Page images
PDF
EPUB

practicability or to eliminate it from further consideration, and I think that the time has come when it is possible to bring about such an experiment.

Senator BROOKHART. You say your bill is the same as the chairman's, except he has included all commodities?

Senator HOWELL. Yes; and I have included but one commodity. Senator BROOKHART. And both of them are permanent; that is, they may run right along?

Senator HowELL. Yes.

Senator BROOKHART. Well, the chairman's bill would not be an experimental bill. It is a bill to put into effect the equalization principle.

Senator HOWELL. No; his would also be an experimental bill, but it would apply to all crops, and I do not think that you can get such a bill through this Congress; but I do think that, looking at it as an experiment, it would be possible to get through such a bill as I have introduced.

Senator BROOKHART. You heard Mr. Ewing's statement here that agriculture is in such position that it can not wait for experiments. In fact, it is demanding the most drastic action immediately to save it.

Senator HOWELL. I acknowledge that we need the most drastic action, but I do not expect that this Congress, before the close of this session, will provide any such measure, and, as I have said, I want this as a consolation prize-one that, at least, we can get through. If we can get through an all-inclusive bill, well and good. I am simply suggesting this as a possible alternative.

Mr. Chairman, I thank you for your courtesy.

The CHAIRMAN. Yes, Senator, we are always glad to have your

statement.

Now, is there anyone else who cares to ask any other questions of Chairman Stone.

Senator FRAZIER. Mr. Chairman, I wanted to take up just a question or two.

The CHAIRMAN. Very well. Mr. Stone, you may resume the stand.

STATEMENT OF JAMES C. STONE, CHAIRMAN FEDERAL FARM

BOARD-Resumed

Senator FRAZIER. Last month I wrote to Chairman Stone in regard to S. 1197, the bill to refinance the existing indebtedness of the farmers, and Mr. Stone wrote back a very intelligent letter as to his opinion of the bill. There were one or two items in it I wanted to bring out a little more fully, however. I want to say that Mr. Stone expressed a better understanding of the bill than any of the other Government officials that the bill was submited to, and a more sympathetic interest in the need of agriculture. I want to read a paragraph of Mr. Stone's letter for the record. [Reading:]

In examining your bill a few questions have arisen as to how it would work out if put into operation. As I understand the measure it would refinance the agricultural indebtedness of the country on the basis of a fair value of the land plus 50 per cent of the value of improvements, and at a rate of interest not to exceed 11⁄2 per cent. The Federal reserve banks would issue a large volume of paper money based on land in exchange for the farm loan bonds. This money put into circulation would be expected to raise the price level so

that farm products would sell at a price which would justify land values at or above levels at which debts were incurred.

I think that is exactly the situation, Mr. Stone. If this bill should be put into effect it would undoubtedly raise the price of land values, because the price of farm products, I think, would go up and the price of land values and the price of farm products, of course, must go in accordance with each other.

Mr. STONE Continues. [Continuing reading:]

By keeping a good deal of this paper money in circulation the price level would be maintained at some level substantially higher than that prevailing at present.

And, of course, that is what is to be hoped, because that is what is necessary in order to save the farmers. [Continuing reading:]

One of the questions raised concerning your bill is if the general price level were raised-and presumably it would be under the provisions of the billwould the prices of farm products be kept on a permanently high level?

In my opinion, Mr. Stone, the prices would be kept on a higher level and, of course, I think we need some other legislation along with this refinancing measure to protect the prices of farm products, to stabilize them. But, in my estimation, this would help materially. [Continuing reading:]

Would the bill necessitate the United States going off the gold standard and substituting therefor a managed currency system based partly on land?

In my opinion, it would not, but that is perhaps just a matter of opinion. Personally, I have never been so strong for the gold system, as it is called, as a great many people. It is more or less a myth to me anyway, and if the so-called gold system or standard is to blame for the conditions we are in at present, it would not hurt my feelings a bit if it is changed somewhat. I can not see any better security than farm lands that produce the food products for the issuance of Government money, or paper money.

And then Mr. Stone further states [continuing reading]:

I am not quite clear as to whether you would expect to retire the issue of Federal reserve notes by later selling the bonds to the public.

Of course, it is based on the existing indebtedness, that is, refinancing the existing indebtedness, and unquestionably the rates at this rate of interest, 112 per cent, the general rate of interest would be lowered on real estate, and I think on city property, and undoubtedly the money that would be put in circulation by the issue of $2,000,000,000 or $3,000,000,000 of Federal reserve notes would put money into a revolving fund for business that would purchase those bonds at that rate.

