxpayers are unable to pay. This necessitates new taxes
or heavier taxes on those who can pay. To make matters still worse, falling
commodity prices result in· increased public expenditures for charity, and the
Federal Government is called on to assist banks, railways, and agriculture. It
would be desirable to have public reserves in times of prosperity to be used in
periods of derression. The major portion of the difficulty could be remedied if
violent fluctuations in the general price level could be prevented. There is much
heated discussion about tax reduction. Public debts and fixed charges· make
reduction very difficult. The only way to provide real tax relief is to continue
the price level to which debts and business were adjusted.
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STABILIZATION OF COMMODITY PRICES
213
OTHER EFFECTS OF DECLINING PRICES
The above are but a few of the innumerable effects of a declining price level.
Another serious result is the effect on buying. Losses of profits and unemployment of course check buying, but falling prices in themselves are a check on
buying. When year after year everything that is bought could have been purchased at a lower price at a later date, a philosophy of delayed buying develops.
If after a period of falling prices, prices begin to rise, an abnormal demand develops. Buying is not only for current needs but to make up shortages.
Another effect of declining prices is on wages and employment which are discussed on pages 1671 and 1677.
A clear presentation of the method by which a decline in commodity prices
causes business paralysiR is given in the Cleveland Trust Co. Bulletin. 1
"During the past two years the general levels of wholesale prices have dropped
both here and abroad by about one-third, and have fallen to their pre-war fi!!,ures.
The result is that business relationships and procedures all over the world have
been disrupted and partly paralyzed. As business everywhere slowed down, the
banks began to feel the pressure of curtailed activity. Credit was contracted
by the paying down of business loans, and bank profits were reduced. For a
time these developments were not serious, but soon bankers began to realize
that trade advances that had been amply secured by the pledge of marketable
commodities were no longer so fully protected when the market value of those
commodities was rapidly falling. As the banks brought to bear increasing pressure for the payment of such loans the prices of commodities fell· still further
and faster.
" Then followed a long procession of declines in the market values of other
things in which banks everywhere were financially interested. If agricultural
commodities were worth less than they had been a short time before, then the
farms that produced them were worth less, and farm mortgages were not so
secure. As the products of mines declined in value, the stocks and bonds of
mining companies became less desirable, and the loans made by banks on such
securities ·were not _so safely protected. As maritifactured articles fell in price,
industrial stocks and bonds declined, and successive payments were demanded
by banks on loans secured by such collateral. As the volume of trade declined
similar pressu,re was brought against securities of shipping and railroad companies.
"During much of this year the banks of this country, and of all countries, have
been engaged in a race for liquidity. As the prices of commodities continued to
sink, as stock prices fell, and as the values of real estate shrank, the banks have
been calling upon their customers to make payments of their loans. Some
banks moved in these matters less promptly and less vigorously than others.
Soon bankers began to realize that the institutions which were failing were
largely those that had followed a lenient policy toward their borrowers until
collateral values had fallen so low that the loans could not be paid. In banking
parlance the loans were frozen.
"The resulting tendency was for every alert banker to resolve to protect his
institution and his depositors from the hazards of holding frozen assets, and to
do it by getting into the most liquid condition possible. The way to get liquid
was to get borrowers to make payments on their loans, and in order to do this
many borrowers had to sell securities that had been deposited with the banks as
collateral for the loans. Each new wave of selling carried market prices further
down, and each new decline in market prices reduced the value of collateral
behind other loans and called for further sales. This was a vicious circle of
deflation that caused deflation. The individual institution had no choice but
to follow the policy of liquidity. It was good banking _in each separate case,
for it protected the bank and its depositors, but its general results tended to defer
business recovery. * * *"
G. F. WARREN and F. A. PEARSON.
WAGES-LONG-TIME TREND IN WAGES
If the index numbers of wages, as reported by the United States Bureau of
Labor Statistics, are divided by index nqmbers of wholesale prices, the result is
the purchasing power of wages at wholesale prices (fig. 1). From 1840 to 1914,
the purchasing power of wages increased at a compound rate of 1.71 per cent per
year.
1
The Cleveland Trust Co. Business BulJetln, Volume 12, No.12. December 15, 1931.
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Federal Reserve Bank of St. Louis
214
STABILIZATION OF COMMODITY PRICES
When prices were tailing or rising, the purchasing power of wages exceeded or
fell below the normal rate of increase.
As will be shown (Table 1 and p. 1680) the physical volume of production per
capita from 1840 to 1914 increased at a compound rate of 1.73 per cent per year.
It is not surprising that the purchasing power of wages must keep pace with the
production per capita. Farmers and laborers are the great consumers of the
nation because there are so many of them. If production is to increase at the
normal rate, wages must rise enough faster than prices rise so as to enable the
laborers steadily to buy larger and larger quantities of goods.
If the laborer produces more per capita, he must consume more per capita. If
he is to consume more per capita, the purchasing power of wages must rise.
Over the centuries, wages have been steadily rising when compared with commodity prices. At the present time, many persons are wholly misled on the wage
question by assuming that if prices go back to pre-war, wages must go back to
pre-war. The only way to bring this about would be to have production per
ca uita return to the pre-war basis. Fortunately no such calamity is possible.
PURCH45ING POWE~
175.-----~-------.-------.-------r----~
/.§0
IZ5t-------t------1-------+------+-----1
50
19,ZO
1930
FIGURE 1.-Purchaslng power of hourly wages, exclusive of agriculture, In the United States,• 18301930. 1910-1914=100. From 1840 to 1914, the purchasing power of wages, at wholesale commodity
prices, Increased at a compound rate of 1.71 per cent per year. The purchasing power of wages was
Jowln the periods of rapidly rising prices during the World War and the Civil War. It was very high
In the two periods when prices were declining rapidly
A steadily increasing percentage of the laborer's income is expended for education, entertainment, a.nd the like. Also, a steadily increasing percentage of
the. population are engeged in these occupations. The physical volume of production per capita for those engaged in producing physical things is therefore
higher than the rate of increase per capita for the Nation. In order to consume
all the physical things and also consume the more rapidly increasing nonphysical
things, the buying power of labor should rise more rapidly than the national
output of physical things per capita.
WAGES FROM THE POINT OF VIEW OF THE EMPLOYER AND EMPLOYEE
If the pre-war trend in wages had continued until 1929, and if prices had
remained at 100, wages would normally have been 132 when the five years before
the war is 100. This would have given them a purchasing power of 32 per cent
above pre-war, which would have been the normal growth in purchasing power
in the 16.5 years. But wholesale prices in 1929 were 139 when pre-war is 100.
In order to have their normal buying power, wages should have been 183.
Owing to declining prices, wholesale prices were out of line with retail prices.
In 1929, the laborer could not buy at a price level of 139. The cost of food at
retail was 174; and the cost of living, 172. At an index of 172, laborers would
have had to have wages of 227 to have a buying power of 32 per cent above
pre-war.
1 Index numbers of wages per hour, 1840 to 1929. Monthly Labor Review, vol. 32, No. 2, p.143, February,
1931.
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Federal Reserve Bank of St. Louis
STABILIZATION OF COMMODITY PRICES
215
Other evidence of the fact that a wage level of more than double pre-war was
a reasonable wage level in 1929 is indicated by the fact that industry was able
to pay this wage level and be decidedly prosperous. Some wages were much
more than double pre-war, but farm wages and some other wages were not
double pre-war.
A collapse in the price structure throws consumers' prices out of line with
producers' prices. The laborer is not concerned with wholesale prices when
they are out of line with retail prices. If the price level would remain stable,
wholesale prices would keep in line with retail prices. In 1931, wholesale prices
of all commodities averaged 107 when the five years before the war is called 100.
The cost-of-living index averaged 151. If the buying power of wages had continued at the pre-war rate of increase, it would have been 137 in 1931. With
wholesale prices at an index of 107, the manufacturer might have anticipated
wages of 147. If they could hire labor at this level and sell the product at 107,
industry would be prosperous, and production would be at a high level. But
in order that the laborers might consume the output that the manufacturers
would then produce, they would need a buying power of 137 at a price level of
151 at which they buy. This would require wages of 207 to buy the products
of industry. This shows the impossible situation that inevitably develops when
the price structure collapses. The manufacturer can not proceed with a wage
level of 207 and a price level of 107. But the laborer can not consume the product,
unless he receives these wages. The result is that both production and consumption stop. A visionary reply is sometimes made that all other prices should
eome down. To reduce all freight rates, all telephone charges, all taxes, all
wages, all rents, all commissions, all debts, and all doctors', lawyers', and dentists'
fees quickly could occur only in Alice in Wonderland. It is about as practical
as it is to say that, if a toad could fly, he could spend the winter in Florida.
Long years of unemployment, bankruptcies, and distress, are the only means of
bringing a collapsed price structure into balance. It could, of course, be brought
into balance quickly if the old price level were restored. When unemployment has continued long enough, the great shortage of goods causes industry to
start for a time. But a period of declining prices is, as a whole, a period of
unemployment.
Such a situation also causes innumerable misunderstandings and violent controversies. The manufacturer who sells his product at an index of 107 feels that
wages fifty pe1 cent above pre-war should be a delight to the laborer. He can not
understand the situation. The laborer who should have wages of twice pre-war
to consume the product at a price level of 151 is unable to understand why the
manufacturer is so unreasonable. The "standstill" is due to a collapse in the
price structure for which neither party is to blame. Here is a definite illustration
of the old conundrum of ''what would happen if an irresistible force should meet
an immovable body?"
The situation is much worse for both parties than the above picture presents.
The emplc:iyer has many fixed charges such as debts, taxes, and the like. He also
.sees the value of his property melting away because a new property could be
built at less cost.
The real cost of living of the laborer does not decline so rapidly as the index
numbers fall. These index numbers include rent, clothing, food, fuel and light
at retail prices. They do not include prices of meals which have fallen less. They
do not include telephone charges, railroad and street car fares; doctors', dentists"
and lawyers' fees; hospital charges; education of children; and the like. Most
of these charges have not declined. They decline very slowly.
The cost of living includes rents, but many laborers have followed the highly
-commended practice of buying their own homes. Declining rents are an injury
to these persons. They mean that the home is shrinking in value. This shrink:age is often sufficient to wipe out the life-time savings of the thrifty worker.
Laborers, like other persons, have investments which have melted away.
When the wage level is tising as rapidly as the national output per capita increases,
-the efficient receive promotions, whereas the inefficient may be kept at the old
wage. With declining prices, both the efficient and the inefficient workers continue at the same level, or receive a horizontal cut. Such a situation often re
·.suits in a greater loss through failure to win promotion, than by any cut in wage11
that is contemplated.
·
With rising p1ices, public employeee with the lowest salaries almost invariably
receive the first increase in t,ay. With falling prices, the general public policy
is to cut the highest salaries first and most vigorously so that the efficient suffer
.mo~t from unstable prices.
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216
STABILIZATION OF COMMODITY PRICES
The efficient business man who proceeds with energy is also penalized. The
hoarder is rewarded. Most of the stories about misers which fill the literature
at certain periods in history were written in periods when prices were declining
so that being a miser was profitable.
Public debts and other fixed charges represent such a large part of taxes that
wage and salary reductions do aot produce the results that the tax payer anticiINDEX OF" FWICES
PERCENTAGE
30
275
250
1!301---------1r--------------+-v--+-ir1A-------+~
200
175
,,ot----+lc:nift-----i-----_:;;;;p,,.---if---l---+-+.....;..J<.\rl-...>q'"""r:----l
16/15
1:,q,;
IRS
2.-Wholesale pri<'8S and percentage of unemployed among trade-unions and insured workpeople
In Gre\t Britain,• 18<\l< to 1031. When prires are rising, unemployment declines. Conversely, falling
prices result in an Increase In the percentage of unemployed
FIGtJRII
pated. If the Federal Government cut all salaries and wages 10 per cent, it
would reduce the total expenses only 3 per cent. In 24 typical townships in
New York all salaries and wages amounted to only 35 per cent of the expenditures. A 10 per cent cut would reduce taxes only 3.5 per cent.
INOEX
19
160
70'-f--.U...U..W..L...L.J....L.J....L..L.ILI..JU...U....U..J...LJ...L.L...L.J....L..J..l..L.1..L.IU....U...U....U...U..W..L...L..J..l..L.1..L.IU....U...U....U..,
/7. 'O
1800
1810
l8i'O
l8JO
1840
1450
3.-Wholesale prices and wages In England during the Napoleonic War period,• 1790--1855. 1790100. From 1810 to 1831 prices declined nearly one-half, but wages declined only 15 per cent.
FIGURE
If no salaries or wages were paid, the tax problem would be much more serious
than it was before prices dropped, because New York farm prices have been cut
'in half.
1 From 18Jl8 to !926 inclusive, the percentage of unemployed is based on percentage unemployed at the
end of each month among members ol trade-unions making returns, Nineteenth Abstract of Labour Statistics ol the United Kingdom, p. 79, 1928. From 1926 to 1931 inclusive, the percentage of unemployed is based
on percentage ol unemployed at or near the end of the month among insured workpeople. The Ministry of
Labour Gazette, Vol. 35, No. 1, p. 2, January, 11!27, gives both series for each month of the yP.ar 1926. There
i• very little difference in the two series. The new series was taken from various numbers of the Labour
Gazette.
•
The wholesale prices are the Sauerberk-Statist index, Warren, G. F., and Pearson, F. A., The Agrlculturnl Situation, p. 263, August, 1924. The index numbers were converted from the 11-year base 1867-1877
to the 5-year 1910-1914 base by multiplying by 1.2107.
• Wood, 0. H., The course of wages between 1790 and 1860, The Economic Journal, Vol. IX, p. 6111.
December, 18119; and Warren, 0. F ., and Pearson, F. A., The Purchasing Power of Wages, Farm Economics,
No. 68, p. 1438. November, 1930.
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217
S'I ABILIZATION OF COMMODITY PRICES
RELATION OF FALLING PRICES TO UNEMPLOYMENT
The relationship of rising and falling prices to unemployment in Great Britain
are shown in Figure 2. Many persons discuss the present unemployment in
l!:ngland in terms of a decadent nation. England is an industrial country and is
therefore more affected by a wreck of the price structure than is any other
country. Unemployment in England is a natural ~onsequence of the amount of
deflation which England has attempted at a time when world trade is in a
chaotic condition.
WAGES IN OTHl!lR PERIODS OF DECLINING PRICES
The declines in prices and wages in England following the Napoleonic War
period are shown in Figure 3. From 1810 to 1831 prices declined nearly one-half
and wages declined 15 per cent. After a few more years of moderate decline,
wages began to rise. Since, over a series of years, wages rise relative to prices, the
decline in wages has never been equal to the decline in prices.
Prices and wages in the Civil War period in the United States are shown in
Figure 4. From 1864 to 1879, prices declined one-half and wages decl~ned 15
per cent. Thereafter, wages continued to rise although the general trend of
prices was downward.
During the World War period, wholesale prices in the United States have
declined more than one-half since 1920, and union wage rates are beginning to
decline.
FARM WAGES
Farm wages for various States are shown in Tables 1, 2 and 3. Farm wages
are a compromise between city wages and farm prices. In States distant from
INOEX
200,--------------------r----------.
/86~
1870
l87~
1880
/88~
1890
!.-Wholesale prices and wages, ex~lusive or agriculture, in the United States during the
<'!vii War period, 1860--1890. 1856-1860= 100. Prices re~che<l a peak in 1864 but wages continued
to rise for nine year~. By 1879, prices were cut in half but wages had declined only 15 per cent
FIGURE
industrial centers, farm wages follow farm prices birly closely. In Rtittes that
are near industrial centers, farm wages are influellccd more by city wages than
by, farm prices. For example, in 1919 union wage rates were 58 per cent above
pre-war. Prices paid to farmers were more t.han double pre-war, and wages in
J'.ll"orth Dakota were 86 per cent above pre•\\'ar, but in New York State only 76
per cent above. For 1931, union wageA were much more than double pre-war,
but farm wages in North Dakota were below pre-war, and in N cw York were 42
per cent above pre-war.
The farm wages paid in Alabama average $11.83 per month in addition to
board. This is below pre-war. A considerable number of persons feel that the
present depression is a proper punishment for luxurious living. If this is the
case, conditions in Alahama ought to be good. Living could scarcely be luxurious enough to be injurious on $12 per month.
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218
STABILIZATION OF COMMODITY PRICES
TABLE
1.-Farm wages by the month with. board, 1910-1931
Pennsylvania
New
York
Year
Alabama
--- --1910-1914 ___ ---------1910 __ --- -- --- -- -- ---1911 __ -- -- -- • -- _---- -1912 __ -- -- -- _--- -- __ • _
1913 _____ -- _-- -- -- _-- •
1914 _______ --- __ --- -- •
1915_ - - -- - • --- -- - --- - •
__ - ---- --- • -- --- -1916 __________________
1917
1918_ -- _. -- --- -- --- • __
1919.
-- -- • ------ -- _. __
1920 ________________
-1921_ __ -------------- _
1922 __ -- -- -- -- -- __ -- __
1923_
-- __ -- -- -----. _
19241-________________
19251 ________________
1926 1--- • ----------1927
________________
1928
·---------------19291
_______ · -------1930 1________________
1931
I _____ --·--------
$24. 56
23.50
24.00
24.40
25. 50
25.40
25.40
29.40
35.00
40.00
43.30
64.40
40.00
39. 70
45.50
47.30
48.40
49.60
49.42
48.52
49.25
44. 58
34. 96
$19. 75
18. 75
19.20
19.80
20.60
20.40
21.00
24.00
30.00
34.00
37.80
47.00
35.00
33.00
38.00
39.24
39.42
40.63
40. 21
38.83
40.08
38. 83
29.46
Texas
Iowa
North
Dakota
1
- - -- - -- - -- - -
$13. 56
13.00
13. 70
13. 70
14.40
13.00
12. 50
12.50
16.00
21.20
25.50
29.30
17.00
17.60
19.90
21.67
23.46
22.00
21.08
21.50
21.17
17.83
11.83
$18. 74
18.00
18.40
19. 00
19. 20
19.10
18. 70
20.40
25.00
31.00
38.80
42.00
26.00
24.20
28.30
29. 33
27. 75
28. 67
26.83
29.64
29.13
25.88
19.08
$29.34
28.00
28.30
29.60
30. 70
30.10
31.10
34.10
41.00
50.00
55.00
66.35
39.60
36.80
43.30
43.82
44.58
45. 79
46.92
47.37
47.42
45.00
32. 96
United
States
Oregon
$30.08
29.00
28.90
30.30
31.00
31.20
32.00
33.20
41.00
52.00
56.00
70.00
40.00
38. 70
40.30
41.92
43. 17
44. 17
44.58
45.12
43.96
35.63
25.25
----
$31. 40
32.00
31.00
31.00
31.00
32. 00
31.30
34. 50
44.00
58.00
64.00
68.00
44. 50
43.50
52. 50
45.93
45. 79
49.25
49.96
48.17
50.46
46.29
33.08
$20. 41
19.58
19.85
20.46
21. 27
20.90
21.08
23.04
28.64
35.12
40.14
47.24
30.25
29.31
33. 09
33.34
33.SS
34.85
34.93
34.96
35.16
31. 57
23.84
1 The quarterly wages .published by the United States Department of Agriculture were weighted In the
following manner to obtain the average yearly wage rate: Apr. 1, July 2, Oct. 2, and the following Jan. 1.
• Index Numbers of Wages, 1840-1926. Monthly Labor Review, United States Bureau of Labor Statistics, Vol. 26, No. 2, p. 332, February, 1928, and Warren, G. F., and Pearson, F. A., Purchasing Power of
Wage., Farm Economics, No. 68, p. 1438, November, 1930.
TABLE
2.-lndex numbers of wages, 1910-1931
[1910-14=100]
Farm wages by the month with board
Year
1910_ -- ----. ----- -- - 1911_ __ -- • -- -- --- ---1912 __ • --- __ --- -- --- _
1913 ________ --------1914. ___ • --- ----. --- •
1915 ____ ------ ------ _
1916
---------1917 _______
_________________
New
York
Pennsylvania
Alabama
Texas
Earnof
Union ings
New
wage York
North Oregon United rates 1 factory
Iowa Dakota
States
workers
--- - - - - - - - - - - - - - - - - - -- - - - - - - - 96
95
96
96
95
96
102
96
96 -------97
101
98
98
96
96
99
97
98 -------100
101
101
101
101
100
100 -------99
99
1918 ____ ----- ------ -1919 _____ ----- _-- ---1920 ____ --- -- -- -----1921 __ -- _. --- -- __ -- -1922-.• _---- -- • --- -- -1923. ------ ------ -- -1924_ --------- -----. _
1925_ ----- _--- ------1926_.
_------ ------ -1927
_________________
1928._____________
---------------1929
---1930. -- -------- --- --1931 ___ -- --- -- -------
104
103
103
120
143
163
176
221
163
162
185
193
197
202
201
198
201
182
142
104
103
106
122
152
172
191
238
177
167
192
199
200
206
204
197
203
186
149
106
96
92
92
118
156
188
216
125
130
147
160
173
162
155
159
156
131
87
102
102
100
109
133
165
207
224
139
129
151
157
148
153
143
158
155
138
102
105
103
106
116
140
170
187
226
135
125
148
140
152
156
160
161
162
153
112
103
104
106
110
136
173
186
233
133
129
134
139
144
147
148
150
146
118
84
99
102
100
110
140
185
204
217
142
139
167
146
146
157
159
153
161
147
105
104
102
103
113
140
172
197
231
148
144
162
163
166
171
171
171
172
155
117
I
102
104
105
109
117
135
158
203
210
197
215
233
243
255
265
266
268
278
279
-----iiii
104
116
132
164
190
227
207
202
220
223
228
234
236
237
242
232
213
1 Union Scales of Wages and Hours of Labor In 1931: Monthly Labor Review, United States Department of Labor, vol. 33, No. a, p. 186, November, 1931.
• Wages for tne first part of 1931. Some reductions have since occurred.
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TABLE
3.-Farm wages by the month with board
Farm wages per month
with board
Supply
Per cent
Supply In per cent of
demand
Demand
decrease
State
Jan. 1, Jan. 1, Jan. 1,
1929
1931
Jan. 1, 1929 to
Jan. 1, 1932 Dec. 1, Jan. 1, Jan. 1, Dec. 1, Jan. I, Jan. 1, Dec. 1, Jan. I, Jan. 1,
1928
1932
1931
1932
1928
1931
1932
1928
1931
1932
---1-----·I--- --------- ------ --- ------
New York••••••••••••.•••...•••.••..••••..•.••••••••....•••..
Penn•ylvanla................... •....••.•..•. •.• .•••.•...•.•••
Michigan .•..••.•.•••••••.•••.•...••••••• ·•••••••.••...••.••••
Alabama .•.•••••••••••••••••.... -······......................
Texas.........................................................
Arkansas ••.•.•••••• ·······-·····----·····-·-······.··-····-··
Iowa ... ·····--···-·-·-······-···--····--·-···········-·····-·
Kansas.··--···-··-····-···--·······--······-····-········....
North Dakota_·--··········-·--·····-·······-··-·····--···-··
Montana.-·····-·· ••••• ·······-··--·-········-········-··-···
Oregon. _·······--······ .•• ··-·-·-·-·-·-·-·--·-··- •....•... ··Nevada ....·--·-················-·-·-· •. ·--···-····· .. ···-····
Washington •• ·······----······---······--·-····-·······--····
California •.•• ·-·-·-·········-----·······--··········-··-·····
United States..•. ·-········-··-·············-···-···-···-·····
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Federal Reserve Bank of St. Louis
$44. 75
37. 25
39. 25
22. 00
28. 75
25. 00
44. 00
37. oo
27. 75
46. 25
46. 00
63. 00
45. 00
62. 00
33. 04
$36. 50
32.00
25.00
15.00
22. 25
17. 00
33.00
30.25
16. 75
33. 75
36. 00
45.00
33.50
53.00
26. 03
$28. 75
25. 75
18. 50
10.00
17. 00
14. 00
23.00
23.00
17. 50
26. 75
28. 50
42.00
26. 00
39.00
19. 77
36
31
53
55
41
44
48
38
37
42
38
33
42
37
40
90
95
90
95
94
93
98
94
96
99
101
100
101
101
94
106
109
130
112
115
120
114
122
112
122
138
120
130
117
114
118
119
139
123
121
116
120
128
117
132
145
136
146
123
121
84
89
84
86
86
82
96
99
85
91
90
97
91
92
88
73
76
61
58
57
45
75
63
64
61
66
87
58
77
67
68
71
53
58
53
51
63
59
50
43
61
60
46
69
61
107
107
107
110
109
113
102
95
113
109
112
103
111
110
107
145
143
213
193
202
267
150
194
175
200
209
138
224
152
171
174
168
262
212
222
278
190
217
234
307
23~
227
317
178
200
..,
Ul
....td►
~
~
..,....►
0
!z
0
!,;I
0
0
ts:
ts:
t::,
....
0
~'"ti
~
~
rp.
220
STABILIZATION OF COMMODITY PRICES
NO ONE GAINS BY DEFLATION
All action, public or private, that is based on the idea that some person or group
of persons are to blame for the present situation, is unsound. All action that
assumes that the losses which one is sustaining are due to gains being made by
some one else is equally unsound. The losses are unequal, but practically everyone loses. The trouble is that civilization has not yet progressed far enough to
invent a stable measure of value. Not long ago, au outbreak of bubonic plague
was blamed on individuals. It is now known that the trouble was due to the
lack of development of science or education, or both. Economic diseases are due
to a lack of development of economic science and education. Vast sums of money
have been spent on chemical and medical research. Very little has been spent
on economic research. The little science that has been developed in economics
has not become common knowledge, as, for example, the knowledge about bacteria.
Economic troubles are not acts of Providence any more than polluting a stream
with typhoid is an act of Providence. Both are acts of man and can be remedied,
when there is sufficient knowledge.
F. A. PEARSON.
G. F. WARREN.
PHYSICAL VOLUME OF PRODUCTION IN THE UNITED STATES
CROP PRODUCTION
Index numbers of the physical volume of production in the United States are
given in table 1 and figures 1 to 5. The index numbers for food and feed crops
INDEX
1zo,,-----------.----------~---------/00
80
40
20
FIGURE 1.-In<lex numbers of the volume of food and feed crops produced In the United States, 183~1931.
1926-1930=100. From 1839 to 1914 production Increased at the rate of 3.02 per cent per year. From 19151929, it Increased only 0.60 per cent per year. The upper curve shows production corrected for tho reduced
number of horses and mules.
were made by adding together bushels of wheat, bushels of potatoes, bushels of
corn, quarts of strawberries, and 27 other crops all combined according to their
importance. The purpose of the index was to include only basic commodities,
Livestock is not included. This is all produced from crops except the portion
which is grown on pasture.
The index numbers of crop production are based on reports of the Uuited States
Department of Agruculture and the Bureau of the Census.
The production of food and feed crops in the United States increased from 10
in 1839 to 90 in 1914 (Table 1 and Figure 1). During this period the annual rate
of increase was 3.02 per cent per year. In popular opinion, the rapid increase in
recent years has been the cause of the agricultural depression. As a matter of
fact, the rate of increase from 1915 to 1929 was only 0.60 per cent per year. If
correction is made for the reduction in the number of horses and mules, this rate
was 1.17.
The production of cotton and tobacco followed· other crop production closely,
so that the total crop production increased at about the same rate as food and
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221
STABILIZATION OF COMMODITY PRICES
feed crops. But there was a very large cotton crop in 1859 and small co.tton
crops for a few years as a result of the Civil War.
From 1839 to 1914, the production of food and feed crops per capita increased
at the rate of 0.74 per cent per year (Figure 2). This rate of increase was declining slightly before the war (Table 1). From 1915 to 1929, production per
INDEX
l60r-----------,....---------....------------.
140
40u..._a...-...L--L-....1-...L.-1-...L.-...L......JL-...L--L--1-...L.-L-...L.-...__..__......,
1839
1849
1859
/869
1879
1889
1899
1909
1919
l9Z9
FIGURE 2.-Index numbers of the production or food and feed crc:;,s per capita In the United States, 18391931. 1926-,'!0 100. From 1839 to 1900, the production of rood and feed crops increased 0.86 per cent per
year; from 1901 to 1914, decreased 0.2 per cent per year; and from 1916 to 1929, decreased 0.29 per cent per
=
year, when adjusted for the changes In the number of horses and mules
capita decreased 0.85 per cent per year. When coirreetion was made for the
reduction in the number of horses Md mules, the decrease was 0.29.
It is difficult to see how any one can attribute the agricultural depression to
over-production when production per capita is for the first time in history declining. If this decline continues, it appears that there ultimately will be another
period of high-costs-of-living, which will be particularly severe if the value of gold
INDEX
~0.-----------------------.-----------100
80
60t---------+--------+----40
,2Q
1~.3l..9
.........i"'t1..4""9-"""'1e..is"'9=i:::::1a=6i:9::=i=:1:8:;::7.::'9::;:::_t8-'8-9__J.__18J9L9_.i....,-sLo-9~-,-s.1.,s_...L.1.-:9...11,?Js
FIGUBE 3.-Index numbers of the physical
volume of production of minerals, fuel, and power in the United
States, 18311-1931. 11126-1930
100. From 1839-1914, the production of minerals, fuel·, and power Increased at the rate or 6.43 per cent per year. From 1916 to 1929, the aver11ge rate of Increase was 4.31 per
cent
=
should decline. Those who now consider low prices to be a definite proof of overproduction will, if they are still living, attribute the high prices to under-production.
The business situation is interfering with consumption so that supplies of some
products are high. Livestock cycles go on whether prices are rising or falling.
Just now, the supply of hens is low and hogs, high. Last year they were reversed.
111442,:--32-PT 1-·-15
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Federal Reserve Bank of St. Louis
TABLE
1.-lnde:t numbers of physical volume of production in the United States, 1899-1991
[1926-1930=100]
p,
"'
....
1
t
p,.
.,
Year
i
,:I
.s=
I
0
J
l-g
0
...
-~'cl
=
,:I
e
p,
g.
!l
;;
0
lie.
"
=
.
,:I
0
p,
tl
~
a:
~-.
f;l
!l
~
:.
:.
"to
!
p,
!
...
"to"
o!
0
1
lie
"'
]
!
ti,
,l
i"~
18M. ·••··••••·•··•···
1856 .. ······•···•· •...
1857.....•......••....
1858 .. ••··•······· .••.
1859. ·····••··········
1880 •...••......•••••.
1861 .•.•••.•••.•••..•.
1862... ····•·•··•··•••
1883.•.•.•.•.•••.••••.
18114...•.•...•••.••••.
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Federal Reserve Bank of St. Louis
14. 27 ·····•• .. ~ ...•
14. 77 ••···•• ······•
15.28 ·•··•·· ·······
15. 86 .... , .. ·.•·····
16.36 ······· ·······
16.86 ······· ·······
17. 36 ·•··•·· .•.....
17. 86 ·•··••· .•...•.
18. 36 ••...•. ·······
18. 86 14. 09 14. 07
19. 45 ······· ·······
20.12 ····•·· ····•··
?.fl
78 ....•.. ······•
21. 45 .; ..... ····•··
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1866 ________________
-1867 __________ .. _______
29. 30 ------- -------·
29.88 21. 71 20.55
30.47 22.38 21.48
__ -- -- -- -- -- _-- • -- 31.05 23.95 22.84
1868__________________
1869
31.64 24.81 23.63
1870
__
• --- -- ----- -- - - - 32.30 25.96 25.65
1871. _________________
24.66 23.46
33.221
1872_ ----------------- 34.22 26.47 26.40
35.14
25.52 25.46
1873_ ----------------1874 __________________
__ ---------------- . 36.14 25.07 24.87
1875
37.15 32.Zl 32.40
1876_ ----------------- 38.06 31. 76 31.36
1871---------------- - - 39.07 34.99 34.16
1878_ ----------------- 39.98 37.44 36.85
1879
---- -- -- -- • _ 40.98 44.69 43.24
1880_______
__________________
41.99 42.02 41. 79
1881-_________________
- ----------------- 42.99 34. 56 34. 77
1882
1883 __________________ 44.07 43.41 43.66
45.16 44.48 43.26
1884 ___ .------------ __ 40.24 49.09 47.29
47.94 47.19
1885_ ----------------- 47.
46.15 45.6
1886_ ----------------- 48.
49.
43.90 43.83
1887
----------------1888 ___________________
00.
51.87 50.80
51.59
53.86
52.45
1889_ ----------------1890_
189J_ ----------------_________________ 52.67 44.49 46.14
53.76 59.41 58;94
1892_ ----------------- 54.84 61.85 50.37
1893_ ----------------- 55.93 52.23 51.42
1894_ ----------------- 57.01 49.20 00.54
1895----------------- · 58.10 63.39 60.42
1896_
----------------- 59.18 66.99 64.47
1897 __________________
60.27 63.43 64.15
1898_ ----------------- 61.35 69.15 69.37
1899_ - ---------------- 62.44 69.20 69.05
1900 __ ---------------- 63.52 69.61 69.04
190L _ ---------------- 64.86 61.38 61.65
1902_ ----------------- 66.28 78.19 76.66
1903_ ----------------- 67.61 73.15 71. 74
1904 __ ---------------- 68.95 77. 68 78.43
1905 __---------------- 70.28 81.07 78.67
------- ------------------------------------- ------------- -------------·----------· ------------·
------- ------------------- ------------------------- ------------------------------- -------------------------------------------------------------------------------------------------------------------------------·-----
28.28
29.51
.................
30. 74
31.97
33. 21
43
34.18 ...............
35.99
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37.39
38. 78
40.18
41.57
42.97
44.36
46. 75
47.Ui
48
49.55
51.
