We have arrived at the third stage of the depression, which is a determination to face realities, and this always marks the first step of improvement. We realize that the boom days have passed and we begin, therefore, to order our personal, business, and governmental expenditures on a new basis. We have heard much talk recently about governments, Federal, State, and local balancing their budget. This is all very desirable, but it is also equally desirable that individuals and corporations also balance their budget which is nothing more or less than bringing their expenses in harmony with their present and prospective incomes.

The era of extravagance in personal and business expenditures has passed, and, therefore, all types of business are effecting economies. Business is eliminating many of the expenses which it incurred during the period of prosperity and which had very little or no relation to the profitable conduct of the business, and as a result, there is promised that business will be on a more healthy basis than it has been for many years.

Supplementary government aid to natural processes of recovery is desirable wherever it is effective, but there is a great temptation, as has been in part the case during the past several years, to continue to use palliatives and not to seek a remedy. We are arriving at the point where we need, so to speak, to use the surgeon's knife and lay aside the hypodermic. Doubtless, the Government can do something in the way of wisely extending credit as has been done in part by the activities of the Reconstruction Finance Corporation to certain deserved businesses. It can also aid by better bankruptcy law so that the railways and industrial corporations can more readily reduce their capital structure and enable many present creditors to write off their present claims and substitute for them a claim on the earnings of the business that will be possible in the future. But it is useless to go on loaning Government credit to banks, railroads, and other industries which have no hope and have had no hope for months that under the most favorable conditions they would ever be able to get a fair return on their present capital structures.

The solution of our problem lies primarily in permitting the natural corrective forces to operate as effectively and quickly as possible. Efforts to prevent the natural functioning of economic laws by attempting to maintain unsound economic relationships within the price structure by governmental action, such as through price fixing schemes, the bolstering of decayed capital structures, either railroad, industrial, banking, or agricultural, will only prolong and not cure the depression. The same thing is true in our economic life.

It is time to call upon the creditors of railroads, banks, farms, and other industries to assume their share of the burden of deflation and the reconstituting of their capital structure and not expect the people of the United States continuously, through taxation, to assume a burden which in large part belongs to the owners of the properties.

Source: Facing the Facts, edited by J. G. Smith, published by G. P. Putnam's Sons, Chap. XI.

TABLE II.-Consumption of principal foodstuffs in the United States

Source: Annalist; July 22, 1932, p. 107; November 21, 1930, pp. 869-870.

Source: St. Louis Globe Democrat, February 12, 1933; page 1, part 2.

(A letter received from Mr. Orlando F. Weber, New York City, is here printed in full as follows:)

Hon. REED SMOOT,

Chairman Committee on Finance,

NEW YORK, February 17, 1933.

United States Senate, Washington, D. C.

DEAR SENATOR SMOOт: Upon my return to the office I find your letter of February 8.

I have noted in the newspapers the comments made by the various gentlemen who have appeared before the committee and find myself in sympathy with the thoughts already expressed before the committee as follows:

(1) The Budget should be balanced in order to maintain the Government credit structure.

(2) There should be no cancellation of foreign debts; to do so would not benefit the people of our country.

(3) The low price of farm commodities has had a real bearing on reduced industrial activities during the past two years, and has an important bearing on our present situation.

Burdened as the committee must be with the mass of opinions now being expressed before it, I would be pleased if this letter would be satisfactory in place of my personal appearance.

Very truly yours,

ORLANDO F. WEBER.

(A letter received from Rev. H. C. Morrison, D. D., Louisville, Ky., is here printed in full as follows:)

Senator REED SMOOT,

LAKELAND, FLA., February 17, 1933.

United States Senate, Washington, D. C.

MY DEAR SENATOR: Your letter of February 8, forwarded, has reached me. It is impossible for me to visit Washington City at this time.

Let me congratulate you on your long and faithful service which you have rendered to your country as a public servant.

Permit me to offer the following simple suggestions:

First, close the doors of this country tight against any immigration, except tourists and students.

