ourse, or by bankruptcy. We can not consider the debts of 1920 n the same basis as the debts of 1930, because there are very few ow surviving. We can not resurrect and can not help the losses hat have already occurred, after liquidation, because it is impossible o reach them; any law would affect only the outstanding debts. I tried, some years ago, to make an average, to get that center of ravity, and concluded at that time, which was before the war, the verage outstanding debt was about one year old. There are so any phases you have got to take into account now, when we have O many Liberty bonds outstanding, starting in 1918, the average ould go back further; and the frozen loans of the farmers and thers now still outstanding, having been carried on a sort of moraorium, you would perhaps carry it back still further, perhaps two r three years. I am not a dogmatist, because I have made no alculation; but I would like to ask Senator Owen whether he has ied, through any statistical apparatus, to find out what is the averge. My impression is different from his; and if the facts should now that he is right, of course I would favor 1926; but if 1926 was ght before 1929, it is certainly not right now, because there has een a drop. His answer, perhaps, is that it was not right, and that should have been higher. Maybe that is true, but it seems to me at it is possible, instead of our sitting here using offhand figures as o what is the average-it might be possible to have a real expert udy, which would get the results correctly.

Mr. GOLDSBOROUGH. Professor Fisher, do you not think there are ther elements to be considered, in addition to the arbitrary elements debtor and creditor? Do you not think that this is a very necesry consideration, the fact that our people have not yet readjusted hemselves to this changed condition. Do you not think that this a very serious consideration, that this price level should be raised, order that this complete readjustment may not be necessary, the omplete readjustment of wages and standards of living? It seems o me that is really more important than any technical relation etween debtor and creditor, which, as a matter of fact, the creditor ass does not perceptibly feel. Do you care to comment on that? Doctor FISHER. Yes. The creditor class, of course, does not mean mply the rich; because, in fact, the rich are generally in the debtor ass; it means, among others, the savings banks depositors. So I o not think, we should consider the debtor entirely; I do not think e should consider the creditor less worthy of attention than the ebtor.

Mr. GOLDSBOROUGH. I certainly had no such intention.

Doctor FISHER. I just wanted to make that clear, in view of what ou have said; but in answer to the question as to the effect of this on dustry and employment, it seems to me it should go right back, Ir. Chairman, to the very same thing; for, if we should stabilize the present level, what would be the reason why it would not be st for business? Simply because it has debts

Mr. GOLDSBOROUGH. It would take 20 years to readjust the couny to the present price levels, and then it would be all right; but what the use of going through all of that deadly period?

Doctor FISHER. Exactly; but I think it is clear that a rising price vel is absolutely necessary. I am just as strong for that as yourself, the ex-Senator. It is only a question of how far to raise it. But,

taking an hypothesis, suppose we did do the unjust thing of stabilizing at the price level just where it is now, I ask you what would be the reason that that would be unjust to business? It would be just the very same reason I have been discussing, because it would go right back to the debt proposition, the business proposition; and I say the reason that it would take 20 years, as you say, is that so many busi ness men now have that tremendous millstone of debt around their neck. If you can wipe out the debt, and consider just the future, if there were no debts carried over from the past, the proper place to stabilize is just where we are; but because of these left-over debts of the business men and the farmer and everybody else, you have got to go back; and in going back you have got to take account of all of the debts.

Mr. GOLDSBOROUGH. We will be glad if you will comment on Professor Fisher's statement.

Mr. OwEN. My answer is this: That it is true that the creditor is often the debtor also, so that one account would balance the other. It is true that the interest of the savings account, in mutual savings banks, might be affected by this; but since it is on both sides of the account, and on the security against which it is held, obviously it would not do any harm because they are on both sides of the ledger: but this is not merely a question of individual debtors, or individual creditors, but it is a question of restoring the purchasing power of the people of the United States to the point where we can have normal conditions of living; and the best standard we have got is what actually occurred when 550 commodities were measured, one by one, for 365 days a year, through 1922, 1923, 1924, 1925, 1926, 1927, 1928, and 1929. It was at 98 in July, 1929. You can raise the technical question against anything which involves a large number of people, and show that policy would be unjust to some particular case. You have got to deal with this in a national aspect, and from national figures, nationally collected, and give the answer; and I regard that as more dependable than my own opinion could possibly be, or even the opinion of one who is as highly esteemed and valuable in this field as Doctor Fisher is. Even if there were an error the creditor would not be so greatly harmed as the weaker debtor. The case is more than a question of statistical data by experts. It deals with flesh and blood and life. That is my answer.