54. 3
56. 75
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59.16
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61.56
.17
63.96
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66.36
68.77
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54
71.17
73.40
.31
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75.63
77.87
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80.10
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82.34
. 61
84.57
. 73
86.80
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89.03
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91.27
1.29
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2.02
2. 45
3.07
110.91
3. 61
115. 26
4.35
116.66
5.02
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6.17
7.82
8. 12
8. 66
8.69
8. 37
11.13
12. 96
14.30
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12. 67
12. 87
14. 57
13.24
16. 71
16. 77
19.55
22. 76
25.26
25.55
24.58
25.09
25.18
31. 73
30.45
32.96
35.47
37.39
38.16
36.05
40.61
39.54
40,25
43.16
49.48
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56.63
51.36
67.11
66.03
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1.06
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2.08
2. 19
2. 41
1.87
1.96
1.89
2.56
2.77
2.95
3.49
4.29
4.91
4.63
4.48
4.59
4.88
5.58
5.67
5.42
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6. 82
7.67
9.65
11.17
12.93
14. 84
3.15
3.80
3.92
4.14
4.19
4.13
5.12
5.82
6.44
6.12
5.84
5.93
6. 70
6.30
7. 71
7.97
9.02
10.28
10.96
ll.12
10.76
11. 26
12,.48
13.84
13.64
14.90
16.08
16.65
16.89
16.21
17.99
17. 94
18.26
19.25
21.80
22.82
25.35
24.49
30.92
31.48
34.87
-------
1. 79 ____ .,. __
2.23
2. 47
2.63
2.99
3.07
3.113
4.49
4.87
4. 87
4.39
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5.44
5. 91
7.27
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9.09
9.45
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16.06
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19. 28
21.15
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-------
--------------------------------------------·----------------------------------------------·-----------------------------------------------------------------------------------------
-------------------·-----
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1. 72
1.84
2.09
2.15
2. 33
3.15
3.42
3.42
3.09
3.15
3.48
3.84
4.18
5.15
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6. 47
6. 74
6.55
6.67
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9.15
9.66
10.83
12.53
12.37
13. 77
11.76
11.33
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14.30
15. 75
18.16
20.54
21.57
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26.56
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2.40
2. 91 --ia."79
3.06 14.41
3.23 15. Zl
3.36 15.81
3.34 16. 91
4.02 16.18
4. 77 18.11
5. 25 17. 91
5.05 17.61
4. 75 21.49
4.84 21.07
5. 43 22.86
5.33 24.30
6.31. 28.12
6.85 27. 75
7.71 24.62
8. 77 29.83
9.29 29.99
9.31 32. 25
9.15 32.28
9.99 31.92
11.16 31. 70
12.19 35.89
12.53 37.04
13. 96 34.51
14.61 41.57
15. 51 37.64
14.86 38.06
14.28 37.51
16.51 43. 71
16.50 45.95
17.27 46.25
18.82 49. 76
21.30 00. 76
22.33 51.47
24. 71 48.91
25. 31 57.22
29.55 56.72
30.03 60.67
35.12 62.96
12.06
12.63
13.37
13.90
14.84
14.261
16.00
15.90
15. 72
18. 84
18. 55
20.06
21.38
24.48
24.46
22.04
26.42
26.63
28.46
28.61
28. 67
28. 73
32.21
33.50
31.82
37.47
34.64
34.55
34.11
39. 75
41.64
42.26
46.66
46. 91
47. 78
46.14
53. 73
53.18
56.54
60.00,
-------
8.19
10.81
9.74 36.18
11.38 --1i:tr~::(~::I 10.01 37.35
12. 02 10. 67 77. 13 73. 56 10.40 38. 71
12.49 11. 18 78. 41 74. 681 10.62 39.48
13.40 11. 95 80. 37 79. 41 10.34 41.40
12.82 11.49 74.23 70.62 12.10 38.59
14.57 13.22 77.35 77.15 13.94 42.58
14.37 13.17 72.62 72.45 14.94 40.89
13.97 12. 90 69.37 68.82 13.97 38.66
17.08 15. 34 86.86 87.21 12. 79 45.98
16.83 15.19 83.45 82./10 12. 72 44.22
18. 41 16.55 89.56 87.43 13.90 47.12
19.68 17. 72 93.65 92.17 13. 33 49.22
23.03 20.53 109.05 105. 51 15.40 56.20
22. 70 20.67 100.07 99.52 16. 31 54.06
20.25 18.92 80.39 80.88 17. 93 47.10
24.96 23.06 98.50 99.07 19. 90 56.64
25.07 23.Zl 98.49 95. 79 20.57 55.51
Zl.~6 25.03 106.16 102. 27 20.13 58.95
27.21 25.05 101.29 99.70 19.33 57.49
26.96 25.39 95,49 94.19 20.67 55. 78
Zl.18 26.02 88.83 88.69 22.58 55.00
30.69 28.92 102. 71 100. 59 24.14 60. 77
31.69 30.19 104.40 101.67 24.29 61.43
30:09 29.49 84.47 87.60 26.50 57.13
36.18 34.27 110. 51 109. 64 27.18 67.30
32.85 32.01 94.55 91.85 28.28 59.90
32.84 31.14 93.38 91.94 26. 57 58. 72
32. 90 31.21 86.30 88.65 25.05 57. 71
38. 78 36.90 109.10 103. 99 28.42 66. 75
40.82 as.59 113.20 108. 94 27.88 68.98
41.27 39.40 105.24 106. 44 28.65 68.48
44.20 42.51 112. 71 113.07 30.68 72.05
46.20 44.86 110.83 110.59 34.11 73. 99
47.03 45.96 109.59 108. 69 35.15 74.04
44.57 44.67 94.63 95.05 38.10 ·68. 72
52.55 52.45 117. 97 115. 66 38.19 79.28
53.29 53.19 108.19 106.11 43. 71 78.82
57.20 55.99 112.66 113.75 43.55 82.96
60.47 60.85 115. 35 111.80 49.97 86.04
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Constant group weights \Vlth comparative values, 192&-1930; crops, 51.85 per cent; lumber and pulp wood, 6.51 per cent; fUel and power, 25.18 per cent; and other minerals and
secondary metals, 16.46 per cent.
·
:
1 Weighted In accordance with values of 1926-1930 plus value added by manufacture as reported by E. E. Day and W. Thomas. The growth of manufactures 1899 to 1923,
Bureau of the Census, Census Monograph 8, pp. 140-146, 19:18: Crops, 42 per cent; lumber and pulpwood, 8 per cent; fuel and power, 13 per cent; and other minerals and secondary
:
.
metals, 37 per cent.
• In the Index numbers with variable group weights, each group Is weighted In accord11nce wi~h comparative values In different periods,
! 131!Sl!4 Q~ ~qtal bll3ic proquct!on1 variabje group weigh~,
·
·
·
·
- · ·· ·
·
1
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
~
t'3
~
TABLE
1.-Inde:i: numbers of physical uolume of production in the United Statu, 1899-1981-Continued
--
:
i!
I
,s
0
p,
f
Year
Q
]
';;
~
p.,
lllOIL ---····-- -------1907- ----------------1908 __ --------- ------1909 __ ---------------1910_ - ---------------1911_ ----------------1912_ ----------------1913 __ ---------------1914_ ----------------1915 __ ---------------1916_ ----------------1917 _ ----------------1918 __ ---------------19111- ----------------1920_ ----------------1921. _---------------1922 __ ---------------1923- ----------------1924_ ----------------1925. ----------------1926 ___
--------------1927
__________________
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71.62 83. 78 83.41 123.67
6.06 ------· 74. OIi 15. 02 35.68 80. 72 ------7,18 ------- 86.66 18.38 41.88 llL57
73.04 76.03 711.01 123.83
74.37
75. 71
77.06
78.21
79.38
80.56
81. 72
82.89
84.14
85.31
86.48
87.65
88.90
90.32
91.74
93.07
94.49
95.83
97,25
98. 58
100.
00
1928. __ --------------1929_. ---------------- 101. 42
102.
76
1930. __ --------------1931 •• _--------------- 104-11
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
79.14
81. Sil
82.68
74. 76
93.f
80. 4
89. 71
lOL_ll
87.18
94.92
93.86
95.30
103.26
91. 77
101.36
101,06
96.82
97.12
96. 72
103. 69
106. 31
99. 86
93. 41
79.60
81.45
81.86
78.63
11168
81.81
91. 77
96.79
85.65
92.17
92.41
93.38
10L84
86.09
112. 90
120.18
120.07
116.4.9
121.81
119.32
110.32
104.36
110.10
1:,:
9~~
97.
80.52
97.81
112. 96
109.17
113,25
110. 62
104. 00
102. 79
103.
78. Sil
78
96.11
96.83
95.G
_JIil. 69
99.89
100.90
104.85
100.14
94. 21
91.1, 96. 1111 60.11
------------------------ ..
8.33
77.31
9,68
76 82.89
11.02
89.lM
12. 43
90.03
14.17
93.71
16.41
100.25
19.23
92.47
22.66
94.. 52
26.94
102. 18
31.15 ...... -.......... 113. 46
36.27
116.84
39.80
79 97.31
48.40
111. 96
45.28
9L40
53.36
62.62 -----90 1 1 ~ :
66.64
99,70
94.65
74.90
110.52
84. 70 ------91. 47 ------- 101. 36
101. 56
100 97. 211
28
111.
110. 96
31 ------____-___ lOL
89. 63
106. 86 ------- 7,f.81
-------
-------·-----··---·
-------------
-------- .. ----
19.30
20.69
23. 14
24. 07
24.92
71.25
28. 83
30.62
33. 94.
37. 71
38. 66
4L06
411.97
47.81
56.09
74.41
75.21
M.59
83. 78
96. 98
99. 36
114. 06
105. 82
100.16
~,
§'!!l
i
li-e :a"'
i;,'a
I. i~ .~~
t
.
="'
l . 1 . !5 ii -~i~
=-a~
-g-.c
""'i
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~i'd
.s
"
~
~
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'O
a
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'O
'al
! I
:§
j
i
al
IZl
-------
:: --iii:sa
39.19
42.08
46.68 69.60 18. 77
46.M 56.93 20. 78
48.66 65.92 26. 77
52.43 68.67 26.80
60.87 59. 94. 24.59
53.02 70.44 36.34
58.00 88.36 61.13
64.46 87.36 63.88
66.85 84.62 59.99
61. 76 70.14 53.31
71.22 79.12 56.38
63. 73 46.69 39.66
64.30 67. 1g 63.25
86.31 93.44 76.11
82. 75 86.19 74. 31
84.86 95. 76 83.20
93. 78 101. 00 94.42
97.56 98.M 96.14
99. 02 102. 50 104. 79
108. 85 109. 98 116. 39
100. 81 87. 98 88. 26
I
0
p,
"'5.,
a
::l
-<
~lit
!:1.
j
!:~
-5~'<3
-"ii! !l
~
~.a
="' =
li:§ ~i~
"""
-g="'lit .§:§~
§'!l
!:1.
t
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p,
~
i
t
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711.19
i
!
I -~~.
I
ll
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i 1
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.
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i
t
p,
]
ll
t
i
ii:
lE-<
'o
E-<
E-<
E-<
-- - - -E-< - - - -""'- -E-t- -~ - -"ii!
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s
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"fil:ia!
..c-e,!
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g
39.37 37.14 66. 76 64.13 63.87 64.o8 116. 98
40.20 41.22 64.12 61. 73 61.90 62. 72 104.09
31.M 36.17 63.68 59.23 60.91 69.01 106.41
43.63 42.69 67.83 65.43 65.86 66.63 108.11
46. 74 46.10 69.45 67.22 67.46 68.44 107.18
44.86 45.94. 67.48 65.00 65.07 65.50 95.59
53.59 50.60 77.05 74.82 711.80 76.25 118.00
56.48 53.63 72.52 71.25 71.30 72.18 99.49
48.80 50.05 75.60 72.04 74.36 72.11 109. 78
59. 70 56.66 80.16 77.98 79.49 78.41 121. 98
79. 78 66.61 79.31 81.84 78. 78 82. 76 103. 61
79. 97 70.59 83. 70 84.68 83.42 85. 53 111.26
76.86 70.81 83.22 83.09 83.21 83.98 108.53
64.84 62.98 80.88 78.90 80. 81 79.37 108. 73
71.96 71.51 88.95 86.48 88. 72 86.56 116.15
44.40 66.09 73.23 67.31 73.00 66.83 101.61
65.95 64.95 83.25 80.95 83.11 80.35 110.49
87.98 86.97 93.78 93.48 93.41 92.51 108. 68
82.46 82.63 90.99 90.08 91.28 90.09 102.47
91.80 87.61 95.02 95.51 95.01 95.67 101. 35
98. 93 95. 81 98. 89 99. 60 99.35 100. 25 99. 46
97. 79 97. 65 99. 75 99. 56 99.65 99. 86 105. 18
103. 22 100. 68 102. 98 103. 32 103.09 103. 87 106. 31
112. 00 110. 10 104. 53 105. 96 - 103.66 105. 52 98. 46
88. 07 95. 78 93. 86 91. o8 93, 14 91. 42 90. 91
91.16 60.16 67.!fl 69.16
~
86.94
78.11
86.06
78.U
88.,16
,Q
30
116.46
102. 70
107.03
107.68
106.23
100.M
116. 75
101. 66
112.30
116.77
101. 79
108.04
106. 86
106.M
114. 66
95.32
104. 76
104. 04
100. 99
102.98
102. 71
102. Bo
104. 85
98. 74
91. 69
91.99
liL86
66.43
48.64
66.39
69.83
58. 74
63.74
66,68
61.25
67.14
79.17
82. 75
81.88
71.86
80.44
62.10
70.80
93.46
87.46
91.42
98.52
99.06
100.68
108.156
93.22
76.01
89.18
84. 7&
8L90
86.99
87.M
83.20
95.49
88. 52
90.99
95.90
93.63
97. 78
96.22
92.20
99.80
80.82
90.59
100.37
96.60
99.14
102.16
101. OIi
103.09
102. 21
90.65
Bl.66
Ra1ttf~=-•______ ::t
'1B
::::=3" 02l=3· oa ---~;~ ------- ------- _______ !_______ :/ 96 ______________ :::,. m::ta
::t s;i::=3'
78 ::_
~osb1. 73
~ m.::u1 __·:I:: o. ,..I::_
=--.·--. -·-----·______ _
~g~~~- -------- ------- ------------- ------------- ------- ------- ------- ---·--- ------- ------- -------1-------------!------- --·---·
-. ----- :t
. 60 .85
3. 62
4. 31 ------- ----·-2. 11 ------- -. 8S-----•·
. 60,------- ------- ------- ------- ~ 84 -·----- -------
191&-1929--- ·----- _______
1. f6
-
1.17 1. aa1 (1)
c•>
c•>
c•>
c•>
NoTE.-Figures in Italics are preliminary,
• The rates of change are based on the equation Y=B?".
• Rate of change when adjustment is made for horses and mules, 19lll-1929,
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Federal Reserve Bank of St. Louis
c•>
c•>
c•>
c•>
I
c•>
c•>
I
c•>
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c•>
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2. 80
• M_
-. 20 ______________
,______
I
-226
STABILIZATIOI!I'. ·aF COMMODI'EY' PBiOOES
MINERALS, METALS, FUEL, AND POWER
This index number includes coal, petroleum, natural gas, nearly all other.
minerals, and includes scrap iron and other secondary, metals and water- power.
From 1839 to 1914 production increased 6.43 per cent. (Table 1_ and fig. 3.)
From 1915 to 1929 it increased only 4.31 per cent per year. Production was a
little high in 1910, but was low in 1921 and in 1931. The production per capita
INOEX
1,20
,oo
80
40
.20
OU...---''---L-L---1_..J..._1--1._..1---J'---L-L---1-..J..._1-....1._..,_.....J'-~
18.:19
1849
/859
1919
1869
1879
1889
1899
1909
1929
4.-Index numbers of the physicRl volume of total basic production in the United State.~, 1839-1931.
1926-1930=100. From 1839 to 1914 the tote.I volume of basic production increased at the rate of 4.03 per
cent per year, and from 1915 to 1929 production Increased only 2.11 per cent per year
PtoURE
from 1839 to 1914 increased 4.08 per cent per year, but only 2.8 per cent from 1915
to 1929. (Table 1.)
TOTAL PHYSICAL VOLUME OF PRODUCTION
When crops, forest products, fuel and power, and other minerals and secondary
metals were all combined, using variable group weights in .accordance with their
importance from time to time, the total basic production increased 4.03 per cent
N0£X
120
.20
Oll----'--L-J__--1-..L.-L-....L--'----'--'---'----'---'--'---'---'----'..__...,_,
18:19
1929
1849
1859
1869
1889
1899
/909.
1919
1879
P!GUBE 5.-Index numbers of the physical volume of total
basic production per capita in the United States,
1839-1931. 1926-30=100. From 1839 to 1914, the total basic production per capita Increased at the rate
of 1.73 per cent and from 1915 to 1929, only 0.64 per cent
per year from 1839 to 1914. (Table 1 and fig, 4.) From 1915 to 1929 production
increased only 2.11 per cent per year.
Before the war the total basic production per capita increased 1. 73 per cent per
year, but from 1915 to 1929 increased only 0.64 per cent per year. (Table 1
and fig. 5.) In only one year since 1913 has production per capita been as low as
it was in 1931. That year was 1921.
·
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227
STABILIZATION OF COMMODITY PRICES
Data before the Civil War are limited, but apparently this war also reduced the
-very·lm-ge undeveloped
output per capita for a-time-. -At-that- time there
natural resources per capita.
w-
WORLD PHYSICAL VOLUME OF P~ODUCTION
World physical v_ol_u1!1e. 6f pro_<;l_ucti~n_a_s.~_!l,l('.uJ~.ted__QY.:_Q_!t_!l.§!.lYc;ler _of _tp.e F~deral Reserve Bank of'"New York 1s s1iown m Table 1"ana figure 6. "From 1865 to
1914 production increased at the rate of 3.15 per cent per year. Production was
materially reduced by the World War and by the panic of 1920. It was gradu•
ally increasing until the-panic of 1929.
The comparative growth· of world population and world production can be
approximatelrrneasured ··by determining· producti:on·per capita in atl· countries
exclusive of Africa and Aeia. (Tfl.ble 2 and fig. 7.) This indicates that from
1865 to 1914 the production per capita increased 1.91 per cent per year. ':rhis
rate of increase is about the same as for the United States (1.97). Production
per capita is of course far higher in the United States than in other countries.
Apparently the world has been able to increase its lower production at about
~he same rate that the United States has increased its higher production.
TABLE
·2.-Index numbers of world production, 1840-1930
1
[1910-14=100]
Year
----,World I Physi•
World Physi•
physi- Ical vol·
physi• cal volcalvol• umeof Year calvol• ume·of ·y
ear
ume of I produc•
ume of producp1:oduc-tion per
produc• tion per
capita·
tion
capita
j tion
!
1840.....• __ l
184f: ___ • __ .j
---- '
1842
1843::: ____ : 1
1844________
1845.-- ----·
11
11
12
j/4
23
22
26
26
28
28
29
-1863_.J-- 22
l.'/
1864 ___ 1
2:l
1865 ___ 1
24
1866___
24
18fi7___
25
1868___
25
1809___
29
1870 __ •
18!7•-····-·
12
12
13
13
14
mL::::::
1&50_ -- --·--
1115
mt:
:f30 1873._.
17
18
33
34
19
19
35
35
36
36
38
39
1846 ___ --··-
1851________
1852 __ ._____
1853_. __ -·-·
1854•••••• -.
1855. __ --·-1856•• -----1857_ •• --.-1858_.______
1859 _____ .__
18f>O________
1861__._____
1862- _--·---
15
16
16
17
20
20
21
22
29
31
31
S/i .
i
I
-----,------
1874___
1875___
1876___
.1877._.
1878___
1879;__
18()()___
1881.__
1882___
1883,__
1884,__
1885,__
~~
:
i
I
,
'
-i
1
31 !
30'
33 j
33 I
35:
36 '
37 i
41 I
38
44 ,
43
46
46 i
I
I
-
! --- - - - ;
i
I
World Physi•
physi• cal vol·
calvol• urneo[ Year
ume of j produc•
produc• tion per
capita
tion
40
40
42
42
42
41
411
48
53
53
55
56
57
63
58
66
62
66
64
1897___
1898_._
1899___
19()()___
lOOL_
1902 __
1903___
190L__
1905___
1906___
1907___
19()8___
1909___
1910.__
1911___
1912_..
1913___
19]4___
1915___
1916_,_
~t64 :: ¥~78 I, mt:
1919___
1920 __ •
1921___
1922__ _
63
69
68
76
82
81
72
72
86
19230_·_
84
89
90
88
94
98
94
92
1924___
1925___
1926___
1927___
1928.-.
1929___
1930___
1931___
77
78
77
84
90
87
87
il
i
.188tL ~ : - ~
63
46 i
1887___
67
50 '
1888___
fi9
52
1889___
65
50
1890___
72
56
1891___
68
53
1892___
00"'
54 I
. 1893___
:g50 im:::
1896___
World [ Physi•
physi- : cal vol•
calvol•iumeof
ume of I produc•
produc-tion per
tio_n__ capita_
__
i
93
995
6
105
106
98
100
96
i~
I
!,
1
97
98
97
105
105
95
96
92
~!
87
93
97
105
87
93
101
107
109
114
JJ0
115
1J9
126
113
123
ll5
130
119
136
121
139
111!
130
-··---·- -···---·
The figures in italics .are e,stimates.
1 The index numbers· or"world physical volume of J)roduction from 186.'H930 were prepared by Carl
Snyder and furnished through the courtesy of the Federal Reserve Bank of New York.
An Index number of world J?hysical volume of production of cotton, coal, and pig iron was calculated for
1840, 1850, and 1860. These mdex numbers were 12, 14, and 24. For the same years the Snyder _curve
projected backwards gave Index numbers of 11, 15, and 20. An index number for the same years was cal•
culated including steam and sailing vessels, miles of railroad, cottos, coal, and pig iron. The index numbers
of 10.year periods from 1840 to 1890 were as follows: 11, 15, 23t 28, 39, and 53, and the Snyder index for the
same years was 11, 15, 20;" 29, 41, and 50. These index numoers agreed very- closely with the projected
Snyder index.
These index numbers from 1840 to 18R5 are the Snyder curve, y=23.830 (1.0315)•, projected. These are,
of course, only approximations and do not show variations from year to year.
Production per capita is base<! on the population for Europe, America, and Australia, as reported by
Willcox, W. F., International Migrations, Publications of the National Bureau or Economic Research,
(Inc.), Report 18, vol. 2, Appendix 1, JJ. 641-4, 1931.
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Federal Reserve Bank of St. Louis
228
· STABll.IZATION OP COMMODITY PRICES
INDEX
"'"
IZO
40
20
······· ········ ·····
······
~~~!}~_._-:l8-:!-4c-9:,--''--18.-'S.L.9--'-,.-IIJ....-9-'-,.-l!l...
79----'--IIJ89-'--'-,.-l!l...9_9....._190_._9_.....,...,'9...
,9_....._/g,t..._g_,
FIGUIIE 6.-Snyder's Index numbers of world physleal volume of production, 1840-1930. 1910-1914-100.
From 1866 to 1914, the world's physical volume of production normally Increased 3.15 per cent per year.
Production was materially reduced by the World War llBd b:, the panics of 1920 and 1929, but Is gradual!:, Increasing
The production per capita was very low during the war period; low in 1921;
and is again very low for 1930-31. In no year since the outbreak of the war has
production per capita been as high as would be expected from the pre-war trends.
~or-------,---------,-----------.
INOE.X
l.cO
80
40
20 · ..t·····-···
...... ............··-····
"
...
0 ..,___._-.1._..,___..__.__-L---L-..,__....L.___L._-L---L-.J...-....l..-,-L-..L.--1_.l-l
18.39
1849
185"9
1869 187.9
1889
1699
1909
1919
19.29
FIGURE 7.-World production per capita, 184(}-1930. 1910-14-100. From 1865 to 1914, the world's physical
volume of produetion per capita increased 1.91 per cent per year. For many years before the war, production per capita pr«lCljlded with great regolarlt:,. During the World War period, it was strikingly decreased.
This Is contracy; to the popular opillion, but shows that man can not fight and produce at the same time
CAUSES OF LOW PRODUCTION PER CAPITA
During the World War, the low production per capita is easily explained by the
fact that such a large percentage of the able~bodied men were in the Army. All
of the production of copper, lead, iron, food, and the like which these men used
is of course included regardless of the purpose for which these commodities were
used.
Another factor preventing a normal increase in production is the b~akdown
in world trade. Each country of the world is attempting to become self-sufficient.
It is seeking actively for foreign markets in which to sell and is attempting to
stop buying from other countries. This is done by tariffs, prohibiton of imports,
limitation of imports, and milling restrictions. France has set the amount of
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Federal Reserve Bank of St. Louis
229
STABILIZATION OF COMMODITY PRICES
meat it will accept from other countries. Many foreign countries allow only a
certain percentage of foreign wheat to be milled. These restrictions tend to keep
production in areas where production is inefficient.
An even more important factor in preventing the normal development of
production is the decline in prices. A price decline throws producers' prices
out of line with consumers' prices. Since laborers and farmers are producers,
the values of their products are thrown out of line with.the prices of the products
which they must buy. This makes it impossible to buy the normal amount of
produce and results in unemployment. Since 1920, the United States has had
two of the worst periods of unemployment ever known, and England has had
continuous unemployment. These results of the war are checking the rate of
improvement in the physical well-being of the world.
Instead of finding ways of further curtailing production, the world needs to
find ways for increasing production by finding ways whereby the popuations
that desire to work may be employed producing things to sell in exchange for
things that they desire. (Pp. 1671 and 1675.)
F. A. PEARSON,
G. F.
wARREN.
MONEY AND PRICES
WORLD GOLD PRODUCTION
World gold production was strikingly decreased during the war period. This
was due, in part, to the decreasing value of gold and in part to the exhaustion of
mines. In 1922, gold production was less than three-fourths of the pre-war
amount. Production is now increasing but the estimated production for 1930
is less than that of 22 years ago. (Table 1.)
TABLE
!.-Relation between monetary atockB of gold and the physical Polume of
production and wholesale prices in England, 1839-1931
Year
Five-year moving
Est!average
mated
Index
Index
Index numbers
World's world's numbers
numbers
produo- stock of of world's of world's Ratio, of wholetion of
monesale
gold
or phrulcal
gold,
tarygold stock
voume
In
divided prices
monethouat the tarygold,
or proId in Ratio of Wholeby pro- Fngland,
gold to
sands
end of
duction duction
sale
1880year,
proprices In
of fine
188018801914=
ounces millions
1914=
1914ductlon England
1001
100 I
of fine
100•
ounces 11
---------------·----------------------------------------------------------·-------- --------------------------·- ------------------- -----·-·-----·------·---------------- --------·------------------- ----------
100
100
1880-1914•••••••••••••
12,293
231
100
100
125
l840-1844 •••••••••.•••
47
20
17
118
$0
2,037
49
21
105
115
194&-1849•• ······-····
JU
116
1850-1864.••••••••••••
5,835
......................
63
27
14
1855-1859 •••••••••••••
6,267
186
134
89
38
18
....................
1860-1864 .••••••••••••
6,057
107
46
137
144
147
136
1865--1869•••••••••••••
6,206
122
/i3
36
134
1870-1874.••••••••••.•
5,299
136
59
44
141
121
1875-1879•••••••••••••
5,254
146
124
63
52
1880-1884 •••••••••••••
4,921
154
67
63
106
113
1885-1889•••••••••••.•
5,3tll
162
70
71
99
96
7,109
97
1890-1894•••.•••••••.•
178
77
79
93
......................
11,907
96
94
87
209
90
1895-1899 .•. ·--·······
• The world's production of goM In dollars from 1844 to 1859 was taken from the final report of the Royal
Commission appointed to inquire Into the recent changes In the relBtive values of the precious metals, publlshed by the gold and silver commission, Washington, D. C., pp. lM-155, 18811. These figures were converted to fine ounces by dividing by $20.67. Later figures were taken from the United States Trea.'IUl'J'
ll'lnance Report p. 676, 1929. The estimates for 1929 are subjeet to revision.
1 Warren, 0. 'Ir., and Pearson, F. A., Relation or Gold to Prices, Farm Economics No. 611, pp. 1461-2,
February 1931. Kitchin, J ., The supply of gold com_pared with the prices of commodities, iaterlm report
of the gold delegation of the financial committee or the League of Nations, Document C. 375. M. 161. Annez
XI, pp. 79-8.~. September, 1930. The index numbers of the world's stock of monetary gold were converted
to the 35-yeat ba~e, 1880-1914, by multiplying by 0.43247. The fine ounces of gold may be converted to
dollars by multiplying by $20.67.
• The index numbers or the world's physical volume of production were converted from Carl Snyder's
estimated values at 1923-1925 aver&ge price to the 35-J'811r base, 1880-1914, by multiplying by 0.004416. The
index on the 1910-1914 base wa.~ projected backwards from 1864 to 1839 on the basis of the curve, y =:13.830
(1.0315)•, and then converted to dollars by multlplylng by the 1910-1914 base, $33563. Page 1684.
• Warren, 0, F., and Pearson, F. A., The Agricultural Situation, p. 263, August 1924. These index
numbers were converted to the 35-year base, 1880-1914 from the 11110-14 base by multiplying by 1.1254
They may also be converted to the 35-year base from the 11-year base, 1867-77, by multiplying by 1.362.
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Federal Reserve Bank of St. Louis
----------
~,
230
TABLE
STABILIZATION OF COMMODITY PRICES
1.-Relation between monetary stocks of gold and the physical 'volume of
production and wholesale prices in England, 1839-1931-Continued
-
Year
Esti•
Index
mated
Index numbers
World's world's numbers
produc- stock of of world's of world's Ratio,
physical
tion of
mone ..
gold
tarygold stock of volume
gold,
divided
mone•
of prothonat the tarygold,
by
production duction
sands
end of
18801880year,
of fine
1914=
1914=
ounces milliens
100
100
of fine
ounces
Five•year movin g
average
Index
numbers - - - · of wholesale
prices in
gold in Ratio of Whole
England, gold to
sale
1880proprices in
1914=
duction Englan d
100
--- --- --- -----1900--1904.•.••••....••
1905-1909. •·•·•• ....•.
1910-1914.....•.•...•.
1915-1919..•.•••..•••.
1920-1924.....••......
1925-1929...•.•••.••..
1839. •·•••·•·••••··•••
1840..••••..•••••...••
1841. ..••....••••.•..•
1842..•. ••···•••··•·••
1843 ..•.•..•.•••....••
1844 ...••. ···•·• •·•·••
1845...•••....•.•.....
1846•..•••••.••••...••
1847 ..•••....•••....••
1848-...••..•.•••.•••••
1849 .. •••••·•· ••••·•••
1850•....•.•..........
1851. ..•.•......•.....
1852.....•...•.•.... _.
1853 ..••..••...•....••
1854 .......•......•...
1855 .......•....•••.••
1856 .....•.......•..••
1857 ...........•...••.
1858 .•.•••.•.•.•.•••..
1859 ... •···•·· ...•••..
1860.......• :. ·····•••
1861. ......•..•.•...•.
1862 ...••• ·•·•·•·•••··
1863 ....•.••.•..•...••
1864 ....•.......•.••..
1865.•.••..•••.•.•••..
1866 ....••.• ·•·•··•···
1867••·•••·•••••·• ••..
1868.•.•••.•••••.•..•.
1869.....••..•.•••••••
1870.•..•.•••.......••
1871..•...•••..•.•.•••
1872....••.....•..•.•.
1873 •..•..............
1874.•••.••••.•• ·•·•··
1875 ••..•••. ·••••••·••
1876••.• ············"·
1871 ·.. ·.•.•••.•.•••.•
1878.••.•••••• ·•••·•••
1879 ••.••••.•. •••·•·•·
1880.•.• ·•.•••.•.••••.
1881.. ·• -·••••.•••• · ••
1882•• ·•••···••······
1883 .•.••.•..••• · .•..•
1884 ·•••..••• · •·•·•·•
1885 ............ · ... ·.
1886 ...•••.•••...••••.
1887··••·•••••·•••• .•
1888. ·•····•··········
1889.••••. •·•••••··•••
1890•...••.• •••··• ••••
1891. •••••.•. ••••••••·
1892.•••••••••••••••••
1893.••..••••..•••••••
1894.••.••.••••.••••.•
1895 ••.••••••• ••••••••
1896. ••·••••••••• •••·•
1897 ·•••••••·•••••••••
~:. ,:._.............
1900.•••.••···········
1901 ••.. •' ·••••••••••
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
14,391
20,246
22,116
20,285
16,876
19,414
----------------------------·----------------1,799
I, 799
1,799
1,799
I, 7Q9
2,990
3,343
3,908
8,605
7,320
6,001
6,360
6,950
6,276
5,869
5,879
6,486
5,950
5,950
5,950
5,950
5,950
6,270
6,270
6,270
6,270
6,270
5,591
5,591
4,654
4,390
4,717
5,016
5,512
5,671
5,262
5,149
4,984
4,934
4,615
4,921
5,246
5,136
5,117
5,331
5,974
5,749
6,320
7,094
7,619
8, 764
9,615
9,784
11,420
13,878
14,838
12,315
12,626
294
304
362
433
481
525
46
46
47
47
47
47
48
48
49
49
52
54
57
63
69
74
80
85
90
94
98
102
105
108
110
112
115
119
122
125
128
131
134
136
138
140
141
144
146
149
150
151
153
154
155
156
158
160
162
165
167
169
173
177
182
189
195
201
208
217
226
233
241
108
131
157
187
. 208
227
20
20
20
20
20
20
21
21
21
21
22
23
25
27
30
32
35
37
39
41
42
44
45
47
48
48
50
51
53
54
55
57
58
59
60
61
61
62
63
64
65
65
66
67
67
67
68
69
70
71
72
73
75
77
.79
82
84
87
90
94
98
101
104
111
131
148
143
159
194
16
16
17
17
18
18
19
!!O
!!O
21
II!!
2!!
23
!!4
24
25
26·
27
28
28
2/J
so
SI
Sr.
S3
34
34
35
36
38
37
42
42
45
45
45
49
49
52
54
55
60
56
65
63
68
68
68
68
75
77
74
83
78
80
80
90
94
94
102
101
106
107
97
100
106
131
131
117
Je5
125
118
118
111
111
111
105
JO$
100
100
105
109
113
125
128
135
137
139
146
145
147
145
147
145
141
147
146
147
142
149
136
138
131
133
136
124
127
121
119
118
108
118
103
106
99
100
101
103
95
94
99
90
99
99
103
93
93
96
92
97
95
97
------------------ ----------------- ---------------
----------
97
.
102 --·------113
-------214 ---------- -------186 ---------169
-------140 ---------140
--------I 31
137
119
124
117
12&
113
I 21
114
114
111
118
118
109
119'
120
106
I 11
129
115
104
106
103
l 12
100
I 08
104
105
106
104
102
110
108
106
116
116
129
122
122
138
128
129
133
137
137
137
137
136
143
134
140
124
143
133
128
133
144
135
131
146
135
133
146
137
138
145
140
138
145
143
139
145
139'
137
145
138
138
145
136·
136
146
144
135
135
142
134
133
131
139
137
136 ·
137
140
149
135
141
151
132
l 41
138
130
140
131
128
135
129
125
129'
128
122
124
122
118
119
114
117
119
113
116
120
111
115
116
114
107
1 lit
111
105
100
102
104
104
98
102
100
97
95
100
9&
92
.99
96
98
96
96
98
96
96
95
98
96
98
96
93
92
98
97
90
92
87
86
97
86
84
97
8/i
95
83
86
84
94
90
95
88.
92
95
92
95
95.
102
06
.96
96
231
STABILIZATION· OF COMMODITY PRICES
TABLE
1.-Relation between monetary stocks of gold and the physical volume of
production and wholesale prices in England, 1839-1931-Continued
Est!mated
Index
Index numbers
World's world's numbers
produc- stock of of world's of world's
tlon of
moneof physical
gold,
tarygold stock
volume
monethouat the tarygold,
of prosands
end of
duction
1880of fine
year,
1880ounces millions 19141914=
100
of fine
100
ounces
Year
--- --1002 ______________ ---1903•.
-- -- -- •..• -- •..•
1904
__________________
1005
-- • --- • --------• -- -1906•••
____________
1907 ________________ ._
1908 __________________
1909 _______________ ---·
1910.•.••..••••••••••• ,
1911. •.••.•••..•••.• , _
1912.•.•••••••••.•.•.•
1913 .•••••• · ---····--·
1914.•••••••••••••••••
1916 .•.••..•••. •••••••
1916 ..•.••.•••.• ···-·
1917.............. -·-·
1918 .••••• -·· ••.••••••
1919.•••••••••.•••.•.•
}g~~:::::::::::::::::
i
1922.•••••••••••••••••
1
14,355
15,853
16,804
18,396
19,471
19,977
21,422
21, 965_
22,022
22,397
22,605
22, 2.55
21,302
22,738
22,031
20,346.
18,614
17,698
16,130
15,975
15,452
17,791
19,031
19,026
19,349
19,431
19, 67 fi
19, 590
1923 .•.•••••••.•..•••. 1
1924 ..••••••••• ·•••••.
1925 ...•••••••••.•••••
1926••••••••••.•.••.•.
1927 •••.•••••..••••.•
1928.. - - • - • - ••••. - • - • • 1
1929. --- •••••• -· _•..• _
1930..................
to, 160
1931. .•••••• .- ···- -- · ·/ .•••••••••
:1
I
249
257
266
280
290
301
317
J!.30
340
351
360
372
388
407
4.23
434
449
452
463
476
481
490
493
501
513
525
537
1\50
672
580
Five-year moving
average
Index
numbers
of whole-
Ratio,
sale
gold
in
divided prices
in Ratio of Wholegold
by progold to
sale
duction England,
proprices 1h
18801914=
duction England
100
-108
111
115
121
125
130
137
143
147
152
156
161
168
176
183
·188
194
195
200
206
208
212
213
217
222
227
232
238
B47
Slit
114
115
115
134
129
129
95
97
100
97
93
101
106
l3.8
104.
126
140
143
156
157
146
148
142
144
142
138
166
138
159
169
171
187
182
193
201
205
193
105
106
100
103
116
119
129
131
137
141
128
149
131
125
125
116
122
118
115
116
res
---------- ----------
95
95
97
97
97
96
96
9S
9S
98
105
109
99
101
106
109
116
116
117
144
181
233
255
255
258
168
163
165
172
185
172
167
163
156
132
108
99
100
102
104
104
104
106
96
101
101
102
104
10&
106
110
113
---------- -------------------·----------------------------------------------------- ------·--·
------------------------------------------------------------------------____ _____ --------------------------------------------------------------------------------------------·------------------------- -----------------------------------·---------· ---------,..