Second, ship out of this country all foreigners with any sort of criminal record. Third, keep a safe protective tariff over home products that can amply supply the needs of our people.

Fourth, discourage the wealthy people from taking hundreds of millions of dollars out of this country the coming summer and fall, as tourists to Europe.

Fifth, arrange for the Federal Government to unite with the State governments, the great cities, Red Cross, and wealthy philanthropists to get the millions of idle people of the cities onto the farms where they can make a comfortable living with a good degree of contentment.

Sixth, have the Government gather up the hundreds of thousands of idle boys and men who can not find employment, and put them into the military camps, the Government uniform them, give them rations and have them devote a certain part of each day to study, a part to physical culture, and a part to industry. They could do much in draining and preparing land for agriculture.

Seventh, if automobiles could be taught to eat corn and oats there would be a demand for all the products of the farm, and the vexed farm problem would be solved. Automobiles have led millions of people to mortgage their property in order to buy cars. They have wasted time and money running about the country. Less of the steering wheel and more of the hoe handle is one of our great needs. Eighth, keep the country dry. Save the hungry, poor people from wasting that which would buy bread, for beer. Pass a resolution in the Senate calling upon ministers of the gospel to lead the people back to the Bible, to reverential fear and loving obedience to the God of the universe.

Respectfully,

H. C. MORRISON.

(A brief submitted by the Kiwanis Club of Elizabeth, N. J., is here printed in full:)

KIWANIS CLUB OF ELIZABETH

ELIZABETH, N. J.

The Kiwanis Club of Elizabeth realizes that conditions are rapidly getting worse, and that a united effort must be made at once if we are to avoid municipal insolvency and additional suffering. We have invited the various civic and taxpayers groups in Elizabeth to join us in the following program.:

1. To study local credit, municipal and industrial conditions.

2. To present a definite program for rehabilitation.

3. To offer our cooperation in putting the program in effect.

We believe that the most serious aspect of the depression is the mental state of our citizens, rather than the material losses we have suffered. We have an overabundance of food, clothing, shelter, and labor, but lack the will or the means to provide credit machinery for the interchange of these commodities.

It is quite evident to us that a plan to end the depression must first seek to raise the morale of our citizens, and, secondly, restore the credit machinery of the country. We also believe that a movement toward recovery need not and should not await the settlement of international problems. Men can not get back to work until credit gets back to work.

We are looking at our difficulties from a purely local viewpoint, and realize that we can not effect a permanent cure unless we have both State and Federal cooperation. The State may aid by using its credit to prevent wholesale municipal insolvency. The State may also provide a more equitable method of taxation to relieve industry and real estate of a disproportionate share of public expense. The Federal Government may aid by sponsoring a nation-wide organization to raise the morale of the people, and by liberalizing the policies of the Reconstruction Finance Corporation and the Federal home loan bank.

Elizabeth may be used as a typical example of conditions throughout the Nation. Elizabeth has a population of 115,000, of which nearly 30,000 are dependent on public relief. Probably 20,000 more are in dire distress, but are too proud to ask for help. Hundreds of homes are under foreclosure, and the number is increasing in leaps and bounds. Banks and building and loan associations are practically in a state of liquidation. Taxes are paid with difficulty or not at all, and the city must resort to borrowed money to pay operating expenses. City credit is impaired and bonds can not be sold. Owing to economies in city, county, and State government, unemployment is increasing. No concerted effort to provide work has yet been made. Large industries are demanding reduction of ratables on pain of closing plants. Increasing unrest and defiance of government.

PLAN SUGGESTED FOR ELIZABETH CITIZENS COMMITTEE

The Kiwanis Club believes that credit in one form or another is the main factor in the present situation. Start the machinery of credit to function in an orderly manner, and problems of unemployment, mortgage foreclosures, and municipal insolvency will no longer exist. We believe the 50 Elizabeth building and loan associations can be used as a lever to break the credit stalemate, and to that end have submitted plans to the department of banking and insurance.