Are there any more questions?

Mr. GOLDSBOROUGH. Now, Senator Owen, I have advocated in this committee, and in speeches, and in the press that in this period of terrible fear and stress that the Federal reserve system, the Federal Reserve Board would be justified in announcing to the country its tremendous resources, as were available before the Glass-Steagall bill was passed, and which have been made available by that measure, and that they proposed to go into the market and purchase securities, until the price level was raised to a given point.

Mr. OWEN. Yes.

Mr. GOLDSBOROUGH. Is not that justifiable?

Mr. OWEN. That is what they ought to do. I can not believe you will get them to do it unless you command them to do it; because the board is of a "conservative" temper, and they would probably think such action would be "radical," They would probably be told it

as "radical" by advisors in whom they have confidence, so that othing but a legislative mandate could secure such action. In dealing with legislative mandates, it ought to be cautiously sed, because, after all, we must depend upon administrative integrity nd the wisdom of those whom we engage to carry out our policies. When you have laid down a policy, as in this bill, it is assumed they would carry it out in substance; but if they were to use all of the normous powers they have got, which are unlimited to all intents nd purposes, and aganist the $1,400,000,000 of gold, which they ave now, they could establish over $4,000,000,000 of reserves and nable the banks to support a credit structure of over $40,000,000,000. They could buy United States obligations and pay for them with 'ederal reserve notes to $7,500,000,000 when $2,000,000,000 would e more than enough; $1,000,000,000 I believe might suffice. The eneral commodity index would prove what was enough. There is o lack of available means of credit in any sense except fear. Regardess of member banks the reserve banks could buy bonds of the United tates and correct conditions.

I think what is troubling the country is that the local banker does ot want to ask any credit from the reserve bank, and the individuals ho want credit, locally, are unable to get it, because the bankers re afraid they might get a run on their banks by their depositors, nd for that reason they hesitate to make loans. That is a difficulty hat is psychological, for the larger part because the banks with mutual support could pay off desposits in any probable run. The un never seems to exceed 35 per cent of the deposits.

Mr. GOLDSBOROUGH. If this statement of fact and statement of olicy were made by the Federal Reserve Board, that they were going to the market, and were going to buy $25,000,000 worth of Govrnment securities each business day until the price level reached a ertain point, do you not believe that the effect of that positive tatement of what they were going to do, would be almost magical? Mr. OWEN. I think it would have a powerful beneficial effect. Mr. GOLDSBOROUGH. A very prompt effect, would it not?

Mr. OWEN. It would have an immediate effect, in my opinion, and hey should do that very thing. That is precisely what I have been rging. Professor Fisher has told you he agrees with my contention. Doctor FISHER. May I ask a question? This time it is a real

uestion.

Mr. GOLDSBOROUGH. Yes.

Doctor FISHER. I would like to know what Senator Owen's answer would be to an objection of a friend of mine who talked with me ecently. I have my own answer, which I will give at length, later, ut I would like to know what his answer is, while he is here. He ays that the powers of the Federal reserve system are great enough o do this. I think that many of them would deny it, as this friend enied, who said they only had the right, to this extent: That the owers of the Federal reserve system would not suffice, without the ooperation of the member banks, and that you have got to get housands of banks in the United States to cooperate, to get any esult. You said, yourself, a moment ago, that they would have sychological difficulties.

Mr. OWEN. I have just explained that.

Doctor FISHER. Can those powers be exercised, despite that difficulty, in your opinion, and how?

Mr. OWEN. Their powers of lending are open to be exercised upon demand and can be exercised in buying bonds and bills regardless of member banks. I have already explained that the member banks must make demand, and I have explained this morning why they were not making demands; so the question has already been fully answered, but in buying bonds with reserve notes you are adding directly to the circulating medium which would favorably affect commodity prices.

Mr. GOLDSBOROUGH. Senator Owen, it is also going to be contended before this subcommittee that, if we raise the price level in this country, it will immediately let in cheap foreign goods, and thereby tend to lower the price level, and then that more money will have be put into the banks by the Federal reserve system, in order to raise the price level again, and that it will be a continuous process, until the price level is raised in foreign countries. I want to say first that I do not agree with that at all, but I want to get your reaction to that kind of question.

Mr. OWEN. The extract that I read from Gustave Cassell answered that fully; I opened my remarks with that quotation.

Mr. GOLSDBOROUGH. I want you to go more into detail.

