AMERICA’S GIGANTIC EXPERIMENT

Patea Mail, Volume LIII, 8 September 1933, Page 3

AMERICA’S GIGANTIC EXPERIMENT

INFLATION BE CONTROLLED? PRESIDENT ROOSEVELT’S BOLD STEP. An intensely interesting survey of the economic and financial position of America at the present moment, and the gigantic experiment which is being conducted by President Roosevelt, was given by Mr. W. H. Hemingway, one of the founders of the firm of ' Hemingway -and Robertson, before ■ members of the Brisbane Chamber of Commerce recently. The subject dealt with the possibility of economic control which, he said, was' of peculiar interest. In England ho saw a marked trend towards change—a silent revolution was in progress. It ’Consisted of a more equal distribution of wealth. Despite what we heard of England, the English artisan was immensely better off than was the artisan of his (the speaker's) time. Mr. Hemingway said that he had spent ten years in America and had seen that national demand for change after the great period of prosperity. Not only politicians but professors and economists had declared that a new era hud dawned and that all people should be capitalists. Then, on Oe-

tober 23, 1929, the crash came with ' the suddenness of an earthquake. He himself was working, he remembered, on the 42nd storey of a building in Wall. Street ’when he read a paragraph only one and a-half inches in depth in the New York papers, which contained a warning issued by the Federal Reserve Board in Washington. On the following day the people started to realise on their securities. By 10 o’clock on the New York Exchange 3,000,000 dollars worth of shares had changed hands at steadily falling figures. By one o’clock it was 11,000,000 and by 3 o’clock it was 16,000,000, THE GREATEST DEPRESSION. That precipitated- the greatest depression that the United States' had ever experienced. The position grew worse despite the fact that politicians and business, and the Lord knows who not, held conferences in Washington and issued a statement slating that the Stock Exchange was merely making an adjustment and they urged the people to carry on business ns usual. But it did not turn out that way. In the first place the Americans made the ghastly mistake of regarding it purely as a local matter and failed to realise that it could be remedied only by the co-operation of the nations of the world. * THOUSAND BANKS CLOSE. There were many factors which led ; up to this changing economic state. During that period no fewer than 9995 banks closed their doors. .All , did not go bankrupt, but the majority did. The closing of banks meant a loss of 40,000,000,000 dollars to investors. The depression affected American world trade to such an extent that the exports fell from eight thousand million dollars to two thousand million dollars. Commodity prices fell by more than 60 per cent, and other manufactured articles by 33 per cent. Consider what that meant to the 30,000,000 farming population of the United States! If everything he had to ’ buy had fallen by the same proportion he would have been all right, but the disparity between the falls was too great , and the Araerican farmer, with his products subject to J world parity prices and the vicissitudes of flood, drought, and storm, had an absolutely intolerable time. The banks w’ere so badly affected by the fall in value of their securities that unheard of legislation was passed and tho National Banking Corporation was formed. But this five thousand million dollar concern was'only a dfrop in the bucket. Prices stilly fell, so other measures were adopted. The Reconstruction Finance Corporation raised between two hundred and three hundred million dollars to accommodate financial institutions loaded with frozen assets. This applied also to insurance companies and rail- - ways. WAR DEBTS. Then there was the question of war ' debts. But the loss through the adverse trade balance was as nothing to the trivial war debts. He used the word trivial advisedly'. Although America after entering- the war, loaned „ money to the belligerents, not one dime of the Victory and Liberty loans raised from the people left the United States. To-day the bond-holders looked to the American Government for repayment, But that was as nothing when WC remembered that foreigners to-day owed U.S.A. seventeen thousand million dollars. That money was not backed by a federal guarantee, and it followed that if it was not repaid by the debtors it was a dead loss. Already they were .eight thousand millions in default. This was one of the most serious phases which faced American financiers to-day. FALL OF NATIONAL INCOME. The national income of U.S.A. in 1929 was 89,000,000,000 dollars. In 1930 it was 73,000,000,000, and in 1932 000,000,000. With such a full in K£“,hational income unemployment was inevitable. When ho loft Now York City a few months ago New York was feeding 359,000 families daily. Another evidence of the tremendous crash was the fact that the market value of the securities listed at the New York Stock Exchange before the crash wag 89 billion dollars. In 1932 it was only 15 billion dollars. It. was true that there had been a recovery since, but one could not re-

gard that recovery healthy recovery. Not only was thcro a deal of speculation behind the recovery in stock values, but without a doubt there was a certain amount of controlled inflation.

HIGH COSTS OF GOVERNMENT. Then they must take into consideration another factor which applied also to the whole world. That was the increased cost of Government. For every dollar the Federal Government in U.S.A. spent 30 years ago on Government, they spent 32 dollars today. This was a burden on present and unborn peoples.

In all these circumstances tho Democrats in their programme made it a plank that they would put the American social, commercial, financial, and economic house in order. When President Roosevelt was elected he

lost no time in commencing tho, great experiment. Within 25 minutes of his making his speech of acknowledgment of' election he started that experiment by closing many banks. A bank moratorium was declared. That lasted for nine days. Many of tho banks subsequently opened, but a great number had never yet done so. But that was only step number one. In his aggressive attack on this problem Roosevelt had the unique experience of having the entire nation befinal him. The politicians, like true politicians, fell into line. The result was the conferring upon President Roosevelt of powers of a discriminatory nature greater than those ever given a free elective official in any country in the world before. CONTROLLED INFLATION. The great fault, if there was one, was that the U.S.A. would persist in regarding the mutter as purely domestic and their failure to appreciate that it was one of world-wide significance. Their objective, for instance, was to raise commodity prices to the 1926-28 level. They did not mind about the rest of the 'world —it could go hang. Then Roosevelt proposed a controlled inflation. Never yet in the history of the world had any Stale been able to control inflated currency. The question was could Roosevelt do Time alone could toll. Mr. Hemingway produced a document from his pocket. "I am holding in my hand,” he said, “one of the most revolutionary measures that has been passed in any Parliament outside Russia. The Federal Industrial Recovery Act which gives enormous powers to President Roosevelt and makes provision for tho sum of 3,300,000,000 dollars to be spent in public works. That must result in a deliberate inflation of currency. The question is, can it be controlled? The measure which contains only nine clauses is a dramatic document, even more revolutionary tlnn any step taken even in Russia, for Russia’s was a social revolution. This is am economic revolution.”