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So, why could we not use that money to do it? Just stop paying on this national debt for a while, and use the money we expected to pay on the national debt to retire the other debt, the adjusted service certificate, another war debt which is just as much entitled to liquidation. When we liquidate it, then we can go back to the old war debt, and we will be just exactly where Congress, nine years ago, expected us to be.

Furthermore, if Congress does not want to do that, and if the bond market would not stand it, I want this Congress to consider seriously the issuing of a part of that in Treasury notes. Of course, whenever one suggests anything like that, he is usually called radical, or a communist, or a bolshevist, but I want to state seriously, as one who has given it much consideration, that Congress can well afford to consider issuing Treasury notes in payment of a slarge proportion of this. We have $346,000,000 worth of Treasury notes outstanding that were issued in 1863, and, as they are mutilated or destroyed, they are always replaced. What is back of them? Are they fiat money? They have no more back of them then we would have back of the notes you would issue for this purpose.

I make that suggestion for this reason. The Treasury Department says that we have $36.20 per capita in circulation, that is, circulating medium. Ten years ago we had $53. As you reduce the per capita circulation of money, you necessarily reduce purchasing power, and as you reduce purchasing power, the wheels of industry commence to slow up, and as they slow up, business is hurt and å depression comes on. So, the only way on earth we can hope to have a prosperous Nation, in my mind, is to have plenty of circulating medium. Although the Treasury Department says that we have $36 and more per capita in circulation, I do not believe we have that much money.

My reason for that is this: During the last 100 years we have had lots of money lost by fire, shipwreck, and in other ways, and the Treasury Department is assuming that not one dime is lost, but that it is in circulation, which is not true.

Take the report of the Comptroller of the Currency on all the banks in the Nation. He shows that there is only about eight or nine dollars per capita in circulation in this Nation. That is counting what is on deposit in the banks. We do not know how much the people have in their pockets, but let us presume that they have half that much in their pockets, which I believe is going too far, but one guess is as good as another. That would make it only $12 per capita in circulation. So, I think that in connection with this big question, that other big question, the money question, should come into it, and Congress should seriously consider issuing Treasury notes, which they can do, to pay off a part of this indebtedness.

I thank you, gentlemen, very kindly for your attention and consideration. If any of you would like to ask me any questions, I should be very glad to try to answer them. I do not know that I can.

Senator WATSON. Are there any questions?

Senator COUZENS. I would like to ask the Congressman if it is not a fact that the contraction in circulation takes place after the depression in business, rather than before?

Mr. PATMAN. Senator, I suspect you have given that sufficient consideration to have your own opinion about it, which I have no doubt, would be better than mine. You say it takes place after the depression, rather than before?

Senator COUZENS. Yes,

Mr. PATMAN. I think it takes place at about the same time the depression comes on, Senator. I think that is part of it.

Senator BARKLEY. In view of the flexibility of our currency system, especially the Federal reserve system, which is supposed to be more or less automatically adjustable to the needs of business, do not the two things go along together?

Mr. PATMAN. Absolutely. I am glad the gentleman mentioned that. You see, the Federal reserve system has been contracting the currency for the last few years. Ten years ago we had over $3,000,000,000 of Federal reserve notes outstanding. We have now only a little over one billion. The word has been passed down through the Federal reserve system to close down, liquidate, and today banks all over this Nation are failing because they are refusing to accept what is good collateral, because they .claim it is not liquid collateral, and they are absolutely destroying places of business and banks.

Mr. RANKIN. May I make a suggestion? In 1920 the contraction of the currency took place before the depression. The depression followed right on the heels of the contraction of the currency.

Senator COUZENS. Deflation and circulation are two different things. The fact that there is a depression obviously brings about a need for less money in circulation, and so it is perfectly obvious to me that the decrease in consumption takes place before the contraction of the

currency Mr. RANKIN. Also, when you contract the currency, it slows up business, as the gentleman from Texas has said. In 1920, when the order went out to raise the rediscount rate, and call these loans

Senator CouzanS. We need not take up time discussing that.
Senator GEORGE. I do not believe we could settle it.

Mr. Patman. I am very much obliged to you, Mr. Chairman and gentlemen.

