Evening star., 1935-11-17
Text of Hoover Address Outlining Fiscal Program


budget.
There is another of these huge
penalties Of this economic plan
ming" which may be illustrated by
a bit of American history. It con-
Germs a great mistake of the Fed
eral Reserve System in 1927. That
was before my administration, and
in any event at that time the sys-
tenn was independent of the ad-
ministration. 1t also concerns a
gigantic price in human suffering.
Imitation Of Bank
Credit Held Unwise.
In an effort to support the shaky
financial structure of Europe, our
Reserve System in 1927 Joined with
foreign government banks in ex-
pansion or imitation Of bank credits.
Some of us laymen had bitterly
protested that we had no need OF
expanded credit. that in view OF
the then situation it would be
dangerous. We were told 1t could
and would be easily controlled.
There we're other impulses, but
this imitation of bank credit con-
tributed to set off the greatest
madness of speculation and greed
since the Mississippi Bubble. Men
then also dreamed they were in a
new era. They resisted every
warning. The controls proved in
effective. The movement collapsed
of its own weight in 1929.
No human being could have be-
lieved that such griefs and trage-
dies ever lay in so obscure a thing
as bank credit imitation. 1t brought
hunger to the door of millions of
homes. 1t destroyed the savings
of millions of families. 1t created
scene of financial misdoings
which have furnished the ma
terial for ceaseless attacks upon
honest business. This initiation
perhaps STAYED off for a year or
two the inevitable collapse in
Europe. That struck us in 1881,
an already weakened Nation. But
such strength as we had left
saved both ourselves and the world
from chaos.
There are morals in that story.
But there is something Of far
more present importance in that
story than postmortem moraliz-
ing. Despite that bitter experi-
ence the new national planners,
to finance their huge spending and
other purposes, have desperately
resorted to the same imitation of
bank credits. They, however, ap-
parently do not believe in homeo-
pathic doses. The dose of that
same poison now injected into our
national bloodstream by the New
Deal is already three or four times
as great as that of 1927.
They say also 1t can be con-
trolled. But will the politically
controlled reserve system prove any
more successful? Stated in its
mildest form, this is gambling with
the fate of a Nation. Should these
controls fail, this democracy will
not survive the shock.
Gains Against Speculation
Declared Small.
And national planning" was
supposed to shake us free from
vicious speculation and money
changers. OF this you can be sure.
Instability Of currencies and infla-
ton of credit are the green pas
lures upon which the speculator
grows fat. He Is the sole benefi-
ciary from instability. The costs
of that instability do not appear
in the Government budget, yet
they appear in every honest busi-
ness. They add to the price of
every commodity.
And here the national plan
ming" collides with itself. OF what
value are old-age pensions, or un-
employment insurance, savings
for old age, or any other beneficent
effort under the scourge Of devalu-
alton and imitation?
We can express Government
expenses in figures. But no mortal
man can compute the costs, the
burdens. and dangers imposed upon
120,000,000 people by these actions.
Its cost in national impoverish-
ment far exceeds even taxes. Its
losses will be larger than the
national debt.
1t is time for plain speaking
and blunt statement of some fun
damental principles upon these
monetary and fiscal questions.
And let me speak to you in old
fashioned language. When was
a boy in Iowa I learned some very
simple truths about finance. I
leaned that money does not grow
on trees; it must be earned. I
learned that the first rule of a
successful career is to keep ex-
penditures within the means of
paying them. learned that the
keeping of financial promises is
the first obligation Of an honor
able man. And I learned that the
man who borrows without intent
to repay Is headed for bankruptcy
or disgrace or crime. These may
be platitudes, but they are still
truths.
Honor Most Essential
In Government Dealing.
As have increased in years and
in opportunity to study the affairs
of governments, have made very
simple but vital observation. That
is that a government should have
in financial matters the same
standards that an honorable man
has. A government must realize
that money must be earned be-
fore it is spent, that a nations
word in finance must be sacredly
kept, that nation is immoral If
it repuoiates its obligations or in
fiates its mediums of exchange or
borrows without regard to pos
terity; and, finally. that a nation
which violates these simple prin-
ciples will, like a man. end in dis
honor and disaster. A government
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