The Sauk Centre herald. (Sauk Centre, Stearns County, Minn.) 1886-current, 1939-02-02

from Washington
The Way Out
By Con gresham hnutsOn

The Way Out
Rarely does a day pass but there
comes to my desk some plan Tor
National Recovery, but most OF
these plans fail to recognize the
fundamental fact that all depres-
sions are caused by construction OF
credit and loss of confidence and
that until provision is made for a
dependable circulation of money
that will do away with the econ
omic peaks and valleys the road
ahead of us will continue stoney
and rough, and we will continue
to have depressions, recessions and
panics.
At present, there is deposited in
the banks in excess of 50 billion
dollars, owned by the people,
which is a liability of the banks in
favor of the people. Twenty-Five
billion dollars of this is represent
ed by demand deposits, thirty bill
lion in time savings and other
types of deposits
The currency in circulation at
the present time is over Sc, 1885,
100000. The currencv in circnia-
ton, plus the % billion dollars of
demand deposits represents our
present stock" of money.
If the individuals to whose ac-
counts these credits stand were
doing a large volume of business,
that is, freely buying, selling and
trading with each other, the %
billion dollars of demand deposits
would be turning over at a min
imum of 20 times per annum. The
national income would easily be 8
times the stock" of money-de-
mand deposits, plus currency in
circulation. For years our ma
tional income was about 3 times
the amount of our stock" Of
Therefore, we should have
on the basis of that formula a
of SO billion dollars ma
tional income in 1889.
Probably one of the greatest
in our whole banking
structure is due to the fact that
the power to tissue" money is
lodged in the hands of the private
system. When that pri-
vate banking system is seized with
fear, whether it develops within
the system or originates without
the management of the system,
credit is Immediately contracted
and the price level begins to sag
and break; fear grips the people,
the whole money spstem goes into
reverse and operates against the
economic interests of all. If our
system were so organic
ed and operated that a government
commission, or author
ity, could expand credit whenever
the private banking system begins
to contract credit, and do so with
out creating more tax exempt, in
terest bearing bonds, then the flow
of money could be synchronized to
production and consumption Of
and bring abou t
of agricultural prices
as we'll as prices on manufactured
goods.
Any time a majority of the
members of Congress desire to do
so, simple but far reac hin 6
can be made to the
Federal Reserve Act, changing
the present procedure to a man
ner whereby the Federal Banking
authority, as an agent Of the Con-
gress, can become the issuing"
authority and thereby carry out
the powers set forth in the Con-
stitution and in the interest of the
general welfare. OF course, If
Congress prefers to let the private
banks operate as the issuing"
agencies and continue the "crea-
ton" of tax exempt, interest bear
ing bonds, for the purpose of fin
ancing governmental activities in
the form of "pump-priming pro-
grams" an otherwise, in that
event, the people will have to con-
tinue to bear unnecessary burdens
which the founding fathers, in
the drafting of the Constitution
clearly sought to avoid.
There is a general impression
that the present system was in
in 1862 and that it
grew out of the necessities impos-
ed by the Civil War. That Is not
correct. AS a matter Of fact, the
present system has been in opera
ton since the inception Of the
primarily, because OF
the fact that as the government
issues great quantities Of I. o. US
in the form of interest bearing
bonds, which obligations invari-
ably gravitate into the hands Of
the private banking system, the
banks become the principle credit
ors of the government, thus en-
abling them to WELD undue influ-
ence on governmental policies.
Within the last few years, as
never before in our history, the
has depended upon
the banks as the principle outlet
for government bonds. Today, we
find the private banking structure
in its portfolios approx
mately IS billion dollars OF tax
interest bearing, govern
ment bonds. A total Of approx
mately q billion dollars of Federal
obligations have been issued since
1882. Obviously, the government
at this moment convert
the IS billion dollars OF bonds into
currency without development OF
initiation which would
be more disastrous to the poor
man than 1t would be beneficial.
But the government could, without
inviting disaster. relieve the tax