EXTENSION OF STABILIZATION FUND AND POWERS, ETC

THURSDAY, MARCH 23, 1939

HOUSE OF REPRESENTATIVES,

COMMITTEE ON COINAGE, WEIGHTS, AND MEASURES,

Washington, D. C.

The committee this day met at 10: 30 a. m., Hon. Claude V. Parsons presiding, for further consideration of H. R. 3325.

Mr. PARSONS. The committee will please be in order.

I believe our colleague, Mr. Bryon of Maryland, desires to introduce a witness at this time.

Mr. BRYON. It is not often that relatives agree, but I want to ask your indulgence to hear a cousin of mine at this time. He has made a study of the matter concerning which the committee is deliberating, and he desires to speak to the gentlemen of the committee.

Mr. PARSONS. We shall be very glad to hear him.

Mr. WHITE. I ask unanimous consent that I be allowed to submit for inclusion in the record a statement to be prepared by me.

Also, I should like to submit for inclusion in the record certain correspondence I have had with a newspaper concerning the matter now before the committee.

Moreover, I should like to include in the material submitted for inclusion in the record a copy of the Silver Purchase Act as published in the bulletin of the Federal Reserve System. I think that should be made a part of the record.

Mr. PARSONS. How much space will the material you have in mind cover?

Mr. WHITE. I do not know how much space it will cover. I should like to make a statement and put in three or four pages that are relevant to the matter now under discussion.

Mr. PARSONS. Three or four printed pages?

Mr. WHITE. Yes.

Mr. PARSONS. How much correspondence is covered by your request? Mr. WHITE. Not more than that.

Mr. PARSONS. Is there any objection to the request of the gentleman from Idaho?

Mr. EBERHARTER. What is the correspondence to which you refer, Mr. White?

Mr. WHITE. It is an exposition of the administration's silver-purchase program. I have prepared it with great care and have done a great deal of research work in connection with it.

Mr. EBERHARTER. What is the correspondence with the newspaper? Mr. WHITE. It is a statement to the newspaper founded upon my research concerning this matter now before the committee.

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Mr. EBERHARTER. Does it include newspaper articles?

Mr. WHITE. No.

Mr. HALL. Does the statement include what you told the newspaper?

Mr. WHITE. It is a statement I made in answer to newspaper editorials. The statement is founded upon my researches in connection with the monetary question and the fiscal policy of the Federal Gov

ernment.

Mr. PARSONS. Do you also want to put in the record the newspaper article or articles?

Mr. WHITE. I had not thought of that.

Mr. ANDRESEN. Reserving the right to object, and I do not intend to object, is this material largely concerning the silver question?

Mr. WHITE. It concerns both the silver and the gold questions. It is a comparison of the Federal Reserve monetary currency and silver currency certificates.

Mr. ANDRESEN. Are you willing to broaden your request so that it would allow any other member of the committee the same privilege you are asking?

Mr. WHITE. Mr. Chairman, I think that should be done. I think every member of the committee should be allowed to do that if he wishes to.

STATEMENT OF HON. J. WILL ROBINSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF UTAH

Mr. PARSONS. Mr. Robinson of Utah is here this morning and he desires to speak to us and then go to another committee meeting. Let us hear Mr. Robinson at this time.

Mr. ROBINSON. First, I want to say that I do appreciate the manner in which you gentlemen are going into this important matter. It seems that you are using both diligence and intelligence.

I hope you will see fit to report out a bill so that our present practice in regard to this matter may be continued. Personally, I feel that it would be a very splendid thing if we could continue to purchase our domestically minded silver with a subsidy, if that is what you want to call it, by an act of Congress. If we cannot do that, the next best thing is to pass the bill you have before you. I prefer to see this desired result done by a definite act of Congress.

I believe, in common with many metallurgists in the West, that the so-called subsidy has been of benefit to us because it has taken men from the relief rolls and put them to work in the mines.

The figures show that, granting for the sake of this statement, that this is entirely a subsidy, the cost to the Government has been only about $56,000,000 on account of that so-called subsidy; whereas it has taken directly from the relief rolls in 1 year at least $50,000,000 by way of employment. It has then, in that sense, worked as a subsidy.

I should like to submit for inclusion in the record a statement along that line. The only question I desire to discuss is the one concerning domestically minded silver.

Mr. PARSONS. Without objection, the gentleman will have an opportunity to revise and extend his remarks in the record at this point.

Is there any objection to the request of the gentleman from Idaho? After a pause.) The Chair hears none, and it is so ordered. Mr. SHEPPARD. As I understand, Mr. White's request is to cover all members of the committee?

Mr. WHITE. Yes; I amend my request so that it will include all members of the committee.

Mr. PARSONS. Is there objection to the request of the gentleman from Idaho that all members of the committee be permitted to extend their remarks in the record? (After a pause.) The Chair

hears none, and it is so ordered.

STATEMENT OF WALTER H. BYRON

Mr. PARSONS. The committee will now hear Mr. Walter H. Byron. Mr. Byron, will you please give your full name, occupation, experience, and background? Also state for whom, if anybody, you speak other than yourself.

Mr. BYRON. My name is Walter H. Byron, and I speak for myself only.

As to my background, I received my education in the University of Maryland and the Massachusetts Institute of Technology in chemical and mechanical engineering. I was connected with the shoe and leather business for about 14 years. I spent 6 years after that abroad living in France, Switzerland, and Great Britain. For the last 10 years I have been living in Boston, Mass., and have been doing independent research work.

At the present time I am connected with the Hagerstown Shoe & Legging Co., Hagerstown, Md.

Mr. PARSONS. Go right ahead.

Mr. BYRON. It is my understanding that the committee is interested in hearing different viewpoints on the subject of money, with special reference as to whether certain emergency powers granted to the Chief Executive shall be retained or allowed to lapse.

