The Washington times., 1935-11-27
INITIATION SEEN
GUARANTEEDBY
NEW IDEAS
!. By LEWIS HANEY
Professor Of Economics, New York
University


M. s. Eccles, the man whom
Mr.. Roosevelt has put at the head
Of the nations banking system,
has made q statement which de-
serves careful analysis.
:: AS / will show. it indicates that
the Roosevelt administration is
deliberately headed for extreme
Initiation.
The Eccles statement may or
may not be publish" Its bear
ing upon the immediate position
Of the stock market is relatively
tnimportant. The big point is
that it shows the New Dealers to
have ideas about money and
credit which guarantee that they
will not try to control initiation
until after it is out of control.
He states that there Is no evi-
dence of accumulating inventories
or frantic bidding" for limited
quantities of goods. This condi-
tion he considers as proof that
no initiation exists.
We may infer that it will take
o lot of initiating to make him
move. He is going to wait until
people are frantically bidding up
prices, and inventories are piling
up. He will not see any infla-
ton until initiation has goen so
far that q crisis is reached and
q crash is inevitable.
This is the same line taken by
the authorities in 1927 and 1928.
They fiddled while inflati on
burned. 1t is like saying that
there is no fire until the flames
burst through the roof!
He states that stock specula-
ton is not yet depriving the
capital market Of adequate funds.
So what? 1 suppose We must
wait until stock speculation gets
to the point where the capital
market is actually strained, be-
fore anything will be done about
1t.
Above all, note this: He states
that the stock market is being
financed by "caSh," and that,
because there has been no in
crease in security loans, there
has been no expansion Of bank
credit.
But he adds few words which
completely stultify this state
ment, for he says, no credit ex-
pansion "save through the pur-
chase of Government securities"
That Is the whole story. In
stead of individual spectators
borrowing, the Roosevelt Admin.
iStration hos done the borrow
ing. Instead Of swollen bank
loans on securities, we have
swollen bank Investments in
Government bills and notes. In
stead of record breaking brokers
loans, we have record breaking
public debt.
The speculation in stocks now
going on is financed by bank
deposits. But where do these
deposits come from? They come
from the Administration bor-
rowing.
Mr.. Roosevelt's man. Morgen-
thau, borrows few billions. Mr..
Roosevelt's man, Eccles, then gives
Morgenthau a bank deposit credit
for the amount. Mr.. Roosevelt'S
men, Hopkins. Ickes, and Tugweu.
spend the billions of credit. Then
the checks they draw, being re-
ceived by corporations and indi-
viduals, are redepoSited.
This is the source Of the
abundant investment fun S"
Eccles talks about. His CASH is
as much speculative credit as ever
the brokers' loans of 1929 were.
The people could not or would
not borrow. So the Roosevelt Ad-
ministration has done the borrow
ing for them. Instead Of the
1928-29 increase in inStalment
credit and brokers loans. we have
the 1933-35 increase in our public
debt and bank deposits"
Back of Eccles' statement lies
his erroneous notion of the value
of money. He is a straight fiat
money man, and he swallows
whole the exploded quantity
theory" of money value.
He holds that money is public
debt. When he talks about "caSh,"
therefore, he means credit! He
holds that money gets its value
from the credit Of "the govern
ment," because the debtor govern
ment can force us to use whatever
it puts out as currency. Then he
goes on to believe that changing
the value of the currency, or
prices, is merely a matter of the
quantity of currency put in the
hands of people who are willing
to spend.
But if they spend it for stocks,
apparently it doesn't count!
In my opinion, initiation is guar
anteed by the fact that the politi-
clans now in power have adopted
such definitions that they call
credit cash" and will see infla-
ton only when it gets frantic"
Money Markets
NEW YORK, Nov. 27 Q.N.sD,-Call