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Remarks by Governor King
at the dinner held in connection with the
joint meeting of the Boards of Directors of the
Federal Reserve Bank of Cleveland and its branches
Erie, Pennsylvania
April 12, 1961

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I am happy to be with you tonight.

As a member of the

Board of Governors of the Federal Reserve System, I am kept quite
busy with many administrative duties, but I believe it is equally
important to keep old contacts alive and make new ones.

Many decisions

are made in Washington, but the thinking that produces such decisions
is going on all over America before it ever reaches Washington.

As a

consequence, I always feel it is a privilege to have an opportunity
to leave the city on the Potomac for a visit to real grass-roots America
Many who inhabit the beautiful city of Washington believe that it is
the fount of true wisdom, but in this I do not agree.

The great wis-

dom of America is scattered across the entire United States and no
section has a monopoly on wisdom.
Having said that I came here hoping to learn, I am now in
the awkward position of being expected to talk when I would prefer
to listen.

I remember the adage that one of Washington's political

sages uses to help orient young Congressmen.
talking, you ain't learnin1."

He says, "When you1re

Believing that there is a good deal

of truth in this statement, I will now proceed to talk, but I do
promise you that it will not be lengthy in the hope that my return
to silence will afford me an opportunity to learn from you.
A question that keeps coming back to me again and again is:
How will this great country of ours respond to its new position in the

I say new position because we have found ourselves in recent

years to be a nation which has developed the habit of sending more of

our funds abroad than we take in from the rest of the world.

Of course,

this is partly a result of our assistance to foreign nations in the development of their economies subsequent to World War II.

We have helped

them become productive and prosperous because we know that weak allies
are almost as bad as none.

But now that our allies in the cause of

freedom and competitive enterprise are strong, our own position in
world trade is challenged by these same allies.

They are also challeng-

ing our position as reserve banker to the free world.
our power and prestige has abated at the present time.

This threat to
While it would

be nice if it has gone away forever, perhaps a wiser choice of words
would be to say that this threat has merely been postponed.
hope that it has gone away forever,

We all

But, do we dare take unnecessary

I hope not, because the stakes are high.

Fate is working

hard now to create a new and great profile in courage.

We should

hope the appointment for the sitting will be kept; for, indeed, the
fate of the great American vision of freedom might hinge on the courage
of one man.
It should be obvious that we should do nothing —
nothing —
at present.

and I repeat,

to artificially push prices of anything higher than they are
And yet Congress is seriously considering an increase in

the minimum wage and extension of coverage to several million not presently covered.

Even though some of us approve many aspects of the

social revolution that has occurred in the United States in the last
30 years, I nevertheless believe that such legislation at this point
is unnecessary gambling with our future.

If all of the results could

be said to be good, then perhaps such a gamble might have better hopes

- 3 -

of success than at the present time when a side result is surely to
be considerably more unemployment in certain sections of the United
There really aren't many alternative courses of action, as
I see the matter.

Either we assume the burden that goes with responsi-

bility or we decide that responsibility just isn't for us and, accordingly, we abdicate our position in the world.

The latter is an un-

pleasant thought, but it is one that we must contemplate.
I heard a distinguished historian speak a few days ago, and
he said that what is different about our position in the world today
is that we are closer to each of these possibilities than we ever have
been before.

Time will eventually require a decision from us.


world will probably allow us adequate time to make a decision, but I
doubt that it will permit us to avoid one.
Hy father has demonstrated to me many times the advantages
of being deliberate and slow in decision-making.

And I have seen the

passage of time solve many problems much better than man could have
done in a sense of urgency.

But the nature of some problems is such

that they become more aggravated by timidity and hesitation.

Of course,

the problem I refer to is our perennial deficit in our balance of payments.

Perhaps it will just go away if we do no more in attacking it

than we are doing today.

I do not believe it will.

Until we take more

positive steps than we are at present, it is difficult to see how we
can launch into a period of high-level,sustainable growth.

As long

as our future course is in doubt, the economic wheels will probably
have difficulty in reaching full sp^fed.

- a As most of you probably know, the Federal Reserve System
cannot solve this pressing problem.

While we can be helpful, the

problem is one which all our people must solve together.

Reverting to

earlier affirmation of faith in the pood common sense of our people

as a whole, I see a basis for optimism.

But this grass-roots thinking

must be transmitted to those in authority.

Here, then, is a responsi-

bility and A challenge to all private citizens —
be informed and to inform others —

a responsibility to

and a challenge to find ways to

make one's thoughts understood.
Historically, the Federal Reserve System has had relatively
little contact with foreign central banks and international banking

I believe this has been in conformity with the intent

of Congress, and I for one do not believe that our best interests would
be served by any loss of sovereignty.

However, I do believe that our

present position in international economics will require us to maintain
better liaison with our foreign friends than we have in the past.
future and theirs are intertwined.


More frequent contact and better

liaison would require confidence on both sides of the Atlantic.


have suggested, that some sort of world Federal Reserve be organised,
but I can hardly believe that the American people would consent to our
Participation because an inherent part of any such plan is a loss of
sovereignty to the participants.

Perhaps my southern heritage influences

roe to place more importance on the role of the States in our union than
do others, but I believe we are all united in our determination to protect our sovereignty, which I believe is the taproot of freedom.