The figures in italics are estimates.
WORLD MONETARY STOCKS OF GOLD
In spite of the low production, world monetary stocks are steadily rising
This has led to the erroneous belief that the stocks must be ample, for "Are they
not larger than ever before?" With business at a normal level there would not,
be ·enough gold to maintain pre-war prices. 1
The true measure of the adequacy of a money supply is whether there is enough
of it to sustain the price level to which society is most nearly adjusted. Public
and private debts, taxes, hospital charges, freight rates, passenger fares; doctors,
dentists, and lawyers' fees; and all other economic relationships in England and
the United States were becoming fairly well adjusted to a wholesale commodity
price level of 150.
If there were only gold enough to support pre-war prices, there would be just
enough to explain the present world catastrophe.
·WORLD MONETARY STOCKS OF GOLD AND WORLD PHYSICAL VOLUME OF PRODUCTION
RELATED TO PRICES IN ENGLAND
World monetary stocks of gold are given in Table 1. From 1850 to 1910,
monetary stocks of gold increased from 54 to 340 million ounces. The index
numbers of gold stocks increas!;ld from 23 _to 147 when the stocks of 1880-1914
are called 100.
In the same period, the physical volume of world production increased from
22 to 140.
1 Warren, G. F., and Pearson, F. A., Relation of Gold to Prices, Farm Economics No. 69, pp. 1460-3.
February, 1931.
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Federal Reserve Bank of St. Louis
232
STABILIZATION OF COMMODITY PRICES
If the gold stock of 23 is divided by a production of 22, the result expressed as
a percentage is 105. If the gold stocks of 147 are divided by 140, the same ratio,
105, is obtained.
Prices in England in 1850 were 105 and in 1910 were 106. The ratio of. the
stocks of gold to the production of other things remained the same, and prices
were stable.
From 1850 to 1870, gold increased faster than the production of other things,
so that the ratio of gold to other production increased from 105 to 136 and prices
rose from 105 to 131.
.
From 1870,to 1890, gold increased from an index of 131 to 169, or 29 per cent.
The prdduction of other things increased 76 per cent. The gold stocks did not
keep pace with other things. The ratio of gold to other things fell from 136 to 99,
and prices fell from 131 to 98.
These relationships for the entire period are given in Table 1 and Figure 1.
While there are considerable variation_s in short periods of time, prices for 75
years before the war were generally very close to the quantity of monetary gold
divided by the quantity of other things.
The 5-year averages show how closely the relationship holds in each period.
The widest divergence is shown for the five years 1865-1869 when gold divided
IIIIOEJ/
z50·.---.------.-------.--------.--
zoo1---1-----+------+------+-++---1
80
1839
18,10
1870
1890
.
1,,0
1,,0
1.-Ratio of world's monetary J!Old stocks to world physical volume of production and wholesale prices In England, 1839-1930. 188(H1114=100. For the 75
years before the World War, prices rose If the world's monetary stocks of gold increased faster than the production of other things and fell if gold Increased less rapidly. .A.n uceptlon occurred during and following the World War when most of
the countries of the world discontinued the gold standard. But the relationship
bas been restored.
FIGURE
by production averaged 147, while prices in England were 136, or a 7 per cent
difference in the relationship. About the same percentage difference occurred for
the five years 1895-1899 and for 1910-1914. For a number of years in the nineties, prices were low. Thia was a period of severe depression, and considerable
gold was doubtless hoarded. During most of this period, the Bank of England
paid a premium for gold. 2
Short-time fluctuations are affected by other factors. The final fluctuations
in the price level from the gold relationshipa are the algebraic sum of short time
variations in crops, due to weather; livestock cycles; business cycles; and to some
other ca.uses. In 75 years before the war these variations were always temporary.
This 75-year relationship may be expressed as follows:
Gold=Prices x physical volume of production,
or Prices=
.
Gold
.
'
Physical volume of production.
For 75 years before the World War, world monetary stocks of gold had to
increase at the same rate as the world physical volume of production in order to
maintain stable commodity prices in England. If gold stocks increased more
rapidly than other things, prices rose; if they increased less rapidly, prices fell.
1
Report of the Director of the Mint, 1900, p, 206. 1000.
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Federal Reserve Bank of St. Louis
233
STABll.IZATION OF COMMODITY PRICES
Jn order to eliminate short-time variations, 5-year moving averages of the
ratio of gold to production and wholesale prices in England were calculated
(Table 1 and fig. 2). Each figure given in the last two columns of Table 1 is an
average for that year and the two preceding and two following years.
Discrepancies still exist, but the general trend of the two curves is the same,
showing that, although physical volume of production increased nine tim~s, prices
fell only a small amount in 75 years, because monetary stocks of gold rncreased
over eight times.
The abnormally high prices from 1915 to 1930 were, in part, explained by
the reduced demand for gold (page 1694) and, in part, by the low production of
l
,,o~
l .·•.
l
80....,...i........i....-................................................................................~
,a,.o
,aJo
1a110
1610
18ao
,4s,o
,,,o
tSIOO
FIGURE 2.-Five-year moving averages of the ratios of world
monetary stocks of gold to world physical volume of production and wholesale prices In England, 1840-1931. 18801914=100. Comparisons of Ii-year averages of the ratios and
Ii-year averages of prices flt more closely than the data for single years (Figure 1)
other things. The world physical volume of production was low from 1914 to
1925 and has been low since 1929. The abnormally low production raised the
ratio of gold stocks to production in that period, and accounts for the rise in
the gold to production ratio line. World production of goods began to rise from
1923 to 1929, but was at no time equal to the normal increase. The low production in 1930 raised the ratio line. A still further decrease in 1931 will raise
it strikingly. These fluctuations do not change the long relationships.
TABLE
2.-Relation between monetary stocks of gold and the physical 11olume of production and wholesale prices in the United States, 1839--1931
s!i"'
~;N8
o-=
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100
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20
1880-1914. ___ • -- • -- -- -- • --- •• -47
17
20
118
96
...............
1840-1844------ --- --------. ---21
lS(li-1849••••••••••••••••••••••
49
so
106
96 .. ............
............. _
63
'rt
118
105
..............
14
1860-1854. --- -- ---- -- -- -- -- -- -89
18
186
118
88
!SM-1859. --- -- • --- -- •• -- --- •••
1 Warren, 0. F,i,.!llld Pearson. F. A., Relation of Gold to Prices, Farm Economics No. 69, pp, 1461-2,.
February 1931. JUtchln, J. The supply of gold compared with the prices or commodities, Interim Report
of the Goid Delegations of the Financial Committee of the League of Nations, Document C. 376. M. 161,
Annex XI, pp. 71H!6, September, 1930. The Index numbers or the world's stock or monetary gold were
converted to the 31i-year bsse1 1880-1914, by multiplying by 0.43247. The fine ounces of gold may he converted to dollars by multlplymg by $20.67.
1 The Index numbers of the world's physical volume of production were converted from Carl Snyder's
estimated values at 1923-1926 average prices to the 31i-year base, 1880-1914, by multii;ilylng by 0.004416.
The Index on the 1910-1914 base was projected backwards from 1864 to 1839 on the bas18 of the curve, y=
23.830 (1.0316)•, and then converted to dollars by multiplying by the 19HH4 base, $33,563. Page 1684.
• Warren, 0. F. and Pearson, F. A., Index Numbers of Wholesale Prices of All Commodities, FARll
ECONOMICS No. 72, pp.1686-7, September, 1931, and page 1634 of this issue. The Index numbers were converted to the 31i-year base, 1880-1914, by multiplying by 1.14604.
'Statistical Abstract of the United States, United States Department or Commerce, 1922. Forty-fifth
Number, p. 512, 1923, and the fifty-second number, pp. 246-7, 11130. The Index numbers were converted
to the 35-year base, 1880-19141 by multiplying by 0.00073.
• Table 1, page 1680. The mdex numbers were converted from the five-year base, 1926-30, to the 31i-year
baae, 1880-1914, by multiplying by 2.2411.
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Federal Reserve Bank of St. Louis
------- ----·-- ------- ------------- ------- ------- ------------------- ------- ------------- --··--------- -------
234
STABILIZATION OF COMMODITY .PRICES
2.-Relation between monetary stocks of gold and the physical volume of production and wholesale prices in the United States, 1839-1931-Continued
TABLE
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H
,843- - - - - - - - - - --- - -- - -- - - - - - - - -
1844- _. - . - - - - - - - - -- - - - -- - -- -- - 1845 ___ -- -- -- -- -- - - . - - - - - - .. - - 1846 ___ -- ---- ------------- ----1847 _--- ------- -- ------ -- --- -- .
1848- - _- - -- - - - -- - - • - - -- -- -- -- - 1849- - _. - - - . - . - -- - - . - . - - - - - - - - 18_5Q ______ ------- -- ----•-····
1851-- -- . - ----- ------- -- ----·-1852-- __ ---------- _-----------1853. -- -- ----- -- ---------- ----1854._ -- . - - ----------- --------1851' -------------------------1856 _____ -- . --- ---------------. --- -- ------- ------1857
- _. - .--- __ - _____ - ______ -- __ _
1858-----.
1859_ -- _-- --- -----------------186(), -------------------------1861 __ --- -- ------------------- _
1862_. -- ---- -- ----------- -----1863-. --- -- -- • -------------- --1864 ____ -- . -- -- ---------------1865 ___ --- . ------ --------- ----1866--. -- --- ----------- -- -----1867 --- -- --------------- ------ _
1868 -__ ---- --- ------------- ---1869 ___ ---------------- ---- -- -1870 _____ ---- -- -------------- -1871 _____ -- -- _. -- __ -- -- ____ . _. _
1872. ------. _---------- ----- --1873' -- ------ -------- ---------1874 ___ -- -- -------------- -----1875._ - . - - - - - - - - - -- -- - - - - -- - - - 1876 _____ -------- -- -- --- ------1877 -- --- -- ------------ ----- --1878. -- . - - • ____ -- ___ -- -- _-- -- -1879 •. _.• ---- -------- --- -------- --- ------------- ------_
1880--_________________________
188L
1882. -- ---- ------- --------- -- --
1883_. - • -- • ----------------- ---
1884 ___ -- -- -- -------------- _--1885 ___ -- -- -------------- -- ---1886 ___ -- -- ------------- --- -- -1887 --- -- -- . -- ----------- --- -- .
1888. - • -- -- ----- -- ------ ------) 889 .. _--- -- ----------- ------- _
i~g~:::::::::: :::::::::::::::::
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Federal Reserve Bank of St. Louis
107
122
136
146
154
162
178
209
249
304
362
433
481
525
46
46·
47
47
47
47
48
48
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235
STABILIZATION OF COMMODITY PRICES
2.-Relation between monetary stocks of gold and the physical volume of production and wholesale prices in the United States, 1839-1931-Continued
TABLE
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1892___________________________
1893_____________________ . ···-1894 ___________________________
1896___________________________
1895_
-- -- -- -- ---- -- -- --- - -- -- -1897___________________________
1898__________________ · --------
1899 ___________________________
1900 ___________________________
1001. __________________________
1002___________________________
177
182
189
195
201
208
217
226
233
19()3_
-------------------------1904___________________________
241
249
257
266
1906 ___________________________
280
290
1907--------------------------1908_ --- _-·- __ ----- -- ----- ----1909 __ --- -- ------ -- __ --- --·-·-1910 ___ -- _------- _------ --- ---1912
1911.___________________________
-------·--------····-·----
301
317
1905 ___________________________
1913_ -- -- _-- ----- -- -- --- ----- -1914_
1915___________________________
-- _--- _----- -- --- -- - - - -- -1916 ___________________________
1917 ___________________________
1918
_-------------------------1919 ___________________________
1920___________________________
1921. __________________________
1922 ___________________________
1923 ___________________________
1924 ___________________________
1925 ___________________________
1926--------------------------·
1928----------·-·-------·-----___________________________
1927
1929___________________________
1930 ___________________________
1931 ___________________________
330
340
351
360
372
388
407
423
434
449
452
463
476
481
490
493
501
513
626
637
550
611
680
77
79
82
84
87
90
94
98
101
104
108
111.
1!5
121
125
130
137
143
147
152
156
161
168
176
183
188
194
195
200
206
208
212
213
217
222
227
232
238
S47
161
78
80
80
90
94
94
102
101
106
107
114
115
1!5
125
134
129
129
138
140
143
156
157
146
148
142
144
142
138
156
138
159
169
171
187
182
193
201
205
193
99
99
103
93
93
96
92
97
95
97
95
97
100
97
93
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106
104
105
106
100
103
115
119
129
131
137
141
128
149
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116
122
118
116
116
118
--··--- -------
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80
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109
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1,466
1,618
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1,636
1,753
1,818
1,871
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Nou.-The figures In Italics are estimates.
Apparently wars, like the Civil War and the World War (figs_ 4 and 6) check
the increase in production or actuall:i,r lower it. After recovery occurs, the increase
.again proceeds at a normal rate. If this is the case, world's gold supply would
need to have increased a little less than 3.15 per cent per year since 1914 to sustain
pre-war prices with what would now be normal production.
WORLD MONETARY STOCKS OF GOLD AND WORLD PHYSICAL VOLUME OF PRODUCTION
RELATJ!JD TO PRICES IN THE UNITED STATES
In the 5-year period 1885 to 1889, the world monetary stocks of gold were 70
when the average for 1880-1914=100 (table 2). The world physical volume of
production was 71. The ratio of gold to production was 99 and wholesale prices
in the United States were 96. Fifteen years later, the world gold stocks had
increased 54 per cent, and the world physical volume of production, 56. The
ratio of gold to production was 97 and prices were 97.
Many persons now contend that the world's gold stocks are higher than ever
before so that they must be ample. They are 49 per cent above the 1914 amount.
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Federal Reserve Bank of St. Louis
236
STABILIZATION OF COMMODITY PRICES
In the previous period given, the 54 per cent increase in gold was only sufficient
to maintain prices when production increased at the same rate as gold stocks. Is
there any reason for assuming that the 49 per cent increase in gold is more than
sufficient to maintain pre-war prices with normal production at the present time?
Figure 3 and Table 2 show the relationships of the gold-to-production ratio to
p_rices since 1880. Prices in the United States were more erratic than those in
England primarily because of financial difficulties during the 20 years following
the return to the gold basis in 1879.
In general, prices rose when gold stocks increased more rapidly than production
and fell when they increased less rapidly.
From 1839 to 1880, wholesale prices in the United States were lower than the
gold supply would suggest. This difference, compared with England, is due to
the fact that agricultural prices in the United States were low during this period
and that agriculture has a heavy weight in the United States index numbers,
and to the further fact that the United States gold supply was small relative to
production.
The discrepancy was very great from 1858 to 1865. This was due to the
panic of 1857 and the inflation during the war. When inflation occurs, the value
of the money declines faster than prices rise so that a theoretical price in gold is
low.
UNITED STATES MONETARY STOCKS 01' GOLD AND UNITED STATES PHYSICAL VOLUMll;
OJI' PRODUCTION RELATED TO WHOLESALE PRICES IN THE UNITED STATES
In 1885, the United States had $589,000,000 of monetary gold, and in 1897,
$696,000,000. Probably in 1897, some persons contend that there must be enough
INOeX
.250
.---"""T--------
I
tW>oleaole pru:ea
~o----------++----~
IJ{\.
1930
1895 l!J05 1915
3.-Ratio of world's monetary gold
stocks to world physical volume of production in relation to wholesale prices In
the United States, 1880-1931. 1880-1914=
100. For the 35 years before the World
War prices rose if th.e world's monetary
stocks of gold Increased faster than the
production of other things and fell if gold
Increased less rapidly. An exception
occurred when most of the countries of
the world discontinued the gold standard.
But the relationship has been restored.
FIGURE
gold as the supply bad increased 18 per cent. In the same period, the United
States physical volume of production increased at the normal rate, or 52 per cent.
In 1885, the ratio of gold-to-production was 97 and wholesale prices were 97
when the 35 years, 1880-1914 is 100.
In 1897, the ratio of gold-to-production was 75 and wholesale prices were 78.
All the data since 1880 are shown in Figure 4 and Table 2. During the period
when the country was off the gold standard, wholesale prices were higher than the
small amount of gold would be expected to support. Specie payment was resumed in 1879 and prices continued high relative to gold for the following six years.
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Federal Reserve Bank of St. Louis
STABILIZATION ·OF COMMODITY PRICES
237
From 1885 to 1914, the highest discrepancy between prices and the gold-toproduction ratio was for 1900 to 1904, when the ratio was 104, but prices ~veraged
only 97. The discrepancy was 7 per cent. No other five-year period showed a
discrepancy of more than 4 per cent.
For the thirty-year period 1885 to 1914, monetary stocks of gold In the United
States had to increase at the same rate as the physical volume of production in
the United States in order to maintain stable commodity prices. If gold stocks
increased more rapidly than the production of other things, prices rose; if gold
increased less rapidly, prices fell.
From 1892 to 1899, prices in the United States were below the normal relationships to world stocks of gold, but were not below their normal relationships to
stocks of gold in the United States. In 1896-96, prices were much below their
relationship to world gold but were much above their relationship to United States
stocks of gold. The United States returned to the gold standard in 1879 but the
resulting bankruptcy, unemployment and political controversies were such that
INOE.X
&.70
WhoA
~ale prices
189$
190.5
191.5
1930
,.-Ratio of the United Stat.es monetary
gold to the United Slates physical volume of production in relation to wholesale prices in the U nlted
States 1880-1931. 1880-1914-100. From 1880 to
1914, the United States gold divided by the United
States production of other commodities eque.lled
prices
FIGURE
it shook the faith of Europe in the ability of the United States to maintain the
gold standard. Securities were returned and sold on the New York market and
other means were taken to withdraw gold from the United States. This resulted
in a price level far lower than the world stocks would call for. Low as prices
were, they were high compaied to the United States gold stocks.
A similar situation now exists in England. Gold payments were resumed in
1925, but six years of effort resulted in so much unemployment and political
agitation, that. the world doubted the ability of England to maintain the gold
standard. The same devices were used to withdraw gold and it became impossible for England to maintain the gold standard. Index numbers of wholesaleprices in England were low relative to world stocks of gold, but were high relative
to English gold stocks. For two years, prices in England have been declining in
advance of the decline of prices in the United States. The major factor controlling prices is world gold supply, but the location of the supply has some influence.
WHY WERE PRICES HIGH FROM 1916 TO 1930?
The real problem that requires explanation is not why prices fell when the world
went back to a gold basis, but why prices in the gold-using countries were so high
from 1915 to 1929. With the outbreak of the war, most of the countries of the
world discontinued the use of gold and gave little attention to gold supplies. They
shipped gold to neutral countries to pay for war materials. The reduced demand
for gold made it cheap, so that prices in countries that did not use gold were high.
111442-82-PT 1-16
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Federal Reserve Bank of St. Louis
238
STABILIZATION 'OF COMMODITY PRICES
The same thing happened a few years ago in China. India began to sell silver,
which reduced the value of silver and made prices rise in China. (Fig. 9, p. 1665.)
The same thing might occur again if other countries would stop bidding for gold.
If this occm-red, the gold would move to the gold-using countries. The small
world demand would make it cheap and prices would rise.
From 1916 to 1920, prices in the United States were even higher than the gold
supply would suggest. This was partwularly true from 1919 to 1920. In that
period the government held down interest rates in order to sell the Victory loan
at a low rate of interest. 2 This resulted in a great expansion of credit so that the
large gold supply was more than fully used. (Table 3.)
Shortage of goods and government and private hoarding of goods also contributed to high prices. England did not sell the last of her war supplies of pork
until 1921. 1taly was rationing her hoard of sugar in 1921, not to hold prices
down (world prices were very low), but to get rid of the sugar at a high price.
Before the other countries began to desire to have the gold back again, wholesale prices in the United States were about 50 per cent above pre-war.
England and other countries made the mistake of thinking they could go back
on the gold basis by deflating to the level of prices in the United States. The
government did not realize that this increased demand for gold would lower
prices in both countries.
One after another of the various countries began to move toward the reestablishment of the gold standard. Sweden returned to the gold basis on April 1,
1924; Germany, in the fall of 1924; England and the Netherlands on April 28,
1925; Belgium, October 25, 1926; Italy, December 22, 1927; and France, June
25, 1928. These countries did not return to a free gold coinage but to a gold
exchange basis so that one could get gold bars if he had money enough. In
France, it requires about $8,000 to buy a gold bar. The only way that most
Europeans can get gold is. to buy American coins. Our $20 gold pieces are
reported to be selling at $21.50 in France. This demand has been so keen that
New York banks are trying to prevent the movement. 3
The vigorous bidding for gold made it very valuable regardless of its location.
The United States held large stocks of gold, but the world demand determined
its value. The demand for gold· gradually grew until there was a world-wide
panic to get it. This panic grew worse and worse until the fall of 1931 when
England and a large number of other countries discontinued the gold standard.
EFFICIENCY IN THE USE OF GOLD
Much has been said about the increa.sed efficiency in the use of gold. The
monetary circulation of the United States has steadily declined in proportion
to gold. (Table 3.) Bank deposits (or credit) have steadily risen in proportion
to gold.
In the 17 years proceeding the establishment of the Federal reserve system,
1888-1897 to 1905-1914, the total monetary circulation plus bank deposits in the
United States for each dollar of monetary gold increased from $9.17 to $10.78 or
an increase of$1.61. In the next 17 years, 1905-1914 to 1922-1931, the increase
was from $10.78 to $12.03, or an increase of $1.25. The rate ot increase has been
less rapid than that which was occuring before the establishment of the system.
If a dollar of money performs more transactions than a dollar of bank credit, the
increased efficiency is less than this comparison indicates.
The small increase in the efficiency in the use of gold 1s easily offset by other
factors. Some of these mav be that the number of transactions to handle a
given volume of physical production has increased. When bread was made in
the home, fewer transactions were involved than when bread is purchased.
Increased fabrication may have occurred. There is a steadily increasing number
of noncommodity transactions. Newspaper, radio, and moving picture employees and laborers are relatively more numerous than formerly. When commodity prices are stable, wages rise and require more money. All of these things
have been occurring gradually throughout the 75-year period. The increasing
efficiency in the use of gold has also been occurring gradually. Whatever the
explanation, the simple fact that the general course of prices has been determined
by the ratio of gold stocks to production of other things is established.
It is often said that the United States has more gold than it needs and that
the gold is sterilized. The total credit outstanding in 1929 was high in propor2 Report of the Joint Commission on Agricultural Inquiry, House of Representations, 67th Cong., 1st
sess. Report 408, P. II, p. 12, 1922.
,
'New York Times, Feb. 3, 1932, p. 26.
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Federal Reserve Bank of St. Louis
239
STABILIZATION OF COMMODITY PRICES
tion to total gold supply indicating that the gold was fully used.
It was so tully used as to cause a reaction.
(Table 3.)
FUTURE RELATIONSHIPS OF GOLD TO PRICES
The physical volume of production from 1923 to 1929 increased at about the
normal rate for the fifty years before the war, 3.15 per cent per year. It will
be impossible to know definitely just what the rate of increase will be after such
a period of world chaos. Apparently, a production of about 211 would be normal
for 1930, and 218 for 1931. The index number of world gold stocks in 1931 was
251. The ratio of gold stocks to this estimate of production was 115. If there
were no other factors to consider, a commodity price level of about 115, when
1880-1914= 100 would be normal. On a 1910-1914 basis this would equal
prices of 102 in England and 100 in the United States.44 In August, 1931, before
the gold basis was abandoned, prices in England fell to 96. In December, 1931,
prices in the United States were 100. Prices have returned to their normal
relationship to the gold supply.
If a free gold basis were established and all the countries that formerly used
gold returned to it, a price level materially below the normal level would be
expected for some years.
Confidence in money has been repeatedly shaken for almost a generation.
After such a period, there are many factors which tend to make prices low in
proportion to gold stocks.
TABLE
3.-Monetary gold, money in circulation, and bank deposits in the United
States on June 30, 1880-1931
Period or year
Total
money I
1880-1889. _. -·----·-··-· $1,488,000
1890-1899 •• ····--··-···· 1, !l45, 000
1900-1009 ••••••••••••••• 2,906,000
1910-1919••••••••••••••• 4,722,000
1920-1929 •• ·-· ··-••••••• 8,422,000
1880. --··--·-·-········· 1,186,000
1881. ·····-···-····-··-· 1,350,000
1882. -··-·-·-·---····-· 1,400,000
1883 •••••••••••••••••••• 1,472,000
1884 •• ·- -······· •••••••• 1,487,000
1885 •••••••••••••••••••• 1,537,000
1886•••• ·- •••••••• -· -· •• 1,561,000
1887•• •••••••••••••••••• 1,633,000
1888. -·················· 1,691,000
1889. ·····-············· 1,659,000
1800 .•••••••••••••••••.• 1,685,000
1891.. ······-·· ··-···· .. 1,678,000
18112.• ·····-···· ••...... 1,752,000
1893. ············-····-· 1,739,000
1894 •.••••••.••.••.. ·-·· 1,805,000
1895 .• ···--······-···· .• 1,819,000
1896. ·••••·•·•··••·••• - 1,800,000
1897 __ •• ···········--·-· 1,907,000
1898_ ·---·-····· ••••..•• 2,074,000
1899. -·-·-·-·-·· •.•....• 2,100,000
1900 .••.•••.••. ·•.••...• 2,336,000
1901.. ············-- ••.• 2,511,000
1902.••••••••••••••••••• 2,594,000
1903 .• ····-········· •••• 2,718,000
1904. ·············-···-- 2,838,000
1905. _••·•·• .•.•••..•••• 2,919,000
1906. _••.••••• ····-·-·-· 3,109,000
1907 •• ········-······-·· 3,158,000
MoneMonetary· Totalmon• Totalindi· Percentage of tary cir• Deposits
gold coin etary circu• vidual de• gold
to
culation
per dollar
and bul• · Jation:
posits•
total per dollar of gold
lion 1
money• of gold
$563,000
699,000
1,349,000
2,290.000
4,029,000
352,000
478,000
507,000
543,000
546'000
589:ooo
591,000
655,000
706,000
680,000
696,000
647,000
664,000
598,000
627,000
636,000
. 600,000
696,000
862,000
963,000
1,034,000
1,125,000
1,193,000
1,249,000
1,328,000
1,358,000
1,476,000
1,466,000
$1, 222, 000 · $2,988,000
1,628,000
4,962,000
2,596,000 10, 7112, 000
3,702,000 21,210,000
4,861,000 44,510,000
973,000
2,134,000
1,114,000
2,539,000
1,174,000 _____
2,756,000
.,._,. ____
1,230,000
1.244,000
1.293,000
1,253,000
1,318,000
3,305,000
3,419,000
1,372,000
1,880,000
3,776.000
1,429,000
4,061,000
1,497,000
4,197,000
1,601,000
4,665,000
4,627,000
1,597,000
1,001,000
4,651,000
4,921,000
1,602,000
1,506,000
4,945,000
1,641,000
5,095,000
1,838,000 5,688,000
1,904,000
6,769,000
2,081,000
7,239,000
8,461,000
2,203,000
9,105,000
2,279,000
2,400,000 . 9,554,000
2,553,000 10,001,000
2,623,000 11,351,000
2,775,000 12,216,000
2,814,000 13,100,000
------------------···-------------
37.8
37.9
46.4
48. 5
47.8
29. 7
35.5
36.0
36. 9
36. 7
38. S
37.8
40.1
41. 7
41.0
41.3
38.5
37.9
34.4
34.8
35.0
33.3
36.5
41. 6
44.0
43. 7
44.8
46.0
46.0
46.8
46.5
47.5
46.4
$2.17
2.33
1.92
1.62
1. 21
2. 76
2.33
2.32
2.27
2.28
2.20
2.12
2. 01
1.94
2. 03
2.05
2.31
2.41
2.67
2. 65
2.52
2. 51
2.36
2.13
1. 98
2. 01
1.96
1. 91
1. 92
1.92
1.93
1.88
1.92
$5. 31
7.10
8.00
9.26
11.05
6.06
5. 31
5. 44
------------------5.05
4.84
5.66
5. 83
6.49
7.03
7.74
7.42
7. 74
8.24
7.32
6.60
7.03
7.00
7.52
7.63
7.65
7.53
8.36
8. 28
8.94
1 Statistical Abstract of the United States 1930, United States Department of Commeroe, No. 52, pp,
246-247. 1930.
• From 1880 to 1899, Inclusive, Statistics! Abstract of the United States 1923, No. 46, p. 605, 1924; and
from 1000-1929, Statistical Abstract of the United States 1930, No. 52, p. 247. 1930.
• From 1880-1914, Statistical Abstract 1923, No. 46, p. 798, 1924, and from 1915--1929 from Statistical Abstract of the United States 1930, No. 52, p, 262. 1930.
• 6-year average, excluding 1883-1886, for which data are lacking.
•• Estimates of a normal prioe:level of about 90 were obtained by assuming that production proceeded at
a normal rate, sinoe the war began. Farm Economics No. 69, pp. 1460-1462, February, 1931.
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STABILIZATION OF COMMODITY PRICES
3.-Monetary gold, money in circulation, and bank deposits in the United
States on June SO, 1880-1931-Continued
Period or year
Total
money
MoneMonetary Totalmon• Total indi• Percentte.ry cir• Deposits
sgeof
gold coin etary circu- vidual de• gold
to culation per dollar
and bu!per dollar of gold
posits
total
lation
lion
of gold
money
1908 •.••••••.••••••.•.•• $3, 423, 000 $1,618,000 $3, C179, 000 $12, 785, 000
1,642,000 3,149,000 14,108,000
190\L .••••.•••...• ------ 3,452,000
1910. -·----------------- 3,467,000 1,636,000 3,149,000 15,283,000
3,607,000
1,753,000 3,263,000 lli, 906,000
1911- -------------··-···
1,818,000 3,335,000 17,024,000
1912_ ----- ----·-··· ·---. 3,702,000
3,419,000 17,476,000
3,777,000
1,871,000
1913 __ ··-··-··--·· ----- 3,459,000 18,518,000
I, 891,000
1914_ - ·-·-··-------- .... 3,798,000
4,051,000
1,986,000
3,320,000 18,966,000
191/L ---····-··-·-·· ....
2,445,000 3,649,000 22,526,000
1916 __ -----------------· .4, 542,000
4,066,000 26,058,000
5,679,000
3,220,000
1917 __ --···-···--------.
1918. --·····-········-·· 6,906,000 3,163,000 4,482,000 '¥1, 716,000
3,113,000 4,877,000 32,629,000
1919 ____ ••• ----- •• -- --.. 7,688,000
Ii, 468,000 37,268,000
1920_ ---····-······-·-·· 8,158,000 2,865,000
3, '¥14, 000
4,911,000 34,791,000
1921.---··-·--·········· 8,175,000
3,785,000
4,463,000 37,144,000
1922. --···-·-·-···-·---· 8, '¥16,000
8,703,000
4,050,000
4,823,000 39,984,000
1923. -- --- -- ---- -- -- -- . 4,849,000 42,004,000
1924••• ·-········-·-···· 8,847,000 4,488,000
4,815,000 46,715,000
1925 •••••••••••••••••••• 8,304,000 4,365,000
4,885,000 48,8'¥1,000
1926. -·-···-······-···-· 8,429,000 4,447,100
4,851,100 51,062,000
4,587,000
19'¥1 ••••••••••.•••••• --. 8,667,000
4,109,000
4,797,000 53,245,000
1928•• ---·-· ••• -·-·-·-. - 8,118,000
4,746,000 53,158,000
1929•• ···---···-··-··-·- 8,539,000 4,324,000
4,535,000
4,522,000 53,564,000
1930 6 ······---···-····· 8,307,000
9,080,000
4,956,000
4,822,000 50,485,000
1931 6 -·····-····-·-····
47.3
47.6
47.2
48. 6
49.1
49. 5
(9.8
49.0
53.8
56. 7
45.8
40. 5
35.1
.f0.1
45. 7
46. Ii
50. 7
52.6
52. 8
52. 9
60.6
50.6
M.6
54.6
$1.90
1. 92
1.92
1.86
1.83
1. 83
1.83
1. 67
1.49
1.26
1.42
1.57
1.91
1.50
1.18
1.19
1.08
1.10
1.10
1.06
1.17
1. 10
1.00
,97
$7.90
8.59
9.34
9.07
9.36
9.34
9. 79
9.55
9.21
8.09
8. 76
10.48
13.01
10.62
9.81
9.87
9. 56
10. 70
10.98
11.13
12. 96
12.29
11.81
10.19
• Annual Repol't of the Comptroller of the Currency, Dec. 1, 1930, pp. 57 and 138. 1931; and Text or
the Annual Report of the Comptroller of the Currency, pp, 128 and 146. Deeember, 1931.
Whenever the countries again establish a free gold basis, the tendency to
hoard gold will be greater than before the war.
Banks in the United States and in other countries will, for some years1 wish
to maintain a liquid position so that they will not again be called on to sell
securities at a loss in order to get cash. This means that high cash reserves will
be held.
In some regions, there is a shortage of banks so that a much larger amount
of money will be kept in homes than formerly was the c11se. For some time,
fear of banks will increase the tendency to keep cash rather than bank accounts.
Because of low profits, many banks are introducing a charge for checks. This
will tend to reduce the number of small accounts and reduce payments by check.
In case all the countries that formerly used gold return to .the gold stardard,
large bank reserves will be necessary in order to establish confidence in the
country. It is not enough that the bank have the confidence of the citizens of
that country. If the citizens of other countries do not have confidence in the
bank, gold withdrawals from that country are easily made.
The situation during the nineties was somewhat similar to the present, but
much less serious.· During that period, prices in England as well as in the United
States, were low relative to the world monetary stocks of gold. Im the United
States, they were often 10 to 15 per cent below the normal ratio. In England,
the discrepancy for several years was more than 10 per cent.
In recent years, the world stocks of monetary gold have not been increasing
as much as 3 per cent per year. Gold production is increasing, but would have
to increase strikingly to allow world monetary stocks to increase 3 per cent
per year. Some economists have been misled by making calculations on the
rate of increase in gold production since 1922. This is doubly fallacious. It
begins measurement from an abnormally low point, and would be incorrect in
any event, for it is world monetary stocks of gold and not gold production that
must increase at the same rate as other things in order to maintain stable prices.
Another reason for anticipating that wholesale prices will be lower than the
normal gold relationship is that other uses of money include many fixed or semifixed charges that remain high and temporan1y absorb more than the normal
share o_f money and credit. Until these become adjusted to wholesale prices,
they will depress wholesale prices below the normal gold relationships.
Regardless of what temporary price level may occur, if all of the countries
that formerly used gold return to a gold basis, there does not seem to be any
probability of maintaining pre-war wholesale commodity prices except in those
countries that reduced the weight of gold in the monetary unit.
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STABILIZATION OF COMMODITY PRICES
241
If there should be a material increase in the efficiency with which gold is used
in the Federal reserve system, this conclusion would still hold because there is
almost no chance of a general increase in efficiency throughout the world. It is
world supply and world demand that determine the value of gold. There is no
indication that the Federal reserve system has increased the efficiency of gold
more than the slow and gradual normal increase would call for. (Table 3.)
Decreased world efficiency is to be expected
Of course, a sudden discovery of some phenomenal supply of gold might change
the situation, but such discoveries are largely accidental and usually require some
years to strikingly increase the gold supply.
There are four important possibilities that will- affect the situation:
1. Countries now off the gold basis may cease to bid for gold and reduce its
value.
2. Whether or not No. 1 occurs, they may not return to the gold standard.
3. Whether or not No. 1 occurs, they may return to the gold standard. This
caµ occur with or without revaluing the currency.
4. With any one of the above combinations, it is possible that the United
States may follow a monetary policy that will tend to correct the present deflation.
It is possible, but not probable, that the countries which formerly were on the
gold basis, will discontinue to bid for it and by reducing demand reduce its value.
If this or any other cause should raise prices in the countries that continue on the
gold basis, the world would again probably be misled into believing that all
countries could go back to the gold standard by deflating to that price level, not
realizing that the increased demand for gold would lower the price level. If the various countries should reduce the weight of gold in their currencies so as to restore
their prices to the level to which their internal debts and other economic relations
are adjusted, they would escape the further catastrophes that accompany deflation.
