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mind you, 90 per cent of all business is done on bank checks, so that that represents your velocity.

Senator Walsh of Massachusetts. And the figures, if we could get them, for January and February would show a further decline.

Mr. EccLEs. Yes; would show a much further decline.
Senator Gore. And in 1929 the turnover was 45 times?
Mr. EccLEs. Yes.

Senator GORE. But in New York City the turnover was over 150 times.

Mr. EccLEs. I am taking the country as a whole. It varies with different parts of the country.

Senator GORE. Yes.

Mr. EccLEs. While during the same period the volume of money represented by total bank deposits and currency has declined approximately 22 per cent. It is clear, therefore, that the velocity, rather than the quantity of money, supports the price structure and that our problem to-day is not one of increasing the volume of money but its velocity.

Senator Walsh of Massachusetts. But, as a matter of fact, we have increased the volume or currency.

Mr. EccLEs. Yes; currency, but the total of currency and bank deposits is 22 per cent less than in 1929.

Senator GORE. But currency alone is about 25 or 30 per cent more. Mr. ECCLES. Yes; but it is not working. Some of it is in hoarding.

Senator Walsh of Massachusetts. What figure did you give, Senator?

Senator GORE. Twenty-five per cent.

Mr. EccLEs. No; currency is more than that to-day. Currency to-day is close to 30 per cent more.

The CHAIRMAN. Then the bank deposits must be less.

Mr. Eccles. The bank deposits are possibly 30 per cent less, or between 25 and 30 per cent. The 22 per cent represents the combination of the volume of currency and bank deposits. The deposits are more than 22 per cent less.

The CHAIRMAN. That is what I said.

Mr. EccLEs. And currency is 30 per cent more. Making the average 22 per cent.

Several factors to-day stand in the way of increasing our money velocity.

I repeat there is plenty of money to-day to bring about a restoration of prices, but the chief trouble is that it is in the wrong place; it is concentrated in the larger financial centers of the country, the creditor sections, leaving a great portion of the back country, or the debtor sections, drained dry and making it appear that there is a great shortage of money and that it is, therefor, necessary for‘the Government to print more.

This maldistribution of our money supply is the result of the relationship between debtor and creditor sectionsjust the same as the relation between this as a creditor nation and another nation as a debtor nation--and the development of our industries into vast systems concentrated in the larger centers. During the period of the depression the creditor sections have acted on our system like a great suction pump, drawing a large portion of the available income and deposits in payment of interest, debts, insurance and dividends as well as in the transfer of balances by the larger corporations normally carried throughout the country. This makes for a shortage of funds in the agricultural areas and an excess of funds in the cities.

During our period of prosperity funds were flowing from the creditor sections into the debtor sections in the extension of new credits and capital expansion as fast or faster than they were flowing out. There is no way of reviving the return flow through the operation of credit or investment until there is a basis for credit brought about through an increased price level and until there is an opportunity of profit through further investment of capital. The agricultural areas during the periods of prosperity did not share in their portion of the national income and this made for further concentration of money in the creditor sections, with too large a portion of our aggregate debts in the agricultural areas. This explains the reason for a greater financial collapse as shown by the bank failure record throughout the entire back country, represented largely in the agricultural areas,

The maladjustment referred to must be corrected before there can be the necessary velocity of money. I see no way of correcting this situation except through Government action.

It is estimated that one-third of our population is dependent upon agriculture in its varied forms and it is recognized that prosperity is impossible without a revival of the purchasing power of our agricultural population. To bring about the restoration of business to the average of the postwar period I have to suggest five points as first-aid measures designed to bring about recovery. Action with reference to these should be taken immediately. They are as follows:

First. Make available as gift to the States on a per capita basis $500,000,000 to be used during the balance of this year in assisting to adequately take care of the destitute and unemployed, pending a revival in business which should result from the following program.

Senator Walsh of Massachusetts. Is that a gift or a loan?

Mr. Eccles. I am covering it here. I am first outlining them and then I cover each point individually in detail.

