Evening star., 1933-05-07
|CHASE ECONOMIST
| SHES AT INITIATION
Says Full Use Of Powers
Would Bring Disaster, but
Doubts Such Action.
BY the Associated Press.

BY the Associated Press.
NEW YORK, May 6.-The full use
of the three main provisions Of the
administrations imitation bill would be
"horrifying If the new legislation were
mandatory rather than permissive," in
the opinion of Dr. Benjamin M. An
derson, economist Of the Chase National
Bank of New York
He described the new currency legis-
lation as "a political compromise" IN
an issue of the Chase Economic Bull
letin."
This Is the first time since the in
ception of the inflationary legislation
that the worlds largest commercial
bank has made public the views OF
its chief economic adviser. Winthrop
w. Aldrich. president OF the bank, Is
a brother -in-law Of John D. Rookie
feller. jr.
granted to the President under the
Thomas amendment to the farm Dill.
If fully used. would generate 80 Wild
and SO uncomfortable q flight from
the dollar, so wild and uncontrollable
a speculative boom. that disasters Tar
worse than any we have known yet
would follow" said DR.. Anderson.
Fortunately, he added, there Is great
confidence both at home and abroad
that the President will not deliberate
ly use these powers IN such way as
to shatter the currency or wreck the
credit of the Government or undermine
the fabric OF good faith in contracts,
and that he cannot be Stampeded INTO
doing these things"
Debasement Called Peril.
Analyzing each one of the imitation
bill provisions, DR.. Anderson said de-
basement Of the gold dollar by reduction
of the gold content to SO per cent, or
anythink like that amount. would seem
to be the worst source OF action. Inc
surest sufferer under such program
he maintained. would be thes budget OF
the United States Government, and
consequently, the credit OF the country
There can be no doubt, think" "
he added, that this is well under.
stood in Washington. II there should
be a violent rise In prices and cost OF
living as result Of monetary deprecia
ton the expenses of the Government
would mount much faster than its rev.
enues."
Contrasting the experience Of Ger
many and France in this connection,
the economist warned that If we let
the dollar get out of hand. our budget
Is sunk" With 1t goes the ability to
float long term bonds, he stated. Our
Federal system of taxation, he pointed
out, with its heavy emphasis in income
taxes, Is in many ways admirable, but
its success Is predicated on sound
money"
Government security purchases by
Federal Reserve Bank, amounting to
$4,000, 900 900. as provided in the infia-
tion bill would almost certainly lead to
the present standard OF value could not
be maintained, asserted DR.. Anderson
Describing in detail this process, he
said 1t would add three billions Ito the
heart Of the money market, namely. to
the reserves of the member banks, 3"
which normally, would result in rapid
expansion Of bank loans and deposits
A gold embargo, however, perverts the
mechanism. he said.
Violent Stop Forecast.
III, for example, every member bank
indebted to the Federal Reserve System
should pay of its Indebtedness in full,
he said. less than $500 900 900 would
be required for this purpose. The re-
manning $4,000, 100000 would then go
almost entirely into member bank re-
serves. Indeed, If there came increased
confidence in the banks themselves in
the process. member bank reserves
might be increased substantially more
than $260O,0 100000.
1T would be certain, however, that at
one Of the later stages of the process,
when commodity prices were mounting
high in the flight from the dollar, there
would be an increased call for hand-to-
hand cash, which would rapidly pull
down bank reserves and bring the pro-
cess to a violent stop-until new legis-
lation was enacted. raising the paltry
So ,0o0, 900 900 to much larger figures
DR.. Anderson showed how $500 ,000,-
900 increase in member bank reserves
from 1922 to 1928 led to an increase in
credit of more than $4,000, 900 600,
which created our present credit dis
aster." In view of this fact, he added,
no one can contemplate with any
equanimity at all the adding Of $500
millions to the existing member bank
reserves Of z, 100 millions. There would
be little hope even for a debased gold
standard il this were done" An issue
of three billions Of greenbAcks. he
stated, would have approximately the
same effect.
Foreign Aspects Analysed.
The danger of international compe-
tition in currency depreciation compels
cooperation to avert 1t, the Chase econ
omist asserted in his analysis of the
ton. A return to the gold standard is
essential, he said, particularly for the
United States and England. But If
America left gold for the purpose OF
strengthening its hand in international
negotiations, DR.. Anderson stated. "it
would, of course, be impossible to sane
tion 1t. The risks are too great" The
debasement Of the dollar, or the crea-
ton OF q fluctuating, irredeemable pa
per. "can find no possible economic
Justification" he added.
Proposed legislation for the 30-hour
week and price-fixing schemes came in
for sharp criticism; The 3o-hour week
generally applied" said DR.. Anderson
would demoralize so many businesses
as to lead to widespread cessation OF
activity and widespread bankruptcy
The domestic allotment plan he termed
as violently contradictory" to the pro-
gram Of restoring foreign trade and re-
storing farm prices by restoring the ex-
port market.
1T Is only in the light Of the distinc.
tion between permissive legislation ano
mandatory legislation that 1t is possible
to see any consistency or any promise
of q good outcome in the economic
program of the new administration,
the statement emphasized. AL the
powers which the Congress has given
and is expected to give to the President
simultaneously exercised. would un-
doubtedly wreck the country"
WTAIE CNEN IN VchPc