The Dillon herald. [volume] (Dillon, S.C.) 1894-????, 1920-10-07
McLAURIN ON COTTON

Hor Jno. L. McLaurin has sent
the following letter to Editor Grlst,
of the Yorkville Enquirer:
The cotton growers are confronted
with a situation more serious in its
consequences than 1914-1915.
Cotton dropped suddenly then from
IL cents to 7 cents-about 5 cents
pound. Now it has dropped from
over 40 cents to around 20 cents.
This in the full time of prosperity,
when the people Of Europe are half
naked crying out for clothes.
Every year leads to period of in
fation, which is followed by a panic.
The Federal reserve act was supposed
to guard against rapid defation, and
it does, if carried out according to
the purpose of the act. With almost
unlimited power to initiate, it was
necessary to create a corresponding
power to debate, but it was expected
that the board would exercise COM
mon sense and justice in welding the
enormous powers conferred upon
them in either case.
The act itself is q grand conception
almost perfect, but 1t was never ex-
pected that bankers alone should die
tate its policies, or that a man VINO
seems so totally devoid Of practical
wisdom as Houston should be secre-
tary Of the treasury. Under mis-
policy, the price Of cotton is not to be
fixed by the law Of supply and de-
mand, but by the Federal reserve
board, through Its power to Iexpand
and contract credits.
Before the passage OF the Federal
reserve act, our surplus cotton as
finished by acceptances or bills or ex-
change on English banks. After the
passage Of the Federal reserve act,
this surplus cotton has been financed
through the Federal reserve banks.
Now Mr.. Houston coolly tells US to go
elsewhere. Where can we go? Eng
land cannot carry the surplus cotton
and we have not time to make other
arrangements. For cold blooded, pitt
less audacity Houston makes the
ghost of Captain Kidd envious. What
does it mean?
II Mr.. Houston means suddenly to
90 the limit allowed by the Federal
reserve act in dedation and he seems
to take pleasure In making 1t plain,
that he does, then we must get on
gold basis at once. No nation has been
on a gold basis since 1917, when we
declared war, and issued bonds which
the treasury allowed banks to enter
as deposits, thereby increasing the
currency in circulation just the
amount of the bond issue.
The Federal reserve act provides
for a reserve of 40 per cent. in gold
to protect its notes. This cannot be
done. 1t is physical impossibllity at
this time, because If all the available
gold in the world were stacked up in
the treasury, it would not equal 40
per cent Of the notes outstanding. The
Federal reserve act is a new depart
ure in finance and must be construed
according to its intent and purpose.
1t was intended to provide credit to
meet the business needs of the coun-
try by the creation Of an elastic sys-
tenn which would expand or contract
as those needs arose, and not
according to the arbitrary will of a
star chamber board in Washington.
What right have either Harding or
Houston to say when prices are too
high or too low? Money and credit
are the life blood of the nation.
They are medium of exchange and
should ebb and flow freely as the
body demands.
Government policy in thirty days
makes a dollar buy twice as much of
my cotton and doubles the debt con-
tracted in making that cotton grow.
The people of the United States
will never stand for a policy, which
will double the wealth of the rich
and at the same time double the pow
erty of the poor, thus repeating on a
gigantic scale "the crime Of 1878"
Leaving cotton out of the question,
how does Mr.. Houston expect to get
this 40 per cent. gold reserve If he
throttles our industries and foreign
trade through contraction Of credit?
How are we going to pay interest
on the enormous war debt, with low
priced products and dear money? In
1915 cotton went $500 bale under
the cost of production; today at 20
cents it is $4,000 under the cost Of
production. No money was to be had
anywhere in 1915 until after the es-
tablishment Of the state warehouse
system, through which we were soon
able to secure per cent money at any
bank on a warehouse receipt. You
will remember, however, that in pub
lie addresses at the time, and re-
peatedly since, warned that we could
not long depend upon this source of
aid for sooner or later the Federal
reserve board would fall under the
control and manipulation Of non
producers. 1t was clear to me that
the only permanent way out was for
each state to have its own ware
house and banking system. What l
said to Congressman-elect McSwain
in my letter Of a few weeks ago, you
will remember was only by way of
reiteration Of the doctrine that l have