Leonard, University of Southern California; James D. Magee, New York University; Arthur W. Marget, University of Minnesota; A. Wilfred May, New York City; Margaret G. Myers, Vassar College; Melchior Palyi, the University of Chicago; Ernest Minor Patterson, University of Pennsylvania; Clyde W. Phelps, Chattanooga University; Chester A. Phillips, the State University of Iowa; Charles L. Prather, Syracuse University; Howard H. Preston, University of Washington; Harold L. Reed, Cornell University; Leland Rex Robinson, New York City; R. G. Rodkey, University of Michigan; Olin Glenn Saxon, Yale University; Walter E. Spahr, New York University; Oliver M. W. Sprague, Howard University; William H. Steiner, Brooklyn College; Alvin S. Tostlebe, the College of Wooster; Rufus S. Tucker, Westfield, N. J.; Russell Weisman, Western Reserve University; William O. Weyforth, the Johns Hopkins University; Nathaniel R. Whitney, the Procter & Gamble Co.; Max Winkler, College of the City of New York; John Parke Young, Occidental College:"

These students and teachers of finance and political economy doubtless have a profound knowledge of economic law and must be familiar with the economic history and development of the several national monetary systems and more especially with the monetary system of the United States.

In their communication they "recommend in the interests of a sounder currency and the public welfare the repeal of the Silver Purchase Act of 1934, which is diluting and weakening our currency structure." Now, in considering the recommendations of these eminent gentlemen in connection with the recent financial history of the United States, I am sure it has been clearly demonstrated to the entire satisfaction of most everyone, with the possible exception of these 68 economists on whose advice much of the past monetary legislation was devised and enacted into law, that our money system has signally failed to meet the requirements of the American people in the conduct of their business. Due to this failure the country has been plunged into one of the most disastrous financial depressions of its history, a depression from which we have not as yet recovered. Through most of the Hoover administration and all of the succeeding administrations the Congress and the National Government, in an effort to remedy these conditions, have devised and put into operation a series of banking and credit expedients which are only substitutes for a sound and adequate currency.

These attempts to remedy the defects in our banking and monetary system have met with little success, and now business finds itself in a condition in which the influence of big bankers and their zealous servants, the so-called economists, are largely responsible, with the result that we are struggling with a system that has laid an unbearable interest load on the American people as the price of operating their-the people's-monetary system with Federal Reserve currency. When this system failed with such disastrous consequences in the recent depression and it was demonstrated so clearly that it was necessary to strengthen our financial structure by broadening the metallic base of our redeemable currency by adding silver to the money volume and thus relieve the strain on gold and obviate the necessity of revaluing the dollar-when we were in a fair way at last to give the country a sound, workable, adequate money system by the remonetization of silver, the bankers and their helpful economists stepped in to save their precious interest yield and their prerogative to expand and contract the currency and thereby control prices and instead of remonetizing silver to place our currency on a sound foundation of money redeemable in gold and silver which would have created a stable dollar with which to measure values, a dollar that would remain constant in its purchasing and debt-paying power. The influence of these so-called economists prevailed and the people were given a new artifice by the statute which created the Reconstruction Finance Corporation, an instrumentality to draw on the collective credit of the American people through the taxing power of Congress to finance loans to individuals and business organizations, thereby salvaging the interest yield of the bankers from the threat of the remonetization of silver and the creation of a sound currency.

What is the Reconstruction Finance Corporation? In the first place, it is a poor substitute for bimetallism; in the second place, it is the greatest reservoir ever created for the storage of wealth out of reach of taxation, a Government facility which relieves the financiers and capitalists of the risk and expense of lending their money and collecting the interest and principal, an agency that absorbs through the medium of tax-exempt securities the bulk of the money available for investment and forces business and industry to turn more and more to the Government for the necessary money to finance its operations.

Let us remember that this system, this substitute, has the approval and acclaim of these eminent economists, 68 leaders of financial thought in this country, and how has this system worked?

The people through their Government have lost on one class of R. F. C. loans, to say nothing of the Dawes grab of $90,000,000, and the class of loans that includes the ministration to the railroads. The Reconstruction Finance Corporation has canceled under authority of legislation enacted by Congress over $2,500,000,000 in R. F. C. loans, to be exact as stated in a letter from Chairman Jones under date of February 13, 1939:

"In response to your inquiry of February 3, 1939, we wish to advise that as at the close of business January 31, 1939, the Secretary of the Treasury had canceled Reconstruction Finance Corporation notes aggregating $2,699,236,945.83, pursuant to Public Act 432, Seventy-fifth Congress, approved February 24, 1938." Just a small item in the staggering price the American people are paying for a faulty and unworkable monetary system. Do these eminent economists and the American people want further proof of the advantages of the "sounder currency," the brain child of these economists, a currency system that made necessary the Reconstruction Finance Corporation, the expedient that blocked the remonetization of silver, which would have relieved the greatest money shortage in relation to the needs of the people this country ever experienced.

