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ing to import gold, and by limiting their paper currency, kept their paper unit, the krone, at an actual premium in terms of gold instead of gold being at a premium in paper as in other countries. There is one other possible instance, but that is the only well-authenticated instance where you have paper money in a country more valuable than the gold which is supposed to be the base. Îf they could do that, as they did, they ought to be able now to control fully and to stabilize. There is not the slightest doubt that they can.

Mr. STRONG. Doctor Cassel, of Sweden, who is supposed to be an authority on gold, was over here during the hearings on this same subject two or three years ago, and he testified here. Did you meet him at that time?

Professor FISHER. Yes. I did not meet him here, but I had him as my guest in New Haven.

Mr. STRONG. His statement was that the first duty of a nation setting up a monetary standard was the stabilization of its unit of value.

Professor FISHER. Yes. I think every economist would agree to that. I know of no one who would not.

I have a letter here which I received last February from Major Bellerby, of England, who is a professor in one of the universities in England-Manchester, I think-and who has been deeply interested in this subject from the standpoint of labor. He says:

I think you may take it that this country has fairly definitely in mind two ends: The first is to secure the expansion of industry through the expansion of currency and credit, and through the recovery of prices; the second is to institute & system of stabilization of the

price level when prices have reached a position at which they yield an adequate margin of profit and when unemployment has fallen well below a million. These two aims were accepted by the McMillan committee as ideal. It is fairly safe to say that they are now the accepted objectives of the government.

Then, some of you may have heard, over the radio last fall, a speech by the honorable Pethik-Lawrence, formerly member of Parliament on this subject, in which he says:

As a proof of the confidence of the ordinary Englishman in the inherent strength of the national credit

England has, as you know, gone off the gold standard.

may tell you that not at any time since the crisis first arose, not even during the general election when some of the politicians were trying to make our flesh creep, has there been any run on the banks.

Going off of the gold standard did not do harm. All this time people have been putting their money into the ordinary banks and into the post office savings bank just as they had been doing for years past,

The people who do notice a complete change in the situation are the traders and manufacturers who are dealing with countries that have remained on the gold standard. When the pound stood at $4.86, goods which cost an Englishman & pound to make could not compete in the international market with goods made in America for $4. But now that the pound has fallen to $3.30 the English manufacturer has a decided advantage over his American rival so long as he can continue to make the same goods for about a pound, and this he is still able to do to-day because his costs of production have risen little, if at all.

At the same time the Englishman
This is so valuable that I would like to quote quite a bit of it.

At the same time the Englishman who is manufacturing for the home market finds that his foreign competitors are less able to undersell him because their

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prices turned into English pounds are higher than they would be if the pound End remained at its old gold ratio.

Thus a double fillip has been given to British production and it is no doubt tu this reason that there has been the rise in the price of industrial common stoc which I mentioned just now. For this reason also the numbers of our unemployed which had been mounting up and up week by week before we went off the guk standard in September, have since then been coming slowly but steadily dor: again.

Of course there is the other side to the picture. The cost of raw materias imported from abroad has gone up. Uncertainty as to the future level of the exchange has complicated international trade. The prestige of the city is London has suffered. But on balance British manufacture and commerce hate gained substantially up to the present by our going off the gold standard,

But if you ask me whether there is any chance of the English pound behavinx like the German mark or the Austrian krone a few years back, and coming to be worth only a few cents or even less than a single cent, I can tell you at once that the suggestion is utterly fantastic. It is true that there has been a rise of Le 7 per cent in wholesale prices in England since we went off the gold standard.

After that, it went up to 13 per cent; now it is 10 per cent.

But retail prices and the cost of living have only made a tiny advance and are still considerably below their figures for a year ago.

I do not think England is in any hurry to go back to the gold standard, and I she does go back it is highly improbable that it will be on the old ratio of 44.80. Most Englishmen think that we are much better off to-day in spite of our fluctu. ating exchange than recently when we were tied to gold.' It seems to many of us that not only this country but a large part of the civilized world was drifting to disaster because we were all bound up through the gold standard to a steadily falling level of wholesale prices, by which many manufacturers and merchants were being steadily ruined.

