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I may say that Dr. G. F. Warren, of Cornell University, one of the leading agricultural economists of the country and in no sense a radical—in fact, I consider him very conservative—and in this I disagree with him—feels that the surplus is done away with for the most part, so far as paying an unfavorable price on the pressing things in the next four or five years is concerned, but that the great fear which the farmer has—and he holds this position very firmly and strongly—is the general deflation policy. He feels that if we are on the gold price level in the old sense of the term, and not a managed price level, that the deflation will be such as to cause continuous hardships in the agricultural sections—because we are a great debtor class—for the next 10 or 15 years. That is his opinion.

The CHAIRMAN. In that connection, Doctor Sprague has testified before this committee this week, and he expressed the thought that it would be necessary to continue the management of the gold reserve through the cooperation of the central banks of issue at least over a period of 10 years, because of the possibility that if all of these countries went on the gold basis there might be a dearth of gold, and that therefore it will be necessary to exert a management over that gold during that period of time.

Mr. WALLACE. I rather like the idea of a managed gold affair, provided it does not mean either inflation or deflation, if it is handled with the common sense which has characterized, as a whole, the management of the Federal reserve system during the past five or six years, and I think all thoughtful people will agree to that, that it has been a rather intelligent management, but we are fearful as to the future. We thought we detected during the past years some symptoms on the part of the Federal reserve people indicating that they might want to start a slightly gradual downward trend again.

The CHAIRMAN. Whom do you recognize as the managers in this gold situation ?

Mr. WALLACE. DO you mean internationally at the present time ?


Mr. WALLACE. At the present time we feel that the Federal reserve system, as a whole, has quite a dominant influence. In saying that I am merely accepting the testimony of people more expert in such

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toward enhancing the purchasing power of money, quite unconscious, perhaps, that the folks that are likely to be on the Federal Reserve Board and in the Federal reserve bank at New York are people likely to have an unconscious bias in that direction just as farm people and manufacturers have an unconscious bias in the direction of decreasing the purchasing power of money or inflation. We feel that there is a little bit of an unconscious bias in both directions, and that the people who are likely to be intrusted with the management of the Federal reserve system, both regional and the board itself, are likely to want to see deflation, and that they would much prefer to have such instructions given 15 years hence when the price is lower rather than now, and we with our bias—we all have bias—in the Middle West, have the other feeling, that it would be better to stabilize this thing right now. Of course, we prefer to hold it where it is now, have the thing come to a head now instead of letting it go ahead and causing continuous unrest over a period of years on the part of the farmers.

The CHAIRMAN. Taking that position as your position, have you given consideration to the possibility of our trade relationships with the other countries of the world, now that they are getting back on an established basis of consumption of manufactured articles, that we might be in a very unfortunate position if our price level is maintained at the present basis in selling our superfluous products to those countries in competition with other intensified manufacturing industries in Germany, England, France, and so forth ?

Mr. WALLACE. This occurs to me that England would be very anxious to cooperate with us in stabilizing at a moderately high price level, that France would be equally anxious to do so, and that the Scandinavian countries would be anxious to do so. That would be especially true of England and France, because of the fact that it lessens the burden of paying their Government debts to us if the price level is stabilized relatively high.

The CHAIRMAN. If we stabilize on the present basis, do you give them an advantage in marketing their products throughout the world in competition with ours?

Mr. WALLACE. I must confess that I can not follow that reasoning.

The CHAIRMAN. If our general price level keeps up to the point where it is and the other countries of the world intensify production Mr. WALLACE (interposing). You are assuming that they will all be on a gold price level and they will all at that time be on a gold basis ?

The CHAIRMAN. Yes. In other words, I discovered in England last February that the manufacturing element of England felt that because they stabilized on a $4.86 basis instead of, say, a $4 basis, they have impeded their industrial recuperation largely.

Mr. WALLACE. That would seem to me to suggest in that case the advisability of our stabilizing on the present high basis—I mean that your statement would suggest that.

The CHAIRMAN. I have wondered in connection with your statement of a moment ago, whether you have given consideration to the possibility of our trade relations being disturbed by stabilizing at a high-price or low-price level here, and what effect it might have on

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Now, agriculture is interested in those long-time swings, not in the short-time swings concerning which so much of this conversation is about. We are interested in the long-time swing. The farmer is in the business a long time, and I feel it is to the long-time interest of this Nation to have the proper consideration given to these longtime swings just as well as to the short-time business cycles. It is good form nowadays to consider the short-time business cycle, unemployment, and how it can influence policies of various sorts. What we are contending for is that similar consideration be given to the agricultural cycle, which is a much longer affair, and, in my opinion, a much more vital affair to the fundamental welfare of the Nation.

The CHAIRMAN. DO you feel that the power is vested in the Federal reserve operations to influence this situation favorably or unfavorably ?

Mr. WALLACE. I feel that the Strong bill would have some favorable influence in this direction and that it would cause knowledge and a much greater understanding than we have now as to just what powers they do have. Of course, it is not clear as to how much ability they do have along this line. We should know more about what these powers are and what they mean to agriculture and to business, and I feel that the Strong bill is a movement in this direction.