Mr. Stone raises another question [continuing reading]:

In other words, is the bill adequate to prevent overinflation and then a later drastic deflation of farm prices?

The bill provides that when the per capita circulation shall reach $75 per capita the Federal reserve notes may be retired. That would prevent overinflation, I believe.

That

It also provides that the retirement shall not be to exceed more than 2 per cent of the outstanding notes issued per year. would prevent an undue deflation following the inflation. I think Mr. Stone will agree that we need some inflation at the present

time.

Mr. STONE. Senator, I have not called it inflation. I have called it deflation in the value of the medium of exchange.

[ocr errors]

Senator FRAZIER. Well, I mean an inflation in the amount of currency.

Mr. STONE. I do not think the difference is very great, but it sounds much better.

Senator FRAZIER. I understand, yes. That is about all I care to say unless you wish to express yourself further. I appreciate the opinion you have given.

Mr. STONE. NO; I have nothing further than I have expressed in that letter. I have given you my idea of the bill.

Senator BROOKHART. Mr. Stone, has not everybody who has studied this question of commodity prices at this time reached the conclusion that the gold standard has put our prices too low?

Mr. STONE. I do not know that they have all rested it on that basis, Senator, but I think almost everyone who has studied farm conditions has arrived at the conclusion that our medium of exchange is out of line with what it was at the time the debts accrued.

Senator BROOKHART. That means that the gold standard has appreciated in value and, consequently, depreciated farm values?

Mr. STONE. When you get into the gold standard, I think almost everything in the gold standard is in the confidence in the Government. When you give up your gold value to-day, you have $1.60 behind the Government obligations.

Senator BROOKHART. The gold standard for reserve depends on the taxing power of the Government for its size.

Mr. STONE. For its size and value; yes.

Senator BROOKHART. And so the value of our money, whatever it may be, depends on the taxing power of the Government, as well as Government bonds depend solely on that. Now is it not easier to extend both the taxing power and the Treasury notes without interest than it is to extend bonds even with interest?

Mr. STONE. I think things like that, Senator, might be a little dangerous in more ways than one.

Senator BROOKHART. It is dangerous to get your imagination going and not overdo it.

Mr. STONE. You have to take that into consideration.

Senator BROOKHART. Suppose it is intelligently controlled?

Mr. STONE. You have to take that into consideration, and that is the reason I came to the conclusion I did in this statement I presented to the committee yesterday. I think that accomplishes the same result, only it does it under control.

Senator BROOKHART. You think that if Congress would provide for a Treasury note issue of $2,000,000,000 or $3,000,000,000, that that would mean that they must at some time or other provide for a good many billions more?

Mr. STONE. That may develop. That is entirely speculative.

Senator BROOKHART. Now supposing they should do that, you can, retire the entire national debt with Treasury notes and still sustain them better than all the bonds on which we pay interest, and we would not pay interest on the notes. And would we not have the same taxing power on the notes as on the bonds?

Mr. STONE. You have the same taxing power. In fact, you have any taxing power which Congress may establish. I do not think the

question of taxing power is involved, because whatever Congress does, you have the same resources with which to tax.

Senator BROOKHART. We had just reached the conclusion-I thought you agreed with me-all that is behind the bonds is taxing power, and all that is behind the gold is taxing power.

Mr. STONE. Not all, because you have some actual gold base. Senator BROOKHART. Well, we got that through taxes, did we not? We had to tax somebody to get every ounce of gold the Government owns.

Mr. STONE. All wealth comes out of the ground originally.

Senator BROOKHART. Yes; but when the Government gets it it taxes somebody.

Mr. STONE. That is right.

The CHAIRMAN. Are there any further questions? pause.) We thank you, Chairman Stone.

(After a

Senator FRAZIER. Mr. Chairman, I would like to insert a copy of

Mr. Stone's letter to me in the record.

The CHAIRMAN. Yes; we will be glad to have it. We thank you, Chairman Stone, for your kindness to the committee.

(The letter of Chairman Stone to Senator Frazier is here printed in the record in full, as follows:)

Hon. LYNN J. FRAZIER,

United States Senate.

MARCH 23, 1932.

DEAR SENATOR: In response to your recent request, I have gone over your bill for refinancing agricultural indebtedness (S. 1197), and I wish to commend you for your recognition of the serious problem which confronts our farmers as a result of the great burden of debt which was incurred at a higher price level and which they are now finding it impossible to liquidate with low-priced farm products.

