cent, cut the income of bond holders to the same extent, and the principal of the bonds similarly. In other words, it should get all items of expense down to the new price level.

My own judgment is that a reduction of the tariff to 5 or 10 per cent, a $10,000,000,000 program of reforestation and public works, a high income and inheritance tax-up to the levels of England or Germany-a capital levy to finance the program of public works, and proper adjustment of the price level, would bring us out of the depression within a year or two. It is clear that the situation demands drastic remedies. Putting talcum powder on a cancer will not do any good. We have tried that sort of thing too long.

Very cordially yours,

JOHN ISE.

APPENDIX

STATEMENT OF HON. GEORGE W. ARMSTRONG, FORT WORTH, TEX., AND

NATCHEZ, MISS.

PRELIMINARY

I am 66 years of age, reside in Fort Worth, Tex., where I have lived for the past 45 years, and I am a manufacturer and farmer, I am president and owner of the Texas Steel Co. which manufactures reinforcing concrete bars, steel castings, and oil-well supplies. I am also the owner of 30 plantations in the State of Mississippi, comprising about 30,000 acres. The Texas Steel Co. and also my plantations are mortgaged for more than their present value.

I pretend to have some knowledge of the money question and of political economy. In 1922 I wrote The Crime of '20 which revealed to the public for the first time the minutes of the meeting of the Federal Reserve Board and Advisory Council of May 15, 1920, that decreed the deflation which brought upon America and the world the catastrophe of 1920. I have since written Truth (two volumes); The Calamity of '30, Its Cause and the Remedy, and A State Currency System-To Hell With Wall Street. These books revealed to the public for the first time the enormous hoarding of our moneys by the Federal Reserve System, and the fact that we now have in actual circulation of all kinds of money, including Federal reserve notes, only about $1,250,000,000 or about $10 per capita instead of about $38 as stated in the official reports of the Comptroller and the Treasury Department.

THE CAUSE OF THIS DEPRESSION

It is my understanding that the subject matter of your investigation is the cause of this depression and the remedies that will correct it. I have covered both of these subjects rather fully in my book The Calamity of '30, a copy of which I will be glad to furnish complimentary to any member of the committee or of Congress who is sufficiently interested to read it. I will here make only a very condensed statement with but little argument, of the conclusions of this book.

It must be obvious to you that the cause of this depression is the deflation of all values as measured by the dollar; or stated conversely, the inflation of the dollar. If that is the cause, then the remedy is equally obvious that this condition can only be corrected by reversing the process and by deflating the dollar and inflating all values as measured by the dollar-and your conclusions and recommendations should, therefore, be the best and quickest method of accomplishing this desired result.

The deflation of 1930 has been brought about through the operations of the Federal Reserve System in precisely the same manner that this System brought about the deflation of 1920, viz, by the contraction and hoarding of money and credit and by advancing the discount rate. The deflation of 1920 was brought about, as stated in the official minutes of the deflation meeting of the Federal reserve authorities on May 15, 1920, for the avowed purpose of "checking the vicious circle of increasing prices and wages." The deflation of 1930 was brought about by the same System for the purpose as stated in the press and in the Federal reserve bulletins of that time, of checking speculation on the exchanges. The methods used to bring about both deflations were precisely the same, viz, the contraction and hoarding of money and credit, and advancing the discount rate.

I have stated that the volume of money in circulation is only about $10 per capita. This statement is based upon the last annual report of the Comptroller of the Currency showing that the approximately 19,000 National and State banks have in their vaults less than $800,000,000-or as I recall the figures, actually $743,000,000. This represents all the money that is in circulation ex

cept the money in the tills and pockets of the people. The only estimate I have seen of this amount is one by Mr. McCoy of the Treasury Department some years ago estimating it at $440,000,000. This is surely a liberal estimate. I think your own observation will convince you that the people have less than half as much money in their pockets as the banks have in their vaults. Accepting this estimate, however, as being correct, there is actually about $1,250,000,000 in circulation-or $10 per capita.

In many of the States there is only $3 or $4 per capita in circulation. In Texas we have about $5 per capita in circulation. The volume of money in circulation is so limited that people are unable to conduct their ordinary small transactions in currency. There is no credit obtainable from any source except from the Reconstruction Finance Corporation and other governmental agencies, and except also for certain kinds of self-liquidating transactions. The crying need is to correct this situation quickly and thoroughly. The best method for that purpose is to pay the adjusted compensation due the soldiers, in Treasury certificates and to make these certificates tenderable for debt and taxes. The effect will be to get new money in circulation in every nook and corner of the land, because the veterans are everywhere. This will restore buying power to the people, credit power to the banks, and values and prices and wages.

GOLD STANDARD

My book "The Calamity of '30" contains a true story of the machinations of the international bankers following the Versailles Treaty in bringing about the restoration of the gold standard throughout the world. All of the countries of the world except the United States, have been forced to abandon it. The truth is we have not been on the gold standard since the establishment of the Federal Reserve System in 1913, but it has been used as a pretext to keep up the value of the dollar. If we had no other money except gold, and our gold was permitted to circulate, we would have approximately three times as much money in circulation as we now have, with the result that all values and prices would be approximately three times more than they now are, and the burden of debt and taxation three times less.

