The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1934-09-12

6. To restore profit margins in in
dustry by getting prices back above
costs.
7. To increase the flow of money
and the volume of trade and en-
ployment.
8. To raise farm prices.
9. To balance the budget.
Action was needed. His plan was
as follows:
First and foremost. to relate
prices up to about the 1926 level
so that Cd the real" burden OF
farm mortgage and fixed money
debts no longer ate up the whole
profits of industry, and % so that
on the revival in profits the bonds
of the railways, ETC., held by the
banks would become better covered
and by rising in price would once
more restore the proper balance as
between assets and liabilities OF
banks, insurance companies, etc.
DRICE relation was, in fact. an
Il essential in order to avoid a
continuance of the banking crisis
and farm mortgage foreclosures
for although in the spring of 1888
the total OF American internal
debts was just as big in dollar
values as in 1929, the total of the
assets had shrunk in dollar values
because of credit def1ation and
monetary boarding, to below that
of the debts. The choice thus lay
between a prolonged epidemic OF
bankruptcies and foreclosures or in
creasing the values Of property OF
all kinds of relation. Relation
was naturally decided upon because
it would:
ca Correct the recent injustice OF
def1ation.
Cd Readjust the assets of the
banks.
(c) Put an end to the social strife
that was already growing because
of mortgage foreclosures and un-
employment.
The first half of the Presidents
monetary policy consisted therefore
of bringing back the price level to
that point at which, on the average
existing debts were contracted. The
second half was subsequently tc
stabilize that price level when al
last it had been reached, and thus
to provide the nation with a sound
dollar which would not change its
purchasing and debt-paying power
during the succeeding generation.
Roosevelt's monetary plan, in
brief, was Relate, then stabilize
and thus to correct one wrong with
out creating another.
There remained, however, the
psychological question of confidence
which it was clearly necessary tC
restore as soon as possible. Conf
dence, however, is a troublesome
word, which has, as it happens, sew
eral meanings.
First of all there is the conf
dence due to people possessing faith
in their government. Efficiency, JUS
tice, sound policy and finance are
what create and maintain such con-
fidence.
But a government may cause
lack of confidence" in itself, either
by inaction, on the one hand, OF
by a flood of economic and socia
legislation on the other. At times
it may cause lack of confidence In
itself and in the industrial outlook
by overtaxing; at others by over
expenditure, or inadequate taxation
n Il
DUT those who talk glibly about
ID governments either destroy
ing or creating Confidence" should
clear their minds as to what they
really mean. Do they refer to con-
fdence in the currency, confidence
in the banks, confidence in the
government, or business confidence?
When Roosevelt came into power
there was certainly no confidence
whatever in the banks, and the fact
that people were cashing their de-
posts and drawing money out
forced many banks to close. Con-
fidence in banking institutions,
however, i. e., in the places where
people keep their money, is not the
same thing as confidence in Amer
lean money, although confidence in
the places where people keep their
money is essential to continued
prosperity; it is obvious that an i'm
portant part of the Presidents work
was to recreate confidence in the
banks.
Confidence in the dollar, i. e., in
American money, as distinct from
American banking institutions, is
quite another matter; and inciden-
tally it is not the same thing as
business confidence. Confidence in
the dollar as such implies the belief
that if one invests in it will not de-
preciate, but preferably appreciate.
Confidence in the money of coun-
try is largely brought about by a
def1ation, and ruined by imitation.
Business confidence, however, is
quite a different thing. Business
confidence requires the belief that
profits will be made, i. e., that COM
modities will not depreciate and that
money will not appreciate. Indeed
assuming that confidence in the
banks exists, business confidence is
largely engendered by causing lack
of confidence in money. This latter
point is not generally realized anc
tends to give rise to much confused
talk.
In respect of confidence Mr.
Roosevelt's plan had to be mixed
one:
Cd To restore public confidence
in monetary institutions, i. e., the
banks;
CD To give capitalists some con-
fidence in American money anc
above all in bond values-whicf
was carried out in the main by pro-
viding the currency with a huge
and convincing gold reserve; and
Glib simultaneously to foster
business confidence by policy Of
credit imitation in order to secure
higher prices.