Senator Watson. We are very glad to have had the opportunity of hearing you.

Is Mr. Connery here?

Mr. RANKIN. May I suggest that before we hear Mr. Connery, we let the American Legion proceed?

Senator WATSON. Very well, if there is no objection. John Thomas Taylor.

STATEMENT OF JOHN THOMAS TAYLOR, LEGISLATIVE REPRE

SENTATIVE, AMERICAN LEGION Senator WATSON. Proceed in your own way, Mr. Taylor, to make your statement.

Senator HARRISON. You are speaking now for the American Legion, are you not?

Mr. TAYLOR. Yes.

Senator COU ZENS. May I ask the witness on what authority he is speaking for the American Legion now?

Mr. Taylor. As the representative of the American Legion on all legislation, Senator.

Senator COUZENS. Yes; but I recall that you appeared before this committee previously, and you also spoke for the American Legion. At least, you alleged you were speaking for the American Legion at that time, and you opposed the paying of the bonus at that time. I am asking you on what authority you are now speaking for the American Legion; by whose authority?

Mr. TAYLOR. I am the national representative in Washington on legislation of the American Legion.

Senator Couzens. I understand who you are, but I am wondering on what basis you are now speaking on what edict from the Legionnaires.

Mr. Taylor. On the basis of the resolution adopted by the national executive committee last Sunday in Indianapolis.

Senator COUZENS. That is what I wanted to get at.
Senator HARRISON. If I were you, I would put that in the record.
Mr. Taylor. I would like to read it. ¡Reading:]

Whereas resolutions submitted to the national convention of the American Legion, held in Boston, Mass., favoring the payment in cash of the adjustedservice certificates, were tables because the American Legion was firmly opposed to initiating such legislation within itself, and because the first and major activity of the American Legion has been and always will be the care of the disabled and his dependents, whose welfare has been and must, of necessity, remain our first obligation; and

Whereas much legislation looking toward the conversion into cash of the adjusted service certificates has been initiated in the present session of Congress, and activities resulting therefrom, although originating in Congress, have been projected into individual posts and departments of the American Legion to such an extent that the national commander has found it expedient to call this special meeting of the national executive committee for the purpose of expressing the opinion of the American Legion, as requested by certain Members of Congress and demanded by the rank and file of the Legion; and

Whereas there is little doubt but that the immediate distribution and circulation of funds accruing and payable 15 years hence from such conversion would at this time materially assist in the relief of present distressful economic conditions and put new life into American business and would without any doubt whatsoever bring immediate relief to the hundreds of thousands of veterans, their dependents, who are now in sore distress and dire need: Therefore, be it

Resolved by the national executive committee of the American Legion, That we again declare and reaffirm as our first and major objective, legislation for the further relief of the disabled man and his dependents, and will take definite exception to any interference with, or delay in, the passage of such legislation; and be it further

Resolved, That the national executive committee indorses the principle of immediate cash retirement, on application, of the adjusted-service certificates, without choosing as between any of the specific bills now pending before Congress, it being the opinion of the national executive committee that the passage of such legislation would benefit immeasurably, not only the veterans themselves but the citizenship of the entire country, and would be an appropriate demonstration of the gratitude of the Nation to those who carried its arms in 1917-18.

INDIANAPOLIS, INT., January 25, 1931.

Mr. Chairman, that is the expression of the American Legion on this subject.

Senator COUZENS. May I ask you a question in that connection? You say you do not take sides, as I remember the resolution, with respect to any bill; but do I understand that the executive committee approves the full payment of the face value of the certificates?

Mr. Taylor. It approves and indorses the principle of immediate cash retirement, on application.

Senator COUZENS. That is, of the face value of the certificate?

Mr. Taylor. The executive committee would not take any stand on any specific measure before the Congress.

Senator Couzens. I understand that is what the resolution means, but when you passed the resolution did you mean that you favored paying the full value of the certificates as they exist to-day, or what did you

mean? Mr. TAYLOR. The executive committee feels that that is a question that is solely in the hands of Congress, and not in the hands of the executive committee of the American Legion.

Senator COUZENS. Then, this resolution does not mean anything, as applied to Congress, in connection with what the legionnaires want.

