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Quite a proposal, isn't it? But I think it's perfectly sound. Let us see what would be the effect of uch an adjustment on commercial debts-bills payable and bills receivable. Here is the case, briefly stated :

Now listen attentively! If the firm of Smith & Co. sold to Brown & Co. 100 units of goods at, say, $2,000, and Brown & Co. sold to Smith & Co. 2,000 units at, say, $2,000, the mutual payment of their bills would involve a total money transfer of $4,000. But considering that the present dollar has only a 25-cent purchasing power, the $4,000 actually have an aggregate value of only $1,000.

Now, if Brown & Co. cuts Smith & Co.'s bill 50 per cent, to $1,000, and Smith & Co. cuts Brown & Co.'s bill 50 percent, to $1,000, a total of $2,000 would change hands between them, but with this difference: Their $2,000, under my proposal, would actually have a $2,000 purchasing power.

Which is better for Smith & Co, and Brown & Co.-to receive each $2,000 with only, in fact, a 25-cent purchasing power ($500), or to "compromise" for $1,000—but with every dollar imbued with a 100-cent purchasing power?

Now, let us assume, in the aggregate, $4,000,000,000 of mutual commercial debts. If fully paid, with dollars that have only a 25-cent purchasing power, as is the case at present, the $4,000,000,000 will have an aggregate exchange value or purchasing power of only $1,000,000,000. Whereas under the plan proposed, namely, reducing the amount of the debt by one half, or to $2,000,000,000, but payable with dollars having a 100-cent purchasing power, not only will all debts be paid in full but there will have been created $1,000,000,000 of additional purchasing power as a fund and stimulus for a new volume of business: This point alone, if there were nothing else to commend it, ought to win for itself serious consideration.


This same principle would be applied to all borrowings and lendings, all contracts and obligations involving money transfers. It would include notes, bonds, and mortgages—even insurance policies and premiums.

I'll try to illustrate just as briefly and as simply as possible how the adjustment would work out. Once more keep in mind the difference between a 100-cent dollar and our present 25-cent dollar.


1. The mortgages on farms aggregate 942 to 10 billion dollars. Let us say 10 billion to make it easy figuring. Under the present arrangement-of a 25-cent dollar-the $10,000,000,000 have an exchange value or purchasing power of $2,500,000,000.

Under my arrangement the 10 billion dollars would be cut in half-reduced to 5 billions. But on the new basis of a 100-cent dollar, the 5 billion dollars would actually have an exchange value or purchasing power of 5 billion 100-cent dollars.

I think the farmers will welcome this suggestion-receive it, as it were, with open arms. The best that has been offered them thus far is a temporary extension, or moratorium. Ultimately they must pay in full. My proposal is an adjustment of their difficulties, a lifting of the crushing burden that is now weighing them down and ruining many of them.


2. The mortgages on urban real estate amount to 36 billion dollars. On the present 25-cent dollar basis they have an exchange value of 9 billion dollars.

Under my arrangement the 36 billion indebtedness would be reduced to 18 billion, but every dollar would have a full 100-cent exchange value,

If the investors who bought “gold bonds” (what a jest! gold bonds payable in gold !) will receive in the aggregate 25 cents on the dollar they will be exceedingly lucky. (And the dollars they salvage will be 25-cent dollars.) Under my proposal they would receive back 50 percent, but every dollar would have a 100-cent value. Here is an opportunity for them to recover their losses, not in quantity but in exchange value and purchasing power.


3. There are 20 billion dollars of Government bonds in existence. Their value on a 25-cent dollar basis is 5 billion dollars. Under my proposal they would be cut in half-namely, to 10 billion—but every dollar would have a 100-cent exchange value and purchasing power.

I'll pause here long enough to remind the people of the United States that Government bonds are not an investment. They, the people, the bondholders themselves, are taxed in order that the Government may pay them the interest and the principal. Oh, can't they see that the quicker the public debt is reduced and liquidated the better off they'll be? I have stressed this over and over in my pamphlet on “War Debts and Their Redemption ", and in my editorials.


