Evening star., 1937-03-16

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people would not only be anti-social
but uneconomic.
I do not believe that sharp price
rises in certain basic commodities
should be controlled at this stage of
the recovery by a restrictive money
policy which would tend to freeze
and might bring about an actual re-
auction in the total volume of en-
ployment and production.
The way to control unjustifiable
price advances is by increasing pro-
ductlon. This can be done so long
as there Is idle labor willing to work,
so long as there are unused natural
resources and an abundance of money
at reasonable rates. All three of these
conditions are present at this time.
With reference to the volume of
money, after the full increase in re-
serve requirements goes into effect on
May l, there will be more bank de-
posits and currency in circulation by
fully S2,000,00000O than at the peak
of 1928 and 1929. There will also be
excess reserves upon which billions
of further credit can be extended by
the banks without the need for bor-
rowing from the Federal Reserve
banks. In other words, the supply
OF money to finance increased produc-
tion at low rates is amplr. Further
more, with the ample reserves of the
Federal Reserve banks, additional sup
plies of money can be made available
when needed to finance expanded pro-
duction at reasonable rates by the
purchase of Government securities in
the open market. At the same time
the Reserve System has instruments
for controlling directly the diversion
of bank credit into security specula-
ton.
Supply of Funds Ample.
'The Federal Reserve System, which
is an arm of the Government, Is
powerleSs to maintain a stable economy
unless other essential non-monetary
factors necessary to stability are
brought into line either by private in
terests or by the Government. The
Federal Reserve System has exerted
the greatest possible influence to
bring about and maintain easy money
conditions as necessary integral part
of the recovery movement. An ample
supply of funds at reasonable rates
exists and will exist after the increased
reserve requirements take full effect
on May l. So far as I am concerned,
l am convinced that such q supply
of funds should continue to be made
available at rates that will encourage
full recovery and help to maintain it.
Under present conditions of an
accelerating recovery, a continued
easy money policy to be successful in
achieving and maintaining balanced
recovery must be accompanied by
prompt balancing of the Federal
budget and the subsequent retirement
of public debt by the Government in
relationship to the expansion of pri-
vate credit"
President Roosevelt's budget calls
FOR balanced budget in the next fiscal
year if relief outlays can be held to
1887 100000.
Typical of initial reaction in Con-
gress was the comment of Senator
Robinson, the Democratic leader:
Lets go slow about increasing
taxes"
Representative Treadway, Repub-
lican, of Massachusetts, ranking mi
nority member of the Ways and Means
Committee, which originates tax laws,
said:
1T would be absolute confiscation
OF the property of the people, in view
of the extravaganza of the admins
tration, to think of balancing the
budget now through higher taxes"
Col. Leonard P. Ayres, economist
and vice president of the Cleveland
Trust Co., and Prof Seymour Harris
Of the Harvard economics department
agreed that balancing the budget was
desirable, but Harris added:
Il am not sure whether it would
be practical policy at this time"
Would Require Expense Cut.
Ayres said such action would re-
quire lowering of expenditures and
not merely an increase in taxation.
One nationally known New York
banker, who would not be quoted by
name, said: II don't see how the
budget could be balanced without
making money rates tighter"
A slump in Government bonds be-
gan last Friday, attributed by some
officials to predictions of market
"dopesters" that money would become
tighter.
Chairman Doughton, Democrat, Of
North Carolina, and Representative
Vinson, Democrat, Of Kentucky, of the
Ways and Means Committee pointed
out there had been no earlier indica-
ton that any general tax increase
would be needed at this session.
Senator Thomas, Democrat, of
Oklahoma said the budget could be
balanced "any time they raise the
general price level enough for people
to make some money"
1t was the general uptrend of prices,
however, that occasioned Eccles' state
ment. He said sharp rises in basic
indexes should not be
at this stage of recovery "by