Mr. TAYLOR. So far as any specific measure before Congress is concerned, no.

Senator COUZENS. I am not talking about any specific measure, because a number of specific measures call for the full payment. Others call for part payment, and others call for loans. I am not sure what the Legion meant by this resolution to the effect that they favor the payment of the certificates--whether they mean payment in full, payınent on the face value, or with or without deductions. I would like to have that resolution interpreted, if you can do it.

Mr. Taylor. The only thing the Legion executive committee did was to indorse the principle of immediate cash retirement, on application, of the adjusted-service certificates.

Senator Couzens. The present value, or the face value?

Mr. Taylor. The executive committee was not in a position, and refused to indorse any of the bills. The executive committee would not indorse any of the proposals before Congress.

Senator HARRISON. It is up to Congress to construe that proposition, as to whether they meant on the present value of the certificates or the full face value.

Mr. TAYLOR. It is up to Congress to construe what legislation they desire to pass on the subject.

Senator BARKLEY. Of course that is true about the whole situation. It is up to Congress to decide whether it wants to pass anything or not, but where there is a very sharp division as to whether there should be full payment of the face value, or simply a cash surrender value as of to-day, it would have been very helpful if the legion had expressed an opinion. It did not do so. I am wondering whether the executive committee had these different proposals before it and considered them at this meeting.

Mr. TAYLOR. I presented to the executive committee every bill that was pending before Congress.

Senator BARKLEY. Do you feel at liberty to give your own personal views about it?

Mr. TAYLOR. No, sir; I do not.

Senator COUZENS. Is there anybody who can speak for the Legion as to what it meant by this language:

That the national executive committee indorses the principle of immediate cash retirement, on application, of the adjusted service certificates.

Mr. TAYLOR. I can speak for the Legion on it.
Senator COUZENS. What does that mean, then?

Mr. TAYLOR. That means that the American Legion rests with Congress the method in which legislation of this character is to be written into the law,

Senator COUZENS. I am not speaking about the method. I am talking about what you mean by "immediate cash retirement." Does that mean the present-day value, or the value in 1945?

Mr. TAYLOR. That is the one point the executive committee would not take any stand upon.

Senator ČOUZENS. Nobody can speak for the Legion in that connection.

Senator Watson. In other words, as I understand it, they simply say they want them paid, and paid now. The method of payment rests with Congress.

Senator COUZENS. That is not true, Mr. Chairman.
Senator WATSON. That is what I understand.
Senator COUZENS. They say “immediate cash retirement.”
Senator WATSON. Yes.

Senator COUZENS. But they do not say whether it is face value, or the value to-day.

Senator WATSON. No. They say they want immediate payment.
Senator COUZENS. Of what?
Senator WATSON. That is for us to determine, so they say.

Senator COUZENS. It seems to me the Legion ought to say whether they want the full payment, or whether they want the present-day value.

Senator Watson. What was the last formal expression of the Legion on that question?

Mr. TAYLOR. That executive committee meeting.
Senator WATSON. Before that?
Mr. Taylor. The Boston convention.
Senator WATSON. What was their resolution at that time?

Mr. Taylor. A number of resolutions from various departments, through the proper channels, came to the Boston convention and were referred to the convention committee on legislation.

Senator Watson. When was that?

Mr. TAYLOR. In October of last year. Those resolutions were carefully considered by the convention committee, and when the motion was made to favorably report a resolution calling for 80 per cent. cash payment, the vote was a tie, 12 to 12, so that the chairman of the convention legislative committee reported a number of resolutions which were carefully considered, and they rested there before the convention.

The national commander recognized the chairman of the subcommittee to read the resolution, which had come out of the convention committee. That resolution is as follows:

Be it resolved, That provision be made for the retirement and payment, to the extent of 80 per cent, of adjusted-compensation certificates issued to veterans of the World War, during the calendar year of 1931, with option to those who do not desire the cash, to retain the certificate.

That minority report was laid on the table by a vote of 967 to 244.
Senator Watson. Are there any other expressions?
Mr. TAYLOR. None whatever.

Senator WATSON. There were no other expressions of an affirmative character, but just that negative vote laying it on the table?

Mr. TAYLOR. Yes.

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