4. There are approximately 16 billion dollars of State, county, and municipal bonds. Their exchange value, on the 25-cent dollar basis of computation, is one fourth of that, or 4 billion dollars. I propose to reduce them by one half, or to 8 billion, but each dollar will have a 100-cent value.

What I said about Government bonds ap ies also to municipal bonds. The people, ultimately the bondholders themselves, pay both the interest and principal of all such bonds, through the medium of taxes. Their own intelligence ought to make them see that.


5. According to a recent statement, there are nearly 40 billion dollars ($39,195,000,000) of domestic corporation bonds afloat. On the basis of the 25-cent dollar they have an exchange value of 10 billion dollars. I propose to reduce them to 20 billion, but imbuing every dollar with a 100-cent exchange value or purchasing power.

I need only add that the cutting in half of all valid bonds should be done on the basis of their face or original value and not on the basis of their present market price.

At any rate, under my proposal all bondholders would receive fairer treatment than has been accorded them under the sundry reorganization schemes put into effect during the past 2 years.

I would follow the same method with regard to notes, and insurance policies, and whatever debts, contracts, or obligations may be in existence.


And I wouldn't stop there. I'd go a step further. Now smile, for I har good news for you. I'd cut your tax bill in half. Last year the taxes of all kinds amounted to 12 billion dollars. Under my proposal your tax bill could and would be reduced by 50 percent. All Government appropriations could be reduced by one half, for $1 would do the work of $2. That's the way I'd balance the budget.

How do you like that?

And what else can we do? Let's see. Anything else? Oh, yes! All the goods on the shelves of merchants could be marked down 50 percent, and they could sell them at the marked-down price and be better off, make a bigger profit computed not in quantity, but in exchange value or purchasing power, than is possible under existing conditions and under our present high-price system.

All manufactured goods, all factory inventories could profitably be put into the market on this lower price basis.

What else? I would materially reduce rentals. Gentlemen, the chain stores have been blamed for putting thousands of merchants and small stores out of business. It is my belief that most of them were driven out of business, ne by chain stores, but on account of excessively high rents. I would adjust all rents on this new basis.

And I would reduce all rates, freight and transportation rates, advertising rates, telephone rates, electric light and power rates, etc., in the same proportion.

And so forth. Wherever adjustment is possible and necessary, there the adjustment shall be made.

And let me whisper this: I am not an internationalist; and I'm certainly not a cancellationist. I do not favor transferring Europe's debts from the shoulders of the people of Europe to the backs of the people of the United States, for that is what cancellation really means; but merely in passing and in parentheses—and to show the possibilities of what I am trying to propose, I would be willing to readjust the obligations of our foreign debtors on the basis here suggested. Europe owes us 11 billion dollars. Without injustice to the American people we could cut that debt in half if we adopt the principles I'm propounding.

And most foreign bonds, now in default, could be reinstated and salvaged to the holders by this same procedure.


On the question of wages, I shall say only a few words at this time. In the plan here discussed I include, of course, a readjustment of wage rates and scales. But in the readjustment under the new economics I am preaching, let us keep this dominant thought before us. The purchasing power of money is the important thing. But equally important is the purchasing ability of the people. Consequently, the aim should be not to curtail but to increase the purchasing ability of the wage earners, the people, by paying them, not a minimum but a maximum of wages. The greater the amount of wages paid, the greater will be the purchasing ability of the wage earners. That is self-evident. It is only by striving to bring this about that we shall succeed in laying the solid foundation for a progressive and permanent prosperity. Enlightened selfinterest should be a sufficient motive.