As these eminent gentlemen have raised the question of silver in our currency system, it might be well to point out to them the essential difference in the mechanics of creating and circulating Federal Reserve notes not redeemable in coin and silver certificates redeemable in silver dollars and explain the difference between the cost in the form of a continuing interest charge attached to the issuance and circulation of the kind of money they advocate, Federal Reserve notes, legal-tender currency, and the profit the Government makes on the issuance and circulation of silver certificates and the saving in interest to the American people by the use of this kind of money, legal-tender silver certificates, free of a continuing interest charge.

Now how are Federal Reserve notes created and placed in circulation? To get this money--Federal Reserve notes-and place it in circulation in the channels of trade and business, people engaged in business must borrow money from a bank on short-term interest-bearing obligations-eligible paperwhich in turn must be guaranteed by the lending bank and rediscounted by the Federal Reserve bank to secure the issuance of Federal Reserve notes equal to the amount of the promissory note-eligible paper-deposited with the Federal Reserve bank as security. By this operation business must pay current rates of interest on every dollar of money in the form of Federal Reserve notes-legal tender money-that is placed in circulation and as long as it is kept in circulation, and the businessman must pass this item of interest as part of the cost of doing business on to the customer.

Now how are silver certificates created and issued into circulation? The Treasury buys domestically mined silver at 64.64 cents per ounce and immediately issues silver certificates at $1,291⁄2 per ounce against this silver, making a 100-percent profit on the transaction, and buys foreign silver at 43 cents per ounce and makes a profit of 200 percent by placing the silver in circulation in the form of silver certificates-money that is placed in the channels of trade and business by the Government interest-free in paying current expenses.

As an example of how this money-silver certificates-is placed in circulation, it is interesting to note that Members of Congress and their clerical help in cashing pay checks at the Disbursing Office in the Capitol are paid in brand new silver certificates which they proceed to put into circulation. Let us examine the facts concerning this money-silver certificates-"which is diluting and weakening our currency structure." Silver certificates is the only paper money which we have which is redeemable in coin and, as a matter of record, most of the silver, as fast as it is acquired, is put into circulation as money as is evinced by the daily statement of the Treasury, the amount of silver certificates increasing day by day as silver is purchased.

Consulting the daily balance sheet of the Treasury of December 22, 1937, 1 year before the release of this pronouncement, under the heading "Silver," we find there was $1,346,357,530.10 in silver on hand against which there was in circulation in the form of silver certificates and Treasury notes of 1890, $1,392,303,346, and on November 22, 1938, 30 days before the release of this pronouncement, we find there was $1,603,827,604.29 in silver in this account and that the silver certificates and Treasury notes of 1890 in circulation against this silver was $1,574,972,353. Thirty days later, on December 22, 1938, the day of this release, there was $1,629,983,167.79 in silver in this account and the currency in circulation against this silver in the form of silver certificates and Treasury notes of 1890 was $1,582,363,371, showing an

increase of $7,391,018 in new currency placed in circulation in the month preceding the release of this pronouncement against silver.

Now concerning the recommendation of these 68 eminent economists: "in the interests of a sounder currency by repealing the Silver Purchase Act of 1934, which is diluting and weakening our currency structure," let us consider the soundness of each kind of money.

Silver certificates are redeemable in silver dollars and are backed 100 percent with silver bullion valued at the cost price of the bullion to the Government for every silver certificate in circulation. Federal Reserve notes are not redeemable in coin and the law only requires a 40-percent gold coveragegold that it is illegal to use as money. The advantage of using this kind of money-Federal Reserve notes-we are told, is "that when business gets slow and currency piles up in the bank it-the local banks-goes to the Federal Reserve bank and pays back the currency it secured and redeems its collateral-reducing commercial loans. The Federal Reserve currency is then retired." It should be apparent that this is just the trouble with their system. The difficulty is to get the banks to create and issue this money again when needed-at times when it is most needed as business learned to its sorrow in 1929.

Do these eminent educators seriously contend that the kind of money that goes out of existence when business slows up is better than the kind of money that remains on deposit to be withdrawn and put to work at the will of its owner? Do they believe that business and employment is made more secure by the monetary system dependent for its creation and circulation on banking conditions and "confidence" of the banker in making loans on future business conditions and the ability of the applicant to repay the principal with interest? Do they believe that this kind of currency is better than silver certificates redeemable in silver dollars, which are permanent in their existence and remain the property of the owner to be put to use whenever wanted?