But by that act they would increase their ability to withdraw gold from other
countries. Such a normal price relationship causes normal business within the
country and costs of production below those in the country that is deflating.
Deflation always leaves costs high relative to prices.
There is, of course, a possibility that the United States will adopt a monetary
policy that will tend to restore prices. In any event, a striking temporary recovery will sometime occur from the extremely low prices which now prevail for basic
commodities. Any price level that is out of adjustment with the monetary
situation should not be expected to be maintained permanently.
A summary of the major forces affecting the general price level is given below.
Forces tending to raise commodity prices
above the pre-war level
Forces tending to lower prices below the pre-war level
1. If the normal relationship held, world monetary stocks
1. England and other countries might cease
of gold would only support pre-war prices.
to bid for gold.
2. World monetary gold stocks are not increasing so rap.
2. Phenomenal discoveries of gold might
Idly as the physical volume of production.
occur.
3. All central banks desire high reserves.
3. Financial policy may raise prices for a
4. All private banks desire high cash reserves.
time or a permanent monetary change might
6. Some individuals cannot use banks because their
be made.
4. A temporary rebound from phenome- banks have closed.
6. Banks are discouraging small checking accounts.
nally low prices for some basic commodities
7. Throughout the world, confidence Is such as to favor
Is likely to carry them above pre-war for a
hoarding.
time.
PROPOSALS BEING DISCUSSED IN VARIOUS COUNTRIES
1. The gold standard has been suspended in England and about 20 other
countries. During such a period the country has a managed currency. Some
countries are discussing the possibility of permanently mamtaining such a managed currency, but some definite base for currency is generally desired. Suspension of the gold standard is generally looked upon as a temporary measure to
check bankruptcies and price collapse and give time to decide what to do next.
2. Reduction of the weight of metal in the monetary unit is another proposal.
This does not provide for a continuing measure of stability of value. It is a
single drastic adjustment to meet a catastrophe resulting from declining prices.
This was done by France, Belgium, Italy, and most of the other countries of
continental Europe. By this means they avoided the effects of the deflation
before 1930. Since the adjustment was made when gold prices were about 150,
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Federal Reserve Bank of St. Louis
242
STABILIZATION OF COMMODITY PRICES
these ·countries did not escape the results of deflation to a gold level of 100.
England and the other countries that are off the gold basis are discussing revaluation. If England should reduce the weight of gold in a pound about one-third,
she could restore the price level to about 150 if gold prices remain at 100.
3. Instead of revaluing the currency as France has done, Germany is attempting
to avoid the maladjustment due to deflation by revaluing everything except
money. Debts in East Prussia. were reduced 50 per cent. For all Germany,
wages and salaries have been reduced 10 to 15 per cent; interest rates 14 to 25
per cent; rents and freight rates about 10 per cent; and prices fixed by industrial
concerns are lowered 10 per cent. A price dictator has been appointed to complete
the process. These measure are as drastic as the methods used by France but
are more cumbersome.
The world has had innumerable experiences with plans to prevent prices from
rising. But such a writing down in the whole price structure has rarely if ever
been attempted.
4. The use of two or more metals not as alternates, which bimetanism proposes,
but as provided by Marshall's symetallism, is being discussed in England. He
proposed, "that currency should be exchangeable at the mint or issue department,
not for gold, but for gold and silver, at the rate of not £1 for 113 grains of gold,
but £1 for 56½ grains of gold, together with, say, 20 times as many grains of
silver." He .."would make up the gold and silver bars in gramme weights, so
as to be useful for international trade." 6
5. There is some discussion of a proposal to keep all of the gold in a central
.bank and to change the weight which will be given for one unit of money from
time to time, in order to keep the buying power of the monetary unit approxi~
mately constant in terms of all commodities.7
6. If no means is found for restoring prices, the only alternative is to complete
the process of deflation. Much of this can be done in 10 years, and it can be com;.
pleted in a generation. 8 Debt collections, foreclosures, writing down, and writing
off of debts, liquidation of banks and the like will be some of the innumerable
problems. Nothing is gained from minimizing the gravity of such an effort.
F. A. PEARSON
G. F. WARREN.
ADJUSTING AGRICULTURE TO THE PROBABLE PRICE LEVEL
The general commodity price level is the most important problem that con•
fronts the farmer. The ideas that present prices are due to extravagant living;
to the substitution· of gasoline power for horses; to·lack of confidence; to overproduction;9 or to the business cycle are so prevalent that all this long discussion
has been· given to arrive at the simple fact that prices below pre-war are to be
expected if the gold-using world returns to gold basis.
Some recovery from the present extremely low prices is to be expected.
There is a possibility that monetary changes may be made, but the only safe
procedure for the farmer is to anticipate the continuance of prices at or below
pre-war. If some monetary change is made, it will be easy to adjust to the more
favorable situation.
·
If this is true, the chief ways of procedure are:
1. Find ways of producing farm products with less hours of labor.
2. Find ways of reducing cos.ts of distribution.
3. For certain products, increase the quality to meet the new demands for
quality from workers who have a high buying power.
4. Not being able to increase efficiency or reduce distributing charges fast
enough, total food production is being reduced or held about stationary while
population grows. Ultimately, this will result in a period when consumers'
prices of food are high compared with other things.
• Marshall, A., Money, Credit, and Prices, p. 651 1923.
.
7 Such a proposal is applied to the commodity pnce level because all monetary experience has been with
commodity money. This proposes to make all rather than one commodity the standard of value, but keeps
one precious metal as a reserve. If the level of all payments, including wages, were kept stable, It would
mean that commodity prices would constantly fall because wages In terms of commodities rise as efficiency
Increases. A stable level of commodity prices is the.aim.
s If the prices should continue to decline, the adjustment would continue to lag.
• A popular remedy for the present situation In the United States is to attempt to restore prices by reducing production. To reduce production sufficiently to restore the price level of 1929 with the world reestsb•
!!shed on a gold basis would call for a reduction of about 38 per cent below the 1929 level of physical volume
of production. No such calamity can occur. If any group can maintsin monopolistic control of its product
Its prices might be maintained, at the expense of others.
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STABILIZATION OF· COMMODITY PRICES
243
If this diagnosis is correct, the individual farmer should be careful about longtime debts, except for things that are below pre-war prices.
He should not buy land nor work land that does not give a high output per
hour of labor. He should have a business large enough fully to employ all his
time and that of his labor. He must get more bushels of grain and more pounds
of milk per hour of labor. The chief ways of doing this are by obtaining more
milk per cow, more eggs per hen, higher crop yields per acre, and if these high
productions are obtained, by having a larger business, and otherwise by using
labor more efficiently.
Higher crop yields should be obtained by dropping out of use the fields that
do not give high yields. Such fields may be used for pasture or, if very poor,
may be left idle. This often means renting, or buying all or part of an adjoining
farm and working only the best land on both.
In northern Livingston County from 1908 to 1928, the average size of farm
increased from 148 to 166 acres, but the acres of crops remained the same. The
poorer crop land was thrown into pasture. In this way, crop yields were increased.
Those who carried this movement much father than the average did best.
The fields that are used for cultivated crops should be well fertilized and well
cared for. Fertilizers are cheap, but wages are high. More care in using good
seed, attention to disease control, and the like are .essential. Such changes mean
more production per man, but mean fewer men and some reduction in total agricultural production. How much reduction occurs depends on how many acres
a.re thrown out of use or into lower classes of use.
..
Occasionally, as in western Kansas, a region of low yields per acre can be
used because a new machine comes in and makes the output per man high with
low yields. But even in this region, high yields for the region are very important.
The most effective way to obtain more milk per cow and more eggs per hen is
to cull the herds and flocks vigorously and promptly, so that no low producers
are kept.
Those that are kept should be well fed and well cared for. It is to be expected
that on the average for the next ten years, that labor will be higher and feed
will average cheaper than milk and eggs, therefore the best way to save labor is
to keep only good stock.
Farms that depend primarily on hired labor are usually less efficient in. the use
of labor than family farms, but are more efficient in the buying of supplies and
selling products. In a period of deflation, labor becomes a much more important
item in costs. It is, therefore, a particularly unfavorable time for farms that
depend primarily on hired labor.
However, the majority of the farms in New York State are not large enough
fully to employ the present labor when modern machinery and efficient methods
are used. Many farms need more land or more cows, or both. This does not
mean an increase in the total cows. It means fewer farmers and more cows per
man.
Labor may be made more efficient by the greater use of .autos, trucks, tractors,
and other machinery. Labor-saving plans are often more important than machinery. Methods of doing work at the time and in the manner that make an hour
count for the most are of unusual importance. Usually it is necessary to have
yields per acre and per cow above the average before it pays to enlarge the business. The only solution for the person with low yields is. to reduce both his
living and farm expenses.
More bushels of potatoes and pounds of milk are required than· formerly to
hire a man for a day. The farmer's own time is, therefore, valuable. Even if he
hires no labor, he should be no less interested in .efficient use of labor.
Because distributing charges remain high, it is particularly important that
farmers reach nearer to consumers before they sell. On the main highways,
many New York, farmers are going the entire distance by serving the cooked
food to the tourist, or selling at roadside stands. Others truck their products to
city wholesale markets or retail markets. Others sell to truckers who come to
the farm. All these movements will proceed much further. Any tendency to
excessive taxation of trucks will be injurious.
In the past 10 yea.rs, the high distributip.g charges have served as a protection
to farmers in southeastern New York, southern New England, and New Jersey,
so that these regions have had no severe agricultural depression.
Another method of reaching nearer the consumer is through cooperative sE1lling
associations. Th,ese should eliminate unnecessary services, and perform the
necessary services better, or at less cost. They also look after the general welfare
oftheproduct.- .
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In order to get out from under the handicap of selling at wholesale prices which
are low and buying at retail prices which are high, one should buy in quantity and
for cash. The immediate response is, "Where will one get the cash?" But this
takes less cash than to buy small quantities on time. Only rich people can afford
to buy small quantities on time. If credit must be obtained, it means using banks
instead of stores for credit. If legislative provision is made for use of the intermediate credit banks, these can help.
Through cooperative associations in New York, the farmers have greatly
reduced the cost of feed, seed, fertilizers and other farm supplies. These cooperative movements are destined to go much further in the future.
Decade after decade, the percentage of t)le consumer's income that goes
for food is decreased. This enables consumers to demand better quality. The
lag in wages when deflation occurs, makes a special demand for quality. This
may have a little setback in a severe depression, but in a deflation period as a
whole, quality is of special importance. For example, potatoes from some parts
of New York are as good as they used to be, but are not good enough to satisfy
consumers. Many of our apples are not good enough. Our grade A milk is not
good enough. The new price schedule is intended to improve its butterfat.
The consumption of milk, eggs, fruit, and fresh vegetables has not yet reached
the limit. If the whole standard for these is raised, it will result in increased consumption and will benefit farmers and consumers.
In a period of falling prices, the prices of milk, eggs, fresh vegetables, and other
choice products hold up better than prices qf grain and other less desiraple foods.
This was tru11 after the Civil War and has been true for the past 10 years. Fortunately for New York, these are our main products. This fact together with
location is largely responsible for the fact that prices paid to New York farmers
for farm products averaged 78 in December, 1931, while the average prices paid
farmers for all food products in the United States was only 69.
Whatever the price level in the United States may be, New York farmers will
receive relatively higher prices than the average for the United States compared
with pre-war prices for the same products and will further benefit by being producers of the choicer products.
There are some large areas in New York State that can not use labor efficiently.
Many farms in these areas have been abandoned and many more ought to be
abandoned. Fortunately, these farms are generally good forest land and are
needed for forests to protect water supplies, regulate stream flow, provide for
hunting and recreation. It is fortunate that New York State has adopted a policy
of buying and reforesting a million acres of such land.
G. F. WARREN and F. A. PEARSON..
WHY
ARE PRICES
LOW T
In February, 1919, hi~h prices were explained by monetary causes. In February, 1931 1 low prices are explained by monetary causes.
For a number of years, gold was not used by many countries. The lack of
demand reduced its value. Economic relationships were being fairly well adjusted
to a commodity price level of about 150. Recently, the gold-using world attempted
to return to a gold basis. There was only gold enough to sustain pre-war prices
with all countries on a gold basis and normal production of other things. Prices
in England and the United States returned to the pre-war relationship to the
world gold supply in 1931. In August, 1931, prices in England were 96. In
December, 1931, they were 100 in the United States.
Many calls are received for the Extension Service News of February, 1919.
The supply has long since been exhausted. Therefore a few quotations from it
are given below.
The last Government loan was the Victory loan, which was sold April 21 to May
10, 1919. Ninety per cent was sold on credit with payments to be made May 10
to November 11.1 The peak of prices came in May, 1920.
Mr. WHITE. Then I have another one here by Professor Warren,
containing three pages from the discussion he had at Syracuse, N. Y.,
last week, at a milk meeting, in which he spoke of the cost of distribution, due to the rise of value, in which he says that the prices rose
because of the low demand for gold; prices fell because of the high
demand for gold; debts, not wages, the major problem, and so forth;
1
Federal Reserve Bulletins, Vol. V, No. 5, page 417, May 1, 1919.
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STABILIZATION OF COMMODITY PRICES
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and I would like to offer it, because I think it has very valuable
material.
Mr. GOLDSBOROUGH. Without objection, it will be included in ·the
record.
(The matter above referred to is here printed in full as follows:}
{Meeting or representatives of the county emergency milk committees at Syracuse, N. Y., March 16, 19321
THE ECONOMIC SITUATION
By G. F; Warren
I have been asked to present something of the general economic situation. I
will call attention to four points:
1. The general price level.
2. The necessary surplus of milk.
3. The unnece888ry surplus.
4. Unusual cost of distribution due to rise in the value of gold.
Anything peculiar about the dairy industry, about agriculture, or about business
cycles is trivial in importance when compared with the rise and collapse of the
whole price structure, which bas caused chaos in all price relationships. Briefly,
I explain this situation as follows:
PRICES ROSE BECAUSE OF LOW DEMAND FOR GOLD
For half a generation most of the world ceased to use gold as money and ceased
This made gold cheap, just as wheat would be cheap if half of the
wheat-eating countries should cease to use it or to bid for it. Since gold has been
chosen for money, cheap gold means high prices and dear gold means low prices.
For years, England and the United States had a wholesale commodity-price
level of 40 to 50 per cent above pre-war. We were becoming fairly well adjusted
to such a price level.
This price level meant wages of more than double pre-war. The normal
increase in efficiency of labor made wages of more than 200 in adjustment with a
price level of 150. It is a mistake to assume that wages and prices go together.
For centuries, wages have risen as efficiency increases. With the cost of living
at the December index of 146, wages must be double pre-war in order to consume
the product if we are to resume normal production.
The price level of 150 also greatly increased debt-paying power. Public and
private debts in the United States rose to several times pre-war. With the higher
price level and the increased business, these debts were not particularly burdensome.
to bid for it.
PfilCES FELL BECAUSE OF HIGH DEMAND FOR GOLD
From 1925 to 1928 the various countries began to bid for gold in an effort to
reestablish the gold basis for money. Each of them desired high reserves. To
make matters worse, India attempted to shift from silver to gold. France reestablished a gold basis in 1928, but reduced the weight of gold in the franc to one-fifth
of the former amount. This placed her in a strong competitive position in world
markets. She was able to sell goods abroad and get gold. This developed into
a world-wide panic to get gold. We must distinguish between location of gold and
demand for gold. The value of gold is determined by the world supply of it and
world demand for it.
With the small demand for gold in the war period, mining decreased. It is
now increasing, but production is only equal to that of 23 years ago. But world
business is much greater than it was 23 years ago.
There is scarcely gold enough to maintain pre-war prices, with all the countries
that formerly used gold back on a gold basis. But all of them have incurred public
and private debts. Last year, prices in England and the United States fell to
the pre-war relationship to gold; that is, gold is as valuable as it was before the
war, when compared with the average of all commodities. It is still more valuable
in terms of·basic commodities. Instead of exchanging 20 bushels of wheat for an
ounce of gold, the Kansas, Australia, and Argentine farmers found it necessary
to give 80 bushels. At prices paid to New York farmers, twice as much produce
is necessary to get an ounce of gold as was the case for the 10 years ending with
1930. But public and private debts must be paid in gold. The scramble to get
gold became a panic. Before a free-gold basis was generally established, the crash
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STABILIZ~TlON :OF . COMll,1:0D;t'l'Y .l'RICES
came apd over 20 countries gave up the effort to stay on a gold basis. Stnce
"England left the gold basis, the pound still pays a pound of debt (except in foreign
.countries). But it now requires one-fourth less gold to get the pound.
DEBTS, NOT WAGES, THE MAJOR PROBLEM
There are only two· possible· solutions of the present business chaos. Either the
commodity price level m11st rise to and remain at the.level. at which public and
private debts were contracted, or else the endless bankruptcies; of which we have
had a sample, must continue. Puhlic and private debts in 1929 were estimated to
he 56 per cent of the national wealth: The· wealth is primarily based on commodity prices. If the wealth sh,ow.d shrink on.e-third, the d.ebts would become
84 per cent of the wealth, and a large part of them could never be paid. A beginning of, this liquidation has occurred in the last two years. It promises to be
temporarily interrupted, but unless commodity prices can be raised and• k:ept
somewhere near the level at which the debts were incurred; the·liquidation will
have to continue. The debts can not be paid with a dollar that is worth 50 per
cent more than the dollar which was borrowed. It is popularly assumed that the
creditor profits by getting a more valuable dollar, but if the dollar· rises in value
;too much, tp.e ·creditor gets n0thing. ·He may get possession of an unsalable piece
·of property with a tax'bill thrown in for good measure.
·Popular discussion centers .about wages, both public and private. It should
center on debts, both public and private. There is a common opinion that if
wages in the building trades should decline, more building would occur. The
more the wages :drop the less building there will be, so long as the debts are unliquidated... If a house could be built for half the.former cost, the value of all the
houses in America would drop one-half, and nearly every house.on which there is a
_mortgage would have to change hands at a forced sale. In such ·a chaotic condi·tion, prices would drop far below the costs of building. · The more the costs of
:building drop, the more bankrupt properties·win be thrown on the market and
.the less building there will be; If commodity prices can be restored to the level
-to which society is· adjusted, industry would start. It can· not be started by
destroying property. values, any more than you can lead farmers to raise cows
by destroying the value of the cows which they now have.
RISE IN: COMMODITY PRICES ONLY WAY TO RESTORE PROSPERITY
.Since debts are largely based on commodities, either directly or on copper in an
electric line, rails in a railroad, and lumber and steel in a building, the only way
to restore propsperity quickly is to have commodity prices rise. Complete
'liquidation would ultimately restore prosperity, but it would take many years,
with endless -economic and political trouble.
The tempor.iry abandonment of the gold standard by many. countries may
relieve the demand for gold, and cause some rise. But it is probable that most
of these countries will continue to bid for gold. A mild temporary relief from
this source is possible, but genuine permanent relief is not probable. Of course,
.
we can not tell what·monetary laws these countries will pass.
Whenever prices fall, they ultimately go too far, and some recovery is certain
to occur.
· The new credit legislation and proposed change in Federal reserve policy may
help in raising prices .. Many economists think that the price level of 1921-1929
will be restored by credit policy. It may also be said that many of them also
thought that that price level would continue when we had it.
Whatever the temporary price level, I believe that if all the gold-using world
returns to gold, it is likely to have its pre~war value when compared.with other
eommodities. Money would then have its pre-war value except in countries
that reduce the weight of gold in the monetary unit.
Mr. WHITE. Upon the request of Mr. Wallace, who was leaving
Saturday, I wired for Doctor Pearson's and Doctor Warren's history
of prices in the United States. This gives the price levels of the United
States and gives a revised, complete form of bibliography, and also
would make a basis for anyone who desired to go into detail in the
study of these questions ·of the price levels and their causes and
effects .
.Mr. PRALL. I move that it be included.
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Mr. BusB¥~ I second the motion.
Mr. GoLDSBOROtrGH. It has been moved and seconded that the
document just spoken of be included, All in favor say aye; the con·
·
'tracy no. It is so ordered.
· (The matter above referred to is here printed in full as follows:)
THE HISTORY OF PRICES IN THE UNITED STATES
(By George F. Warren and F. A. Pearson, Farm and Home Week, February 19,
..
1932, Friday, 12 m.)
·
Prices of commodities, fluctuate 'from year .to year, ni~nth to month day to
.day, and hour to hour. The fluctuations in prices are so difficult to follo.w t.llat
.it.is almost impossible for the human mind to grasp their significance whH,e.they
.are taking pl~ce. It is frequently difficult to explain the changes even.~fter ~hey
have occurred. These fluctuations cause µiore hap_piness, suffering, -and rmsery
than any other phenomena with which we desL ,Variations in prices cause tarreaching changes iri human relationships. The pl:'oportion of the,good things of
life that go to thrifty old people who have saved, to the farmer, to the railroad
worker arid to the teacher, are changed whenever. the general price level risea. or
falls. 1f prices rise or· fall, wealth is transferred from one group to another.
Falling prices transfer more wealth from debtor countries to creditor countries
;than was originally foreseen. Falling prices transfer more wealth from the
,indebted farmer to the creditor than was anticipated at the time of the loan,
When prices rise, industry is stimulated. Those who borrow money to buy
for sale on a later market prosper. The government that is in debt finds it easy
to pay because taxes that may be high in dollars are low in goods and are easily
paid. Those who live on fixed incomes and salaries suffer; wages lag; strikes are
numerous; city laborers are radical; and labor legislation is popular.
When prices fall, most of these things are reversed. Buying is checked; unemployment occurs; taxes are a heavy burden; borrowers suffer; farmers expenence hard times and are discontented. Agricultural legislation is demanded •
.The production of goods is curtailed and the nation grows poorer.
.· If changes in prices are slow and gradual, adjustments are made with less
:friction. Violent changes, such as are now occurring, cause so many injustices
that man is arrayed against man, class against class, and nation against nation.
The fluctuations in the general price level play an important r6le in the history
of a people. In our colonial history, prices were closely allied with the monetary, political, and economic events of that time. In every new agricultural
country money and capital are scarce. A new country wants more money,
not in itself, but for the thmgs it will command. Money will buy plows, wagons,
clothing, medical supplies, guns, powder, and many other things thet are sorely
needed in a new country.
The colonies had numerous experiences with paper money. Some were fairly
successful, but most of them were a failure. An old country like England wants
a stable price structure or even a declining price level as they think they gain as
creditors. The new country wants rising prices because it is then easy_ to pay
their obligations.
The Revolutionary War was not due to the Boston Tea Party but was ·_more
largely due to the act of Parliament which forbade the· Colonies to print paper
money.
During the Revolutionary War, prices rose very high due to the printing of
paper money-the continental notes-and to-day we have the old expression,
''things are not worth a continental." Following the Revolutionary War, we
find experiences similar to those following the Civil War and the World War.
Immediately following declaration of peace, extravagance and luxury prevailed
among all classes throughout the States. State and continental paper money
was plentiful. The English merchants who were anxious to sell goods and had
accumulated stocks during the war extended credits to facilitate sales. The
foreign.goods found.a ready market as the people had been deprived of them for
almost 10 years. Although they had no money, they purchased the goods with
little thought of how to pay for them. The apparent prosperity, however, did
not last long as the English creditors called for payment. The distress was wide11pread. Goods were offered for sale but would not bring fair prices because of
the scarcity of money. Land that was sold for debts brought practically nothing.
Prudent men did not_consider it:safe to lend money at the rates then prevailing-25
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STABILIZATION OF COMMODITY PRICES
to 30 per cent. Everywhere the papers were filled with notices of insolvencies.
In one county of Maryland, the populace forced the auspeneion of all civil suits
and in another the people would not allow anyone to bid on land offered at sheriff
sales.I In Rhode Island; a paper-money party was formed. In Massachusetts,
the discontent was expressed by Shay's Rebellion, which was a farmers' revolt
agaimt deflation. Farmers had borrowed money at high prices with an inflated
paper currency, and it was impossible for them to meet their _ol>lig/;\tions .after
pJ;ices dropped. Although the rebellion wl\s put dciwti, the·State :recognized the
injustice and legalized a moratorium for debtors. 2
In October, 1797, the first year for which data are available, prices were 124
when 1910-1914=100. Prices were at about the same level as they were in
July, 1930, 133 years later.
The first United States bank was established in 1792. Webster described the
results as follows: "He was made Secretary of the Treasury; and how he fulfilled
the duties, at such a time, the whole Nation received with delight, and the whole
world saw with admiration. He smote the rock of natural resources, and abundant streams of revenue gushed forth. He touched the dead corpse of public
credit, and it sprang to its feet."• He might have added that prices rose rapidly.
The highest prices of this period occurred from 1797 to 1801. Just prior to this
time, the United States was not a large exporter, but with the Napoleonic Wars
there was a strong demand for goods and much of the carrying trade fell into our
hands. The country was highly prosperous. Due to the various embargoes
and other war measures, prices were very erratic. In 1801-02 prices declined
from 148 to 111. Domestic goods, as well as imported goods, declined. At this
time, Great Britain a1,1d the rest of Europe were at peace, crops were good, agricultural prices declined, shipping was depressed.
France and Great Britain resumed hostilities and American products were in
demand. From 1803 to 1806, prices rose from 113 to 137. American merchants
and carriers of freight prospered until Jefferson laid the embargo on all ships in
American ports.'
In 1806, England issued a proclamation blockading all the ports from southern
France to northern Germany. Napoleon retaliated with the Berlin decree
which declared the British Isles in a state of blockade. These and various other
measures made it difficult for us to reach European markets and prices in the
United States were erratic and declined. In 1807, the United States passed the
embargo act, forbidding American vessels to depart for any foreign port or
foreign vessels to load in American ports. This act was disastrous to American
trade, and prices fell from an index of 137 to 112. A few years later, a less restrictive measure, the nonintercourse act, was substituted, and prices rose.
WAR OF 1812
The charter of the first United States bank expired in 1811, and was not renewed
because of the opposition of the State banks. The bank was dissolved and
$7,000,000 of the $10,000,000 was remitted to British capitalists.' The people
got what they wanted-cheap money. In 1811, there were 88 State banks and
in 1813 there were 208. During 1813-14, Pennsylvania alone chartered 41
banks. 6.
•
The War of 1812 was financed largely by loans. The State banks purchased the
United States notes and issued their own paper money payable on demand.
The bank note circulation increased from $45,000,000 in 1812 to $100,000,000
in 1817,7 which is almost the same percentage increase as occurred in bank
deposits in the World War; and prices rose from an index of 126 to 182. Specie
payment was suspended except in New England. The war was not popular
in New England, as it interfered with their shipping. New England banks
refused to lend to the Government as the Government refused to guarantee the
interest on the money it borrowed and made no effort· to collect taxes to meet
these monetary interest charges. The financing of the War of 1812 fell heavily
on the banks of the Middle Atlantic States. The Treasury levied against the
resources of the Middle Atlantic banks to.obtain funds. For this reason, specie
1 Behren11, K. H., Paper Money in Maryland. Johns Hopkins University Studies in Hlstorfeal and
Political Science, Series 41, No. 1, p. 78-9. 1923.
• Hickernell, W. F., Financial and Business Foreeastmg, p. 106. 1928.
I Kinley D., The Independent Treasury of the Unlted·States; p. 3. 1893.
• Smith, W. B., Wholesale Commodity Prices in the United States, 1796-1824, The Review of Economto
Statistics, vol. 9, No. 41 p. 176. October, 1927.
• Gallatin, A.tSJonsiaeratlons on the Currency and Banking Systems in the United States, p. «, 1831,
• Hickernell, w. F ., Financial and Business Forecasting, vol; 1, p. 143. 1928.
r Dewey, D. R., Financial History of the United States, 8th ed., p. 144. 1920.
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249
moved from Middle Atlantic States to New England. The South could not
export cotton due to blockade by the British Navy, and shipped gold to New
England to pay for merchandise much the same as gold moved to the United
States during the World War. However, thE. specie movement reached a peak in
1814 and specie moved out of New England. Prices declined from an index of
182 in 1814 to 151 in 1816.
The chaos which inevitably followed recalled the valuable services rendered
by the first bank of the United States, and political antagonism melted away.
THE SECOND BANK OF THE UNITED STATES
The second bank of the United States was formed in 1816 and in the next two
years expanded rapidly. Specie payment was resumed in 1817. The bank.
expanded too rapidly, became alarmed, and contracted its currency. This
precipitated the crisis of 1818. The currency was reduced from $8,300,000 in
1818 to $3,600,000 two years later, and prices dropped from an index of 151 in
October, 1818; to 100 in December, 1820. According to Gouge, "The bank was
saved and the people were ruined." 8 After another war, a century later, prices
declined almost exactly the same amount. From the prosperity of 1929 to
December, 1931, prices fell from about 150 to exactly 100.
Wheat sold as low as 20 cents a bushel in Kentucky. A man in West Virginia
who formerly purchased a year's subscription to Niles Register with a barrel of
flour stopped his subscription because four barrels were required. It is also
recorded that at Pittsburg, flour was $1 per barrel; boards, $2 per thousand;
sheep, $1 per head, but imported goods remained at the old price level.9 This
agrees in principle with the agricultural panic 100 years later, when, as is well
known to all farmers, agricultural products are now very cheap, but prices of
the things farmers buy has dropped slowly. The only difference was that in
1820 the manufactured goods were imported, while. in 1929 they were made
largely in the United States.
The results of this wild inflation and deflation and mismanagement of a central
bank are evidenced in the agriculture of the time. In Lancaster County, Pa.,
land rose from $85 to $275 and then dropped to $65. In Cumberland County
land rose from $50 to $175 per acre and then dropped to $35. 10
Prosperity of the period continued in the western· country until the middle of
1818. Huntington 11 calls it "The golden age of th~ western country," and in the
words of Gouge, "Silver could hardly have been more plentiful at Jerusalem in
the days of Solomon than paper money was in Ohio, Kentucky, and the adjoining
regions." 11 Large quantities of goods were brought into the country, and with
the collapse, the specie moved east to pay for these goods. Prices fell and the
paper currencies depreciated. This is well illustrated by the depreciation of
Ohio banks 11 in February, 1822.
Bank of Steubenville, par; Lancaster Bank, 1; Western Reserve,2; Columbus,
2; Portsmouth, 15; Hamilton, 31-35; West Union, 4;0; New Lisbon, 50; Cleveland,
75.
One writer comments on the decline in prices at Steubenville, Ohio, where at a
marshal's sale an elegant sideboard gig and a very valuable horse sold for $4,
and concludes with the comment that a man with a little money could make a
fortune attending marshal's and sheriff's sales. 14
In March, 1822, the Dayton prices were: Flour $2.50 per barrel; whiskey 12}~
cents per gallon; wheat 20 cents, rye 25 cents, and corn 12 cents per bushel; fresh
beef 1 to 3 cents per pound, butter 6 to 8 cents per p_ound; eggs 3 to 5 cents per
dozen; and chickens 50 to 75 cents per dozen. 16
Following this panic, the second Bank of the United States was on a sound
basis, and for a decade was fully established in the confidence of the people.
Prices were stable for a decade at about the 1914 level.
1 Gouge, W. M;.i A Short History of Paper Money and Banking In the United States, Pt. II, p.
1 Smnner, W. u., History of American Currency, p. 82.
1874.
10 Gouge, W. M., Short History of Paper Money and Banking in the United States, Pt. II, p,
110. 1833.
122. 1833.
u Huntington, C. C.,A HistoryofBankingandCurrencyln Ohio Before the Civil War, OhioArchlllOlogical and Historical Publication, vol. 24, p. 285. 1915.
11 Gouge's Journal or Banking, p. 320, Mar. 30, 1842.
11 Htmtlngton, C. C., A History or Banking and Currency In Ohio Before the Civil War. Ohio Archeological and Historical Publication vol, 24, pp. 333--345. 1915.
u Western Herald and Steubenv!ile Gazette, August 10, 1820, cited from Huntington, C. c .. A History
of Banking and Currency In Ohio Before the Civil War. Ohio Archaeological and Historical Publication..
vol. 24, p. 298. 1915.
u Ohio Archaeological and Historical Publications,. vol. 24, p. 298. 1915.
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PANIC OF 1834
Andrew Jackson was raised in Tennessee and had seen the struggle of the
farmers developing a new country under very adverse conditions. He felt that
the Bank of the United States should help the farmers as it had helped the business
men. He insisted that the bank should loan to agriculture as well as to trade.
What he really wanted was a Federal land bank system. The bank had been sosuccessful that it was not expedient to attack the financial policies so he attacked
the social policies.
Jackson was a persistent enemy of the second Bank of the United States.
He ordered that the public funds be deposited in certain specified State banks
known as "Jackson's pets." This so unsettled the money market that the
bank contracted its loans and currency from $66,000,000 to $52,000,000, and
prices declined from 102 to 88.
At this time, the country was on a bimetallic basis, but silver was the common
coin. By the coinage act of June 24, 1834, the ratio was changed from 15 to 1
to 16 to 1, and the gold coins were reduced form 247.5 grains of fine gold to 232:
grains.1 6 Thus the gold coins were debased 6.26 per cent. This act definitely
·shifted the United States to a single gold standard. After 1840, American silverdollars were seldon seen, because they were worth more than gold.
PANIC OF 1837
It was well known that the charter of the second bank of the United States
would not be renewed. It expired in 1836 and resulted in the establishment of
many State banks. From 1834 to 1937, the money in circulation increased 50
per cent, and prices rose from an index of 88 to 129. These index numbers are
based on prices at New York City where wild banking was not so prevale_nt. In
the West and South, the rise was much greater. Uncontrolled banking was
substituted for conservative banking. Banks were located in the depths of the
forest where there were few people and plenty of wild cats, and were known as.
wild-cat banks.
The following quotation is typical of conditions in Michigan:
"~N ALADDIN'S PALACE
"Apropos to the plan of establishing banks at inaccessible places is the incident.
related by a gentleman if this city, who, in wild-cat days, was traveling through
the woods of Shiawassee County. The country was very new, with only here and
there a log cabin in the woods, surrounded by a little clearing. The road had
never been worked, and was principally indicated by 'blazed' trees. Toward
night of an early June day he came upon a fork in the road, and was uncertain
which track to take. He had not gone far upon the one which he had choosn
before he became satisfied that it was only a wood road-that is, it had been
used for hauling out wood or lumber. * * * He had not proceeded far, when
in a little clearing before him there loomed up a large frame structure, across the
front of which was the conspicuous sign, 'Bank of Shiawassee.' It was one of
the wild cats quartered in the native haunts of that animal, the depths of the,
forest." 17
This was a period of rapii:l expansion. In the preceding quarter of a century
the finances of the country were on a sound basis, and the foreigners loaned us
large amounts of c~pital. From 1830 to 1837 our imports of merchandise·
exceeded our exports, which indicates that foreigners invested large amounts.
This tended to easy credit and expansion. Foreigners invested in our railroad,
State, and municipal bonds. It was a period of interior improvements and
expansion of business, agriculture, waterways, turnpikes, and railroads.
This resulted in reckless expenditures in farm land, city lots, cotton, grain,,
slaves, railroads, canals, and public improvements. The specluation culminated
in the panic of 1837. In May, 1837, the banks suspended specie payment.
Wholesale prices declined from an index of 129 to 99 three years later. The·
decline was about the same as occurred from May, 1930, to January, 1932.
l'he Federal expenditures doubled in a year, and the Treasury was confronted
with a $12,000,000 deficit. States and municipalities were bankrupt, and many
States repudiated their debts. We are frequently reminded of these debts by
the English.
11 Laughlln 1 J.
17
L., Money, Credit, and Prices, vol. 1, p. 236., 1931.
Report 01 the Pioneer Society of the State of Michigan, vol. 6, p. 217. 1884.
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The years 1834 to 1836 were memorable ones; emigrants poured into the Middle West; money was plentiful. Land was purchased from the Government at
$12 per acre and plotted in t:iwn lots which sold for $20 per lot. Chicago was
the center of the land craze. Salesmen went back to New York and Boston.
to sell lots in imaginary cities. Water-front lots in Chicago, with 4,000 people,
sold _for $7,000. Land in Maine that sold for 25 cents per acre seven years.
previous now sold for $12. Land on Long Island brought $1,000 per acre.