It should be the business of those who are at the head of the great central banks of the world to secure to us such a stable unit of value in every country. They possess wide powers for such a purpose. They issue the currency. They have the means to expand or contract credit. They consult together from time to time. But in my view that have wholly failed to do their duty in this respect; and our English economist, Maynard Keynes, whose writings many of you know so well, shares this opinion with me.

I do not think, therefore, that England will go back to the gold standard unless she has some assurance that if she does so she will have more voice than she had before in controlling its distribution which would enable her to escape the grire consequences from which she suffered during the last few years.

At the present time a large part of the world is off of the gold standard and many countries have deliberately chosen to link themselves to the English pound rather than to gold.

Sooner or later there must be international cooperation to secure a sound monetary system which will serve the needs of the world better than what we have had up till now. It may be, when that day comes, that the world will throw off completely its allegiance to gold. For gold has been an autocratic ruler which has not treated its subjects well and there is nothing inherently impossible in the idea of a monetary system in which gold plays no part.

But I think that a better solution will be to retain gold and instead of dethrone ing it make it into a constitutional sovereign which shall no longer possess arbitrary power but shall guide the destinies of nations according to the peoples' will.

Mr. Strong. Might I observe right there that this change in the value of the English pound is a direct illustration and proof of your theory of changing the value of the American dollar into grains of gold, is it not?

Professor Fisher. It shows control, at any rate.

I would like to quote now from Sir Basil Blackett, who is also s director of the Bank of England. I have already referred to Sir Josiah Stamp, who is a director. Sir Basil Blackett, on October 22, last,

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advises, as reported in the New York Times, against haste in resuming the gold standard. The article reads:

Some reasons why Great Britain should not hasten to return to the gold standard, either at the old or new parity, were given by Sir Basil Blackett, a director of the Bank of England, in a speech to the Rotary Club to-day:

“We are bound to ask whether there is an alternative international standard, such as bimetalism, symmetalism, or a nonmetallic standard, which would work better than gold."

Even if there is such an alternative, however, the question will still be asked whether conditions are ripe for its adoption.

"If by sacrificing the stability of exchange, Britain can be made the master of its own economic destiny, not to be dragged at the wheels of the chariot of the Federal Reserve System of the United States or the Bank of France, and give real stability to the internal price level, the alternative of a managed sterling currency is at least worth examining.'

He suggested that it would be worth examining whether it might not be possible to adopt an imperial currency standard,

I have quoted so much on the movement for stabilization, because I thought it was worth while that you should know the high spots in this movement which now involves so many distinguished bankers and business men throughout the world.


Now as to this bill and the present hearings. You have heard already from many men who have anticipated what I would have said, especially ex-Senator Owen and Prof. W. I. King. Ex-Senator Owen omitted to mention that he had introduced into the original Glass bill, now the Federal reserve act, a stabilization clause which was afterwards stricken out. W. I. King, I hope you realize, is one of the leading statisticians and economists of the country. I only wish that those two speeches could have been heard over the radio by every business man and banker in the United States. If they could have been, there would be no doubt about the success of your efforts to get some constructive legislation adopted by Congress immediately. All we need is education. The thing that is needed the most is to have people read what has already been written on this subject.

I was much impressed at one of the meetings of the Stable Money Association about a year ago to hear the president of one of the largest life insurance companies confess that only within some six weeks before that speech had he known anything about this subject and appreciated its overwhelming importance; and he waited humbly to confess that he ought to have known about it and that henceforth he would be one of the strongest supporters of the stable money movement—which he has been.

I also call attention to another business man, a leading business man in his own city, in the West, who started out with the idea that the plan as originally proposed by me in my "stabilizing the dollar” was a wild one and that I was a very dangerous man; he undertook to show that these beliefs of his were right and in order to prepare himself he studied into the subject, and the more he studied the less his opposition grew, until he turned exactly the other way and finally wrote a book on the subject which was dedicated to me.

Now, these two “conversions" that I have mentioned are characteristic of what happens when a man really grapples with the subject;

but the trouble is that the average business man not only does not grappled with it, but he has not the faintest idea of what it is all about, because of what I call the money illusion. He takes it for granted that we already have a stable dollar because we have had the price of gold uniform since 1837 at $20.67 an ounce, which merely means that the weight of a dollar is 23.22 grains of pure gold, some such uninformed people ask, “Isn't that stability? What more de you want? Why interfere?' Any interference will give you instability.”