Surely a billion and a half dollars of silver certificates-legal-tender money— is an invaluable stabilizing influence in the Nation's monetary system. These eminent gentlemen are concerned about "a sounder currency." Let them explain what was wrong with the currency and the Federal Reserve Banking System in 1929 and why it was necessary to bolster this perfected banking system with the financing operations of the Reconstruction Finance Corporation; and let them explain the circumstances that plunged the country, with all its resources and facilities for production and distribution, $44,000,000,000 in debt, with an annual interest charge which all the money we have in the form of silver certificates would hardly pay the interest on for 1 year.

In their solicitude for a sounder currency have they-these economists— taken into account what the failure of this undiluted currency has contributed to existing business conditions, unemployment, and public debt? Can all the 68 compute the loss suffered by the American people resulting from our faulty, defective, and unworkable monetary systems?

Have these disinterested (?) economists in their zeal for "the general welfare" considered the real motive behind this opposition to the Government's silver policy? Do not they know it is the simple matter of collecting interest by the banks on the money in circulation?

We have today $1,599,577,227 in interest-free silver certificates in circulation which these 68 economists want us to release "in the interest of a sounder currency," to be replaced by Federal Reserve notes-money that must be supported while it is in circulation by interest-bearing commercial paper or Government bonds which would yield the banks in interest computed at 3 percent, $47,987,316.61; but we all know that current rates of interest on business notes is more than 3 percent. If we calculate the interest at 6 percent, then the Federal Reserve notes which would replace the silver certificates now in circulation would yield the bankers $95,974,633.22-$96,000,000 every year flowing to the banks out of the pockets of the American people as the price of keeping this billion and one-half dollars in circulation when we are already paying an interest-carrying charge on the bulk of the money now in circulation; that is, Federal Reserve notes and Federal Reserve bank notes.

According to the Treasury statement of January 31, 1939, this currency in circulation amounted to $4,707,729,936, on which the interest, computed at 6 percent, is $282,473,796.16—a charge which business must raise every year and pay as interest to keep this money in the channels of trade and business.

In addition to this interest load, we are paying a service charge of $44,000,000,000 of public debt. We must carry this load "in the interests of sounder currency and general welfare"-whose welfare, the American people or the American banker? Is there no limit to the tax and interest load that these 68 eminent economists would lay on the backs of the American people?

Let me say of these disinterested (?), learned, and eminent economists that there can be no permanent prosperity in this country until our Government devises and gives to the American people an adequate, workable monetary system free of a continuing interest charge; and when the Government sets about doing this thing, let us thrust aside self-seeking bankers and financiers, and the Lord deliver us from the advice of political economists. [Applause.]

EDITOR NORTHERN IDAHO NEWS,

Sandpoint, Idaho.

HOUSE OF REPRESENTATIVES, Washington, D. C., February 21, 1939.

DEAR SIR: With reference to the editorial, Cost of Our Silver Policy, appearing in your issue of February 10, for the information of your readers I feel a statement in your editorial discussing the purchase and use of silver as money in our currency system should square with the facts.

As a matter of record, as fast as silver is acquired by the United States Treasury, it is immediately put into circulation as money in the form of silver certificates as evinced by the Treasury's daily balance sheet, the amount of silver certificates put into circulation increasing day by day as silver is_purchased. In consulting the daily balance sheet of the Treasury, we find on January 10, 30 days before the date of your article, under the heading of "Silver" there was $1,647,152,490.35 on hand against which there was in circulation in the form of silver certificates and Treasury notes of 1890 $1,592,489,142 leaving $54,663,348.35 in silver in the general fund of the Treasury. Thirty days later, on February 10, the date of your article, there was $1,665,195,233.48 in silver in this account and the currency in circulation in the form of silver certificates and Treasury notes of 1890 was $1,600,744,889, showing an increase of $8,255,747 in new currency placed in circulation in the month preceding your article.

By this statement there is over a billion and a half dollars in silver in the Treasury which is in use as money circulating throughout the country in the form of silver certificates which is the only money policy of the Treasury on which the Government is making a profit and by which the American people are relieved of an interest charge as the cost for the issuance and circulation of money. On its silver purchases the Government is making 100 percent profit on domestic silver bought at 64.64 cents per ounce and issued into circulation in the form of silver certificates in paying Government expenses at $1.291⁄2 per ounce, and 200 percent profit on foreign silver bought around 432 cents an ounce and issued into circulation in the form of silver certificates, but as large as this advantage appears to be, it is of minor importance compared to the benefit the American people derive from the Government silver monetary policy. When we consider that this currency (legal tender silver certificates) is issued into the channels of trade and business by the Government in paying current expenses, it is paid out minus interest and circulates interest-free. As an illustration of how silver certificates are placed in circulation, it is interesting to note that Members of Congress and their clerical help in cashing pay checks at the disbursing office in the Capitol are paid in brand new silver certificates which they proceed to put into circulation.