Grain was high priced on the Atlantic seaboard, and some was imported from
Europe. It was unfortunate that grain should be imported from Europe when
the Middle Western States could produce much more than was needed and price3
were ridiculously low. 18 It took little imagination to prove that transportation
was necessary. Borrow money and build canals, as they would pay for themselves, was the popular cry. The Erie Canal had been producing $1,000,000
in revenue. New York State was in the midst of vast internal development.
Trade diminished and to1.ls fell off, and in 1838 the legislature authorized a loan
of $4,000,000 for further expansion. The plan was to borrow as long as tolls
met the interest, with no provision for paying off the principal. In 1833 the6 per cent stock of the State commanded a premium of 20 per cent, and in 1841
it sold at a discount of 22 per cent.
In 1837, Massachusetts issued State bonds to finance railroads to bringMassachusetss in touch with western commerce.
Maryland was involved in extensive internal improvements involving th1::Chesapeake & Ohio Canal Co. and the Baltimore & Ohio Railroad. In 1842:
State script was down to 50 cents on the dollar. 20
In South Carolina, tangible and active property depreciated 50 per cent, land
even more, and city lots scarcely sold for the cost of improvement. Diversifica-.
tion of crops was the proposal to relieve the situation.1 9
As early as the fall of 1836, Mississippi land speculators complained of theshortage of money. The credit of the South had been overrated and now it
was underrated. Negroes that formerly commanded $1,200 to $1,500 each weresold for $200 to $250 cash. In 1836, a i,mall planter bought 22 slaves for $3,200 ..
In 1837, he sold 3 of the best men for $850 to buy pork and corn to feed theremaining 19. The common complaint was that the farmers placed too much.
reliance on a single crop and bought everything else. This is not an unfamiliar·
note.
In 1836, it was estimated that Louisiana would soon have 900 miles of railroad.
and 60 miles of canal under State supervision.
The panic came somewhat later in the Central West. By 1839, however, farmprices declined, money was scarce. Much of the indebtedness in Illinois to.
eastern merchants was liquidated in produce. Notes were drawn payable in
corn, horses, or other farm products. Interest rates ranged from 10 to 50 per
cent. Wisconsin was flooded with spurious paper money. By 1841 it is estimated.
that one-third of the banks of Ohio had failed and riots occurred. Wisconsin,.
Tennessee, Kentucky, Indiana, and Michigan had similar experiences. 21
In 1835-36, the Indiana Legislature authorized the construction of more than.
1,200 miles of canals, two long railroads, and many miles of macadamized road.
Illinois planned no less than nine railroads- and 1,300 miles of canals crisscrossing·
the State and the improvement of five rivers. Michigan was the most enthu-.
siastic. With 100,000 persons, the State bonded themselves for three railroads
and several canals.
With the panic of 1837, all the States were in difficulty. Michigan repudiated·
her debts. Indians compromised with her creditors, forcing them to take less
than was due. Illinois had a wise governor who stopped all improvements,.
raised taxes, and protected the State's credit. Penns;rlvania bonds fell below
par and in 1840 the State defaulted on the payment of mterest. 22
The deflation produced its usual effects which are now so apparent. Prices
of food at interior points fell much more than at large centers. Indian meal per
barrel of 196 pounds on western waters was worth $1 per barrel and at New York
City $3.19.21 ·
•
Harlow, A. F., Old Towpaths, 1926, p. 109.
McGrane, R. c;, The Panic of 1837, p. 104. 1924.
McGrane, R. C., The Panic of 1837, pp. 113-114. 19:U.
11 McGrane, R. C., The Panic of 1937, pp. 12, 32, 33, 34, 127, and 130. 1924.
"Harlow, A. F., Old Towpaths, pp. 107-116. 1926.
11 Ellsworth, H. L., Report of Commissioner of Patents, February 15, 1842. See Hazard's United State1t,.
Commercial and Statistical Register, vol. 6, p. 155. March, 1842.
11
11
JI
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Down in Kentucky, the legislature recognized the impossibility of farmers
paying their obligations and "stay laws" were passed giving debtors two years
to pay.24
·
Mark Twain's Autobiography, page 9, records that about 1845, at Florida,
Mo." Everything was cheap, apples, peaches, sweet potatoes, Irish potatoes, and
corn, 10 cents a bushel; chickens, 10 cents apiece; butter, 6 cents a pound; eg~,
3 cents a dozen; coffee and sugar, 5 cents a pound; whisky, 10 cents a gallon."
The credit of a nation is an extremely fickle thing. From 1834 to 1838, the
United States imported over $28,000,000 more goods than we exported. For the
five years, 1839 to 1843, our imports and exports practically balanced. The
Nation could not borrow and paid for all the imports with exports instead of
credit and exports. The crash came during Jackson's administration, and he
was replaced by Van Buren.
PRICES IN THE FORTIES AND FIFTIES
During the forties, prices were very low, about 20 to 25 per cent lower than
those prevailing at the present time. The Mexican War caused a slight rise
in 1846-47.
The low level and declining prices accentuated the margin between prices in
producing and consuming centers. In the fall of 1841 wheat was worth 70 cents
per bushel at Detroit and $1.33 at New York City; oats 20 and 49 cents; corn 30
and 69 cents; and hay $5 and $20 per ton. 25
Prices of agricultural products rose rapidly from 1844 to 1847. The disastrous
rains in Europe in 1845, accompanied by the Irish famine, 26 and the reduction
in import duties by the repeal of the corn laws, caused an advance of 67 per eent
in farm prices. In the words of Morley, it "rained away the corn laws."
Deficient crops and the failure of the potato crop in 1846 resulted in the socalled Irish potato famine. There was a remarkable increase in our exports of
breadstuffs, which rose from $7,445,000 in 1845 to $53,262,000 in 1847.27 There
was a general advance in prices of farm products and the large exports at high
prices resulted in an inflow of money.
The period from 1846 to 1857 was one of great prosperity in the United States.
Immigrants arrived in increasing numbers. In 1845 the immigrants coming to
the United States numbered 114,000 and in 1847, 225,000. 28 '.fhe Subtreasury
system was established in 1846. Gold was discovered in California. There was
an extensive expansion of railroad construction in the West. The general level
of prices rose steadily from an index of 73 in 1843 to 115 in 1857, with but one
reaction, 1847-1849. Europeans were eager to loan funds to American industries.
This was one of the golden eras in American history. Early writers and travelers who were usually from the better-educated and leisure classes of Europe did
not always understand but always commented on the passion for work, the
ingenuity in mechani<lal inventions, the resourcefulness of business,29 and the
prosperity of the country. There was a rapid expansion of railroad construction.
Railroad stocks and bonds were issued in excess of the amount that could be
absorbed as permanent investment. These accumulated in the hands of the
banks and left them with insufficient resources to provide for ordinary business.
Railroad construction rose from• 1,654 miles in 1855 to 3,642 miles in 1856.30
Interest rates rose to 15 per cent for the best paper and to 24 per cent for secondgrade paper. The banks had loaned heavily to finance railroads and. business
The crash came early in 1857. The average price ot' 10 western railroad stocks fell
from 84 in October, 1856, to 33 in October, 1857.31 Wholesale prices declined from
115 to 92. In the attempt to reduce loans and accumulate gold, the banks forced
customers who had borrowed on railroad stocks to sell out at severe losses. In
the fall, most of the banks suspended specie payment. Many railroad3 went into
M Hickernell, W. F., Financial and Business Forecasting, I?· 158. 1928.
"Hazzard's United States Commercial and Statistical Register, Vol. VI, No. 12, p. 177, Mar. 23, 1842.
" Cole, A. H., Wholesale Prises in the United States, 1843-1R62, The Review of Economic Statistics,
vol. 11, No. 1, p. 35. February, 1929.
"Bullock, C. J., Williams, J. H., and Tucker, R. s., The Balance of Trade of the United States. The
Review of Economic Statistics, vol. 1, No. 3, p. 220. July, 1919.
"Dewey, D.R., Financial History of the United Stat.es, p. 257. 1922.
"Recent Economic Changes-In the United States, National Bureau of Economic Researoh,.vol. 1, p. 7.
1929.
11 Hickernell, W. F., Financial and 'Business Forecasting, vol 1, p. 253.
1928.
.
11 Cole, A.H., and Frickey, E., the Cours11 of Stock Prices, 1825-1866. The Review of Economic Statistics, Vol. 10, No. 3, p. 129. August 1928.
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bankruptcy.32 In the interior, bills of remittance to points on the Atlantic coast
commanded a premium of 10 per cent. 33
CIVIL WAR
During the Civil War, prices rose rapidly. In the latter part of 1861, specie
payment was suspended and Congre3s issued large quantities of legal-tender
notes. This was the beginning of the greenbacks which.played such an important
r6le in the political and price history following the Civil War. The increasing
amounts of currency were accompanied by advancing prices and a depression in
the value of the greenbacks. In July, 1864, it took $2.58 in greenbacks to buy
one gold dollar or a greenback was worth 39 cents in gold. The price of greenbacks fluctuated with the fortunes of war, but usually depreciated in advance of the
rises in commodity prices. Prices rose from an index of 90 to 225 in September,
1864. After the war, expanding business and declining prices played such an
important r61e, that paper currency was the paramount question. Late in 1865,
with but six dissenting votes, the House of Representatives passed a resolution
approving the contraction of the currency as early as possible in order to resume
specie payment. Apparently the people were not so unanimously agreed as the
legislators at Washington. They, however, soon had their ear to the ground, and
the greenbacks were the center of controversy for the next 15 years. Various
methods were proposed. One group suggested a speedy return to specie payment.
According to the New York Tribune, "The way to resume was to resume."
Eastern bankers advised the accumulation of gold to raise the value of greenbacks
to a gold standard. David A. Wells suggested the "cremation process." This
involved drawing in a few greenbacks each week and destroying them. Another
suggestion was to redeem them in gold at say 90 per cent of the face value. Still
others suggested a do-nothing policy and that resumption would take place by
"growing up to specie payment."
There was another important group which was destined to develop into a
powerful institution. This group was opposed to contraction and advocated
expansion of the currency. This group grew by leaps and bounds and in a few
years was consolidated into the Greenback Party.u
By the funding act of 1866, a slight contraction of the currency resulted, 81
but the discontent of the farmers in the West where the farms were heavily
mortgaged, made it increasingly difficult to continue the contraction, and in
1868 Congress passed measures condemning contraction and suspending further
contraction.
DECLINING PRICES FOLLOWING CIVIL WAR
From September, 1864, prices declined from an index of 225 to 174 two years
later. This was quite similar to the collapse in 1920-21 but was less severe.
After this collapse, prices declined somewhat and were relatively stable.
A large volume of bonds was sold to finance the Civil War. The interest on
some of the bond issues was payable in gold, and in other cases no mention was
made of the method of interest payment. At first, the discussions centered around
the principle of justice to the bondholder and the credit position of the Government. Although this was the position of the Government, the sentiment in
the Middle West was quite different. The greenbacks of the farmer, la.borer,
merchant, and soldier, were good enough for the bondholder. It was contended
that the bondholder should accept the "lawful money" which in reality meant
greenbacks. This was known as the "Ohio idea." a5
It was a period of very rapid expansion in railroads, industry, and agriculture,
which was very similar although not so great as that which occurred from 1924
to 1929.
11 Important railroads expanding into undeveloped sections of the west which :went Into bankruptcy were
the ID!nois Central, New York and Erle, and Michigan Central. Dewey, D. R., Financial History of the
United States, p. 263. 1922.
aa Hunt's Merchant's Magazine, Vol. 37, p. 582.
"Dewey, D. R., Financial History of the United States, pp. 336-338. 1922.
aa During the two years of contraction, $44,000,000 In greenbacks was withdrawn from circulation. Dewey
D. R., Financial History of the United States, pp. 343--344. 1922.
,. The Democratic Party and the Republican Pal\tY championed it. Grant, the Republican candidate,
was elected and declared that the national honor must be protected, and that every dollar of Government
indebtedness should be paid in gold.
111442--32-PTl--17
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The effect of postwar economic changes is well put by McCulloch, Secretary of
the Treasury in 1865.87 "* * * Steamboats are crowded with passengers,
and hotels with guests; that cities are overflowing, rents and the prices of necessaries of life as well as luxuries are daily advancing * * * There is no fact
more manifest than that the plethora of paper money is not only undermining
the morals of the people but encouraging waste and extravagance."
In 1866, prices and wages were high; labor scarce; speculation was rampant;
there was a housing shortage; interest rates were high; business was good; foreign
trade was active; and there was a large physical volume of production. In fact,
the conditions were more or less similar to those prevailing after the World War.
PANIC OF 1873
The physical volume of production in the latter part of 1872 and early in 1873
was very high. Coal production, railroad construction, and the iron and steel
industry were very active. Railroad expansion was more rapid than the sale
of bonds to finance them at the time of the panic. There was a large mileage
"connecting nothing in particular." 38 Capital was sunk in railroads and
industry far be~ond immediate needs. Agriculture was expanding in the West
and in the South. In the four years, 1869-1872, more than 25,000 miles of railroad were laid down.
The country borrowed more than $1,500,000,000 in Europe for which there
was an annual interest charge of about $80,000,000. 39 In the fall of 1873, about
crop-moving time, when credit tightened, a severe panic swept over the country,
which was the beginning of a long period of financial and industrial depression.
In 1873 an inflation measure was introduced and passed both Houses, but was
quickly vetoed by Grant. 40
The change in our foreign-trade situation was very sudden. Imports decreased
and exports increased. In 1873, the United States imported $120,000,000 more
merchandise than was exported. In 1874, the exports exceeded the imports
by $9,000,000.
.
TABLE
!.-Exports and import8 of merchandi8e from and into the United States,
1873-74 I
Merchandise
Balance
Exports
1873____________________________________________________
1874. ______________ .----------------- .------- . _________
1 Annual
$522, 4.79, 922
ssa, 283, ~o
Imports
$642,136,210
567,406,342
-$119, 656,288
+sis, 876, 6_98
review of the F_oreign Commerce of the United States, Department of Commerce and Labor
p. 121. 1905.
FALLING PRICES, 1873-1896
Wholesale prices in currency declined from an index of 139 in 1873 to 66 iq
1896, or 53 per cent. The cause of the decline in prices was a subj!a)ct of prolonged controversy but was due primarily to the fact that the production of gold;
which declined from $130,000,000 in 1870 to $111,000,000 41 20 years later, was
not sufficient for our expanding business.
RESUMPTION OF SPECIE PAYMENT
The opposition to the resumption of specie payment came from the agricultural States of the South and West. The resumption of specie payment was
decreed by .the act of 1875. Western representatives demanded the repeal of the
act and several bills were introduced but none passed. During the campaign
of 1876 the inflationist group broke away from the two parties and formed the
17 McCulloch H., Report of the United States Special Commissioner of Revenue, 1869. Cited from
Persons, W. M., Tuttle, E., and Frickey, E., Busmess and Financial Conditions Following the Civil
War ln the United States, The Review of Economic Statistics, vol. 2, Supplement, p. 6. 1920.
11 Sprague, 0. M. W., History of Crises under the National Banking System, p. 1, 2. 1910. Harvard
sup. lff.
11 Dewey, D. R., Financial History of the United States, p. 371. 1922.
"Hepburn, A. B., The History of Currency in the United States, v. 273. 1924.
•1 Eddie, L. D., Money, Bank Credit, and Prices, p. 230, 1928.
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Greenback Party which polled 81,740 votes in 1876; more than 1,000,000 in
1878, 308,578 in 1880, and only 175,370 in 1884.'2 After a great deal of controversy, the resumption of specie payment began in 1879. The inflationist group
lost this contest, but they stopped once and for all further contraction of the
greenbacks.
THE SILVER ISSUE
The paper money issue was hardly settled before the silver issue became prominent. The adoption of the gold standard and the demonetization of silver in
Germany in 1871 and limitation of coinage of silver by countries of the Latin
Union in 1874 and the large increase in silver production in the United States
resulted in a decline in the price of silver. With commodity prices falling and
gold production declining, a powerful faction developed which demanded money
in the form of silver, and passed over the President's veto the Bland-Allison Act
which required that the Treasury buy at least $24,000,000 of silver per year.
The greenback movement gave way to agitation for the unlimited coinage of
silver, and the crusade for the free coinage of silver i;nonopolized the attention of
Congress.
By the Sherman Act of 1890 Congress authorized the issue of an indefinite
amount of legal-tender notes in order to purchase silver bullion. As the notes
were redeemed in gold or silver, the Government was required to keep greenbacks, Treasury notes, and silver at a par with gold. One of the worst droughts
that the United States ever had occurred in 1890. Instead of paying the interest
on our debts with wheat and food products, we exported gold. Our financial
policy shook the confidence of Europe, hastened the outflow of gold, and contributed to the panic of 1893. The Government ceased to purchase silver and
the price fell from 82 to 67 cents in three days and 573 banks closed their doors.
During this period the Boy Orator of the La Platte was campaigning for the
free coinage of silver at the ratio of 16 to 1. On this issue Bryan led the Democratic Party to defeat in 1896.
THE PERIOD OF THE HIGH COST OF LIVING
The discoveries of gold in Australia, Cripple Creek, Klondike, and the expansion of production in South Africa by the invention of the cyanide process, which
enabled gold producers to work poorer ores and rework the refuse that had
accumulated in previous years, made gold more plentiful. Prices rose rapidly.
Prior to this time, there had been a rapid expansion in the agricultural production of the West. Prices of food had been low and stimulated the rapid expansion
of city industries.
During this period we had a continual excess of exports. These large expor1;s
were due to the large cumulative debt owed .by debtors in the United States to
European investors. Previous to this time we had paid our interest in t}J.e form
of wheat, food, cotton, and other raw materials. This period marks the end of
the great expansion in our agricultural exports and the beginning of a rapid
increase in manufactured goods. Up to this 'time no one had disputed the right
of Europe to produce most of the world's manufactured goods. In 1892 manu~
facturers represented only 18 per cent of our exports, but by- 1900 were 35 per
cent. This rapid expansion resulted in considerable agitation in Europe against
the so-called American invasion.
Food prices rose faster than other commodities and wages, and "the high cost
of living," a phrase which was supposed to have been coined by Davenport,
became a very serious problem. Agriculture was prosperous. Farm mortgage!?
were easy to pay.
THE WORLD WAR PERIOD
As is well known to this group, the warring countries bought large quantities
of food and manufactured commodities in all neutral countries. They paid for
these goods by returning stocks and bonds, by shipping gold, and by borrowing
from American investors. 'This, of course, resulted in a rise in commodity prices.
The World War produced more and greater changes in the economic and financial structure of the world than any other event for which we have record.
The foreign investors sold about $2,000,000,000 of American securities. Th&
United States accumulated an enormous amount of gold. Private loans floated
in the United States were over $2,000,000,000. Suddenly the United States
changed from the world's greatest borrower to the world's greatest lender.
•t Dewey, D. R., Financial History of the United States, p. 381.
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After the United States entered the war, we loaned a few paltry billions to the
allied governments---over which we are now quarreling, and we will continue to
do so for a generation.
This was a period of agricultural prosperity, and because of the lagging wages
there was much labor unrest and disturbance. Labor legislation had its day.
The net result was that prices rose to an index of 201 in August, 1918, when
pre-war is 100.
POSTWAR INFLATION AND DEFLATION
From April 21 to May 10, 1919, the victory loan was floated. Ninety per cent
of the bonds were sold on credit. This resulted in the postwar inflation, and prices
rose to an index of 244 in May, 1920.
On May 17,.1920, the United States Senate passed a resolution requiring the
Federal Reserve Board "to advise the Senate what steps it proposed to take or
recommend to meet the existing inflation of the currency and credits and consequent high prices." 43 It was not long before trouble started.
Beginning in May, 1920, prices which were 244 per cent of pre-war started to
decline and did not stop until prices reached 136 in June, 1921. This was the
beginning of the agricultural depression, of which the end is not yet in sight.
Tens of thousands of young men returned from France married, went in debt,
and started farming. Many are ·now paying interest on a debt that it is impossible
for them to liquidate.
The agricultural situation is best portrayed by a letter addressed to Secretary
of Agriculture H. C. Wallace from ~n old farmer in the Southwest. It reads as
follows: 44
"Our neighbor joining us on the east, a hard-working mail, had rented 320
acres of land. He and his wife and one hired man farmed it. They had about
100 head of cattle and about the same number of hogs. The 1st of December
they turned everything over to the landlord, save one team which they hitched
to an old wagon, put in their household goods, got in the wagon themselves, and
drove away to town to get work at day labor and make a new start in life."
THE PERIOD 1923-1920
The rapid expansion in the production and prosperity of the country from
1923 to 1929 was due primarily to a world-wide shortage of permanent equipment in the form of houses, railroads, factories, apartments, power stations, and
roads. A nation can not fight and produce at the same time. Therefore in time
of war we produce immediately consumable goods and let the physical property
run down. If the United States was short of all kinds of goods, certainly the
warring nations were in greater need. Surely France, Germany, Belgium, England, and other countries needed permanent equipment in the form of houses,
railroads, central power stations, factories, and the like, which had deteriorated
through long years of the war and the years immediately following. Nobody
would deny that Rio de Janeiro, Buenos Aires, Melbourne, Quebec, Berlin,
Tokyo, and Shanghai needed new central power stations and many other modern
improvements. The United States was in a strong financial position and furnished the capital for her own expansion and for a considerable part of the
world's expansion. This was our first experience in financing such a world-wide
expansion. This put into circulation an enormous volume of purchasing power,
and resulted in an expansion in our security markets to a level never before known.
We acted like a 4-year-old boy with a pocket full of apples, green or dried, whichever you wish, but in any event the usual difficulties followed.
PANIC OF 1929
In August, 1929, we started on one of the greatest peace-time declines in
prices of which the world has a record. The index of prices fell from 141 in
August, 1929, to 98 in January, 1932.
·
Economic changes, drastic in character, are occurring with such rapidity that
it is difficult for the human mind to foresee them or even grasp the significance
of the changes after they have occurred. The more important are the precipitous
decline in commodity prices, followed by the suspension of payments on reparations, war debts, and other international debts; the suspension of specie payment
"Credit Report of Joint Commission of Agricultural Inquiry, House of Representatives, Sixty-seventh
Congress, :first session, Report 408, Part n, p. 86. 1922.
" Yearbook of Agriculture, 1922, p. s, 1923.
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by most countries of the world; the drastic drop in the pound sterling and other
exchanges; unprecedented exports of gold; the rapid expansion of note circulation; hoarding of currency; advance in discount rates; the $500,000,000 national
credit corporation; bank and business failures; the Interstate Commerce Com•
mission's decision on freight rates; financial embarrassments of many munici•
palities, States, arid railroads; huge Federal deficit; tb,_e Hoover-Laval conference;
advance and decline in grain and cotton prices; the sweeping conservative victory
and the protective tariff in England; repayments by the Bank of England;
Snowden's plan for "voluntary conversion" of the $10,000,000,000 five per cent
war loan to a lower rate; von Hindenburg's decree for a suspension of legal
executions by creditors in East Prussia and a 50 per cent scale down in debts;
the Reconstruction Fianance Corporation; the campaign against hoardingj and
the proposals to increase the efficiency of the Federal reserve system, the ulassSteagall bill.
There have been few, if any, periods in the world's history when there were
recorded so many disastrous events in so short a time.
The world has never experienced, in times of peace, such a prodigious destruction and transfer of wealth in so short a time.. We are now in the midst of the
most severe depression this country has ever experienced. Most measures of
industrial activity are about 40 to 50 per cent below normal. During the depression of 1921 Ayres's index of American industrial activity fell to 27 per cent
below normal. The panic of 1893 was the only one, prior to 1921, that carried
business as much as 20 per cent below normal. In short, the business of the
United States is at a level never before reached in the annals of American business. Honest men can not get work; creditors can not collect their debts; and
"for-rent" signs appear everywhere. Changes are coming so quickly and values
are being swept away so rapidly that fearless and honest men are so bewildered
that they know not how to act. We are like a gassed and wounded regiment in
No Man's Land. After the deluge is over, we can look back and see some of
our mistakes. However, while we are in the midst of the depression the farmers,
the bankers, the business men, the unemployed, and not the least, the Prcaiient
of the United States, are groping for light in order that, in this rapidly changing
panorJJ,ma, we may act promptly and wisely.
This chaotic history of prices, which meant prosperity or ruined the lifetime
opportunities of innumerable individuals, is not due to acts of Providence. It is
due to lack of knowledge of economic principles, or failure to apply the little
knowledge we have.
Our political acts are based largely on experience. These prices disturbances
are not often repeated in the same direction in one generation. It frequently
happens that the generation which is to act on a situation has derived all its
experiences from the opposite set of conditions. If such price chaos is to be
avoided in the future, the scientific principles that govern prices must be discovered, made common knowledge, and applied.
Mr. GOLDSBOROUGH. We have with us this morning a gentleman
that I think we should call, who is here from a distance, Mr. Simonds,
president of the Simonds Saw & Steel Co., Boston, Mass., and we
would be glad to hear from you, Mr. Simonds.
STATEMENT OF ALVIN T. SIMONDS, PRESIDENT SIMONDS
STEEL & SAW CO., BOSTON, MASS.
Mr. S!MoNns. I would like to state my connection with the interests
in this bill, so you will get a little background of why I am here, and
why I am interested. I have been, perhaps, I might say, the principal supporter of the stable money association for the past 10 years.
I have given nine annual economic pledges of $1,500 for each year for
the past nine years, and I have contributed a great deal of time in
trying to create a better understanding of economics in business by
publishing writings and lectures, and so forth, all with the hope of
better stabilization for business.
·
I am a manufacturer, emr.loy normally 2,300 men, and about
$10,000,000 of capital, a family affair, in New England, now in its
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one hundredth year, and we have a great deal of trouble with the
fluctuations between good and bad times, and trying to get our men
get their same income year after year, without violent fluctuations,
and letting a lot of men go, and reducing labor rates) and so forth.
So I have been very much interested in the stabilization program for a
number of years, particularly since 1919, and I have visualized the
chart of the commodity prices after the Napoleonic War and after
th3 Civil War, and gradually falling over 30 years after each war back
to practically war levels.
I agree entirely with the principles of this bill, but I would differ
with section 31.
Mr. GOLDSBOROUGH. You mean the first section?
Mr. SIMONDS. The first section. I am, perhaps you might say, an
amateur ex-economist. I can not go with Professor Fischer or Professor King into all of the details of the practice of bringing about the
means to do with it, but I agree to the general principles of stabilization, and of the bill, but I think it is absolutely necessary that, if you
are getting in an elevator, as you do when you increase the price
level, to determine the point at which you want to stop before you
start; otherwise, you get the way Russia and Germany did by constantly inflating your currency until you arrive at nothing.
Mr. GOLDSBOROUGH. You think there ought to be a definite level
fixl:ld in the bill?
l\1r. SIMONDS. Well, you say "the present commodity levels are
priced as nearly as possible to the level existing before the present
deflation." Well, now that level should be different. The level in
1920was entirely different from the level in 1926.
Mr. GOLDSBOROUGH. All of the committee will agree with you on
that, sir. This was put this way in order to invite discussion, and
the committee would be very much interested to know what your
view on the level is.
Mr. SIMONDS. Well, I have no view as to any exact level, but I
think, in fairness to the debtor and creditor classes, it might be well
to adopt_ a level half way between the present level and tl].e 1920
level, which was taken as the average level after the war up to 1930.
Irving Fischer's commodity index went up from 1867 to I do not know
when in 1920, and it is now about 3 per cent, I think, below the prewar level of 1930. It has fallen not only to the pre-war level, but
below that wholesale commodity index. Now, I think some point
half way between the present level and the 1926 level-in other
words, if it was 100 in 1926 and 67 now, I think that half way would
be a good place to stop.
Mr. GOLDSBOROUGH. W~ll, now, why is that your opinion, sir?
Mr. SIMONDS. The principal reason for that is that about 70 per
cent, as they usually figure, of the total outgo is for wages-in other
words, wages are your most important commodity. It is very hard
and a very slow work deflating wages. A 10 per cent reduction of
wages is not anything at all if you are going to balance it with a
wholesale commodity index, which, after all, is largely wages in its
essence. So that we could go on letting the thing go on the present
gold standard, if we wished to deflate wages from the 1920 level by
at least 50 per cent, but it is a pretty radical thing to do and it takes
a lot of time to do it, because the cost of living only goes down about
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so often. A man getting anywhere from 15 to 18 per cent less money
to-day, per year, is equally as well off as he was before.
We do not care anything about the money we receive, but what we
want is its purchase price established on some uniform level. I do
not care where that figure is set, but at least it ought to be set in
advance, particularly if you are going to use the last section of this
bill; because the danger is that we will not stop at that level, and that
you must have your stopping point reasonably well established before
you start, and that is the place you stop; otherwise, you can go away
above and increase the amount, as they d.id in Germany.
Mr. GOLDSBOROUGH. Do you not think it would require many
more readjustments, if we only went half way back to the 1926 level,
than it would if we went clear back to the 1926 level?
Mr. SIMONDS. I am afraid of that. I am afraid that these readjustments-if you just adjust the thing on these prices, there is a lag
between the time you do so and the time its effect occurs, and I am
afraid of that lag-I do not know what the lag, but there is a question
of time, and what the time is I do not know; but anyway, I am afraid
that you will go away above that price level before you can stop
it. In other words, I am afraid the machine will run way.
Mr. GOLDSBOROUGH. That, of course, is a different proposition.
Mr. SIMONDS. Yes.
Mr. GOLDSBOROUGH. The question of whether or not it can be
done is a different proposition; but we are assuming now that the
Federal reserve system can use their powers to raise the price levels,
we will say, to 1926, and stabilize at that point. Now, assuming that
you can do that, and can stabilize at that point, would not that call
for readjustment in American life, fewer adjustments than going
half way to the 1926 level?
Mr. SIMONDS. Yes, I think that level would be all right; except
that to do it too violently, you will cause a very severe readjustment
and a run-away market that you may not be able to control.
Mr. GOLDSBOROUGH. That is another proposition. That is a very
important consideration, but that is not the thing we are talking
about right now. What we are talking about right now, sir, what
we have in mind now is, assuming that the Federal reserve system
can raise the price level to the 1926 level, and that they can prevent
it from ruilning away, would you have any obj~ction to it?
Mr. SIMONDS. No, not if you have brakes on the machine designed
before you start getting at the-Mr. BusBY. Then you would take 1926 as the pole star to which
the compromise should go, either above or below, and·keep it always
directed toward that. pole star, if you select 1926. What you want
is a pole star to keep your composite of prices directed toward?
Mr. SIMONDS. I agree with the bill and the committee in that
respect, that I think _your price level can be stabilized. I think we
are in a disgraceful condition of mismanaged or unmanaged gold
standard, and it is only a bad habit. It is like my going to the
Congregational church; there is no particular reason why I go to
the Congregational church, except the fact that my father and
grandfather went there.
Mr. BEEDY. Mr. Simonds, you have not yet answered Mr. Goldsborough's question. He is not talking about brakes; he is talking
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about what floor you are going to get off on, assuming your brakes
will work.
Mr. SIMONDS. 1926 is all right. I would prefer something between
the 10 per cent labor cut, which is the usual newspaper conversation,
of course, when I know it is very much more than that amount-I
would prefer not to get labor upset any more than I could, because
that is your most important commodity.
,
Mr. BEEDY. That was what Mr. Goldsborough was talking about.
He wanted to know-Mr. SIMONDS. I prefer not to go back to the 1926 level, although
if you choose it, it is as good as any other level when you finally
arrive at it.
Mr. BEEDY. He wants to know whether you think it would do
more violence not only to labor but to business in general, by your
being represented by 1926, or some other floor.
Mr. SIMONDS. I would rather for him to get off at a point 15 or 20
per cent below the 1926 level, rather than to go that now, because I
think that would cause less violence between the debtor and the
creditor classes, some point b~ow 1926 level, but very much below
the present level.
Mr. GOLDSBOROUGH. Would you proceed, sir?
Mr. SIMONDS. I do not have very much more to say about this,
gentlemen. I am in favor of the general proposition, but I do not
like. that first paragraph at all.
Mr. BusBY. We do not either. We want you to object to it, and
we can fix it.
Mr. GOLDSBOROUGH. Mr. Simonds, in order that the full committee
and the House may understand your interest in this matter, we would
like you to go more fully, if you can, into the interest you have taken
in the question.
Mr. SrMONDS. Well, that is a little personal matter that I do not
know is of very- much interest to the committee. I started under
Professor Talss1g in Harvard a good many years ago, and I have taken
a great deal of interest in it. In fact, it has been my only hobby for a
great many years; so I have read everything on the subject, everything
written in English, anyway, and I started after the war to devoting
part of my personal fortune and part of my time to a stabilization
of business conditions. I do not believe there can be an absolutely
flat stabilization. Prices are bound to fluctuate; but if we do not
do something of this kind, it would be necessary to revise our entire
banking and credit structure much more radically than anything that
has been suggested so far.
I do not agree with Professor King in one respect. I believe the
principal cause of the deflation was the war itself, and not the violent
speculation in the stock market of 1928 and 1929. In doing for this
country, we ought to learn what has happened in the other countries.
In other words, in Russia we had an absolute denial of all of the obligagations set up by the Czarist government, and they ran the money
down to nothing, and established its new values, but it has since gone
backward very largely. In Germany, they ran the money down to
nothing and deflated all of their obligations; and while they say that
France is on the gold standard, we must remember their obligations
that they sold during the war at the 27 price were revalued by them
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at the 3.93 cent price; so they also have denied their war obligations;
and on top of that, we had England and Japan doing the same thing.
We ran into a very dangerous condition at the present time as to
what is going to be the outcome in this country. If this commodity,
wholesale commodity index, stays where it is, or continues to fall as
it has been doing steadily, we run, as Professor King says, not onlv
into the failure of our principal life-insurance companies, by tlie
failure of the very big interests in our savings-bank systems, because
their obligations are going to become worth very much less money
in terms of the gold dollar, if you fix the gold dollar.
Mr. BEEDY. You do not mean their obligations; you mean their
assets?
Mr. SIMONDS. Yes; if the bonds are going to continue to fall in
value.
Mr. GOLDSBOROUGH. Do vou care to express an opinion as to
whether or not the Federal ·reserve system, with the Glass-Steagall
bill, together with this bill, or a bill like it in principle, have the power
to raise the price level?
·
Mr. SIMONDS. I do not think they have sufficient power. This is
only my viewpoint, but as I view the conditions as exist in this
country, we have national wealth of-which is very rough figures;
because I have never seen exact figures-about $360,000,000,000.
We have a national debt, including the national debt and private
debts, of $120,000,000,000. If you use $2,000,000,000 to reflate
with, you only increase the obligations by 1¾ per cent, which is
hardly anything in a country of this size.
Mr. GOLDSBOROUGH. You have in mind the Reconstruction Finance
Corporation?
Mr. SIMONDS. Yes.
Mr. BEEDY. Supplementing that act with this-that is, supplementing that 1¾ possible effect with this proposed legislation-do you
think that we would have the powel', then, to bring the price level up?
Mr. GOLDSBOROUGH. You see, Mr. Simonds, since the Reconstruction Corporation act was passed, we have passed what is known as the
Glass-Steagall bill.
Mr. SIMONDS. Yes; I know.
Mr. GOLDSBOROUGH. Which makes available in gold and in gold
certificates nearly $4,000,000,000 in gold as a reserve, upon which we
can base nearly $10,000,000,000 in Federal reserve notes, which could
be issued. Now, the thought of some of us is that,if the country-if the
banks of the country-and the country need it, after the passage of this
legislation, the Federal reserve system had the power, because of its
reserves, to issue $10,000,000,000 worth of notes, if they desired to do
it; and if the country also knew that the announced policy of the
Federal Reserve Board was to raise the price, whether that would not
restore confidence and put the people who had money into the market,
which is all that is needed to cure the disease, as we understand it, or
as I understand it.
Mr. SIMONDS. Well, personally, I do not believe that any of the
legislation passed so far is sufficient to do what this committee wishes
to do by this bill; and if it is not accomplished by the first paragraph
on page 2, it will be accomplished by the second paragraph.
Mr. GOLDSBOROUGH. You think it can be accomplished by this
legislation?