Senator GORE. We passed a law the other day in which among other things we gave the District of Columbia $600,000. Now they are asking for $200,000 more. I was talking to the head of the community chest of this city and he said that the representatives who distribute this fund came here to Congress and lobbied and got that $600,000 without ever asking him about it; without even getting an estimate from him. Yesterday two Senators advised the District Commissioners to turn in a request for $250,000 more. And they will do it, and they will get it. There is not any end to that business.

Senator SHORTRIDGE. Did you suggest a fund of $500,000,000?

Senator Wålsh of Massachusetts. I wish you would read that first suggestion again.

Mr. Eccles. First. Make available as gift to the States on a per capita basis $500,000,000 to be used during the balance of this year in assisting to adequately take care of the destitute and unemployed, pending a revival in business which should result from the following program.

Second. Increase the amount of Government funds--

Senator Walsh of Massachusetts. You are coming back to a discussion of that first point when you finish giving the five points you referred to?

Mr. ECCLES. Yes.

Second. Increase the amount of Government funds to two and a half billion dollars, and more if necessary, for self-liquidating projects and loans to cities, counties, and States for public works on a liberal basis at a low rate of interest.

Senator Walsh of Massachusetts. How large is that amount?
Mr. EccLEs. Two and one-half billion dollars.

Senator GORE. We passed a bill the other day doing away with the self-liquidating feature. You know as you start this you do not stop. It gets worse and worse.

Mr. ECCLES. Third. The adoption of the domestic allotment plan, or a similar plan, designed to regulate production and raise prices.

Fourth. Refinancing farm mortgages on a long term basis at a low rate of interest.

Fifth. A permanent settlement of the interallied debts on a sound economic basis, cancellation being preferable.

Senator SHORTRIDGE. What! Cancel all those debts?
Mr. EccLEs. I will get to that in just a minute.
Senator SHORTRIDGE. Well, go on.
Mr. Eccles. I will cover those points.

Point No. 1. Unemployment relief. Without going into any detail or figures, it is recognized by everyone that our most urgent and acute problem to-day is to immediately provide adequate relief to the millions of our people who are destitute and unemployed in every corner of our Nation. It is national disgrace that such suffering should be permitted in this, the wealthiest country in the world. The present condition is not the fault of the unemployed, but that of our business, financial, and political leadership. It is incomprehensible that the people of this country should very much longer stupidly continue to suffer the wastes, the bread lines, the suicides, and the despair, and be forced to die, steal, or accept a miserable pittance in the form of charity which they resent, and properly resent.

We shall either adopt a plan which will meet this situation under capitalism, or a plan will be adopted for us which will operate without capitalism.

Private charity is almost entirely exhausted. It is impossible for most of our political subdivisions to provide additional funds through borrowing or taxation. Many of them are in default at the present time in the meeting of their obligations and are unable to provide funds necessary to pay the expense of their schools and local government. I am on the Governor's Executive Unemployment Relief Committee of my State and although I am sure the unemployed receive as much or more than in many sections of the country, available funds are entirely inadequate to meet the situation, which is daily becoming more difficult to control.

I advocate that the Government make available, as the most urgent of all emergency measures, at least $500,000,000 to be distributed to the States as required, as a gift and not as a loan, on a per capita basis in such amounts as will enable the relief organizations of each State to take care of the needs of the unemployed in a more adequate manner than has heretofore been possible. For this reason, that when it is made as a loan there is a resistance to borrowing. There is a cutting down to a point of starvation. When a State has to borrow the money that is the attitude of the public officials of the State as a result of the demands of business leaders and taxpayers generally for economy,

Senator Walsh of Massachusetts. When it is a gift the lid is off?

Senator GORE. Where does the Federal Government get this money to give to the States?

Mr. EccLEs. Where did it get $27,000,000,000 during the war to waste?

Senator GORE. A very different situation.

Senator WALSH of Massachusetts. Let him finish his two sentences under No. 1 and then we will ask him some questions.

Mr. EccLEs. To do less would be to fail in the first duty of government, the protection of the lives of its citizens. This support of the unemployed by Government should rapidly decrease as appropriate action is taken by the Government to restore the proper functioning of our economic system.

Senator Walsh of Massachusetts. Now may I ask you a few questions?