I should like to present the point of view of one who thinks in terms of business and in terms of the price movements relating to business. The businessman thinks of money in terms of activity, movement, purchasing power, dividends, and earnings, in condistinction to the banker, who thinks of money in terms of savings, interest, and fixed prices. It is only active money, however, that makes jobs and provides work, and the more energetic the money the more progress we make. In other words, I think it is safe to assume that if the energy of the dollar is increasing we are going ahead, and if the energy of the dollar is decreasing we are losing ground.

Before the scientist can calculate the energy of an object, he must know these three factors: First, the number of individual particles that make up the mass of the object; second, the weight of the individual particle; and, third, the velocity with which the object moves. Let us think of the dollar as an object in motion and study it in terms of energy. First, how many dollars have we? This part of the problem is national in its aspect. It is regulated through the credit system that allows the banks to have certain credit for use in loans and investments. It is under the control of the Treasury and the Federal Reserve Board, and can be measured approximately by the time and demand deposits in the Federal Reserve System.

Second, what is the weight of the individual dollar? The weight of an object must be measured in terms of something else. We have two things against which we can measure the weight of the individual dollar, namely, the other moneys of the world and commodity prices.

The farm-exchange movements and the commodity-price movements seem to be one and the same thing, and they move in the same direction at the same time. In this peculiar world in which we are living, the country whose money is weakest has a trade advantage over the country whose money is the strongest. Practically all the foreign exchange moves take place rapidly, and this reflects in sudden and sharp movements in the commodity-price level. These rapidly changing price levels confuse the businessman because he is in a constant struggle with the variation in price of his raw materials.

Anything that will tend to steady the foreign-exchange movements in relation to the dollar is constructive, in that it steadies the commodity-price level. Practically all of the basic raw materials, such as hides, rubber, wool, wheat, corn, cocoa, sugar, and copper are international in their production and use. Their prices are regulated in the world market and are measured in terms of world money.

In this war of the moneys the dollar is at a distinct disadvantage in that it tends to strengthen against the other moneys of the world, and consequently to weaken commodity-price levels, measured in terms of the dollar.

This second part of the energy picture, or the weight of the individual dollar, is international in its aspects; is out of control at present, and can be measured approximately by the commodity-price level.

Third, what is the velocity of the dollar? The velocity is the speed with which the dollar moves, and it can be measured by the turn-over or the rapidity with which money is spent. It is neither national or international, but is a pure state of mind, or perhaps it can be brought out in terms of courage and gear. It can never be brought under any control, as far as the individual is concerned. In conclusion, it seems to me that in thinking of the dollar we must think of it in terms of its three component parts.

Anything that increases bank deposits, anything that strengthens the other currencies of the world against the dollar, or anything that speeds up the turn-over of money, is constructive and increases the energy of the dollar.

Conversely, anything that decreases bank deposits, or lowers our commodity-price level, or retards the speed with which money is spent, is destructive and lowers the energy of the dollar.

I have tried to put those three ideas on a graph and set them up on this [indicating] chart.

It runs

Mr. PARSONS. Please explain those, Mr. Byron. Mr. BYRON. I have been keeping this chart 10 years. back to January 1927. This little line here [indicating] indicates the bank deposits. It represents time and demand deposits in the Reserve System. It operates along in through here [indicating]. This little dotted line represents the commodity price. It shows about 50 commodities. It operates in through [indicating] here on the chart.

Mr. WHITE. If I may interrupt, do the commodity prices indicate the cost of labor also?

Mr. BYRON. I think the wholesale prices include materials only. Mr. WHITE. If I am not mistaken, the Department of Commerce commodity prices include the cost of labor.

Mr. BYRON. I do not think these [indicating] do. This other one [indicating] is the check turn-over. It is running through this [indicating] level and drops down to here [indicating] and to here indicating].

If we take those three items and put them into an energy picture, we get something represented by this [indicating] line.

The main idea in this [indicating] chart is to see in which direction we are going, up or down.

I think there is one thing that shows up here. The chart tends to move in a straight line until it gets to here [indicating], when it breaks suddenly. This [indicating] place was where England went off gold in the fall of 1931. We stayed on until this [indicating] point. This [indicating] is the point representing the bank holiday. It went up the line until it got up to here [indicating]. It started to break down and is now working up slowly.

Representative BYRON. What is the break in 1937?
Mr. BYRON. It is right here [indicating].

Representative BYRON. What is that?

Mr. BYRON. That seems to be the turning point in March.
Representative BYRON. Is that where France devalued?

Mr. BYRON. The French started to devalue in the fall of 1936. That was probably caused by the devaluation on the French franc. This [indicating] part of it was definitely caused by devaluation.

Mr. PARSONS. The President in 1937 made the announcement that the heavy industries were forging too far ahead and prices were soaring too high. He stopped the P. W. A., which used considerable heavy-industry goods. Did that have any effect upon the price level and the break of 1937?

Mr. BYRON. The check turn-over started to decrease about that time.

Mr. PARSONS. Do you think that announcement had anything to do with

Mr. BYRON. Somebody spent less money.

Mr. PARSONS. Do you think the announcement of the President had anything to do with the break in prices?

Mr. BYRON. I do not know.

Mr. SHEPPARD. As I remember, one of the pertinent parts of your statement was to the effect that, in your opinion, the velocity of turn-over of the medium of exchange, to wit, money, definitely influenced the trend?

Mr. BYRON. Yes.

Mr. SHEPPARD. And you made a comment concerning the check turn-over. In your reference to check turn-over, did you take into consideration check turn-over in commercial accounts?

Mr. BYRON. That is a figure contained in the paper each week. The report gives the check turn-over of 100 principal cities of the United States. I do not suppose it is all check turn-over, but