The building and loan associations may aid in the following manner:

1. Pay off obligations to banks. This amount is in excess of $2,000,000. Banks have also loaned an additional $2,000,000 to shareholders on pledge of shares.

2. Extend loans to shareholders for relief or payment of taxes. 3. Use liquid reserve funds to purchase city bonds. 4. Collect taxes monthly as an aid to the city. 5. Loan money on bond and mortgage. A number of associations have surplus funds, but, through fear or caution, are not making loans. Other associations have not availed themselves of facilities offered by the Reconstruction Finance Corporation or Federal home-loan bank, to pay off obligations or to extend relief loans to shareholders. A substantial amount could probably be underwritten to finance new homes or repair programs.

The citizens committee may aid the city in the following manner:

1. Suggest the payment of taxes monthly and aid through publicity.

2. Encourage the prepayment of taxes.

3. Aid in the marketing of city bonds.

4. Suggest the building of public works as a relief to unemployment.

5. Suggest balancing of Budget and economy of government.

6. Suggest a remedy for burdensome taxes on real estate and industry.

SUGGESTIONS TO BE SUBMITTED TO THE SENATE FINANCE COMMITTEE

We believe that the most serious aspect of the depression is the mental state of our citizens, and that steps must be taken to improve our morale before there can be any betterment of credit or industrial conditions. We believe the suggestions below would be of tremendous benefit to Elizabeth, and possibly to the nation as well.

Plan in brief:

1. Appointment by the President of the United States or the Congress of a committee of outstanding leaders in industry and finance. Organization of State committees in every State in the Union. Appointment of local committees in every important city and town in the nation. The name of this organization might aptly be the "Prosperity council of the United States. The chief duty of the council and its various subdivisions would be to inspire confidence in Federal, State, and municipal Government; to advise local communities in municipal management; to mobilize banks and building and loan associations in measures to complete liquidation, and to set in motion local credit machinery; to encourage the building of public and private works.

2. Authorization by the Congress of a bond issue of $5,000,000,000 to be called the "Prosperity loan." This loan should be offered to the public in denominations as low as $50, with an interest rate of 3 per cent. Payment for bonds may be made in full or over a period of 50 weeks. Aside from the fact that the Federal Government will have the use of this money, it will serve the following purposes:

(a) Put back into circulation millions of hoarded dollars.

(b) Permit the use of excessive savings bank reserves.

(c) Encourage thrift.

It is important to note that, following the flotation of our last Liberty loan, the condition of our banks and citizens was better than any time in the history of the country. Nearly every family had one or more Liberty bonds which could be used as a basis of local credit. With wholesale retirement of Liberty bonds funds so released were put into stocks and building and loan shares, many of which are to-day either worthless or frozen. Our people would welcome an opportunity to buy Government bonds.

3. If the Federal home loan bank is to serve the public as intended by the Congress, important changes must be made in its policy. The Federal home loan bank is practically of little value as an emergency arm of the Government, nor are its inducements sufficiently attractive ro cause the thousands of building and loan associations to seek membership. As an aid to distressed home owners, the bank can be of little use unless a more liberal policy is adopted. A policy of loaning 60 per cent of present day values, instead of 40 per cent, would go far in stabilizing real estate and help to reestablish credit. The rate of interest charged is not of great importance. It should, however, be sufficiently high so that a loss or insurance fund of 1 per cent may be set up. If fire insurance companies can operate at a profit on charges of $1.80 per $1,000 of insurance, surely the home loan bank would cover all foreclosure losses by a 1 per cent rate.

4. The Reconstruction Finance Corporation can be of greater service to the country by exercising a more liberal policy to small banks and building and loan associations. New Jersey building and loan associations are empowered to borrow an amount equal to 25 per cent of their mortgages. It does not appear, however, that the Reconstruction Finance Corporation will make loans to the same extent.