Evening star., 1953-07-09
Hard Money PoIicy's Wisdom
Is Target of Bitter Criticism
Fear Of mobility to Control Trend
May be Behind 6. O. P. PuIIbuck

tempt. Government economic ex-
perts began worrying about in
flation just as the country was
pulling out of depression. Com
modify prices were climbing
fast. the Federal debt had risen
$40 billion and the budget had
run a deficit every year since
1881. So it was decided to apply
the money brakes.
The Federal Reserve Board
frightened credit by twice raising
the reserve requirement of banks.
President Roosevelt made a
speech. The signs of boom
quickly disappeared. The country
slipped back into depression.
The Reserve Board caught the
blame for that snafu. But no
one actually ever knew what
caused the recession of 1898. All
the experts ever concluded is that
economic psychology is a delicate
thing to tamper with.
These people are not foolish
enough to want a full-scale de-
preston" the CIO says. They
talk of a little less employ
ment'-and a little more un-
employment. It's almost like
a man with a craving to touch
off a little atomic explosion-or
one who wants to experiment
with a small dose of bubonic
plague"
Others Have Doubts, Too.
Nor is the CIO alone in ex-
pressing such doubts.
THE theory of monetary con-
troll" the magazine Business
Week remarks in a recent arti-
Gle, 'is one of the neatest and
Intellectually most satisfying
branches Of economics. The
practice over the past 100 years
has been one disappointment
after another. Again and again,
something has happened to spoil
the Swiss-watch precision that
the theory says is possible"
Until very recent days, at
least. it has been apparent that
the Federal Reserve people and
the new team in the Treasury,
despite such words of caution
believed they had the know-how
to make their monetary theo-
rieS work with precision. They
pointed to the experiences, first
of Belgium, then of other Euro
pean countries, in stabilizing
their currencies after World War
II with something closely akin
to the hard money policy of the
Eisenhower administration. They
drew comfort from the thought
that the Bank of England. coun-
terpart of our Federal Reserve
has worked with government
banking and business to give
England a relatively stable cur
rency for 200 years.
Doubts Still Persist.
Yet it cannot have been easy
to shake off certain nagging
doubts. What if you go too far
dry up the money and credit
build up the psychology Wall
Street describes as "bearish'
and suddenly find yourself head
ing into a sharp recession or de-
preston? Can you reverse the
trend as easily as you started
it by another quick turn of the
money faucet? Perhaps, One
treasury official cites the Gov
ernment's experience in the 1907
recession as proof that you can
There was little or no Federal
control at the time. But this
official says the natural forces
of the economy reacted at that
time to send interest rates
tumbling, easing the money sup
ply and restoring confidence and
credit.
But the critics are not easily
stilled. Representative Patman
shouts the Federal Reserve has
too much power and ought to
be investigated. He says:
"They determine whether we
have good times or hard times.
The administration in power is
responsible if this board is per-
mitted to cause the country to
be wrecked"
That kind of talk, of course,
is strictly political falkland so
long as the economy remains
healthy, the administration does
not have to pay too much atten-
ton to it. But it also is a kind
Of talk which could ruin the ad-
ministration in the event it's ef-
forts to produce a hard money
economy through monetary ma
nipulation should turn sour. Even
the suggestion of an induced de-
preston probably would supply
Gen. EisenhoWer's political op-
position with enough dynamite
to blow the COP. out of the
White House for years to come.
May Return to Plan.
So it may be true. as the Pres
ident's economic advisers insist,
that the only thing which has
caused their current retreat from
the hard money drive they had
embarked on so bravely is the
difficulty they are encountering
in balancing the budget. 1t may
well be they will return in an
other few months to the grand
design they originally cut out
for themselves-their plan to take
the Nation off the boom wave
1t has been riding and to sta
bilize" its economy on a plane
of solid prosperity.
But it also is quite possible, in
the meantime, that one factor
perhaps even a subconscious fac
TORN the present suspension of
the hard money campaign is the
desire on the part of President