That is the fallacious and common opinion of the average man, until he is waked up by studying the subject enough to realize that the only real stability is stability of purchasing power, that what you really want is a commodity dollar, that what you really want is a market-basket dollar, a stability in purchasing power of our commodities in general, not of one commodity only gold. In other words, what you want is a stable price level.

Now, with this fact, that there are few men among business men, among bankers and among Congressmen in both Houses who have any conception of what this is all about, it put upon you leaders here a great responsibility to get such a bill through. If you can convert your colleagues by education, by having them read on the subject, I think the thing can be done.

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The subcommitte

2., Hon. T. Alla M. GOLDSBOROU trhassor Fisher, w


Now, I just want, as a preliminary to what I shall say about the bill, to tell you what my main beliefs are on this general subject

, and if they seem wrong to you, and I do not justify those beliefs before the hearing is over, I would be very much pleased to have you ask questions and to see if I can not do so then.

I can put in nine propositions my main beliefs on this subject:

First, that money has always hitherto been unstable, with very few exceptions, one being when the Federal reserve system, under the leadership of Governor Strong, was trying to stabilize it between 1921 and 1929;

Second, that both inflation and deflation are injurious, and, if extreme, as at present, are ruinous;

Third, that the evils from inflation and deflation may be summa. rized under three heads: Social injustice, social discontent, and social inefficiency. These evils bring poverty, bankruptcy, unemployment, suicide, bloodshed, political upheavals—they are behind all the legislation, practically, that is exciting any comment now in Congresswar, and revolution.

Fourth, that the realization of these evils is hidden. There is no realization of these evils by most people, because they are hidden by what I call the money illusion. We think in terms of money, and take it for granted that it is stable.

Fifth, that the present depression is for the most part due, I would say nine-tenths due, to deflation.

Sixth, that the price level, if we do not do anything about it, could still go down far below where it is now. There would be no absolute bottom to the abyss into which we could plunge I do not say will plunge, but could plunge-until we got down 95 per cent lower than

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we are now, which would ruin practically every business man and every farmer in the country.

Seventh, what has happened—as well as this further fall that is still possible—was all or mostly preventable.

Eighth, that even to-day it is partially curable.

Ninth, if it is not cured, our whole American individualistic and capitalistic system is in danger.

I heard one of the leading bankers—I wish I had permission to quote him, but I do not want to do anything I am not authorized to do—the president of one of the largest banks in one of our largest cities, and the chairman of one of the most important committees of the American Bankers' Association, say that we must raise the price level to let people pay their debts, and that if we do not he fears that the whole capitalistic system is going to collapse. He was willing to raise the price level by changing the weight of the dollar.


I am writing a book on the depression. As I see it in my studies, the depression represents two social diseases, the debt disease and the dollar disease, and the latter has aggravated the former.

Mr. GOLDSBOROUGH. Mr. Busby has to speak downtown at half past twelve, and there is a call of the House now. So the committee will adjourn until 2 o'clock.

(Thereupon, at 12.05 o'clock p. m., a recess was taken until 2 p. m.)


The subcommittee reconvened pursuant to the recess, at 2 o'clock p. m., Hon. T. Allan Goldsborough presiding.

Mr. GOLDSBOROUGH: The committee will please come to order. Professor Fisher, will you proceed, sir?


Professor FISHER: I was getting to the present depression and I stated that I had just written a book on the subject. I have got some of it here and am going to have it all mimeographed so that in case any of you should care to have a copy before it is published, I shall be very glad to send it to you and would like your criticisms.

Mr. GOLDSBOROUGH: Thank you very much, Professor.

Professor FISHER: When I began this study, which was about nine months

ago, I had never made a study of the so-called business cycle, except certain phases of it and I had no idea, no prepossessed idea as to what was now the matter. I always believed that a depression or so-called business cycle was a tangled skein of events not due to any one thing. I believe so now. I do not think any historical event is ever, with some possible few exceptions, due to one thing only.

But the more I studied it, much to my surprise, the more convinced I became that there was one overmastering item, or two-one dependent on the other in this present situation, which together are so important that the other items dwindle into insignificance in comparison.

I want to make it distinctly understood that there are, in my opinion, other elements, other explanations, some of which if there were time

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