Mr. EccLEs. I am just wondering if it is all right to continue with my statement, Senator. Maybe the questions will be answered during the course of my statement.

Senator WALSH of Massachusetts. I would like to discuss this thing

with you.

Mr. EccLEs. Yes.

Senator Walsh of Massachusetts. Is it a fact that the greatest distress in this country to-day is in the large centers of population?

Mr. EccLEs. Well, I am not in a position to say what the distress is in the larger cities.

Senator Walsh of Massachusetts. Are there not many more million people in need and distress in the large centers of population rather than in the farming districts?

Mr. ECCLES. I believe that is true.

Senator Walsh of Massachusetts. You are asking the Federal Govvernment to give money to New York State in large volume, to Massachusetts in large volume, to Ohio in large volume, and to Illinois in large volume, on the theory that they, the richest States in the Union, from whom the Federal Government must get it money, can not support this situation. How can you justify that?

Mr. EccLEs. On this ground

Senator Walsh of Massachusetts. How can you justify giving money out of the Federal Treasury to the State of New York, whose per capita indebtedness is insignificant compared to the Federal Government, who is the great treasure house for the Federal Government to go to for its money, on the theory that it is so bankrupt, it is so helpless that it can not take care of its poor and starving people? We might as well confess bankruptcy if we ever reach that situation.

Mr. EccLEs. Well, there is this difference. A State, of course, in the same financial category as corporations and individuals in that they do not have the power of issuing money or credit. The Federal Government is entirely in a different category because it controls the money system. It is true that the State of New York and the State of Pennsylvania and these other States are creditor sections, not debtor States. In other words, the wealth of the State is less than the wealth of the people living in the State.

Senator Walsh of Massachusetts. I do not follow you. The State has the same power of taxation as the Federal Government.

Mr. Eccles. That is true. But to-day you have not the basis of taxation, for the reason that the production of wealth has largely stopped through unemployment. Now the credit of the Federal Government is in relation to the national income. If the national income is cut in two, then it goes a long way to destroying the credit of the Federal Government on a gold basis.

Senator GORE. You do not think there is any way to destroy the credit of the Federal Government, do you?

Senator Walsh of Massachusetts. Senator Gore, may I finish my inquiry?

Senator GORE. Senator, he said it might destroy the credit of the Federal Government. I did not think that it was possible to destroy the credit of the Federal Government; that it was just inexhaustible and infinite. Pardon me for interrupting, Senator.

Mr. EccLEs. The more unemployment there is the less production of wealth there is and the less ability to pay taxes and support Federal credit unless inflation without regard to the gold standard is resorted to.

Senator GORE. Is Congress going to tax somebody that these States can not tax? What is the resource, what is the reservoir that the Federal Government can tap except the pocketbooks of the people in Utah and New York?

Mr. ECCLES. Wealth is not distributed and ability to pay is not distributed according to population.

Senator GORE. Not entirely.

Mr. ECCLES. No. There is a great difference. In other words, the income tax paid by certain States is a far greater percentage of the total national income tax collected than their population.

Senator GORE. Yes; there is about half a dozen or such a matter. And yet they are coming here asking the Federal Government to supply them funds to feed the hungry, notwithstanding that when that money is repaid they will have to pay a disproportionate share of it.

Senator Walsh of Massachusetts. Exactly. I can understand, young man, and I will vote for any amount of money that is necessary for any State that confesses its inability to borrow money to take care of its poor, Utah, or whatever State--all that it needs. But I can not vote to give money to the State of Massachusetts and the State of New York and the State of Pennsylvania and the State of Ohio, which are the chief sources of wealth in this country, from which the wealth must come, when they have a credit equally as good as the Federal Government,

Mr. EccLEs. Well, their credit can not be as good as that of the Federal Government, for this reason. In the first place, Government bonds are eligible for rediscount with the Federal reserve banks, and that in itself creates the ability with which to get credit.

Senator WALSH of Massachusetts. Very well. Let us issue Government bonds and have the State at the same rate give the Federal Treasury its bonds in return, so that the interest rate in these rich States will be reduced to what the Government will borrow. That is a proposition that might well be given consideration.

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