We are confronted with several grave problems that cry out loudly for solution. The most important of these is the unemployment problem. Twelve million people are out of work. Even with complete recovery it is my opinion that, under existing conditions, some three or four million workers will remain permanently without work. The wages and salaries of those working have been cut from 25 to 75 percent—the average is probably in excess of 40 percent. We boast that we have developed mass production. There is only one thing that will put practically all men and women back to work, and that is our determination to develop mass consumption. This can be done in only one way, viz, by inaugurating a system of wages and salaries that will permanently increase the purchasing ability of the people.

The principle of the wage and salary adjustment should also be applied to fees, rates, stipends, honoraria, etc. But these, and many other things that must be handled, will be taken up each in its turn.


Thanks to the stupid inflation system, we have been computing our wealth, individual and collective, and our income and profits, by the number of dollars; from now on I propose that they shall be gaged, not by their bulk or size or quantity, but by their exchange value or purchasing power. Not the quantity of money, but what it will buy, is the important thing. Is that so hard to understand?

Under the present arrangement, $1,000, whether in the shape of a note, bond, mortgage, or insurance policy, when paid, will give the holder only $250 of exchange value or purchasing power as compared with the value of money 30 years ago.

Under my proposal that $1,000 will be reduced to $500, but its exchange value or purchasing power, on account of a lower level of prices, will be $500—an increase of 100 percent in exchange value or purchasing power.

And (don't sneeze at this) paying interest on $500 instead of $1,000 has its advantages. And receiving interest payments and dividends, to say nothing of fees, stipends, bonuses, salaries, and wages, in money that is worth 100 cents on the dollar, instead of 25 cents as at present, is three times better than we have now.

Gentlemen, I'm trying to tell the country how to get out of the hole we are in and how to get out of the danger zone with a whole skin.

One of the most amusing war cartoons by Bairnsfather showed two British Tommies who had taken refuge in a shell hole. Says one to the other: "This is a 'ell of a 'ole." His comrade replied: “If you know a better 'ole than this one, go to it.”

Anyway you figure it, the arrangement I propose offers benefits to creditors and debtors alike that none of the “ remedies " suggested or applied thus far can give.


The pla that I am discussing here can be put into effect by voluntary and mutual agreements entered into under the supreme national generalship of a small group of, say, 10 or 12 or 15 or 20 men-but who must be of the highest type; men of vision, imagination, and farsightedness—able, honest. honorable, upright, and who shall have plenary and absolute powers.

I am unwilling to admit that such men cannot be found in the Nation: and, being found, I am confident that they can be trusted to perform their worš wisely, prudently, unselfishly, and justly.

The only legislation that is needed is an enabling act that will confer power on those selected and legalize everything that is done under this proposal.

Two things, however, I recommend as necessary for the transition from the old to the new system:

1. That a 60- or 90-day moratorium be declared on all debts. 2. That the stock exchange shall be closed for the same length of time. But these are bridges we'll cross when we get to them.


First, let's make up our minds. We will have to decide whether we are going to wreck the whole country in a desperate and impossible endeavor to maintain the stupid fiction that our dollar is a 100-cent dollar, when in reality it is only a 25-cent dollar; or whether we will face the facts and do whatever is necessary to save ourselves from the cumulative consequences of our collective cupidity and folly.

Every panic we have had in the past 50 years (and every future panic) and every period of depression that will visit us with increasing frequency in the years to come (unless we deliberately change it along the lines here suggested) is only paying another installment on the terrifically huge inflation and debt bill with which we've burdened ourselves; and these payments, if continued for a few years longer, will ultimately ruin us—all of us.

Gentlemen, the robot we have made has a gun in his hand and will blow off our heads, if we don't watch out!


Needless to say, I realize that I have touched only a few of the high spots, in my attempt to show the possibilities of the proposed plan. That is all that anyone, discussing a complicated subject that has a thousand angles, ten thousand ramifications, and a hundred thousand intricacies, can hope to do.

Therefore let it be understood that in this brief summary of a rational readjustment plan, in this mere outline of a sane reorganization program, in this discussion of fundamental principles, I have said nothing of sundry necessary and fundamental reforms that must accompany any intelligent reconstruction effort.