Practically the entire amount of our gold is hoarded by the New York Federal Reserve Bank in its vaults reported to be 80 feet below sea level. So far as its usefulness is concerned it had as well be at the bottom of an uncharted sea. The Congress has only recently compelled by law under heavy penalty, the bringing into the Federal Reserve System for hoarding, the small remnant of gold in circulation. There can be no possible purpose other than hoarding, since the Federal Reserve System and the Treasury will not pay out gold, and if they should pay out gold the recipient would be under the duty to return it at once and would be subject to a fine of $10,000 and 10 years' imprisonment if he failed to do so.

Of what service, pray tell me, is this gold if it can not be used? In the name of common sense, what reason can there be for a convertible gold note if the holder of the note is not permitted to have it redeemed in gold?

The gold standard has been throughout the ages but a pretext of the banking fraternity to limit the volume of money. They fear that without this artificial limitation the governments will respond to the call of the people for cheaper money and for, higher prices for their services and products. It is the inborn, ingrained fear that is transmitted from banker to banker and from father to son. This fear is fundamentally a fear on the part of the rich and the conservative of the people and of popular government.

They hold up their hands in holy horror and point to the French assignat and the German mark as dreadful examples. But during the periods of inflation in France and Germany the people were prosperous and happy; it was only when the bankers succeeded in bringing about deflation that the people became poor and miserable. There is no occasion for America following in the footsteps of France and Germany, and nobody desires that that be done. The Congress can establish through the exercise of its constitutional duty, such value for money and for property and service as will be fair alike to creditor and debtor, and to the money lenders and the people. To say that Congress will not do so is to argue that our republican form of government is a failure.

Since the establishment of the Federal Reserve System, our standard, or yardstick of value, has been a manipulated one dependent upon the will and

judgment of the Federal reserve management. The standard is now manipulated by the open-market committee of the Federal Reserve System, of which the Governor of the New York Federal Reserve Bank is chairman and manager. The result of this managed currency is that we now have three times as much gold in storage as we had prior to the World War, and about one third the money we then had in circulation.

It is absolutely impossible for America to maintain the gold standard, or higher value for its money than the cther leading commercial countries of the world. Such condition will inevitably bankrupt the manufacturers and farmers of the country and pauperize the majority of the American people. The American exporter, whether of farm or manufactured products, must bear the burden of the difference in the exchange value between the dollar and the moneys of the importing countries, which means that the farmer and the laborer must pay the premium on the dollar. The farmers and manufacturers of countries having cheaper moneys have a cheaper cost of production, with the result that they can undersell the American producer in the American market. .It is a necessary first step on the road to recovery to bring the value of the dollar down to a parity with the moneys of other leading nations of the world, which can only be done by increasing the number of dollars in circulation.

SILVER

While metallic money is no longer of any consequence in itself, silver should be restored to the ancient and established ratio of approximately 16 to 1 for the dual reason that it will increase our volume of money and increase the demand for our exportable surpluses. Silver is the money of more than half the people of the world. To the extent that the value of their money is increased as compared with the dollar, their buying power and demand for our products are correspondingly increased. Besides, the restoration of silver will approximately double the volume of our money, which will increase prices and wages and reduce the burden of debt and taxation correspondingly.

We do not need to have any world conference to regulate our own financial policy. If we remonetize silver at the ratio of 16 to 1 the leading commercial countries of the world will be compelled to do so, otherwise the silver-using countries will buy our products in preference to those of cther countries for the simple reason that their money will buy more of our goods.

The ratio of 16 to 1 is not only the ratio that we formerly maintained, but it is the established ratic throughout the ages for most of the commercial nations. It is less than the ratio of production of silver as compared with gold. This ratio is now and has been for several hundred years at about 13 to 1, with the result that the ratio of the stock of silver money and bullion in the world to the stock of gold money and bullion is about 13 to 1.

FEDERAL RESERVE SYSTEM

As important as are the payment of adjusted compensation to the soldiers, the abandonment of the so-called gold standard, and the remonetization of silver-none of these measures nor all of them together will bring about permanent prosperity in this country so long as the Federal reserve management has the power to hoard, expand, and contract currency and credit, and to thereby manipulate the price and wage level.

No matter how much money is put in circulation nor of what kind it is, it will soon be gathered in and hoarded in the vaults of the Federal reserve banks. The cheapening of gold by reducing the gold content of the dollar will not increase the volume of money in circulation; it will only debase gold that is hoarded and in storage in the vaults of the Federal reserve system. The Federal reserve system has developed into a vast hoarding machine and price and wage regulating bureau. It is responsible for two of the world's major calamities, viz, those of 1920 and 1930, and there can be no enduring prosperity until this system is abolished or radically reformed. The Congress should prohibit under heavy penalty (and not legalize, as proposed by the Glass bill) the open market operations of the system, should destroy its power to expand and contract currency and credit, and Congress should resume its constitutional power and duty to "coin money and regulate the value thereof."