MONETARY MATTERS

Manawatu Standard, Volume LIII, Issue 255, 25 September 1933, Page 7

MONETARY MATTERS

REACHING A CRISIS. DECLARATION OF PRINCIPLE. PROPOSALS FOR CONFERENCE. (United Press Association—By Electric Telegraph.—Copyright.) AVASHINGTON, Sept. 23. It is felt in informed AVasliington circles that the monetary muddle in which the Administration finds itseli is rapidly reaching a crisis with a positive declaration of principle, possibly following a conference called by President Roosevelt at AVliite House to-morrow night. At this conference the President will discuss the situation with leading financial advisers, including the Budget director, Mr Douglas, Mr O. M. \v. Sprague, and Mr James AVarburg. It is no secret that the powerful Wall Street financial community, as well as the President’s more conservative advisers, are urging that the positive position oil the currency inflation proposals be enunciated immediately. They halci that the uncertainty over money matters is retarding long-term investments, which, if it continues, is calculated to retard if not defeat the National Recovery Act programme. AVliile the Administration’s recent credit extension schemes, ; commodity purchases and loan proposals are held to be desirable to meet the immediate emergency, they are not considered strong enough medicine to instil the confidence of the capital-investing class on the one hand or silence the inflation agitators on the other. Tlie majority of those called to the President’s conference, it is believed, prefer no inflation at all. However, if some degree of inflation is considered necessary by the President they have a definite plan for immediate limited action, while another plan, it is understood, lias been considered, and may be submitted later. The first proposal, which is ready for discussing to-morrow night, provides for the immediate issuance of about a billion dollars fiat money, with a definite proviso that no other inflation will be undertaken. It is even suggested that the President should renounce the extraordinary inflation powers Congress granted him in the Thomas amendment. The second proposal, which has not yet been formulated in a definite plan, but which is said to have strong Wall Street support, would immediately stabilise the pound and dollar through co-operation between London and Washington. It also envisages the revaluing of tlie gold content of the dollar at the present depreciated level, which is about 35 per cent, off par. It is pointed out that the gold which the Federal Reserve holds, while worth 3,591,000,000 dollars at tlie old legal standard, has now appreciated to about 5,525,000,000 in relation to gold standard exchanges. It is believed that with this amount of gold as a basis, sufficient currency with a reasonable gold coverage could be placed in circulation without resorting to fiat money or arbitrarily halving the gold content of the dollar. Although it is realised that such action might have an immediate deflationary effect, many leading financiers believe it is superior to the President’s previous policy, in which they seo manifold dangers, not the least of which would be the continued, if not an increased, flight of capital to foreign countries, due to the nervousness of American investors. It is admitted that neither plan recognises the power of Congress to force a broad scale of inflation over the President’s head, hut it is believed President Roosevelt’s prestige, and as a final resort liis powers oi veto, are sufficient to keep hint .in control of the situation. PROGRAMME’S PROGRESS. PRESIDENT’S APPARENT FEAR. A COMPREHENSIVE PROBLEM. AVASHINGTON, Sept. 23. Apparently coming to the conclusion that the industrial recovery programme lias advanced too rapidly at the expense of the primary producers, President Roosevelt to-day made a sensational offer to the cotton farmers. He offered to loan them ten' cents a pound on cotton now held in exchange for agreements to reduce the acreage of next year’s crop up to 40 per cent., and in .1935 to 25 per cent. The price of spot cotton is a fraction below ten cents. If all planters accepted the offer it would mean that the Government’s outlay would he about 400,000,000 dollars.

The extension of the plan for supporting cotton prices of ten cents a pound to other major farm products is the immediate objective of the Government’s efforts for lifting farm purchasing power quickly to keep pace with industrial prices. The programme will take the form of a gigantic effort to place “a bottom” under farm prices through an extension of the credit system wherever it can be definitely coupled with production control, which is regarded as an insurance for Government loans. Following yesterday’s announcement of the Government purchase of food and clothing for the unemployed, requests have been made for similar purchases of coal for distribution among the needy. It was thought by the National Recovery Act administration leaders that the subsidising of producers through purchases and loans would make currency inflation unnecessary, or at least quiet for the time being the demands for it.

As a further counter to the inflation proposals, President Roosevelt plans a more liberal lending policy to many banks which have been closed since the March crisis in an effort to liberate some two billion dollars impounded as deposits. The President is represented by his friends as so adamant against currency inflation that he will not even consider the matter until the National Recovery Act codes have been given a. thorough testing and every known means has been exhausted to supply business and producers with the necessary credit. It is believed that recent protests from farmers that the National Recovery Act is forcing them to pay higher prices for the goods they consume has prompted Mr Roosevelt to enlarge the agricultural price-raising programme. The Secretary for Agriculture, Mr Henry Wallace,, commented: “We do not want the farmer to get hooked in the next two or three months.” The agricultural administration also announced to-day that it would impose a two cents processing tax on hogs, and at the same time continue the campaign for buying up and slaughtering pigs. This will also relieve maize farmers, whose products largely go to feeding hogs. Bonuses will be paid to them for curtailing the 1934-35 acreage.