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~
Mr. SIMONDS. I do, but there must be some authority to fluctuate
prices of gold, in dollars, in order to arrive fully at a price stabilization, which is what we want. If we do not do something of this kind,
the promise to pay a gold bond, a promise to pay 50 years in the future,
as many of them, is simply rediculous.
Mr. GOLDSBOROUGH. Mr. Simonds, we are very much gratified to
know the interest you have taken in this matter, and we appreciate
very much your leaving this tremendous business that you have and
coming down before this committee-Mr. SIMONDS. It is not very tremendous right now.
Mr. GOLDSBOROUGH. In the desire to help the country out of the
very trying situation it is now in, and you certainly have the thanks
of the subcommittee.
We will adjourn until 2.30 o'clock p. m.
(Thereupon a recess was taken in the hearing until 2.30 o'clock.
the same day.)
AFTERNOON SESSION
Mr. GOLDSBOROUGH. Now, gentlemen, the subcommittee will
please come to order. Now, Mr. Stewart, we are all ready, sir.
STATEMENT OF ETHELBERT STEWART, UNITED STATES COMMISSIONER OF LABOR STATISTICS
Mr. STEWART. Mr. Chairman, my name is Ethelbert Stewart, and
I am United States Commissioner of Labor Statistics.
Mr. GOLDSBOROUGH. For how long have you been commissioner,
Mr. Stewart?
Mr. STEWART. Since August, 1920.
Mr. GOLDSBOROUGH. How long have you been connected with
the department?
Mr. STEWART. Since July, 1887. I was with the United States
Tariff Board in 1911 and 1912 as statistician in charge of schedule K,
but apart from that, I have been with the Department of Labor
since 1887.
Mr. PRALL. Only 45 years.
Mr. STEWART. That is all.
Mr. GOLDSBOROUGH. Now, Mr. Stewart, the subcommittee, I
think, is very anxious to hear just what your department does in the
way of ascertaining the general level of commodity prices. Will you
make your statement in your own way, please?
Mr. STEWART. Yes, Mr. Chairman. The so-called Aldrich committee of the United States Senate Finance Committee, in 1889~
wanted to get the wages and prices for 50 years, 1840 to 1891. At
that time the ·Bureau of Labor Statistics, or the then Board of Labor,
which was in the Department of the Interior, was the only organization to which they could appeal, and we did that work for them, bringing the wages and prices down from 1840 to 1890. The bureau-then
began to continue those prices. We began the present work in 1890,
and at first issued it annually, and in 1915, when the Labor Review
was started, we began to issue it monthly, and down to January of
1932, when we began issuing the index weekly. We do not now
print the prices with the weekly index, beca,use we ha.ve not the
fa.cilities to do it, but we do issue the index weekly.
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Now, I take it, if I give you two or three illustrations of just what
we do, I do not need to go through the 744 articles.
Mr. GOLDSBOROUGH. No, indeed,.
Mr. STEWART. I will take wheat, for instance, and in consultation
with the Department of Agriculture and all of the interests involved,
we decide what grades of wheat and in which markets-which grades
of wheat determine the price of all wheats, and in which markets we
could take that price to get the average price of wheat. For instance,
we take No. 2 red wheat in Chicago, we take No. 2 hard wheat in
Kansas City, we take No. 1 northern spring in Minneapolis, we take
No. 2 dark northern spring in Minneapolis, we take No. 1 hard
winter in Portland, and we take No. 2 red winter in St. Louis.
Now, as to what proportion of these wheats pass through these
markets, we take the Agricultural Department figures, and the
figures of the grain exchanges at these points.
On No. 1 hard winter wheat at Portland, which is the local
wheat-I say "local," but that is the general district around there,
and this is, I understand, blue stem-I think they call it blue stem
wheat- the output is about 10 per cent of the total marketed wheat
in the United States. Now, we take that price from the agricultural
man on the spot. The other prices we take from the daily reports,
as published in these localities, on that particular grade of wheat.
Now, for instance, when we get these things, we take the output
of two years, 1927 and 1929, and we average them, and we take the
average of those two years as being the total marketable wheat.
Now, in 1927, we produced 878,374,000 bushels of wheat. The
sales by the farmers, according to the agricultural figures, was
728,000,000 bushels. That is the figure we take. We take the
commodity that enters into commerce. In 1929 tl;iey produced
850,965,000, and there were sold 655,000,000. Now, our weights
of average are those two years. Then we take the price to-day and
multiply it by that weight-Mr. GOLDSBOROUGH. The weight of a given commodity?
Mr. STEWART. The weight in a given commodity. We take the
average of the prices in these six markets and multiply them by the
weight, which represents the amount sold in the markets, and that
is carried across. We do that with everything else, every other
thing we do. We take our weights, either from the census, taking
the average output for 1927 and 1929 as our weight, and then we
apply the same prices to that as the weight.
We add then the imports of wheat, which is not a great amount,
but in some things the imports are important; so we rriake the ·sam~
rule all the way through. In a great many things, the census gives
the q_u.antity in a conveniently stated item or unit of production;
that 1s our weight. We take the 1927 and 1929 census, add them, and
divide by two, and get the average for those two years as our weight,
on boots and shoes, for instance. There are a .few things that we
consider of sufficient importance, that the census does not give the
unit of production. Take, for instance, such things as window shades,
the census gives the value but does not give the number. Considering
that window shades were of sufficient importance, we take the value
as shown by the census for 1927, which was $37,081,937; and the
census of 1929, which was about $37,000,000. That is the factory
price, the price that the manufacturers get for them.
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In general discussions of the matter with people who handle that
kind of business, we find that the wholesale price is about 10 per cent
in excess of the manufacturers' price; that is, the wholesaler must
add 10 pn cent more than he pays the manufacturer. We add
them and we divide by two, and we get the average wholesale value,
total value, for that year. Now, then, we take our price, the ascer.:.
tained price of window shades of a certain description, and we add
those. We take the average of those for the two years, and divide
them into the lump wholesale price, and get the weight. Now, this
average price is not used again, except to get your weight; that is all.
Those are the three methods by which we secure our weight. This
latter one is probably less than 10 per cent of the things that we carry.
Again, of course, we add the imports.
I do not know that there is anything else you want.
Mr. GoLDSBOROUGH. Mr. Stewart, what number of commodities
did you start out with when you began making up the index?
Mr. STEWART. As I remember-I do not know that I have that
with me, but it was along about 70 in number.
Mr. GOLDSBOROUGH. On what basis were the increases made in
number?
Mr. STEWART. The general fact that the first one was not sufficiently comprehensive, we jumped to 104, as I remember, then to
270, then to 404, then to 550; and now we come to what I suppose you
are driving at.
Mr. GOLDSBOROUGH. Yes.
Mr. STEWART. It was claimed by most of the economists, or at
least some few of them, and very violently by some of them, that we
were overweighted with farm and food products; that we had too
much farm products. We had 67 items; we had 11 of grain, wheat,
corn, and other grains; we had 12 of livestock, and 44 of other farm
products. They claimed we were doing the heaviest weighting with
farm and food products and other raw materials; that if we had more
consumer goods, as they call them, that is, manufactured things ready
for use--that if we had more of those, or less of the raw materials, we
would have a better index. I added 234, practically all consumers'
goods. That changed the index, which is something between 5 and
6 per cent, about 6 per cent.
Mr. GOLDSBOROUGH. Well, now, the influence brought to bear on
the bureau, were they simply scientific influences or was the influence
of a political nature, or a combination?
Mr. STEWART. I never had any political influence brought to bear
on me, that I know of.
Mr. GOLDSBOROUGH. That has never entered into the picture,
up to this time?
.
Mr. STEWART. No; never.
Mr. GOLDSBOROUGH. I want you to understand, Mr. Stewart, that
I had never heard there had been any, but I wanted to know, because
as we progress with this thlng, that is going to enter into it.
Mr. STEWART. The whole question was whether or not the stuff
that I was carrying was going down faster than it would if we had
more of the consumers' goods, and I wanted to know as well as anybody else, and I added 234 articles.
Mr. GOLDSBOROUGH. Mr. Prall, have you any question?
Mr. PRALL. What is this index used for now, for what purpose?
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Mr. STEWART. So far as the Bureau of Labor Statistics is concerned, its interest at the outset was purely as the Aldrich report
states, to get some measure of the purchasing power of wages. The
whole essence of wages is a question of nominal and real wages, and
that was what it was started for. It had been kept up as a general
index of prices for that purpose largely, because the retail price index
is-at least, we thought was-too cramped, carrying at first 22 items
of food then and now, I believe, 43. We did not believe that was
sufficient. In other words, our retail price index is food, and food
only, so far as our monthly statements are concerned.
Now, our general cost of living index, which takes in a wider range
of retail prices, is only gathered once in six months, and it is too
slow. Of course, it has a wide use that has come from the bureau's
wholesale prices, and was because for years and years there were not
any other--that is, no other official wholesale price index now; but
there was only a few, a very few, private concerns that had them.
I think Bradstreet's or Dun's, I do not remember which, had one.
Mr. GOLDSBOROUGH. As I understand Mr. Prall's question, it is
directed_ as to what particular use is the index put, at this time, what
it is used for; who uses it and for what purpose?
.
Mr. STEWART. Well, it is used in all commercial and financial
circles; it is used by all economists and universities. It may be that
some of them put out their own, but they are based on this. We give
prices to a dozen concerns that issue indexes of their own.
Mr. PRALL. You give this information which is not available from
any other Government office?
Mr. STEWART. Yes.
Mr. PRALL. And for general information?
Mr. STEWART. General information. Then, of course, it is an
index of employment more or less.
Mr. PRALL. I wondered if it was used for that particular purpose
by any organizations, or an:y lines of business, or as a guide on any
purpose of that kind, and I imagined it was.
Mr. STEWART. It is used by practically all of them.
Mr. PRALL. I would like to ask Mr. Stewart, with his long experience in dealing with these commodities and the prices of them, what
his opinion is of this bill, H. R. 10517, and what its effect would be,
f enacted into law, on the unemployment situation.
Mr. STEWART. Well, of course, Mr. Chairman, if I answered that
question at all, I would have to answer it as an individual, because I
do not feel officially in opinions; I have not any index of opinions.
Mr. GOLDSBOROUGH. Mr. Stewart indicated the other day that he
would prefer not to go into that.
Mr. STEWART. I simply would want to preface it by that, that anything I would say on it is an individual opinion.
Mr. PRALL. I think your personal views would be enlightening
and would be appreciated by the committee. I do not want you to
bind your department in any way by your answer.
Mr. STEWART. Well, of course, I could not bind the department
nor the bureau on it. I simply wonder whether the bill would
accomplish what it seems to be aiming at.
Mr. PRALL. Then you must have some belief.
Mr. STEWART. I have.
Mr. PRALL. I would like to know it. I would like for you to tell us.
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Mr. STEWA~T. I simply wonder whether you are going to get what
you say you want from the parties in whose hands you are placing it.
Mr. GOLDSBOROUGH. That is an interesting question.
·
Mr. STEWART. Whether you delegate the power, delegate to any
person, committee or commission, the power, to put us within their
power, we will continue to be in their power.
Mr. PRALL. You think that the concrete is about as good as the
man who mixes it?
·
Mr. STEWART. Yes.
Mr. BusBY. Mr. Stewart, you told us how you carried wheat
through the process of finding the wholesale commodity price; did
you take each of the 784 commodities included in your collection,
through a similar process?
Mr. STEWART. Yes.
Mr. BusBY. Attributed to the particular type of commodity with
which you are dealing?
Mr. STEWART. Yes. Now, apart from wheat-well, I do not
think, just now, of any other commodity in which we can go to a
government department or bureau and get the information. that we
want as to the brands that would control, that would indicate the
general prices. Now, on other things, we have to go to the manufacturer who produces them and ask them the question: "Of the two
or three different things now that you fellows make, which nearer
indicates the trend of prices of that commodity, or that group of
commodities?"
Mr. BusBY. And you do that, if I understand you correctly, and
you follow the course of each of these commodities, and at the end
of the week, at stipulated times, you announce the spread of that
commodity in relation to the purchase price of the dollar in 1926?
Mr. STEWART. Yes.
Mr. BusBY. Now, you have carried, or after you shall have carried
all of those commodities through all of the weeks of this year, you
find, if I understand correctly, the average of the prices of those
individual commodities?
Mr. STEWART. Yes.
Mr. BusBY. Then by combining all of the commodities treated
that way', or dealt with in that way, you obtain what you call the
wholesale commodity price index, by combining all the commodities
and stnkmg such an average as will give you the proper index to the
price of all of them taken together, do you?
Mr. StEWART. The index number is simply a tribute to the American determination to put the history of the universe on a posted
weight. We must have one figure which means everything, and the
index co·mes as near that thing as it is possible to come .
. Mr. BusBY. I take it' that the one figure that you obtain through
that process is the composite center of gravity, the price of all of them,
.
.
if I might use that term?
Mr. STEWART. As nearly as it is humanly possible to get it.
Mr. BusBY. Now, it has been asked you what the commercial
organizations think of the findings of the Bureau of Labor Statistics
in that regard.
Mr. STEWART. I hoped somebody would ask me that question, so
l .prought this along. In. the hearings before the sub<?ommittee on
manufactures, of the Umted States Senate, the heanngs were .on
S. 6215, of the Seventy-first Congress.
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Mr. BusBY. What page of the hearings do you refer to?
Mr. STEWART. Page 86. Mr. Sloan. was on the witness stand.
Mr. Sloan is vice president of. the Standard Statistics Co. of New
York, a statistical organization of high standing, who does not do
anything along this line, and has not any ax to grind. I want to
quote this:
The CHAIRMAN. Mr. Sloan, can you give us a picture of the eourse of the
wholesale prices during the past five years?
Mr. SLOAN. We have used and tested out all of the g_enerally recognized indexes
of commodity prices, and we believe the Bureau of Labor series to be the best
and the most trustworthy. I have brought a chart of tha~ series from 1913 to
date, and along· with it I have run the Bradstreet index of commodity prices; and
while a little more sensitive, by being more heavily weighted with raw materials
than the Bureau of Labor Statistics, but it is virtually impossible to find a better
price index than the Bureau of Labor operates.
Mr. BusBY. So, if I understand that correctly, Mr. Sloan replied
that, by being familiar with all of the statistical indexes relating to
the prices of commodities, he regards that of the Bureau of Labor
Statistics as the foundation of the others, and perhaps superior to
any of them?
Mr. STEWART. He says:
It is virtually impossible 1;o find a better price index than the Bureau of Labor
Statistics.
Mr. BusBY. Now, why did the Bureau of Labor Statistics abandon.
the 1913 price level and adopt that of 1926 instead, if you have a
reason, or no reason at all; I would like to hear you.
Mr. STEWART. We carried the 1913 base until it seemed to me that
we were in an entirely new commercial, industrial, and economic
world; I believed that 1913 was a thing of the past.
Mr. BusBY. Let me ask at this point. Is not it a fact that,since
1913, the modes of transportation, the means of communication, the
accessibility of nation to nation, because of that improvement in the
means of communication and transportation is entirely changed?
Mr. STEWART. It has changed; the standard of living has changed,
and everything has changed.
Mr. BusBY. And is it not your opinion that we are entering on a
more desirable basis, and were on a more desirable, from 1922 to 1929,
from the standpoint of having better housing facilities, and better
means of doing business, and more modern methods in every line
than we had in 1913, that warranted the change of the commodity
prices, or the commodity price level, from that time to what prevailed
m 1926? I just merely want to suggest that, and get your view,
briefly, on that subject.
Mr. STEWART. The assumption that 1913 would ever return was
certain:ly not believed to have any foundation at that time. Now, I
have been asked by a number of people this question: Since your
wholesale price has gotten back to 1913, even a little below it, why
not go back to 1913? The answer is that, until it is ascertained that
the present situation is to be hopelessly permanent, which I am not
willing to admit as yet, at least yet, any return to the 1913 base would
at least put the bureau in position of accepting things as they are, and
saying "What is all of this fuss about? The dollar to-day is the
dollar of 1913; and what is all of this about?" Now, if this isto be a
permanent situation and you want to stabilize it here, stabilize it at
1913, if you dare.
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Federal Reserve Bank of St. Louis
268
STABILIZATION OF COMMODITY PRICES
Mr. GOLDSBOROUGH. It would take 25 years for the country to
recover.
Mr. STEWART. It never would recover. It would have to rock
back to where we were in 1913; our standards of living would be shot
to pieces, and all of your new inventions since then would die, because
we could have no more things than we had in 1913.
Speaking of this, I want to say that the Bureau of Labor Statistics'
price is the price on things, on values; and I want to say that I hope
you will get away from this confusion of terms, that is, the interchange of the word "value" and the word "price." The value of a
thing is its life-sustaining power, its use in food and shelter and
things of that kind. Now, price is something entirely different. To
illustrate, a loaf of bread is valued at the amount of human energy
it will produce, and the amount of human life it will sustain,• and
that does not alter whether your price is 4 cents or 15 cents. The
value is in the thing itself; the price is in the symbols, mostly; and the
question of price is a question of the flow of currency. Of course,
Mr. Chairman, the cost of a medium of exchange, the cost of the
energy required to get a medium of exchange, has got to be taken
out of the price exchange.
Mr. BusBY. I believe that is all I care to ask, Mr. Chairman.
Mr. STEWART. Now, on this 1926, I want to give you a chart of the
1926 price level, and the purchase price of the money. You will see
there-Mr. BusBY. Let me suggest, Mr. Stewart, that those just simply
be introduced as supplementing your statement. I think that the
picture presented by these charts will give a much better picture-I
mean that the information contained in these charts will give a much
better picture to the reader of your testimony that he could possibly
get from any words.
Mr. STEWART. Well, I want to introduce this 1926 chart; and to
say that the average of 1914 to 1931 is 100.5 upon the 1926 basis--·
Mr. GOLDSBOROUGH. For a period of 17 years?
Mr. STEWART. Seventeen years; yes. The 1926 base only varied
five-tenths of 1 per cent from the average of 1914 to 1931. The
other figures are figured out here.
Mr. BusBY. Suppose we offer these three together?
Mr. GOLDSBOROUGH. Very well.
·
The accompanying chart shows the monthly trend of food prices
both wholesale and retail in the United States, according to index numbers as computed by the Bureau of Labor Statistics of the United
States Department of Labor. For this purpose the retail food index
has been converted to the average for the year 1926 as 100.0, the
ba,se used by the bureau in computing the index number of wholesale
pnces.
Per cent that farm products are of all commodities, both as to
number and estimated quantity values. Column 1 represents the
percentage that the groups are of all commodities when 784 series are
used, and column 2 when 550 series are used.
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Federal Reserve Bank of St. Louis
269
STABILIZATION OF COMMODITY PRICES
MONTHLY TRtNO OF PRICES OF' FOOO IN THE. UNITED .STATE&.
e"JIIAU OV LAIOJI STATIITIU
lutlT&D .STAT&I DUARTl"IOIT OP 1.A&oft.
WHOLE.SALE. PRICES - (19U,,. JOO)
RETAIL PRIC£S
110.....------,------,.----'----.-----~-----,------,110
10
1-----------+-----t------+------+-lr--------1 80:
TO
1-------i-----+-----t------+------1----- TO\
~l:;;::::===::.:±:====::!:====:::::::1-=====t:::;:;:;:===±====,:;;:3":
Estimated value in ezchange, 1928
Per eent of all
commodities
Group
784 price 650 prlee,
series
Foods______________________________________________________________________________ _
Farm produets___ • ________________________ -- __ --- --- __ -- -- --- -__ --- --- ---- -- -- -- -- . -
17. 20
24.28
series
21.26
22. 63
Commodities included in groups
Per cent of all
commodities
Group
784 prloe aliO price
series
Farm products________________ .-----------------------------------------------------
Foods-------------------------------------------------------------------------------
8. 56
15.1)6
series
12.18
18.
oo.
NUMBER OF COMMODITIES INCLUDED IN THE WHOLESALE COMMODITY
PRICE INDEX COMPUTED BY THE BUREAU OF LABOR STATISTICS, BY
GROUPS AND SUBGROUPS OF COMMODITIES.
The following tabulation shows, by subgroups and groups of commodities, the number of items included in the index number of Wholesale Commodity Prices as computed and issued by the Bureau ot
Labor Statistics of the United States Department of Labor..
111442--82-PT 1-18
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270
STABILIZATION OF COMMODITY PRICES
The first tabulation is based upon the present index, which includes
784 price series. Tabulation No. 2 will ~ve the differences as occurring in the different groups of commodities between the allocation
into the groups of the 550 series and the 784 series:
Farm products_________________
Grains ____________________
67
Wheat________________
Corn__________________
Other grains___________
6
2
3
Livestock and poultry_______
11
Foods-Continued.
Otherfoods ________________
36
12
Beverages_____________
Coffee_________________
Fish__________________
Sugar_________________
Vegetable oil___________
Other foods____________
17
Cattle_________________
Hogs__________________
Sheep_________________
Poultry________________
5
Hides and leather products______
41
Hides and skins____________
7
Other farm products________
44
Hides----------~-----Skins__________________
3
4
Leather___________________
7
Sole (oak)_____________
Other leather___________
2
Boots and shoes (factory)____
21
Children's_____________
Men's_________________
Women's______________
11
2
3
2
Cotton________________
3
Eggs__________________
7
·Fruits_________________
5
Hay__________________
3
Milk__________________
3
Seeds_________________
4
Vegetables (fresh)______
6
Wool__________________
9
Other farm products____
4
Foods _________________________ 122
3
2
6
2
6
5
4
6
Textile products ________________ 113
Butter, cheese, and milk_____
24
Butter________________
Cheese________________
Milk__________________
18
3
Cereal products____________
28
Bread_________________
Cereal breakfast foods___
Crackers_______________
Flour _________________
Meal (corn)____________
Rice__________________
Other cereals___________
5
3
2
=
3
11
2
2
3
Fruits and vegetables_______ 20
Fruit (canned) _________ --6
Fruit (dried)___________
6
Fruit•(fresh)___________
1
Vegetables (canned)_____
7
Meats ____________________ ___;_
14
_Beef ___________________ --3
Pork__________________
6
Poultry_________________
2
Other meats___________
3
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Federal Reserve Bank of St. Louis
Clothing ___________________
20
Collars________________
Handkerchiefs__________
Hats__________________
Shirts ___________ .:_____
Suits__________________
Trousers_______________
Other clothing__________
2
4
2
2
4
3
3
Cotton goods_______________
35
Drilling_______________
Duck __ .______________
Flannel________________
Muslin________________
Print cloth_____________
Sheeting_______________
Tire fabric_____________
Yarn (carded)__________
Other cotton goods_____
Shirting_______________
2
2
2
4
2
5
2
5
9
2
Knit goods_________________
9
Hosiery_______________
Underwear_____________
5
4
=
STABILIZATION OF COMMODITY PRICES
Textile products_:_Continued.
Silk and rayon_____________
Rayon________________
Silk___________________
Yarns (thrown)_________
15
4
8
3
Woolen and worsted goods___
18
Dress goods____________
Overcoating____________
Suiting________________
Yarn__________________
Other woolen and worsted
goods_______________
6
2
5
3
Other textile products_______
16
Leather (artificial)______
Rope__________________
Thread________________
Twine_________________
Yarns_________________
Other textile products___
2
3
2
3
2
Fuel and lighting_______________
24
Anthracite coaL___ __ ______ _
Bituminous coaL___________
3
3
2
4
4
Coke______________________
By-product ____________ --3
1
Other_________________
Electricity _________________ --1
1
Gas _________________ .______
Petroleum products_________ 12
Fuel oiL _______________--2
5
Gasoline_______________
2
Kerosene______________
3
Petroleum (crude)______
Metals and metal products ______ 130
Agricultural implements _____ ~
Harrows _______________ --3
3
Plows_________________
3
Rakes_________________
2
Tractors_______________
impleagricultural
Other
ments _______________ 20
Motor vehicles _____________ --7
Iron and steeL_____________ 64
Bar iron _______________ --2
4
Bars__________________
4
Bolts__________________
2
Ore iron_______________
7
Pig iron_______________
3
Pipe__________________
2
Rivets________________
2
Saws__________________
3
Sheets________________
4
Wire fence_____________
Other iron and steel_____ 31
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Federal Reserve Bank of St. Louis
271
Metals and metal products-Con.
Nonferrous metals__________
20
Rods__________________
Sheets_ _ _ _ _ _ __________
Wire__________________
Other nonferrous_______
13
Plumbing and heating_______
8
Boilers __________ .. _____
Tubs__________________
Other ___ ~-------------
2
2
4
Building materials______________
86
Brick and tile______________
12
Brick_________________
Tile _____ -________ __ ___
Other___ _______________
6
5
2
3
2
1
1
Cement___________________
Lumber ___________________
20
Lath__________________
Lumber _______________
18
Paint and paint materials____
29
Paint prepared_________
Paint materials_________
6
23
Other building materials_____
24
2
2
Board_________________
4
Glass_________________
2
Lime__________________
4
Prepared roofing_ _ _ _ _ _ _
Other _________________ 12
Chemicals and drugs~-----------
89
Chemicals_________________
52
Acids_________________
Alcohol_______________
Ammonia______________
Baking powder_________
Calcium compound_____
Coal-tar colors_________
compound______
Sodium
Other _________________
10
2
2
2
4
4
5
23
Drugs and pharmaceuticals~_
21
Acid__________________
Other _________________
2
19
Fertilizer materials_________
Other _________________
Fertilizer______________
16
10
6
272
STABILIZATION OF COMMODITY PRICES
House furnishing goods__________
61
Miscellaneous _______ :__________
52
Furnishings________________
40
4
4
Blankets______________
Carpets_______________
Cutlery_______________
Floor covering_________
Irons, electric__________
Oilcloth ___________ ---Sewing machines-______
Stoves________________
Tableware_____________
Other _________________
3
3
2
4
2
3
2
4
7
10
Automobile tires and tubes___
Cattle feed_________________
Paper and pulp_____________
11
Boxboard______________
Paper_________________
Wood pulp_____________
Rubber (crude)_____________
Other miscellaneous_________
3
4
4
3
30
Batteries______________
Caskets_______________
Matches_______________
Oil (cylinder)__________
Oil (neutral) _ _ __ __ _ _ __ _
Rubber heels___________
Soap__________________
Tobacco products_______
Other_________________
2
·=
Furniture__________________ 21
Bedroom______________
Dining room___________
Kitchen ____ _ __ _ _ __ _ __ _
Living room___________
Office_________________
7
3
4
3
4
2
2
2
2
2
5
5
8
·AVERAGE INDEX NUMBERS MADE BY COMBINING CERTAIN SPECIFIED YEARS
The following tabulation shows the average index numbers as issued by the
Bureau of Labor Statistics of the United States Department of Labor using the
average for the year 1926 as 100. The range of years as designated includes the
index number for the first and last year stated in such range. The averages as
shown are simple arithmetic averages of the indexes as published. The two series
of averages are made to show the difference between such averages based on 784
price series as now used by the bureau and on 550 price series as formerly used.
Average Indexes
Average Indexes
Years
Years
784 Items 5.50 Items
784 Items 550 Items
1914 to 193L------············
1914 to 1929-··-··-············
1914 to 1928.·-···----··--·····
1915 to 193L-----·-·····---···
1915 to 1929·-··········---····
1916 to 1931 ••• ·-··············
1917 to 1931.·-················
lffi to 1931...................
1927 to 1931-••••••••••••• -....
1929 to 1931...................
100. 5
103.1
103. 6
102. 4
106. 4
104. 4
106. 7
94. 6
89. 4
84. 9
100. 5
103. 2
103. 6
102. 4
105. 5
104. 4
106. 7
94. 6
89. 4
84. 6
1925 to 1928 ••••••••••••••••• __
1923 to 1925...................
1923 to 1926...................
1922 to 1926••••• ·-············
1920 to 1929 •• ·-·-·--·········1921 to 1930•••• ·-···-·······-·
1914 to 1919...................
1914 to 1918...................
1915 to 1919...................
98. 9
100. 7
100. 6
99. 8
103. 8
97. 0
101. 8
94. 4
108. 5
99.2
100. 7
100.6
99.8
104.1
97.2
101.8
94. 4
108.5
Mr. STEWART. Here are two charts, showing the commodity price
index, and the purchasing power of the dollar. I would like to put
those in.
Mr. GOLDSBOROUGH. Without objection, that may go in.
(The charts referred to are as follows:)
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
Index Numbers of Wholesale Pni..t.s, and.
=
1tj1,J
:
Purtha~1n_q f:>owa of tht Dollar
10ft
:tt--E::::++J:::+:+-r:=-~:::f..B::F-~:=-~1:R-~:=-~=-~l;::::;,~=-:_.::;--l,-:i:;:=_;:==-:r.-~--:--~r===i===i:==t===i===ir==+==:::::i:==+====i==:::::i:==:i=:::::::::i
3211 ...,_,"·.1---1.1-.-+--........1 - - - . . . 1 - - - - - l i - - - l - - -
300 - -....
~~++-i'...;'.....+--+--_.l..11---~'- - - l l - - Ill 14-<'4;-1-!...+-11..,141....
• .._·1---'. . . 1 - - ~ - - -
·--- -
~-:
--·-·
•
......1.........
1 ...,....1_'._-...,_____'_,_,_____ __,,___ - - · _.
:
:,:t•
l+l-+l-i-,+-11-,l,...l_-l-----l~--+--...,--,.,. -,·..,l.,llllll;·, ~~---!'l"k-~~
··.L
~1'1-
;l:1
1..\-I'":. l -
176 !-+<f--,--+..---+----+---,..,..----1 ·'
-:,f
,· 1-------1-----li---~-Al'---I",.___ •...
1llO 14-,'..;.l-1-
11:i
!
~
n
300
275
~.
250
- '--j_-=---·~. i--~C-- __:
.
- '-···--+---l--+---+--+----+----l-----+----=--+-----:.---1
....
- t-- - - - -
-- .
·,
111 1-1-,,....,..,..+--+-----+---I---. ~ - ;j!
/
'
76
~••1
l..'L~-lE-8~Ei~fi-J----1f---+---f-""'""!'"" '
__ ._. ---t----------1--...._-~ ---
li
! 11
,
;
I;.;
N ;3"
!
; .! ;
\
Al,~
i II
!~
I
~ ~ i-------. ~--., 1---
;
_1_ _ _ _---,-+----+--+----4- - - ~ - - ~ - · -
i
I 1:
J,.J...L..l....;4.J..~-4-_.!..____:_+'----+--+----+---+---1r---+---'--191.J
'
"---r~._.....:::::,----
~
;
'.I
/914-
,,
19/S
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Federal Reserve Bank of St. Louis
/9/6
I·
'1917
/918
"''
_/./ _, ._ _J_
---- - ·- -------~;
I ~K~ePo/h,
1
'' .
1-1-++-+-H-.+-+-...---t-,
-----t--·- L_~ ~ '
liO
4D
I/
. ----- .
/'J/9 · /9,ZO
1921 -, /92~
I 19.e.J
;
I" 1924-
/925
225
200
175
'
1
100
•oo
375
350
325
1926
i /927
I 1921 ; 1929 , l9JO
19.31
150
125
IOI
--
75
Index Numbers of Wholesale Pnces and Purchasing Power of the Dollar
1,:16 • /DO
400
375
350
325
300
11
·t,
175
150
126
~
'16
50
---- 1 - - - - - -.
I
,;
.~
-~
i'
;
~... •~.,Al'
~V
I
.
-
I
~---
__ J ___
7
-
·~~
~l/~ -!!?po.,,
;
-· -----
----- ~- ---
:
-- - - -
--
275
!SO
:
i
22.6
;
\~ t-'s. V
I
-
200
I
i
I
'
!
17S
V
~
-
~-- --
[Ji
'
/
~ ,1i
/915
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Federal Reserve Bank of St. Louis
/9/6
1917
1918
/920
/92/
_1922
I 1923
/924
! /925
l
!926 [ 1927 , 1928 11929
,910
e~
r3
s
!2!
125
0
0
100
l,j
I 19.31
~I:;
....
75
~
1-tJ
~
0
l.;l
50
1919
~
b:t
0
:
..
1914
r3
150
·,
I
..!
u,
ts:
I
'I
19/3
--·
'
:
-
l
- ---- r-- --. . . --· 1· - - - -
400
375
350
325
300
---
;
n1
-- \i
ir'•FIL
\
···-
---~---
~ ___ 1__
~t--··
-- ~--
.. '
I;
!j
100
i...,__ __ . _
!:
225
200
f-------r- -- --
; 11,
2'15
250
--
--·-+--- ------
'
! .
40
Ill
STABILIZATION OF COMMODITY PRICES
275
Mr. GOLDSBOROUGH. Mr. Stewart, Mr. Prall has suggested that it
would be interesting to the committee and Congress to just have a
list of the articles making up the 732, so if you will give it to use, we
can insert it in the record.
Mr. STEWART. I will be glad to give it to you later, when we can
get a corrected copy. We would like to insert it in the record.
(The list referred to is as follows:)
The following table shows a list of the items now comprising the
index number of wholesale commodity prices as compiled and issued
by the Bureau of Labor Statistics of the United States Department of
Labor, arranged according to groups and subgroups of commodities.
In addition to the description of the items, the market for which the
quotations are secured is shown, together with the unit generally used
in the trade for such commodities, and the quantities used as weighting
factors in computing said index numbers. The present weighting
factors were introduced in the computations beginning with January,
1932.
The total aggregate value of all commodities for the year 1926,
using the complete list of items, is $54,736,484,000. This aggregate
value is the total of the weighted aggregate value of the 784 commodities.
Quantities used as weights in constructing index numbers of wholesale prices
(Introduced In computations beginning with January, 1932. Average quantity marketed In 1927-1929
GROUP !.-FARM PRODUCTS
Quantity
Commodity
(000
omitted)
GRAINS
Barley, feeding, Chicago __________________________________________________________ . bushels __
Corn, No. 2, contract, Chicago ________________________________________________________ do ___ _
Corn, No. 3, mixed, Chicago ___________________________________________________________ do ___ _
Oats, No. 2, white, Chicago ______________ ; ____________________________________________ do ___ _
Rye, No. 2, Chicago ___________________________________________________________________ do ·__ _
Wheat, No. 2, red winter, Chicago ____________________________________________________ do ___ _
Wheat, No. 2, hard, Kansas City _____________________________________________________ do ___ _
Wheat, No. 1, northern spring, Minneapolis___________________________________________ do ___ _
Wheat, No. 2, dark northern spring, Mlnneapo!is _____________________________________ do ___ _
Wheat, No. 1, hard winter, Portland _________________________________________________ _do ___ _
Wheat, No. 2, red winter, St. Louis ___________________________________________________ do ___ _
113,303
187,825
281,738
288,790
35,134
88,701
253,433
110,748
110,748
71,543.
80,254
LIVESTOCK .ND "POULTRY
Cattle, calves, good to choice, vealers, Chicago __________________________________ lQO pounds __
Cattle, cows, fair to good, Chicago ____________________________________________________ do ___ _
Cattle, cows, good to choice, Chicago __________________________________________________ do ___ _
Cattle, steers, fair to good, Chicago_____________________________________________________ do ___ _
Cattle, steers, good to choice, Chicago _________________________________________________ do ___ _
Hogs, fair to choice, heavy butchers, Chicago __________________________________________ do ___ _
Hogs, fair to choice, light butchers, Chicago ___________________________________________ do ___ _
Sheep, ewes, native, fair to best, Chicago ______________________________________________ do ___ _
Sheep, lambs, western, fair to good, Chicago __________________________________________ do ___ _
Sheep, wethers, fed, poor to best, Chicago ____________________________________________ _do ___ _
~g~m;; n;: ig:l~; ~~~af~rk::: == ====:====== ==:=:=:==== ==========================~-~d~~~==
15,404
15,740
31,480
15,740
31,480
31,865
95,595
3,006
10,524
1,503
801,750
801,750
OTHER FARM PRODUCTS
IfIfIll~l)!")I\?~)I---_;;i:_ }il ~i
;;;;_f/{1
Eggs, fresh, extra firsts, Pbiladelpbia ________________________________________________ •• do .• __
Eggs, fresh, No. 1 extras, San Francisco _______________________________________________ do ___ _
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Federal Reserve Bank of St. Louis
10,726
5,583,481
1,450,255
217,538
209,122
534,642
61,158
63,131
826,623
191,366
86,806
276
STABILIZATION OF COMMODITY PRICES
Quantities used as weights in constructing index numbers of wholesale prices-Con.