Mr. OWEN. You will fix the commodity values of the world, is what you will do. Of course, other people will benefit by it, who are on the gold standard or gold basis. gold basis. You are not on the old gold basis. The gold basis that we were formerly acquainted with was when gold was pocket money. The situation to-day is a totally different thing. You are now on a basis in which the volume and activity of checking accounts measures the means of payment." Of course, we can redeem in gold, yes; but you are making or confirming a commodity dollar under this bill. We have already got a commodity dollar; we have already substituted for gold a commodity value. That was done by the Federal reserve act, validly, distinctly, and intentionally. We emit these Federal reserve notes against commodity bills, and we can emit enough of them to supply all the needs of commerce, and measure the value of all commodities in process of manufacture and distribution.

Mr. Reginald McKenna, formerly Chancellor of the Exchequer of Great Britain, and for a long time chairman of one of the London banks, the London City and Midland Bank, having over $2,000,000,000 of deposits, and one of the biggest banks in the world with over 3,000 branches, said, not long ago, that the world no longer is on the gold basis, but it was on the Federal reserve dollar basis. What he meant by that was that we have got a dollar which is measured 100 per cent by commodities. That is what it is measured by, and you will fix the standards of the world for commodities. Of course, the commodities abroad will have higher values when you do this, and ought to have. I would like to see the United States furnish them with enough money, enough gold, to give them the currency stability that they may require.

Mr. GOLDSBOROUGH. We would be benefited equally with them, would we not?

Mr. OWEN. Of course we would. The idea that trade is a onesided matter is perfectly false. When I sell 1,000 bales of cotton to

Liverpool, I get its equivalent to my satisfaction, and if you multiply that transaction a million times, you do not change the principle. Our so-called balance of trade is merely an economic or arithmetical term Chat does not mean what it seems to say. The reason I say that, is chis: When I sell a thousand bales of cotton to Liverpool, I get the equivalent to my satisfaction. Any balance of trade there? Two and two makes four. It balances itself. I bring back my equivalent of the cotton in one form or another; it may be in merchandise, it may be in gold, it may be in diamond earrings, but whatever it is, it is to my satisfaction, and there is no balance about it. This transaction nultiplied a million times leaves no real balance. The balance of rade is merely an arithmetical calculation, to describe the relative condition between the recorded exports and recorded imports of merchandise. There are certain invisible factors which will enter, which will make the accounts a genuine balance; for instance, there is 5500,000,000 or $600,000,000 invested by Americans abroad in exchange for service in hotels and agreeable entertainment. Marine reights, insurance, interest charges, and so forth. You can not enumerate it in statistics, but it is an equivalent return. You will fix the commodity values throughout the world, when you fix the dollar as neasured by commodities, and commodities as measured by the dolar. When you have done that, you could abolish gold and silver, too, which are mere commodities, at last, but which have been given an pecial status by the worlds monetary demand.

As I said a few moments ago, the industrial demand for gold is about one-fourteeth part of the annual production. Besides the industrial lemand for gold, there is no other demand for gold, except to transfer t as international balances. We have no pocket money demand for gold. We should diminish our own monetary demand for gold by aking the gold certificates out of circulation and striking out the use of it as a reserve against member bank deposits.

Our excessive accumulation of gold (with France also following suit) s causing many countries to go off the gold basis-Chile was the last announced to-day. It is a good thing to let up on the demand for nonetary gold, and as it is done commodities will be favorably ffected that is, commodity values will rise.

Mr. MCFADDEN. Mr. Chairman, may I ask a question?

Mr. GOLDSBOROUGH. Yes.

Mr. MCFADDEN. I would like to ask a question to clarify my own mind and perhaps the point at issue here, in connection with gold. The statement was made earlier that there was $900,000,000 of gold. The Treasury statement shows there is issued and outstanding of cold certificates $1,600,000,000. The difference between the $900,000,000 that was referred to the chairman and the $1,600,000,000, I m assuming is held now by the Federal reserve; is that true? Mr. OWEN. Yes; about $700,000,000 by the Federal reserve agents nd about a billion in general circulation.

Mr. MCFADDEN. They are holding it as part of their legal reserve? Mr. OWEN. Yes, sir.

Mr. MCFADDEN. Now, did I understand you to suggest that the ederal reserve system buy the present free gold of the TreasuryMr. OWEN. No, sir.

Mr. MCFADDEN. With Federal reserve notes?

Mr. OWEN. No, sir.