It is opportune, though, to intimate that the principal reform must take place in the minds and hearts of all of us, but especially in the minds and hearts of our captains of finance and industry, our bankers, our brokers, our indus trialists, our entrepreneurs, our business men, our leaders of thought, our statesmen, economists, and editors.

I repeat, good will, common sense, ordinary honesty, simple decency, these are the things that will get us out of the mess we are in; and restore faith in ourselves, and bring back the now badly shaken confidence of the people—i brief, end the depression period.


To start the ball rolling, leadership is needed leaders who are men of char acter and courage, of proved probity and tried ability. Given a national reorganization committee, a supreme board of directors of 10, 12, 15, or 20 men,

we can accomplish what must be done. We have these men ; let's call them into service. And having accepted, let them dedicate their God-given talents for the complete attainment of the sane purposes here set forth.

If you are at all impressed with my proposal, I should like to venture to suggest the chairman of this committee or board-a man I've never met, nor even seen; a man who probably doesn't know I'm on earth; a man whose name some of you may have heard : I mean the Honorable Alfred Emmanuel Smith-in whose integrity and ability the whole Nation has abiding faith and complete confidence.

Such a committee or board under the chairmanship of such a leader, with the whole-hearted support of the President of the United States and the complete cooperation of Congress, would be able, within a year's time (or at most two) to carry this country successfully through the most critical period and desperate crisis in its history.

The organization of such a committee or board, under the chairmanship of such a leader, would make possible the early discontinuance and orderly liquidation of the Reconstruction Finance Corporation-a consummation devoutly to be wished; it would remove the necessity for further Federal or State relief for the unemployed and those in distress; for, I'm not afraid to predict that within 90 days after the committee or board gets into action, smoke will ascend like incense from every factory and mill smokestack in the land; our streets will be filled with men and women-not looking for work or begging, but going to work, or returning to their homes, from work; our stores will be crowded, not with shoppers but with buyers; our farmers will take on new courage; our banks will settle down to a normal volume of business; our railroads will prosper as never before; hotels, restaurants, and theaters throughout the land will do a thriving business. The depression will be over; and a new era of real and lasting prosperity will have begun.

Nil desperandum! The ship of state, and all its passengers and cargo, can be saved-if we have the will and the guts to do it.




The first essential in the correction of the present situation is a complete and sure understanding of the cause or causes thereof. In my opinion, our President hit the nail on the head when in one of his most important campaign speeches he attributed this depression to the collapse of extended speculation in securities. I first wish to amplify the President's statement in this regard.

More than 1,000,000,000 shares changed hands on the New York Stock Exchange in 1929. Nearly half a billion shares were traded in on the New York Curb Exchange the same year. Evaluating these stocks at probable averages, and taking into consideration sales on local exchanges, over-the-counter sales, and bond trading, the sum total of security trading in the United States for that one year probably exceeded $200,000,000,000. The Census Bureau estimated the total wealth of the United States in 1929 at about $384,000,000,000. Thus a fantastic situation confronted us: the volume of our security speculation approximated half our national wealth. In effect, every other home, every other farm, every other factory, every other everything in this broad land was sucked into this speculative maelstrom of 1929.

Bearing these facts in mind, let us reconstruct the economic scene as it stood just prior to the great climax of 1929. The bubble of wide-spread real-estate speculation had already been pricked a year or two before. For years we had been confronted with an agrarian problem, as had most of the other populous sections of the world. The much-discussed issues of European reparations and reconstruction had been with us ever since the war. To a considerable extent the spread of the chain store and the building up of great corporate structures had already displaced the small merchant and small producer. And by 1929 the high-tariff wall of traditional policy had been surrounding the United States for decades—a fact particularly important to bear in mind in view of the swollen number of amateur and professional economists who attribute the depression to the tariff.

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