GROUP !.-FARM PRODUCTS-Continued
Commodity
OTHER
FARM
Quantity
(000
omitted)
PRODUCTS-continued
Apples, fresh, Baldwins, Chicago•••••••.••••••••••••••••••••••••••••••••••••••••••• bushels ..
Apples, fresh, Baldwins, New York •••••••.•••••••.•..••••••.•••.•.•••••...•••..••.. barrels .•
Apples, fresh, medium grade, Portland, Oreg•••••.•.•••••••••••....••••••••.•.•••.... boxes ..
Lemons, California, choice to fancy, Chlcago.••••.•••..••••••••..••••••••••••••••••.•• do ..•.
Oranges, California, choice, Chicago •••••.•••••••••••••••••.•••.•••••••••••••••••••••••do ...•
Hay, Alfalfa, Kansas City••••..•••••.•.•.•.•••••.•••••••••••••••••••••••••••••.••.net tons ••
Hay, clover, mixed No. 1, CincinnatL •••...•••••••.•.•.•••••••••••••••..••..••••••••.. do ...•
Hay, timothy, No. 1, Chicago •••••.•.•.•.....•••.•••••••••.•••••••.•.•••••••••••••••.. do ..••
Horis, prime to choice, Pacifies, Portland, Oreg •••... c•••••••••••••••••••••••••••••. pounds .•
~~t!~li~~~~~~~~~~~~~=~=~=~~=~=~=~=~~=~~=~~~=·~=·~~)=·~~=·~~~~~~~~~~~=·=·=·=·~=·~=·~~(J=I~~~I~~
Seeds, a1falfa, Kansas City •••••••.•••••••••.•...•••••••.•....••••••.•.•.••••••• 100 pounds.•
Seeds, clover, Chicago..•.•.•••••....••..••.•.....•••••••.....•..••••.•...•••••••....•• do.•.•
Seeds, flaxseed, Minneapolis ••••....•••.••••..•.•••.••••.•....•••••••...•••••••••.• bushels .•
Seeds, Timothy, Chicago •••••••••....•••••••..•.•.•••••.•...•.••••••.....•••••• 100 pounds .•
Tobacco, leaf, warehouse .•.•••••...•.•.•••••.•.•••.••••..•.•.•.•••••..•••••.••.•.•••.• do...•
Onions, Chicago......••....•.•.....•..••••••..••••••••••.•.•••••••••..•••••••••.••.... do ....
Potatoes, sweet, Philadelphia •.••....••••.••••••...•••••...•••••••••••.•••••••••• ,, busheLc
Potatoes, white, Boston •• ••••••.....•••••••••.•••••••••••••••••••••••.••••••••• 100 pounds .•
Potatoes, white, Chicago ••...•.•......•.••••....•••.••••••••••••••.••••••••••••••••••. do.•••
Potatoes, white, New York •.•••....•..•••••.•...•••••••.•••••••••••.•.•.••••...••••.• do..•.
Potatoes, white, Portland, Oreg•...•.•••••••••.•••••••••.•••••••••.•.•••••••.•.•••••.. do.•••
Wool, foreign, grease basis, Argentine, crossbreds, J4 blood, Boston..•••.•.......•.. pounds •.
Wool, foreign, scoured basisi fustralian, Oeelong, 56's, Boston •.•.••••••••.•.•..•••••. do ..••
Wool, foreign, grease basis, Montevideo, one-fourth blood OO's, Boston...•.......•..... do ..••
Wool, Ohio, grease basil!, fine clothing, Boston ••••••.••.••••••••••..••••••......•••... do ...•
Wool, Ohio, grease basis, fine deallne, Boston •••••••••••.••••••••••.•••••...•..••••... do .•••
Wool, Ohio, grease basis, half blood, Boston .•....•.•••••....•.•••.•..• s ••••••••••••••• do ..•.
Wool, Ohio, grease basis, medium grades, Boston •••••••.••••••••••.•••••••••..••••••• do ••••
Wool, Territory, scoured basis, staple, fine and fine medium, Boston.•.••••••••••••••. do...•
Wool, Territory, scoured basis, half blood, Boston ••••••••••••••••••••••••••••••••.••. do.•••
14,523
9,604
73,785
7,409
39,687
9,092
4,219
3,433
32,972
119,043
238,086
39,681
769,726
347
1,554
40,378
589
14,512
10,701
91,680
41,951
56,311
22,428
40,660
104,798
42,553
52,795
49,126
18,422
24,563
30,704
45,617
45,617
OROUPII.-FOODS
BUT'IER, CHEESE, AND JollLK
Butter, creamery, Boston, extra •••••••••••••••••••••••••••••••..••.•••••••••••••••• pounds••
.1~i~t =~fil: ~;:i~,;;~~~::::::::::::::::::::::::::::::::::::::::::::::::::Jt::
Butter, creamery, Chicago, extra flrsts •••••••••••••••••••••••••••••••••••••••••••••••• do ••••
Butter, creamery, Chicago, ftrsts ••••••..••••••••••••••.••••••••••••••••••••••••••••••• do••••
Butter, creamery, Cincinnati, as to score ••••••••••••••••••••••••••••••••••••••••••••••do ••••
'Butter, creamery, New Orelans, fancy ••••••••••••.•••••••••••••••••••••••••••••••••••do ••••
Butter, creamery, New Orleans, cholce .•••••••••••••••••••••••••••••••••.••••••••••••• do ••••
Butter, creamery, New York, extra •••••••••••••••••••••••••••••••••••••••••••••••.•••do ••••
Butter, creamery, New York, ftrsts ••••••••••••••••••••••••••••••••••••••••••••••••••• do .•••
Butter, creamery, New York, seconds•••••••••••••.••••••••••••••••••••••••••••••••••• do ••••
Butter, creamery, Philadelphia, extra •.•••••••••••••••••••••••••••••••••••••••••••••••do~ •••
Butter, creamery, Philadelphia, extra flrsts •••••••••••••••••••••••••••••••••••••••••••• do ••••
Butter, creamery, Philadelphia, flrsts ••••••••••••••••••••••••••••••••••••••••••••••••• do ••••
Butter, creamery, St. Louls, extra •••••••••••••••••••••••••••.••••••••••••••••••••••••• do •••.
Butter, creamery, San Francisco, extra ••••••••.••••••••••••••••••••••••••••••••••••••• do ••••
Butter, creamery, San Francisco, flrsts ••••••••••••••••••••••••••••••••••••••••••••••••do ••••
=~:
~t::: :t~l: 2~:1~rir:::::::::::::::::::::::::::::::::::::::::::::::::::::::~~::::
Cheese, whole mil~ San Francisco.•.•••••••••••••..•.•••..••••••••••••••••••••••••.•• do ••••
~hi: :~:~8ti<a, J:V~~~k=~·.·::.·:::.·.·:.·:.·:::.-.·:::.-.·::::::.·.·:::.-.·::::::.-.·::::::::.-.·.~==
Milk, fluid, Chlrago. (Duplicated In farm products.)
Milk, fluid, New York. (DuI>llcated In farm products.)
Milk, fluid, San Francisco. (Duplicated In farm products.)
Milk, powdered, plant ••••••••••••••••••••••••••••••••••••••••••.•••••••••••••••••• pounds ••
CEREAL PRODUCTS
Bread, Chicago, loaf before baking •••••••.•••••••.•••••••••••••••••••••••••••••••••• pounds •.
Bread, Cincinnati, loaf before baklng.•••••••••••••••••••••••••••••••.••..••••••••••••• do ••••
Bread, New Orleans, loaf before baklng ••••••••••••••.••••••.•.••••••••••••••••••••••• do ••••
Bread, New Yorklsloaf before bakl~··················································do ••••
Bread{ San Franc co, loaf before b lng ••••••••••••••••.••••••••••••••••••••••••••••. do .••.
Ceres breakfast foods, corn, packaged,.factory........................................cases ..
<Jereal breakfast foods, oatmeal, New :r ork ................... 0 ••••••••••••••••• 100 pounds ..
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
44,678
156,374
22,339
128,555
449,943
64,278
61,116
18,967
44. 257
141,622
495,675
70,811
45,521
159,324
22,761
111,696
20,864
48,682
339,751
162, 797
41,925
9,946
37,290
145,329
2,649,387
353,252
362,548
5,438,216
501,989
10,732
7,814
STABILIZATION OF COMMODITY PRICES
277
Quantities used as weights in constructing index numbers of wholesale prices-Con.
GROUP IL-FOODS-Continued
Commodity
Quantity
(000
omitted)
CEREAL PRODUCTS-continued
Cereal breakfast foods, wheat, packaged, delivered--·······-········-········-····-···cases_.
13,644
637,130
637,130
1,700
Flour, wheat, first clears, Buffalo...• ·-······-·-·····-··•·-·--·--·-·-·---·-·-··-··-····do ••••
Flour, wheat, standard patents, Buffalo•.•••.•••.•.• - •• ··-········-··-··-····-···-····do .•.•
Flour, wheat, short patents, Kansas City -··-···-···············--··------··-···--····do ....
Flour, wheat, straights, Kansas City········--···-······ ···-···-·-·-··-··-··--········do .. _.
Flour, wheat, second patents, Minneapolis .•••.•••.••• ·-····-··-···········-·-·-······do._ •.
Flour, wheat, standard patents, Minneapo)is .•••.••••• -····-···-··-·-············--···do ••••
Flour, wheat, patents, Portland, Oreg··--············-·-·-····--····--···· ····-·······do ___ •
}'lour, wheat, short patents, St. Louis .•••.• ·-···········-·······-···-···-·-·-·······-·do_ •..
Flour, wheat, straight.s, St. Louis ....• ·-··-···-····--······-· .. ···········-············do ••.•
Flour, wheat, standard patents, Toledo ••••• ·-··-····-··--···-········-···············do._ .•
7,948
23,845
18,546
6,182
!~~~t~~'iiv~~:L::::::::::::::::::::::::::::::::::::::::::::::::::::::::~~.':i!~~::
8~:~~!~t
Flour, rye, white, Minneapolis .•••. ·-··········-···-·····-···•·········-·-··········barrels ••
~:i~~r~!ti~t~;~\::::::::::::::::::::::::::::::::::::::::::::::::::::~: E~~i::
Meal, corn, yellow, fancy, Philadelphia ••.• ·-···········-················-····-·······do •.••
Pretzels1 bulk, delivered._ ...• _•.• ·-..•• -· .. ·--· ••.. ·-..••. ··-.••.•••.•••••••• ·-••.. pounds ..
Rice, Bme Rose, medium to good, head, clean, New Orleans •.•••••••••••••••••• -.•...do ...•
Rice, Honduras (Edith), medium to choice, head, clean, New Orle1ms •••••••••.• -·-···do._ .•
s,24a
24,728
4,710
5,299
1,766
16,485
2,316
748,273
10,072
10,072
40,498
945,083
315,028
FRUITS AND VEGETABLES
Beans. (Duplicated in farm products.)
Fruits, canned, apples, cannery ···-··········--·········-····-······-···········dozen cans ••
f~~I ~ii~l li!ififiiiJ!E~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Jr~~
Fruits, canned, pineapples, cannery····--·········-··-······················ •• ····-· •. do •...
Fruits, dried, apples, evaporated, packers._ •• ·····-·-·-·--·········-·-·-······-·-··POUntls ..
Fruits, dried, apricots, evaporated, packers •.•• •···-··-··-·--···--···-···-·············do ....
Fruits, dried, currants, cleaned, packers •••••••••• ·-···-············-··········-·······do .•..
Fruits, dried, peaches, evaporated, packers..·-···-········-··--····-··················do ...•
Fruits, dried, prunes, California, 50's to 60's, packers •••••••••• ·-·-·-·········-···-····do._ .•
Fruits, dried, raisins, seedless, packers .•••.•• _•••.••••••••. ····--······ .•.•••..•.•.•••• do ....
Fruits, fresh, apples, Chicago. (Duplicated in farm products.)
Fruits, fresh, apples, New York. (Duplicated in farm products.)
Fruits, fresh, apples, Portland, Oreg. (Duplicated in farm products.)
Fruits, fresh, bananas, Jamaica, 9's, New York .•..•......•.••.•..••••..•......•... bunches .•
Fruits, fresh, lemons. (Duplicated in farm products.)
Fruits, fresh, oranges. (Duplicated in farm products.)
Vegetables, canned, asparagus, 2½, large, cannery.•••.•.•...•.•.•.•...•.•••.•.• dozen cans .•
Vegetables, canned, baked beans, 18-ounce, cannery.·-·················-····-···-··-··do ...•
Vegetables, canned, string beans, No. 2, New York·-················-····-···----···-do .•..
Vegetables, canned, corn, No. 2, factory .. __ ·······-·····················-···········-do. __ .
Vegetables, canned, peas, No. 2, New York ••.... ·-·-·······-······-··············--··do....
Vegetables, canned, spinach, No. 2½, cannery·- ·-·····-·····-··················-·····do .•••
Vegetables, canned, tomatoes, No. 3, New York .......•..•...•.......•...•.•••.•... __ .do •...
Vegetables, fresh, onions. (Duplicated in farm products.)
Vegetables, fresh, potatoes, sweet. (Duplicated in farm products.)
Vegetables, fresh, potatoes, white, Boston. (Duplicated In farm products.)
Vegetables, fresh, potatoes, white, Chicago. (Duplicated in farm products.)
Vegetables, fresh, potatoes, white, New York. (Duplicated in farm products.)
Vegetables, fresh, potatoes, white, Portland, Oreg. (Duplicated in farm products.)
MEATS
Beef, cured, New York ....•...••.••....•.•••..•..•...•.•••• ·-······--·barrels (200 pounds) •.
~~~J;ft~i;:::i::i::=i:::::::i::::::=:::::::::::::::::qp
Mess pork, New York ..• ••-····-·······-·············-··········-···-·barrels (200 pounds) ..
6, 1132
7,303
3,353
20,028
7,813
18,090
32,610
39,673
10,962
36,597
393,620
429,458
63,072
4,904
35,090
21,346
26,848
30,413
7, '¥77
41,692
769
2,131,236
4,262,472
542,452
135,241
652,267
652,267
5,031
~g~~ :1~::; ~~~h,CJt1~~~0::_-_·.~~=:=: =: ==::::::=:::::: =::=:::::==::=: =::::::::::::=:~~.1:fo~~==
wa, 115
503,115
5,576,011}
i~~~IitJ~Ei: ~i~:t}~~-~·::::::::::::::::::::::::::::::::::::::::::::::::::::::::~t:::
391,573
1,001, 92&
Pork, fresh (composite price), Chicago _____ ·-·········-··-··--····-·····················do••.•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
847,764
278
STABILIZATION OF COMMODITY PRICES
Quantities used as weights in constructing index numbers of wholesale prices-Con.
GROUP IL-FOODS-Continued
Quantity
Commodity
OTHER FOODS
(000
omitted)
f f ~~i:
~ffi,~{f:i(f:;;r,'t(iif:f:f:(;(ffiiff ::ff
Coffee, Brazilian grades, Rio, No. 7, New York _______________________________________ do ___ _i
Coffee, Brazilian grades, Santos, No. 4, New York ____________________________________ do ____ !
Copra, coast, New York _______________________________________________________________ d0 ___ _
Eggs, (Duplicated in farm products.)
Fish, canned, salmon, pinkl~o. I, tall, cannery________________________________dozen cans __
Fish, canned, salmon, red, .NO. 1, tall, cannery________________________________________ _cto ___ _
Fish, cod, pickled, cured, Gloucester, Mass _____________________________________ 100 pounds __
Fish, herring, pickled, New York ___________________________________________________ pou.nds __
Fish, mackerel, salt, New York _______________________________________________________ do __ ••
~lsh, smoked, salmon, AlaskakNew York_···-·-·-·-·-·--··----···-··-·-·-·-···-·-··-·do .. _.
if:l~:;~it:;:::o:~-.·_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-::.~~.~~;::
Molasses, New Orleans, fancy, New York •••• ·-···-·-····--·--·--··-···············gallons __
Oleomargarine, standard, uncolored, Chicago •••• ·--·-··-·······--·········-·-·-·-··Pounds••
i:i~ti~l:: ~~lt~==========================================================:::!t::
Salt, American, medium, Chicago_·······-·····-·-·-·-··············-·barrels (280 pounds) .•
l~;~~fI'.ili!!i~lII~~~I~I~I~~~t~~I~~~~~~~~~~~I~~~~~~~~~~~~~~f][~~
Tomato soup, cream, medium, cannery·----··-···-·······················-····-dozen cans •.
Vegetable oil, cocoanut, New York·-·······-·-··-····-············-·-······-·····--POUnds ••
Vegetable oil, corn, New York ••• ·-·····································-·-···········do••••
Vegetable oil, cottonseed, New York ••••••••••• ·-······-······-····-·················do .•.•
Vegetable oil, olive, New York_·····················-·······-··-······· •• ·····-····gallons .•
Vegetable oil, peanut, milL .••.•..•••••••• ·-····-·-····-···········-···············pounds••
Vegetable oil, soybean, New York ••••• ·-········-·················'········--·-···-··do ••••
Vinegar, cider, New York ••·-·················-·-·························-·········gallons ••
19,478
1,848
185,069
466,068
102,274
231,387
1,125,547
510,963
15,504
8,571
545
65,036
18,626
8,888
11,445
300,194
1,913,836
36,477
313,097
125,563
117,572
26,806
28,91.7
332,189
12,197,070
IO, 700,518
59,956
89,267
48,421
669,826
149,514
1,521,830
10,839
13,360
20,964
71,517
GROUP UL-HIDES AND LEATHER PRODUCTS
BOOTS AND SHOES FACTORY
Children's, child's, gun metal high cot.••.•.••.•.••••..•.•••.•.•••••••••••.•.•.•.•.••.palrs .•
Sl:ll~~::,11~~~~~~:~t~iisii::.:::::::::::::::::::::::::::::::::::::::::::::::a~::::
Children's, youth's, gun metru blucher •••••••••••••.••.•.•..••••..••••••.•.•••••.•.• do ••••
~
~:~::: ~·!t~.blWt1~:::::::::::::::::::::::::::::::::::::::::::::::::::::::::t::::.
:Men's black, calf1.oxford, 2 B--···-··············-·-········~············-·-·····-···do_ •••
Men's, dress, meruum grade oxford, black, calf•• -······--·--·-··-··-····--··--··--··--do. __ .
~~~~~~=ff~ ~ ~:=~:~:~: ~: :~:i : : ~ l~ ~ : f ~ :
Women's, black,:kid, McKay sewed, oxford.--·····-·-···-·····-·--_ --------·-···-··-do..••
;~::::: ~~~i;1'b(\f=/i>umii;'ii!ack::::::::::::::::::::::::::::::::::::::::::::::a~::::
Women's patent, 4-eye, tie, black.·--···········-···--··-··----·------····---·-···---do._ ••
Women's, patent-leather pump, black-··---··-··-·-····--·--·-·····-·····-··----······do••••
6,686
16,743
17,390
23,678
ll,917
6,810
6,810
6,810
· 11,917
6,810
6,810
6,810
6,810
11,917
11,917
16,829
16,829
16,829
16,829
42,072
16,829
BIDES AND SKINS
H!des, country1 cow, Chlcago.•• __ ·----·-··-··········-···--·······-··-···----······ponnds_.
Hides, packers heavy; native steer, Chlcago~·-·-·······-----·~-·-··-·-··---··········do ••••
Hides, packers' heavy, Texas steer, Ohlcago_ ••••••••••••••• -----·-···-···-··--·---···-·do••• _
Skins, calfI No. 1 countryl_chicago....................... --··-····-··-·············-··-do••••
Skins, goa,, Brazil, New r ork. _•••••••••••••• .-••••••• _•••••• ~ •••••••••• -~ ..........._.do_._.
Skins, kip, ~o._1~ COUftryt Chlcago._ ••••••••••••••••••••••••••••••••••••••••••••••• _.do ••••
Skins, sheep, PIIClterB , Chle&IIO ·····················································•P81ts_.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
376,896
376,896
376,896
136,891
148,989
67,946
37,522
STABILIZATION OF COMMODITY PRICES
279
Quantities used as weights in constructing indez numbers of wholesale prices-Con.
GROUP III-HIDES AND LEATHER PRODUCTS-Continued
Quantity
Commodity
(000
omitted
LEATHER
Chrome, calf, B grade-Chrome cal!, C grade (net composite price) tannery_____ square feet __
Glazed kid, top grade, Boston-----------------"----------··"················-·-····-·-do_ .••
HBrDess, California oak, general market--·······························-··-····-··POunds •.
Side, chrome tanned, black, B grade, Boston_ ••••••••••.•••••••••••••••••••.••• square feet ••
Sole, scoured backs, oak, Boston ___ ---··-····-·-··-··--··················---·-·-·--POUnds ••
Sole, sid!)S, oakt Boston. __ --····-- --··················································do.••.
.Sole, umon bacKs, steers, New York •••••••••••••••••••••••••• c•••••••••••••••••••...• do .•••
189,951
244,238
15,020
177,197
69,109
69,109
103,664
OTHER LEATHER PRODUCTS
l3elting, leather, plant••••••••••••••••••••.•••.•••.•••••••••••••••••••.•••••.•••••.••... feet ••
Gloves, men's, factory ••••••••••••••••••••••••••.•••.•••.•••.•.•••••••.•••••.•.. dozen pairs ••
Gloves, women's, factory ••••••••••••••••••••.•••.•••.•••••••••••••••••••••.••...••••.• do ••••
HBrDess (composite price), factory ••••••••••.••..••.•••.••• ~ •••.•.•••.••.•••••••••••.•• sets ••
Suit cBSes (composite price), factory••••••••••••.••.•••.•••..••••..•••••.••.•••••••..•• each ••
Traveling bags (composite price), factory ..•.........•••..•.•••••.•••.•.. -·········- _•• do ••••
221,737
988
988
586
4,011,
4,015
GROUP IV.-TEXTILE PRODUCTS
CLOTHING
Collars, soft, delivered_ •..•.•.•••••.•••.••••••••••. -· ••••.•••..•..•..••.••. _•.•••••.• dozen._
Collars, starched, factory-·· ..•...•.••.•••••.•.•..•.•.•.•••.••.••..•..•..••.•..••••.•.. do ....
Handkerchiefs, cotton, men's, plain, New York •.•..••.....•..•• ·-············-·······do.••.
Handkerchiefs, cotton, women's, plain, New.York •••..••..•••.•.••..•.. : ••••.••••••.. do .•..
Handkerchiefs, linen, men's, plain, New York·-············-·························do .•..
Handkerchiefs, iinen, women's, plain, New York ••.••······•··············-···········do..•.
::i:: ::~:: ~~~~!~etii~fury:::::::::::::::::::::::::::::::::::::::::::::::::::::::~~::::
Overalls, with bib, 220, denim, delivered_. ············-·························dozen suits ..
Overcoats, men's, youth's, double-breasted, 30-ounce wool, factory •.••• _.·········-·-·each ..
Shirts, men's dress, factory •.••••..•....•.. ········-·································dozen.•
Shirts, men's work, medium weight, blue chambray, delivered .••.. ·-················-do .•.•
Suits, boys', 4•piece, New York_.·····································•···········-· __ each._
Suits, men's, 3•piece, 13•ounce blue serge, Chlcago....•..•....•.••••.............. -.•.• do .•..
Suits, men's, 4•piece, 15•ounce blue serge, New York ..••••..••.••.•.....•..••. _•.••••• do .•••
Suits, youths', 4•piece, 15•ounce blue serge, New York ....••.•..• : ..•......... ·-·······do •..•
Topcoats, 18-ounce, single.breasted, Chicago.••...••........ •·········-················do.•••
Trousers, boys', knee, aJl.wool, New York ..•.•..••..•...••.•..•.....•......••.• dozcn pairs ••
Trousers, men's dress, 12½•serge, New York ..••....••••.•..••.•.········-·············Pairs••
Trousers, men's work, khaki, factory········-···························-··-···dozen pairs••
3,231
2,717
22,684
25,852
6, 121·
14,540
698
1,397
6,634
3,249
10,923
6,236
6,078
6,698
6,698
8,931
3,249
885
21,307
2,374
COTTON GOODS
289,557
21,231
334,762
201,647
201,647
182,314
~~~~;
40,892
:Flannel, bleached, 4½ yards to pound, mi!L ..•..•••••••••••••.•••••..•........•. _•.•• do_ •.•
219,735
219,735
Flannel, unbleached, 8•ounce, mill ••••.•.••••.•..••••••. ··········-··········-~·······do ....•
269,174
Gingham, 27•inch, milL •••.• _..........•..•......••••••••••••.•••.•••••........• ·-· .. _do ...•
62,680
Muslin, bleached, Fruit of the Loom, mi!L .•.• -························-·········-···do .•. _
Muslin, bleached, Lonsdale, mi!L ..•.•.•.••••....••••••.•..•...•.. _..••..•• _•..•. _._ .. do .. ·62,680
62,680
Muslin, bleached, Rough Rider, mill ..••.••••••••••••••••••••.••..••••••.••••..•.•••.•do_ •.•
62,680
Muslin, bleached, Nainsook, Wamsutta, mi!L •• ················-·-···················do... .
175,811
Osnaburg, 7•ounce, 30-inch mill .•. ···········································-········do... .
284,084
Percale, mill •. _•. ·-··-······-··············· •....••••••.•••••.•.•.....•.. -········· _._do ...•
358,331
1,343,745
~~l~i
351,323
Sateen, filling, black, 36•inch, New York.•············-·························-···do .•..
117,776
Sheeting, bleached, series 1, 10/4 mill ••• _••••••.••.•••.••.••.•••••.•••••.....•......•. _do .•..
Sheeting, bleached, series 2, 10/4 milL ••.••••••..•.•••.••..•.••••.••••• _•.••.•..••..•.. do .•..
117,lf6
392,586
Sheeting, brown, series 1, 36-inch, mill ..••••••.•••••...•.••.•••.• ·-·······-······"····do.•..
392,586
392,586
174,329
174,329
50,917
34,480
T)re fabr/c, bldrs., 10-5, carded, mqL .. ·-················-·····-·····-······--···-·POUDds __ .
192,933
Tire fabrrn, cord, 23-4-3, cardea, rmlL_·---·-···-··········-····-········--·--···-···-·do._ ..
341,777
Toweling, 18•inch, New York •.. ·-·•-···-··--·---·--··-··········-·····-•····-·•--·--YBrds..
Broadcloth, 128 by 68 bleached, mercerized, 35 to 36 Inches, mill_ .••• c •••• _•••••••••• yards_.
Damask, table, mercerized, 58.inch, mlll ...•...•.•••.•..••.•...••.••••••.•..••.•.. _,.. _do .•. _
Denims, Massachusetts, 28-inchhmilL .....................•................• , .••••.•. do •• _,
Drlllings, brown, series 1, 30-inc 2½ yards to the pound, mill .. ·-·····-·····'·······-do.•..
Drillings, brown, series 2, 30-inch 2.85 yards to the pound, mi!L .•.•••••..•. -·····-····do.•.•
!:?J':,c:til~~:i:fN~::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::~~::::
8l~i~: ~tf-f~ch~~ili:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::~~::::
1;filfl 1~:i~~\~~~~:~~rnrn~rnrn~~m~m~rnrnrnrnrn~~~~rn~~~~m~~~~
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
280
STABILIZATION OF COMMODITY PRICES
Quantities used as weights in constructing index numbers of wholesale prices-Con.
GROUP IV.-TEXTILE PRODUCTS-Continued
Quantity
Commodity
om)'Wed)
COTTON GOODS-Continued
Yarn, carded, northern, 10/1 cones, miJL _··························-···············Pounds __
Yarn, carded, northern, 22/1 cones, mill ....•..............••...•.........•..•......... do ___ _
Yarn, carded, southern, single warp, 40/1, spinning, mill••·----------··················do_ ...
Yarn, carded, twisted, 20/2, weaving, mill·-······-···········--··········-············do ___ _
Yarn, carded, twisted, 40/2, weaving, milL--·--··-·-····-·•-·-·····-················-·do ___ _
131,209>
131,200
131,200
131,209
131,200
lrNIT GOODS
Hosiery, cotton, men's, combed yarn, mill.-·-······--·-·-···-··-·····-······-·-dozen pairs._
Hosiery, cotton, women's, mercerized, 220 needle, mill_·····-···-···:···--·······-···-·do __ ._
Hosiery, men's, silk, mercerized top, heel, and toe, 240-needle, 12-thread, mill .• _.•..••..• do .•..
Hosiery, women's, pure silk, full•fashioned, 7•thread, 39 to42gauge, milL ...... __ ....... do._ ..
Hosillry, women's, rayon and silk, full•fashioned, mill_·····-----------·---------------do ___ _
Underwear, cotton, men's, shirts and drawers, mill ________________________ dozen garments_.
Underwear, cotton, women's, union suits, mill ••.... ·------------------····-·-·-dozen suits._
Underwear, men's, woolen, shirt and drawers, milL.-··-··-··-·········-··dozen garments_.
Underwear, men's, union suits, woolen, milL .. -··-···-···-····-·-·--·--·······dozen suits __
19, 3969,243
11,135
26,230
10,727
7,114
7,859
377
747
SILK AND RAYON
Rayon, 150, first quality, New York ... ·--··-···-·-·-·-·····························POunds._
Rayon, 150, second quality, New York •.. ·-··················-····--···-···········-··do __ ..
Rayon, 300, first quality, New York ...•. -·--·········---·-·-··--···-··················do ....
Rayon, 500, second quality, New York•.••.•..••.•••.•••••••...•.•.•.•••...••••••..••• do .•••
Silk, raw, Canton, double extra A, cracks, New York ..•.••.•.••••••.••••••••.•••.••••• do .•••
Silk, raw, China, steam fllature, fourth catagory, New York •.••••••.•••••••.•••..•.•• do••••
Bilk, raw, Japan, double extra cracks, New York ••••••••••.••••••••••••.•••••••••••••• do••••
Bilk, raw, Japan, 18-15, New York •••••••••••••••••••••••.•••••••••••••.•••••••••••.•• do ••••
Bilk, spun, domestic, 62/1, New York ••••••••••••••••••••••. ~ •••••..•••.•••.•••••••.•• do.•••
Bilk, spun, domestic, 60/2, New York •••..••••••..••.••.••••...•••••.••.••••.••.•....• do ..•.
Bilk, spun, Imported 200/2, first quality, New York ••••.••••••..•••..••••••••.•.•••.•. do.•• _
Yarns, thrown, crepe•twist, 3 and 4 thread, New York .••••••...••••.•••.••.• ·-·······do.••.
Yarns, thrown, Organlzlne, 2•thread, New York ••••••••••••••..•••.•••••••..••.•••.•• do... _
Yarns, thrown, Tram, 3•thread, New York •••••.•.••••.•••.•••.•.•.••.••..••••••••••• do •••.
27, 768
27,768
27,768
27,768
3,349
10,047
50,226
16,742
1,991
1,991
594
2,634
1,021
8,129
WOOLEN AND WORSTED GOODS
Dress Goods, women's, broadcloth, 9½•ounce, mill .••...••.••.......•...•...•...•..•• yards ..
Dress goods, women's, crepe, 54•lnch, mill •••••••••••.••••••••..•••.•••••••••••••••••• do .•••
Dress goods, women's, flannel, 54•1nch, mlll ••.••.••..•.•.•.....•...•...••••••..••.•... do ..•.
Dress goods, women's, French serge, 54·inch, mlll •••••••••••••..•••.•...••.•••..••.... do.: ..
DreSB goods, women's, serge, 36•inch, cotton warp, mlll •.....•.•••••••••••••••••••••••. do ...•
Dress goods, women's, Siclli~n cloth, 54-lnch, cotton warp, mill•...•..•.••..••..•...••. do ..•.
g;f=i!i.i~~~ll~~I==:::::::::::::::::::::::::::::::::::::::::::::::::::::::!~::::
Suiting, serge, 11-ounce, 56-58-lnch, mill ••••••••••••••••••.•.•.•••••••..••••••••••••••• do ••••
Suiting, serge, 16-ounce, m!IL •••••••••.•••••••••.•••••.••..••.••••••••••••••••••••••••• do ••••
Suiting, uniform serge, fine grade, 12-ounce, mill•••••.•••••••••••.••••••••••••••••••••• do •••.
Suiting, uniform serge, medium grade, 12-onnce, m!U·•••••••••••••••••••••••••••••••••. do •••.
Suiting, unfinished worsted, 13-ounce, mill ••••••••••••••••••••••••••••••••••••..•.•.•• do ••••
Trousering, cotton warp, 7-ounce 36-inch, mill ••••••••••.••..•••.•••••..••.••••..•••.•• do •.••
Yarn, ¾s's, crossbred stock, white, milL •••••••••••••...•..••...•••••.•••••••.•••.. pounds ••
Yarn, ¾o's, hali•blood, weaving, milL .••••.•••.•••.....•.•••..••••••.•••.•••••••..••• do .•••
Yarn, ¾o's, fine weaving, mill ••••••••••••••.•••....••.•..•.••..•••••••••••••••••••..•• do •••.
20,120
20,120
20,120
20,120
33,0ZT
22,018
1,708
30,180
30,180
20,120
20,120
20,120
20,120
20,120
19,816
45,471
45,471
45,471
OTHER TEXTILE PRODUCTS
Burlap, 40-inch, 10½-ounce, mill •••..••..•.•••••••••••••••••••••••.••••••••••••••.••• yards ••
Hemp, manila, New York •••••.•••.••••••••..•••.••.•••••••••••••••••••••••••••••• ponnds..
Jntehraw, medium grades, New York •••..•••••••••••••••••••••••••••••••••••••••••.•• do ••..
Lest er, artificial, heavy, napped bark, mill. •••••••••.••••.••.•••.•••••••..••••...•• yards ..
Leather, artificial, light, drill back, mill ••••••••••••••••. - ••.•••••••••.•••.•••••.•••.•• do •...
Rope, cotton, awning, New York .••....•..•••••••.••••••••••••••••••••••••••••••••. pounds •.
Rope, pure manila, ¾•inch, New York •••••.••••••...•..••..•...•.•.•...•..••••.•.•••. do ••••
1ic~~~:~t:;k~~~~=:::::::::::::::::::::::::::::::::::::::::::::::::::::::g~::::
:~,:,~
Thread, (cotton), 6-oord, mill. .••......•.••••..•..••• ··-·····-···················--··spools..
Thread, linen shoe, !O's, New York ••..••.•••.•••••••••••.•••••..•••.••.••••••••••••pounds..
Twine, cotton, No. 1, wrapping, milL •••••••••••••••••••••••••••• - •••..•.•.•..••..... do ..••
Twine, binder, standard milL •••••••••••••••••••••..••..••.••••..•..••.•••• 50-pound bales •.
Twine, hard fiber, New York ••••••••••.•••••••••••.•••.•••••...••• ·-···-·-··-·-··POlllldS•.
i=: l~!: ~t ~: :IU::::·.::·.:•.::·.:·.:::::·.:·.:::::·.:·.::·.·:===: ===::::=::=::=:::::::::=i~::=:
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
919,9811
142,316
154,768
33,977
22,125
27,750
94,828
27,535
283,933
4,173,094
3,091
75,098
3,816
83,684
46,788
46,788
STABILIZATION OF COMMODITY PRICES
281
Quantities used as weights in constructing index numbers of wholesale prices-Con.
GROUP IV,-TEXTILE PRODUCTS-Continued
Commodity
Quantity
(000
omitted)
ANTHRACITE COAL
Chestnut, composite price on tracks! destlnat!on_________________________________ gross tons __
Egg, composite price on tracks, dest nation ____________________________________________ do ___ _
Pea, composite price on tracks, destlnation____________________________________________ do ___ _
30,440
7,315
21,237
BITUMINOVS COAL
Mine run, composite price on tracks, destlnatlon __________________________________ net tons __
Prepared sizes, composite price on tracks, destlnation _________________________________ do ___ _
Screenings, composite price on tracks, destlnation _____________________________________ do ___ _
253, 21l0
147,837
103,435
COKE
Beehive, oven, Connellsville, furnace ______________________________________________ net tons __
By-product, Alabama, Blrmlngham ___________________________________________________ do ___ _
By-product, New Jersey, Newark, dellvered __________________________________________ do ___ _
By-product, Portsmouth, Ohio, foundry. _____________________________________________ do ___ _
4,989
12,174
36,521
1,000
ELECTRICPrY
Electricity (composite price), general market ____________________________ 100 kilowatt-hours __
862,740
GAS
Manufactured and natural combined (composite price), general market _______ l\I cubic feet ..