You state, "A currency which crowded out another currency which was already supplying our needs in a better way and which did not cost anything”— let us examine the facts concerning "this currency which did not cost anything." How are Federal Reserve notes created and issued into circulation? To get this money and put it into circulation, the people engaged in business must borrow money from the bank on short-term interest-bearing obligations (eligible paper) which must be guaranteed by the bank and rediscounted by the Federal Reserve bank to secure the issuance of Federal Reserve notes equal to the amount of the promissory notes (eligible paper) deposited with the Federal Reserve bank as security. By this operation business then must pay current rates of interest on every dollar of money in the form of Federal Reserve notes (legal tender money) that is placed in circulation and the busi

nessman must pass this item of interest as a part of the cost of doing business on to the consumer.

If this currency system has "already supplied our needs in a better way," what is wrong with it in 1929 and 1930, and why was it necessary to establish the Reconstruction Finance Corporation to finance business and prevent the collapse of the country's business and financial structure by creating an agency to draw on the collective credit of the American people to finance individuals and business organizations, an agency which at the same time created the greatest reservoir the world has ever known for the storage of wealth out of reach of taxation, relieving the capitalists and financiers of the risk and expense of making and collecting loans and at the same time relieving them of taxes on all money invested in tax-exempt bonds exclusively used to finance the lendings of the Reconstruction Finance Corporation, an agency of the Government that absorbs the bulk of all the money available for investment to finance business and constructive enterprises-with the result that business is forced to turn more and more to the Government as represented by the Reconstruction Finance Corporation for money to finance its operations and development.

Now, what is the motive behind this opposition to the Government silver policy? Principally it is the simple matter of collecting interest by the banks of this country on the money in circulation. We have $1,599,577,227 in silver certificates circulating in the form of "currency which crowded out another currency," i. e., the Federal Reserve currency, which forces business to pay the banker an annual interest yield computed at 3 percent, or $47,987,316.81, but we all know that current rates of interest on business notes are more than 3 percent; if we calculate the interest at 6 percent, then the Federal Reserve notes that would replace the silves certificates now in circulation would yield the banks $95,947,633.62 annually. Ninety-six million dollars every year-something for the bankers to fight for-money to come right out of the pockets of everyone every time a purchase is made from a business firm that has a note (eligible paper) made to the bank and rediscounted by the Federal Reserve bank to obtain the issuance of money of "the currency that is already supplying our needs in a better way and which does not cost anything" (?)

You say "when business gets slow and currency piles up in the bank, it (the local bank) goes to the Federal Reserve bank and puts up the currency it secures and reduces its collateral. The reserve currency is then retired." Might I say that is just the trouble with the system. The trick is to get the bank to create and issue the money again when needed at the very time when it is badly needed. Will anyone seriously contend that the kind of money that goes out of existence when business slows up is better than the kind of money that remains on deposit to be withdrawn and put to work at the will of its owner? Does anyone contend that business and employment is made more secure by a monetary system dependent for its creation and circulation on banking conditions and the confidence of the banker in making loans as against a currency (money) that is permanent and remains the property of some owner to be put to use whenever wanted? Surely a billion and a half of silver certificates (legal tender money) is an invaluable stabilizing influence in the Nation's monetary system.

Let me remind you that this country is $44,000,000,000 in debt, on which an annual interest charge must be paid, and that all the silver certificates in circulation would hardly pay the interest on this debt for 1 year. As to the part this faulty and unworkable money system foisted on the American people by organized capitalists and financiers has played in creating unemployment, the ruin of business, and the distress of the American people, and in sinking the Nation into debt, I leave you to judge.

But let me tell you in all seriousness, my dear editor, that there can be no permanent prosperity in this country until our Government devises and gives to the American people a workable, adequate monetary system free of a continuing interest charge which, in my opinion, must be based on the unlimited coinage of both gold and silver as a means of establishing a stable monetary unit the dollar-to provide for the security of business and business commitments. If the Government will do this and protect business by the enactment and enforcement of the necessary laws to eliminate unfair competition and unfair trade practices, a plan which will operate to establish a parity between the prices of the basic industries-farming, mining, and lumbering-with prices of the products of the manufacturers to be secured by the free play of the law