The Farm Board is heartily in favor of any sound workable method of correcting the unwarranted price deflation which has brought such distress to all agricultural regions. The board indorses in general the resolutions on monetary stabilization recently adopted jointly by the Grange, the Farmers Union, and the Farm Bureau Federation. The Glass-Steagall bill is a step in this direction. We believe that every effort should be made to bring about a sound controlled credit expansion designed to aid both agriculture and industry and to effect a restoration of the price level. With such improvement in prices, our farmers will be in better position to liquidate indebtedness and to face the future with confidence. I am inclosing a marked copy of a recent speech in which I discussed the importance of the problem of restoring the farm price level.

In examining your bill a few questions have arisen as to how it would work out if put into operation. As I understand the measure it would refinance the agricultural indebtedness of the country on the basis of a fair value of the land plus 50 per cent of the value of improvements, and at a rate of interest not to exceed 12 per cent. The Federal reserve banks would issue a large volume of paper money based on land in exchange for the farm-loan bonds. This money put into circulation would be expected to raise the price level so that farm products would sell at a price which would justify land values at or above levels at which debts were incurred. By keeping a good deal of this paper money in circulation the price level would be maintained at some level substantially higher than that prevailing at present.

One of the questions raised concerning your bill is if the general price level were raised-and presumably it would be under the provisions of the bill-would the prices of farm products be kept on a permanently high level? In other words, is the bill adequate to prevent overinflation and then a later drastic deflation of farm prices? Would the bill necessitate the United States going off the gold standard and substituting therefor a managed currency system based partly on land? I am not quite clear as to whether you would expect to retire the issue of Federal reserve notes by later selling the bonds to

the public. I am wondering how a permanent market might be maintained for such bonds at 12 per cent interest. A further question is, Might not the bill stimulate expansion of agriculture into submarginal areas and add to the surplus as a result of reoccupation of farms which have been abandoned since 1920? These are some of the questions which have come up in considering your bill and they seem to be pertinent to its successful operation.

Assuring you of our interest in this fundamental problem, I am, with kind regards and appreciation. Sincerely yours,

JAMES C. STONE, Chairman.

Mr. O'NEAL. Senator, three national farm organizations come, at your kind invitation, to these hearings. This is the third time we have been here, and we would like very much for the committee to give consideration to the bill-our bill-in a definite program of hearings, and we ask the committee to consider it as soon as it possibly

can.

The CHAIRMAN. Yes; we all had that very much in mind, Mr. O'Neal. I am advised that Senator Thomas of Oklahoma has the president of the Farmers Union here, or has some one who would like to be heard for a few minutes. We will hear the gentleman Mr. Baird presents, and then we would like to have statements from the heads of the various farm organizations.

In what form have you arranged the presentation, Mr. O'Neal? Mr. O'NEAL. Mr. Chairman, I have a statement I would like to have go into the record. I do that in order to save time. You are familiar with each organization, what we have presented to the Senate committee, but we will get Mr. Gray to explain the bill in detail, if you so wish.

The CHAIRMAN. Yes.

Mr. O'NEAL. At the proper time.

The CHAIRMAN. As president of the American Farm Bureau Federation you have a written statement?

[ocr errors]

Mr. O'NEAL. I have a written statement I would like to put into the record. I would not take the time to read it before the committee. The CHAIMAN. You may place that in the record now. And we will want to hear you in a moment.

This bill has not been introduced, Mr. O'Neal, in this precise form? Mr. O'NEAL. No, sir.

The CHAIRMAN. But it has been passed around to the various members of the committee, and just looking at it casually, I think it embraces the allotment plan, and the equalization fee, and embraces the marketing act; and it is indorsed by the three major organizations? Mr. O'NEAL. Yes, sir.

The CHAIRMAN. I think it might be well to put into the record, following your statement, a copy of this proposal.

Mr. O'NEAL. Yes; if you please, Mr. Chairman.

(The statement of Mr. O'Neal, and the proposed bill referred to, are here printed in the record in full, as follows:)

SUMMARY OF STATEMENT OF EDWARD A. O'NEAL, PRESIDENT OF THE AMERICAN FARM BUREAU FEDERATION, BEFORE THE SENATE COMMITTEE ON AGRICULTURE AND FORESTRY THURSDAY, ARIL 28, 1932.

The American Farm Bureau Federation in appearing before your committee this morning is interested primarily in securing legislation in the remaining weeks of the present session of Congress which will have an effect on prices of farm products. It is not intended unduly to criticize the legislation which

« PreviousContinue »