Mr. SHEARER. I am an old farmer—a retired farmer—too old to work. I have made some study of this subject from a farmer's standpoint. I am very much interested in the passage of Mr. Strong's bill.

Mr. STRONG. First, I think you ought to give us your position.

Mr. SHEARER. Well, you did not ask me.

Mr. STRONG. YOU are the representative of the farm organizations of Kansas ?

Mr. SHEARER. I am vice president of the Kansas State Farm Bureau, which is one of the most influential farm organizations in our State and in the Middle West. I am also in part representing the three major farm organizations of Kansas, the Farmers' Union, the Grange, and the Farm Bureau.

I have here some resolutions that were put through those organizations that I would like to have put in the record.

The CHAIRMAN. Without objection, these resolutions will be inserted in the record at this point.


ORGANIZATIONS, HELD AT TOPEKA, OCTOBER 2 5, 1927 That whereas there has recently been formed an organization known as the Stable Money Association, its object to stabilize the purchasing power of money, and thereby stabilize the general price level; also to prevent the seemingly inevitable recurrence of periods of inflation and deflation with their attendant ills to both investor and producer: Therefore be it Resolved, That we, the committee permanently organized and representing the major farm organizations of Kansas, hereby indorse the work and aims of the Stable Money Association and agree to convey the ideas involved in securing a stabilized price level to the membership of our several farm organizations in an educational way; and

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We are producing the elemental things, the vital things, in the business life of America, and I hope that in your discussions you will not lose sight of that fact; that unless production is favored, unless production goes ahead in a prosperous manner, the whole structure falls eventually.

To run the thing to the extreme, suppose that we men of the Middle West who are producing the food should take a notion to stop? Your credit paper would not have much value; and I see one thing that I do not like very well, and that is that the stock exchange in New York has got to be such a large affair that they have even almost quit considering whether the stocks they are dealing in are a paying proposition or not. They seem to have got to a point where they are a business in and of themselves, regardless of production.

The tendency is in that direction, and we think, we men who are producing and who are watching the situation closely for fear of a fall in the price level, that the absorption of so much money or credit by the stock exchange, to the detriment of the industrial interests, is not good for the country. We look at it in that light.

They are borrowing and gambling on the ability of corporation to extract profits from the producer and consumer. The American people have become great because they always want the most for the least effort. That has made this Nation great. I do not blame people for wanting a sure thing; but when too many of our people get on the investment side, get on the credit side, and not enough on the production side, why the car of progress may slow down.

Now, about this bill of my friend Strong's. Mr. Strong is my neighbor. I have known him since he was a boy. I have been at times of different political faith from him, but I have been working in these farm organizations in a strictly nonpartisan way, so that I can come here with very good grace as a Democrat and support Mr. Strong's bill and urge this committee that it be reported out.

Now, I will tell you what effect I think it would have. You men know that we have always had panics in this and every other country. All through the past ages, as far back as you can go, we have had panics. We have had recurring panics in the United States.

I am old enough to have lived through the reconstruction period after the Civil War and the panic of 1873. We have had recurring panics about every 10 years, and the average business man and farmer have gotten into a fatalistic mood. They regard it as a part of fate that after a while we will have a panic. They say that what goes up must come down, and after a while we will have a panic.

It is hard for them to believe that we have got a new system, this Federal reserve system, through which it is possible to prevent panics.

They still do not feel that things are any different; they are still afraid that something will drop unexpectedly.

Now, if this measure could be put through, it would be a wonderful assurance to us men, isolated as we are, scattered on the farms of the United States of America. It would be a wonderful assurance to us that here at last, after so long a time, is a power to prevent panics, to prevent lowering our price level, to prevent ruining our business, which has been done so often.

Now, I notice in your former hearings that Governor Strong especially feared that the average uninformed citizen would expect too much of the board; that they would think that if wheat went

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That is why it becomes vital to us men. That is why I am here.

If it were not for that I would not be here.

We are beginning to understand this problem, although you men know that this money question is the least understood of all our public questions. Men are afraid of it, and it takes education to get anything like a comprehension of it.

I want to make a statement rather disagreeing with Doctor Miller, and you men may not agree with me, but I want to make it anyhow, and that is that money is a positive factor. Now, here we are produring[producing]wealth in the United States, all kinds of tangible wealth, bread and meat and cotton and tobacco and wool and steel and cloth and lumber—everything. We are producing the wealth, and they tell us that we produce too much. They tell us farmers that we have overproduced. They tell us that that is the reason our prices are low, we have overproduced; and they tell us that the spinning mills of New England have overproduced and that the steel mills have overproduced and that the cotton men have overproduced.

Now, I have lived a long while in the United States, almost 60 years. I have never seen any food thrown in the sea. I have never seen any of it destroyed or burned up,, of bread or meat or cotton.

It is always consumed.

The truth is that to-day there is a market for everything we can produce—if not in the United States, in Europe. There is a market for all we can produce. I t is only a question of price.

It is no use to talk about hunting for markets. The hungry millions, the half-fed millions of Europe and Asia, are grabbing for every bushel of wheat we have got and every pound of meat and every bale of cotton, if they could only buy it. It is a question of price.

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