467,800
PETROLEUM PRODUCTS
Fuel oil, Oklahoma, refinerY------·-------·-------·-----·---·- __ .•••• __________ .•.• __ barreL.
Fuel oil, Pennsylvania, refinery_-·-------·----·-··--·--··-·-·-···------·---·--···-- .gallon_.
7,670,045
§El~:: ~:!~~\?:g~i:-:-:-::-:-:::-:::·:-:::·:·:::==================================I~====
5,237,237
4,697,147
Gasoline, north Texas, refinerY-------·----------------···--·--·- -·-- _________________ .do ___ _
Gasoline, natural, Oklahoma, refinery _______________________________ • ___ •• ____ • _______ do. __ •
Kerosene, standard, refined, New York ____________________ : __________________________ do ___ _
Kerosene, water white, refined, refinery _______________________________________________do ___ _
"Petroleum, crude, California, well______ • __ ------------------ ________________________ barre} __
Petroleum, crude, KallSBs-Oklahomaii well __ ··----------------------------------------do ___ _
Petroleum, crude, Pennsylvania, we --------·----------------------------------------do. __ _
221,407
4,001,592
2,340,390
1,918,272
I, 179,323
1,179,323
311,981
673,060
37,847
GROUP VI.-METALS AND METAL PRODUCTS
AGRICULTURAL IMPLEMENTS
Binder, grain, factory •• __ -· _____________________ ; _______ • ___________ •• ________________each __
Cultivator, factory ___ • ______ • __ • __________ • __ • __________ --·----·-- ____________ ._. __ • __ do. __ _
fE!.~~0~iff~~:!~-~~~::-_-:::::::::::::::::::.-:::::::::::::::::::::::::::::::.-::J~ii==
!:a~:: =:~ifa~:J~g~~:======================================================!~==
Harvester-thresher, combined, factory. __ • ___________________________ • __ • _____ • __ .-· _;do_. --
lfl~;;;;;;;;;;ii;;;;;;;;;;;;;;:;;;;~;;;;;;;:;;;;;;;;;;~;;;;;:;;;]~~
Plow, walkjng, I-horse (composite Pr\ce), factory ------···---------------------··-·--·-do_._.
Plow, walking, 2-horse (composite pnce), facto?Y-----··-------------------------------do ••••
53
100
45
96
308
I«-!
264
114
17
102
26
110
IS
45
99
140
123
472
803
it?'.' '.'.'.'.\:\:\:::\:\\::\':\:::\-~\~::::~:::~:::::::=:::,=
Tractor, 10/20 horsepower, factory •••••••••••••••••••••••••••••••••••••••••••••••••••••do••••
Tractor, farm, 15/30 horsepower, factory ••••• ·-·······································-do._ ••
;r:~~Ji~F::~:;ctory_····-·--····-·········-·······································ag····
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
45
20
176
4
311
311
62
18
40
911
to
6'
282
STABILIZATION OF COMMODITY PRICES
Quantities used as weights in constructing index numbers of wholesale prices-Con.
GROUP VI.-METALS AND METAL PRODUCTS-Continued
Commodity
Quantity
(000
omitted)
AUTOMOBILES
Buick, f o. b •..•••.••..•.•..••••••.•••.•.•••••.•.•••••••.•••••••••••••••••.••••••••••• each ..
Cadillac, f o. b .......................................................................do ... .
Chevrolet, f. o. b .•••••••••.•.•••••••.•••••.•.•••••••.•••••.•.•••••.•••••••.••••••••••• do ••••
Dodge, f n. b •••••••••••••••.•••••••••••.•.•.•••••••••••••••.•••.•.•••••.•.••••••.••••do ••••
~~~~~:d~ b _-_-:: ::::::::::::::::: :::::::::::::::::: ::· : :::::::: ::::: :::: ::::: :: ::::~~::::
Trucks (composite i:rice), f. o. b •••••••••••••••••••••••••••••••••••••.••••••••••••••••. do ••••
/o:
310
26
1,136
189
1,932'
62
622'
IRON AND STEEL
Angle bars, mill .....•.•.•...•.•.•••.•••.•••...•.•.•...•...•..•••....•••..•..... 100 pounds .•
Augurs, New York ...•.•.•••.••••••..•.......•••.....•••.....•.......•..•..........••. each ..
Axes, factory .. · .....••....•.•..•....••••....•••..••.••........•..................... dozen •.
Bar iron, best refined, Philadelphia......•.................................•.•.. 100 pounds •.
Bar iron, common refined, Pittsburgh................................•.....•.....•..•• do .•••
Barrels, steel, factory ...........•.•...•.......•.......................•.......•.....•.• each ..
Bars, concrete reinforcing, ¾•inch and larger; milL ..•.......................••. 100 pounds ..
Bars, merchant, steel, Pittsburgh ....•.•.....••..... ··•···· ..........•.......•......•. do ..••
::~:; ~r:et
c~~~ii;;isii~·mi11:.·_-.·_-.·_-.·_-_-_-_-.-:_·_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-.·_-_-_-_-_-_-_-_-.·.·_-.:·_-.~~~J~~:::
Billet~. steel, rerolling, Pittsburgh ......•.....•.•.....................•.....•.•.. gross tons ..
Boiler tubes, 2 to 2¾ inches, Pittsburgh ....•.................................•.........feet ..
Bolts, machine, ~~ by 6 inches, mill •....•••.....•.•.•..........••.•...•.....•....... per 100..
!~1r.: f~~: ?\t~~~~t~~t;~======·="==·=·=·=·=·==·=·=·=·=·=·=·==·=·=:=.=.=:.=.=.=.=.=:.=:::::::ii =1~~~1Ii~==
Butts 3½ bv 3½ inches, factory ...................•..•..........••....•.•...... do,eu pairs ..
8~t'\;,~~~~:I1ea1;;"~, ~1~1\t=:·_-_-_-_-.-:_·_-_-_-_-.-:_·_-_-_-.-:_·.:·.:~·.:-:_•.:·_-_-_-_-.-:_·_-_-_-_-_-_-_-_-_-_-.-:_·.:·_-_-.-:_·.t:r;:1~~~::
Chisels, New York .........•.•.....•••....... ,, ..•.•...........•••.•...•••....••...... each ..
Flies, factory ................................• ·..•.•.•••••.......•.•••.•.••....•...... dozen .•
Hammers, carpenters, l•pound, delivered .•...•. , ••.•••.•..•....•.•••...•.••.•.•••..... do.c ..
Hatchets, delivered ..................•...•.•••...•.•••.•...••....••••..••••...••...... do ...•
Knives, com _______________________________ -· _______________________________________ .dozen __
Knobs, door .•........••......•.... ·..••.....••..... ·•••.. ·.••••••.••••..•.••.••••••.. pairs .•
Locks, mortise, 3½ inches, New York ••••••..•·•••.••..••.....•••...•••••.....••..•.••• each •.
Nails, wire, in kegs, Pittsburgh •..•...••••...•••••••.••••..•.••.•.••.•••....•••. per 100 lbs •.
Ore, iron, mesabi, Bessemer, lower lake ports ..•.••.•••••••••••.•••••••.••••••••• gross tons .•
Ore, iron, mesabl, non•Bessemer, lower lake portscc •...•••••.••••••..••••..•..••...... do ...•
Pig iron, basic, furnace ___________________________ ..... ___________________________________ do ___ _
Pig iron, Bessemer, Pittsburgh .••••••.•••.•...••.••.•.••••.....••.•..••..•.....•...... do ...•
Pig Iron, ferromanganese, furnace ..•....•..•••••••••••••.•••.••••••••.•••••••.•••.•••. do .•..
Pig iron, foundry, No. 2, northern, Pittsburgh .•••.•.•.•....••...•••••••..•••••..••••• do ..••
Pig iron, fmlndry, No. 2, southern, Birmingham ...••.••••.•..•••....•••••....••••.••. do ••..
Pig iron, malleable, furnace_ ...•...•.•...•••.•.•.•.•••.•.•••••••.•••••••.••••••..••••. do .••.
Pig iron, Spiegeleisen, furnace ........•......••••...••••, ••.••••..••••••..••••••.•...•• do ..••
Pipe, cast·lron, 6-lnch, New York .................................................. net tons .•
Pipe, black steel, ¾•inch, Pittsburi,;h ............ ~ .•..•.•..... .-••••.•.•..•....•••.... 100 feet ••
Pipe, galvanized, steel, ¾•inch; mlll._ •...••.••...••••••.•.•.••..•..••••...•.•.•.... : .. do ..••
Planes, jack, New York ......•.....•. ·-···············································each ••
Plates, steel, tank, Pittsburgh.•.....•.......••....•.•••...•.•••.•.•••••.••••••••... pounds ••
Rails, steel, open•hearth, mill. ......•...•.•...•...•••••.•••••••.•.•••••••••••••.. gross tons •.
Rivets, large, ½•Inch a,;id up, Pittsburgh or Cleveland •..•••••••.•.•••••.•.•.••• 100 pounds •.
Rivets, small, Ho•lnch .and.smaller, Pittsburgh ..••••..•.•••••••.•.•••••.•.•••••.•.. pounds .•
Rods, wire, Pittsburgh ••............•••.•.•••..•••••••.•••••.•..•••••••.•.•.•••.. gross tons ..
Saws, cross•cut, 6 foot, Phila\ielphia......................... ~ •••••••••••••••••••.••••. each •.
Saws, hand, 26•inch, Phlladelphla ••••••.••••••••••••••••••••••••••••••••••••••••••••• dozen ..
!~!ii,!~!t~~!t;~~~f~~~fr;~==~~~==~~~=~=·~=~~==~====·=·=~·~·=·=·~·=·=·=·=·=·=~·=·=·=·=·=·=·=·=~::·:~~~~{;~;::
Sheets, steel, No. 27, box anneal~d, mill ..••••...........•......•.••....• •-·-····· .. pounds ..
Skeip, grooved, Pittsburgh.··-··········-·············· ..............••........ 100 pounds ..
Spikes (track equipment), ½·inch and larger, milL •............................•...... do ....
Strips, steel, cold rolled, Pittsburgh. ---····················-·······················POUnds ..
Structural steel, mill •..........•..••...••••....•••...•.••••••.••..••••••...•..•• 100 pounds ..
Terneplate, No. 8, I. C., milL •••••••••..•••••••••••••••..•••••••••••••.. boxes (of200 lbs.) •.
~[~ t\!\~~·il~i~h:~k_-.-_-_-_-_-_-_-_-_-_-_-.-.:·.-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_·_-_-_-_-_-_-_·_-_-_-_-_-_-_-_-_-_-_-.1.~.~~.~~~=:
Vises, solid box, 50 pounds, New York ... ••·······•-·······················•·•·········each ..
Wire, fence, annealed, plain, Pittsburgh .....•.•......••.......•........••••.•.. 100 pounds ..
Wire, fence, barbed, galvanized, mill. .•.....•••..•...•••.•.•••......•..•••..••.•••••.. do ••..
Wire, fence, galvanized, No. 9b.Pittsburgh.•...•.•••..•••........••...•.•.•••••••••.••• do ••..
Wire, fence, :woven, Pittsburg ......••....••.•..................••.•....•••.••.... net tons .•
Wood screws, l•inch, New York ••....•.••••••..........••...••.•••••••••.•.••••••.••• gross ••
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
10,978
3,093
135
2,017
2,017
17,823
19,653
101,344
3,394
1,187,442'
2,593
284,774
6,074
15, 782
117, 758
4,536
9,885
8, 7ZT
5,772'
1,621
6,997
461
268
4,956
63,879
98,393
14,334
17,820
53,474
· 2,362'
297
360·
2,241
2,241
1,818
113
1,937
25,319
11,161
766
9,826,808
l 766
5,760
385,086
730
3,399
248
2,708
2,066,886
2,721,735.
5,799,127
13,401
3,714
I, 119,876.
90,970
1,2~4
8,803
37,976
1,557
18,755
4,347
5,185
451
74,300
STABILIZATION OF COMl\1:0DITY PRICES
283
Quantities used as weights in constructing inde:i; numbers of wholesale prices-Con.
GROUP VI.-METALB AND METAL PRODUOTS-Continued
Commodity
Quantity
(000
omitted)
NONFERROUS METALS
1~1iri~i~~!f!e~=::::::::::::::::::::::::::::::::::::::::::::::::::::::::::~]t::
,i
Brass rods, yellow, round only,
to 2¾ inches, milL _________________________________ do ___ _
:~::
::i\~:,•~~-sizei;miii:::::::::::::::::::::::::::::::::::::::::::::::::::~g::::
Brass i~ie:::
wire, yellow,
No. 8, round, mlJl _________________________________________________ do ___ _
Copper, ingot, electrolytic, refinery ______________ -------------------------- ___________ do ___ _
Copper rods, drawn, 1 to 3)4 inches, round only, mill__________________________________ do ___ _
Copper, sheets, hot rolled, New York _________________________________________________ do ___ _
Copper, wire, No. 8, miJJ ________________________________ -------------------------- ____ do ___ _
Lead, pig, desilverized, New York. ___________________________________________________ do ___ _
Lead pipe,
New
York
_________
------------------------------------------- ______ 100 pounds._
____________________________________________________________
pounds.
Nickel,
ingot,
New
York
Quicksilver, domestic, New York ______________________________________ flasks of 76 pounds __
Silver, bar, fine, New York ____ -------------------------- ___________________________ ounces ..
Solder, delivered _______________ • _. ______ • ·- ____ ·-- _____________________ • ___ •.. _____ pounds __
'Zinc,
fl::~. P!te:::v
1Yir~~jg____ .. _-----·-----.. ·---------------·-----------------____ 100 -po:ids__
slab, pig, New York-----------------·----------------·----------------------·Pounds __
343, >27
26, 751
62,300
216, £53
399,COS
133,584
59,448
2,651,469
337, 152
220,343
422,468
I, 585,996
818
55,821
35
60,881
86, 150
177,327
1,425
I, 218,228
PLUMBING AND HEATING
Boilers, beating, New York ___________________________________________________________ each __
Boilers, range, 30 gallons, galvanized, Chicago _________________________________________ do ___ _
Closets, water, without fittings, Pittsburgb ____________________________________________ do ___ _
Lavatories, plant______________ . _______________________________________________________ do. __ _
Radiation, steam or water system, New York ___________________________________ square feet __
Sinks, 8-inch back, witb apron and drainboard, factory ________________________________each__
Tubs, bath, 5-foot, no fittings, factory _________________________________________________ do ___ _
Tubs, laundry, 2-part, cement, without trap, Chicago ____________________ • ____________ do ___ _
416
713
1,617
1,590
152,831
1,503
1,154
243
GROUP VIL-BUILDING MATERIALS
BRICK AND TILE
Blocks, concrete, plant _________________________ -· _____ ------ __ -· ______ -- _-- ___________ each __
Brick, common, building, plant (composite price) ______________ • _________________ thousand __
Brick, fire, clay, straights, Plttsburgh ___ ·-------------·-----·---·---------------------do ___ _
Brick, front, New York, light-colored_ --·······-····----·-----···-··-······---··-··---do_ •••
185,126
6,348
913
Brick, silical~tandard, carlots, plant---··-·----·--·--····-······--·····-····-·····--··do ___ _
Tile, drain, 1'1ew York.·--···--·-·-···-···-----···----····--·······-···thousand linear feet__
Tile, floor, unglazed, factory·-----·------·---·-····-·-·······-·····--····-······-square feet __
270
290
~~i~: r:;J~,:n~~i:1~~~~:-_ ~~~= :::::: :: ::: :::::::::: :: ::::::: :: ::: ::: ::::::: ::: ====~g::::
~R:;
~g~~ ~~:~:~·n?Ci~:~~:::::::::::::::::::::::::::::::::::::::::::::::::::::s~:;:~::
Tile, wall, glazed, white, New York·-··-··-···---·-------·------·--------·---·-"quare feet_.
2,266
337
299
18,982
472,412
369
36,116
CEMENT
Portland (composite price), plant_ ••• ·-.-· ____ -_-___ ----- ---- • -··----·. ··--· ·-·· ••••• barre!__
171,926
LUMBER
California redwood, 4/4, New York .•·---·--·-·-··---·-··--·-·-···-····--····-·--···-M feet_.
528
307
§~i~ir:~~~t~ri;~::~:-:-:-~-:~:_:_:_:_:.:_:_:_=_=.=.=.=.=.:_=.=.=.=_:_=.=.=.=.=.=.=.:_=.=_=_=.=.=-=.=.=-=-============~~::::
269
571
Douglas fir, No. 1, common sheathing1 mill ••.·-·---······--·······--··-·····-·--····--do_. __
Douglas fir, No. 2 and better, drop sining, milL-·-·····-·-··--··--····-·-·-··------·-·do ___ •
Gtim1 plain, sap,'St. Louis •• --·------·---···---··---···--······-·······--···---·-··-·-do_ ••.
Hem.tock, northern, No. 1, Chlcago·--·----···-·-·-··-···--··-···-·-·-··--·····---···--do._ ••
Maple, hard, No. 1, Chicago._. ·-·--··-·-··-···------···---····-···-········--··-·····do••••
Oak, plain, white, No. 1, common, Clncinnati---································-·-·-do••••
6,424
2,141
!~::
~!i~::1f~i~l:~1t:=========================================================!t::
[;~~e_;_~te~n~~g=~~~::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::~g::::
Pine, western yellow, Ponderosa, No. 1, common, mlll •••••••••••• ---·················do ••••
Lath, vouglas fir, No. 1, milL_·········-·······-····---···-·····-······--····-·thousands••
1,106
2,073
794
2,278
1,335
4,143
6,905
3,043
379
548
1,406
1 879
2,971
tii~::~!i~l~a;1~!:;~========================================================!t::
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
5,125
284
STABILIZATION OF COMMODITY PRICES
Quantities used as weights in constructing index numbers of wholesale prices-Con.
GROUP VIL-BUILDING MATERIALS-Continued
Commodity
Quantity
(000
omitted)
PAINT AND PAINT MATERIALS
Enamel, Chicago •..•••.••.••••••••.•••.•...•••••••.••••••••••••••.•••••••••••.•.••• gallons••
House paint, insld~ fiat, all colors, New York ••••...••••••••••••••••.•.•.•••....••.••. do•••.
House paint, outslae, wnite, gloss, Chicago ••.••••.••••••••••.•.••••••.•...•••••.•••••• do ••••
Deck and porch paint, all colors, Chicago •...•••••••.•.••••••••••••••••••••••••••••••• do ••••
Roof and barn paint, red, Chicago ..•.•..•.•.•••.•.••....••••.•••.•••••••••••••••••••• do .•••
Varnish, builders' floor, bulk, 5's, Chicago •••.••.•.••...••.••••.•••.•••••••••••••••••• do ••••
Barytes, western, New York .•.....•..••••.•...•.•.••.•••••.•••••.•.•••••••••••••• net tons ••
Colors, black bone, powdered, New York ..•••.•••..••••.••.••••••••••••••••••••••• pounds ••
Colors, black carbon11 New York ....•••..•..••••.•..•••••••••••••••••••••••••••••••••. do ••.•
Colors, Iron oxide, back, dry, New York •••.••••••..••••••••••••••••••••••••••.••••••. do .•••
Colors, lampblack, velvet, New Y ork••••.•..••••••.•••••••.•••••••.••••••••••••••••••. do .•••
~~\~?~~~~:~t, 01::.":. :~:~~==::::::::::::::::::::::::::::::::::::::::::::::::::~~====
Ethyl acetate, anhydrous, New York .••••••••..••...•••..•••••.....••••••..••••••.••• do .••.
8:~~~= ~i~~~';,1-?!~·yorii:::::::::::::::::::::::::::::::::::::::::::::::::::::::=~~::::
~~~1.?l~t~~1:i~i~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Jr~~
Lithophone, domestlcyNew York •••••.•••..••.•••.•••••....••••••..•••••.••••••••••.• do .•••
17,157
36,811
49,082
6,135
6,135
51,562
344
57,055
282,436
131,400
10,198
4,391
29,215
56,939
15,328
14,613
37,519
74,140
300,438
145,095
387,251
104,664
~it~~!~l~J~~ii=======================================================:at::
Rosin, B grade, New York•••••..•...••••••••••••••••••••••••••.•••••.• barrel of 280 pounds ••
Shellac, T. N ., New York ...•••.••••••••••••••••••••••••••••••••••••••.•••••••••••• pounds •.
Turpentine, southern, New Y ork ••.•.•••••••..••••••.....•••••••••••••.•••••..••••• gallons ••
Whiting, commercial, Imported, New York••••••••••••.••••••••••••••..•••••••. 100 pounds ••
Zinc oxide, leaded, grades, New York ••••••••••••••••••••••••••.•••••.•.••••••••••• pounds ••
764,701
100,667
4,456
40,127
36,270
2,698
335,438
PLUMBING AND HEATING
Duplicated In metals and metal products.
STBUCTURAL STEEL
Duplicated In metals and metal products.
OTHER BUILDING MATERIALS
t:_:,8l!in~:Ccin~finc'ffuii1.1cat.ed.·1n·niei111s·an"iimetai"i5rodiiciii.5····················net tons ••
Board, plaster, Chlcago.•••••••••••••••••••••••••••••••••••••••••••••••••••1,000 square feet ••
Board, wall, 48 Inches wide, Chlcago •••••••••.••••••••••••••••••••••••••••••• ~ •••••••• do ••••
Butts. (Duplicated In metals and metal products.)
Doors, white plnel 5-panel, No. 1, dellvered •••••••••••••••••••••••••••••••••••••••••••each ••
Frames, door, wh te pine, Chicago.•••••••••••••.•••••••••••••••••••••••••••.•••••••per set ••
Frames, winaow, western pine, Chicago ••.••••••••••••••••••••••••••••••••••••••••••• do ••••
Glass, plate, 3 to 5 square feet, New York•••••••••••••••••••••••••••••••••••••••square feet ••
Glass, plate, 6 to 10 square feet, New York ••••••••••••.•••••••••••••••••••••••••••••••• do ••••
Glass, window, single A, lobbers' price ••••••••••••••••••••••••••••••••••. per 50 square feet ••
Glass, window, single B, obbers' price •••••••••••••••••••••••••••••••••••••••••••••••• do••••
Gravel, building (compos te price), plant.•••••.•.•••••...•••••••••••••••••••••••••net tons ••
Knobs, door. (Duplicated In metals and metal products.)
Lime, building, common (composite price), plant ••••••••••••••••••••••••••••••••. net tons ••
Lime, hydrated (composite price), plant ••.•.••••...••••••••.••••••••••••••••••••••••• do ••••
Locks. (Duplicated in metals and metal products.)
Nalls, wire. (Duplicated in metals and metal products.)
Pipe, black steel. (Duplicated In metals and metal products.)
Pipe, cast-iron. (Duplicated In metals and metal products.)
Pipe, galvanized. (Duplicated In metals and metal products.)
Pipe, lead. (Duplicated In metals and metal products.)
Pipe, sewer! delivered, New York•••••••••••••••••••••••••••••••••••••••••••••••••••••• feet ••
Plaster, Ch cago•••••• · .••••••..••••••..•••••..•••••••.•••••••••••••••••••••••••••• net tons ••
Prepared rooting, Individual shingles, factory ...•.••••••.••••••••••••••••••••••••••squares ••
Prepared roofing, medium, factory ••••••••...•...•.•••••••••••••••••••••••••••••••••.• do ••••
Prepared roofing, slate surface, factory ••••.••..••••••••••••••••••••••••••••••••••••••• do ••••
Prepared roofing, strip shingles, factory •••••••••••.•.•••••••••••••••••••••••••••••••••do ••••
Roofing, slate, sea gr_1M:111 quarry ••••••••••••••••••.•.•••••••••••••••••••••••••••••••••do ••••
Sand, building (compo"1te price), plant •••••••••••••••••••••••••••••.••••••••••••••net tons ••
Sash, window (only), 2 lightsii white plne,:dellvered•••••••••••••••••••••••••••••••••••each ••
Sheet, copper. (Duplicated n metals and metal products.)
Bheet, zinc. (Dupllcsted In metals and metal products.)
Stone, crushed, l:½•lnchtfiew York•.••••••.•••.•.••••••••••••••••••••••••••••• cublc yards••
Tar, pine, kiln burned, New York •••••••••••.••••••••••••••••••••••••••••••••••••••ga]lons••
Terneplate. (Duplicated In metals and metal products.)
Wire, copper. (Duplicated in metals and metal products.)
Wood screws. (Duplicated In metals and metal products.)
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
5,281
307
1,113
16,791
5,270
5,270
66,717
66,717
4,418
4,418
80,666
1,979
l,441
189,597
3,637
5,960
19,643
15,596
6,m
43,244
34,000
52,423
438,261
285
STABILIZATION OF COMMODITY PRICES
Quantities used as weights in eonstructing index numbers of wholesale prices-Con.
GROUP vm.-CHEMICALS AND DRUGS
Quantity
Commodity
(000
omitted)
CBE:WCALS
Acid, acetic, 28 per cent, New York ••••••••••••••••••••••••••••••••••••••.••••• 100 pounds ••
!~ii ;~:~t~~f;1~~=:~=:=)~=:=:=~~:=:=)~)~~~~.~~~.~~.~~·~·~·~~·~·~·~·~·~·~·~~.~.~.~.~.~.~.~.~.~.~i~Il;~~
1
Acid, olelc, distilled, New York •••••••••••••••.•.•••••.•••.•••••••••••••••••••••••• pounds ••
Acid, phosphoric, 50 per cent, U. 8. P., New York .•••..••••.•••••••••••••••.•..•••••• do ••••
Acid, salicylic, U.S. P., New York .••••••••••••.•••••.•••.•••.•••••••.•••.•••••••.•.•do •••.
Acid, stearic, triple pressed, New York••••••••••••••••••••••••.••.•••••••••••••••••••• do ••••
Acid, sulphuric, 66°, works••••••..••••.•••••••••••••••••••••••.••••••••••••••••••••••• tons ••
Alcohol, non potable, denatured, works .....•.•.•••.•••••••••••.••••••••••••••••.•••gallons ••
Alcohol, nonpotable, wood, refined, New York .•••••••••••.•••••••••••••.•.•••••.•.•.• do ..••
Aluminum sulphate, commercial, works ••.••••••..•••••••.•••..••.•.•.•.••••••• 100 pounds ..
Ammonia, anhydrous, New York •.••••••••••••••••••••••.•••.•••.•••••••••••••••••pounds ••
.:.~~=::::::::::::::::::::::::::::::::::::::::::::::::::::
!~liin
a~~N~~· ~ik~~:
::a~::::
Arsenic, white, powdered, New York ...•••.•••••••••••••••••••••••••••••••••••••••••• do •...
Baking powder, !•pound can, New York •••••••••••••••••••.•••••••••••••••••••••••••• do .•.•
Baking powder, 10-pound can, Chicago .•••.•••••.•••••.•••.•••.•••.•••.•••••••••••.•• do ••.•
!~~:;srai~!:fe:~*1r:::::::::::::::::::::::::::::::::::::::::::::::::::::::!~.~:::
Calcium, acetate, New York •••••••••..•.•.•••••••.•••••••••.•••••••••••••••••••100 pounds ••
8~~1:!::
~8t1~!~·ife~lo~fc~::::::::::::::::::::::::::::::::::::::::::::::::::::::~.~~~~::
Calcium, chloride, solid, 73-75 per cent, works•••••••••••••••••••••••••••••.•••••••..•• tons •.
Coal tar colors, hlack, direct, New York ••••.•••••••••••••••••••••••••••••••.••••••• pounds••
Coal tar colors, brown, sulphur, New York .•••••••••••••••••••••••••••••••••••••••••• do.•.•
Coal tar colors, indigo, paste, New York •••••••••••••••••••••••••••••••••••••••••••••• do •..•
Coal tar colors, Jet, nigrosine, New York •••••••••••••••••••••••••••••••••••••••••••••• do •.••
Coppers , works ..•.•.•.•.•.•.•.•••••••.••••••••••••••••••••••••••••••••••••••••.•••••• tons ..
Copper su1phate, New York••.•••..•••••••••••••••••••••••••••••••••••••••••••• 100 pounds ••
Copra. (Duplicated In foods.)
~~X:f~et~ife.a!~;k~~~~s_-_-.·.·_-_-.·_-_-_-_-_-_-.-_·_-_-_-_-.·_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-:~~::
Logwood, extract, solid, New York •••••.•••••••••••••••••••••••••••.••••••••••••••••• do .•••
Napthalene flakes, New York••••••••••••••••••••••••••••••••••••••••••••••••••••••••• do .•••
Pine oil, steam distilled, new York ••••••••••••••••••..•••••••••••••••••••••••••••••• gallon ••
Potash caustic, 88 to 92 _per cent, works•••••••••••••••••••••••••••••••••••••••••••••pounds ••
Quebracho extract, solid, 63 per cent, l',ew York ••••••••••••••••••••••••••••••••••.••• do ••••
i~i:fri~i~idb~=~:-::::::::::::::::::::::::::··:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::~~;=~~;::
~~=:
a~····
Soda ash, light, 58 per cent, works .••••••••••••••••••••••••••••••••••••••••••••• 100 pounds••
:~tn:~i:orks••••••••••••••••••••••••••••••••••••••••••••••••••••••.•••••.•
Sodium silicate, 40 per cent, works •••••••••••••••••••••••••••••••••••••••••••••••••••• do ••••
Sodium sulphiae, 30 per cent, crystals, New York••••••••••••••••••••••••••••••••••••• do ••••
Sulphur, crude, mines•.•.•••••.•••••••••••••••••••••••••••••••••••••••••••.•••.•••••••tons .•
Tallow, packers, prime, Chicago ..•••.•••••••.••••••••••••••••••••••••••••••••••••• pounds ••
i~:t~t1f~~;,;;"~~~tan<i"com:··cnui>iiciaie<i"iii.roii<is.Y····························ga11on ••
Vegetable oil, palm kernel, '.!llew York••••••••.•••••••••••••••••••••••••••••••••••••pounds ••
f~~~er(J':i~'riiif::ii1ioo<iiiJ·······································do ••••
·~=~::~!: ~fl;
913
22, 198
81,265
3,560
627
56,470
26,579
6,693
42,610
6,475
101,315
6,617
6,631
214, 6111
38,213
14,394
57,645
104,045
104,045
24,860
2,064
85
1,386
29,300
338,902
489
22,857
26,540
43,765
16,166
60
716
189,680
39,116
16,882
66,981
2,811
16,201
208,898
1,173
231
4,048
32,946
2,617
13,063
10,961
805
2,267
414,901
14,426
66,518
210,SM
DRUGS AND PHABJIIACEUTICALII
Acid, citric, domestic, crystals, New York•••••••••••••••••••••••••••••••••••••••••• pounds••
Acid, tartaric, crystals, New York •••••••••••••••••••••••••••••••••••••••••••••••••••• do ••••
Alcohol, grain, New York .•••••••••••••••••••••••••••••••••••••••••••••••••••• proof gallon ••
Cafflne, contract, 1,000 pound lots, :r.ew York ••••••••••••••••••••••••••••••••••••••pounds ••
Camphor, Japanese, refined slabs, New York •••••••••••••••••••••••••••••••••••••••.• do ••••
Castor oili medicinal, New York ••••••••••••••••••••••••••••••••••••••••••••••••••••••do••••
Chlorine, iquld, worxs .•••.•••.••••••••••••••••••••••••••••••••••••••.•••.••••• 100 pounds ••
Chloroform, U.S. P., New York .••••.••••••••••••••••••••••••••••••••••••••••••••••pounds ••
Cream of tartar, powdered, New York ••••••••••••••••••••••••••••••••••••••••••••.••• do ••••
Epsom salts, U. s. P., New York •••••••••••••••••••••••••••••••••••••••••••••• 100 pounds ••
Glycerin, chemically pureJ.New York .•••.•••••••••••••••••••••••.•••.••••••••••••. pounds ••
Iodine, resublimed, New York ••••.•••.•••••••••••••••••••••••••••••••••••••••••••••••do ••••
Menthol1 jmported, New York •••••••••••••••••••••••••••••••••••••••••••••••••••••.• do ••••
Opium, u. S. P., New York ••••.•.•••.•.•.•••••••••••••••••••••••••••••.•••.••••••.••do ••••
Peroxiae of hydrogen, U.S. P., New York ••••••••••••••••••••.•••.•gross (4-ounce bottles) ••
i~:~~lu~·
i~c1~·.;, W':V.V~\-.::: :::::::::::::::::::::::::::::::::::::::::::::::::::~.~~~==
Quinine, sulphate, domestic, New York ••••••••••••••••••••••••••••••••••••••••••••ounces ••
Soda phosphate, commercial, New York••••••••••••••••••••••••••••••••••••••••100 pounds ••
Strychnine, alkaloid, crystals, New York ••••••••••••••••••••••••••••••••••••••••••• ounces ..
Zinc chloride, granwar, New York ••••••••••••••••••••••••••• : •••••••••••.•.•.•••••pounds ..
111442-32-PT 1--19
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
8,914
8,334
10,463
431
7,199
62,807
2,3o0
3,027
7,514
772
108,168
874
325
157
193
12,484
487
3,472
2,599
434
66,211
286
STABILIZATION OF COMMODITY PRICES
Quantities used as weights in constructing index numbers of wholesale prices-Con.
GROUP VIII.-CHEMICALS AND DRUGS-Continued
Quantity
Commodity
(000
omitted)
FERTILIZER MATERIALS
Ammonia sulphate, bulk, ex vessel, ports---···-·------·-··-·-----------------·---·net tons __
Bones, ground, Chicago_:· .. _·-.·- ____ • _____ ·--·-·-·· ____ ·-._---·-·-_·-- ____ ·- __ ··-·-.do.·-Phospnate roc1r, Florida, land pebble, mlnes_··-···--··---··----·----·-·-·-------·-···do ___ •
Potash, kalnit, 14 to 16 per cent, New York-------------····-------····-·-·-····-·····do_._.
Potash, manure salts, 20 per cent, New York ••.••.••••• ·-·····-·······-·-·············do •• _.
Potash, murlate, 80 to 85 per cent, New York.·-···-········--·-··-···-·-·············do_ •••
Potash, sulphate, 90 to 95 per cent, New York••·-·············-·--··-················-do __ ••
Sod11 nitrate, 95 per cent, New York •••••••• ·····-·-······· ·-··················100 pounds .•
~~{fg~:i58gr:~:altimore ••••• ·-••• -···· .••••••• ··-· -· •••••••• ··-·· •••.••••• ·•••
706
80
3,923
100
375
319
·aa
net·~:··
11,il9
2,483,
346
Middle Atlantic.. '·-·-•••••.•••••• -· .•. ··-_ •..• _···-.·-- ..••. ·-. __ ·-... ··---· •.•••net tons_.
Middle West •. _..••••••••••.•.. _•••.... ___ .·-.•.•.. ·-._-· •.• ·-••.• ·-.•.•.•. __ ••••••.. do_. __
New England_······-·-··············--·-··-·-··········-···-··············-········--do .•••
South Atlantic 8--3--3 •• _••••• ·-••• ····-·-•••••••••••••••• ______ •••••• ·-•••••••••••• ··-••do ••••
720
665
227
FERTILIZER, MIXED
~~~ig ~!!:~c~r;~uthwest:~·.·.·_-_-.-.·.~~==========================================::::~t:::
1,885
1,385
1, 1()8
GROUP IX.-HOUSE·FURNISHINO GOODS
FURNISHINGS
Bl11I1kets, cotton, colored, Boston·--·················--·········--···············-····Pairs._
Blankets, cotton warp, 3¾ pounds, factory ···········--············-·-·············-··do ••• _
Blilnkets, wool, 4 to 5 pounds, factory ·-····--···········-······-··-················POUDds._
§=g: wi:!si7L~Ef~==·=·=====================================================:Jt::
Comfo
@FedFRASER