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Mr. STRONG. And the measurement of the purchasing power of money is that which the money will buy in commodities in general, meaning index numbers, and it has been pointed out to me that there is no perfect index number and they do not know at all times what is best to use. Therefore, I put in the bill a direction for the study of existing and proposed index numbers; that is all.

Doctor MILLER. I would see no objection whatever to taking out the part of paragraph (5) reading— proposed index numbers of prices or other measures of the purchasing power of money— and putting it in as an additional item in paragraph (1). To my mind, it is already covered in item (c) of paragraph (1), which 15029—28 17

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Within 48 hours I have read what Doctor Cassel, I think it was, has said about his expectations as to the failure of gold to meet the needs of the world inside of 20 years, the diminishing supply of gold and the necessity of making new arrangements to meet the situation that will confront us if nothing is done in the way of preparing for a managed currency.

Now, when the economists seems to think that this is the most important problem now facing mankind, and when in our daily work it is a constant factor, are we not justified, some of us, in the hope that some agency of the Government may be directed to compile the statistical data necessary for wise legislation ?

You may, in reply, if I may anticipate what you would say—you may think that the Federal Reserve Board is not the agency to do it, but where would we turn for this except to the chief financial agency of the Government ?

The Bureau of Labor Statistics has been doing this thing after a fashion for many years, but its figures are not those of recognized— I will not say experts, because I do not want to cast any slur upon the bureau, but I think we all take the figures we find in the reports of the labor statistics with a grain of salt, with some uncertainty as to whether they are thorough and adequate. I know that their figures about unemployment, printed from month to month, are greatly at variance with those printed in the current papers, the reports of the American Federation of Labor, etc., and I have my doubts whether the Bureau of Labor Statistics is the best qualified agency to compile this all-important information.

I can not follow you, Doctor, in the suggestion that there is anything dangerous in acquiring knowledge.

Doctor MILLER. There is no objection from my point of view to acquiring knowledge. On the contrary, I think the more knowledge we have, if it is actual knowledge and is pertinent to the problems the Federal Reserve Board has to deal with, the better off we shall be.

My objection to certain of these paragraphs, e. g., to this paragraph 3, is that you are dealing with matters that are physical in substance; any conclusive as to their future must be largely speculative or, if you please, even metaphysical.

For instance, here is one of the things that the Federal Reserve Board would be directed to undertake— The study of the effect upon the purchasing power of the dollar or changes in the supply of and demand for gold, either actual or prospective.

I have the greatest respect for the eminent economist whose name you just mentioned, Prof. Gustav Cassel. He may be right in his forecast of a scarcity of gold in the future, say 10 years from now, in connection with the growing demand for gold, both for monetary and nonmonetary use. He warns against threatened deflation under the gold standard.

There is no method by which the Federal Reserve Board, no matter how competent the men grouped together into an organization far the study of the future effects of the gold standard could resolve that doubt.

An eminent South African professor, Robert Lehfeldt, who died six or eight months ago and who lived close to the mines, a very eminent scholar, takes direct issue with Professor Cassel's forecast

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Mr. LUCE. But, Doctor, we would be derelict in our duty, it seems to me, to pursue your policy of waiting. We owe in this country nearly $20,000,000,000 of public debt. We are confronted at the door with the issue of whether we shall retire the payment of that debt.

It is a vital political issue with us now, and involved in that issue is the question whether it is better for us to hasten the payment of the debt while the dollar is at its present level or retire the payment of the debt when we may have to pay it, as we did after the Civil War,, in two or three times the amount of the purchasing power of our dollar to-day.

Now, that is only one of the various problems that the mind can hardly grasp in the size of the figures that are involved in this problem here before us now of whether we are going to attempt to keep the level of the purchasing power where it is.

Now, you suggest that there be a further accumulation of experience. It happens that last night I was reading Doctor Burgess's book on the Federal reserve system. I had about one-third finished it, but I had read enough to see that that book is just crammed with the proofs that this system is now trying to read the future from the past. Diagram after diagram—and here is one right before us— is of no earthly value unless it is a basis for attempting to judge what ought to be done in order that we may act intelligently, prudently, and wisely.

Now, for the life of me I can not understand why you demur at getting more information to carry out the purpose which is now one of the chief purposes of your work.

Doctor MILLER. I do not demur at getting more information. I want just as much information as can be obtained, but there are certain of these subjects upon which the information is not obtainable by investigation. Fortuitous circumstance may be the decisive factor.

When one speaks about the actual present supply of gold, of course that is a definite, ascertainable, statistical fact. That is just production statistics published in the Federal Reserve Bulletin. That is determinable, historic, fact. But when it comes to the prospective supply, either for next year or 10 years hence, who knows ?

The CHAIRMAN. Doctor Burgess has said that in 10 years the natural growth of our credit requirements here will take up all the gold we have in this country.

Doctor MILLER. That has been said.

The CHAIRMAN. I might also add that we have in these hearings the statement of Doctor Lafelt, to whom Doctor Miller just referred;

and I would like also to state for the benefit of the committee that Doctor Gustav Cassel, whom Mr. Luce referred to, will appear before the committee on next Friday morning at 10.30. He has very kindly consented to come before the committee and make a statement on this very matter.

Mr. LUCE. YOU point out that Doctor Cassel and Mr. Lafelt are at opposite extremes, and of course it is impossible for us to determine with any accuracy which man is right, but does it follow that we should make no attempt to determine and, if possible, adjust our financial system in some way so that in either case disaster may not follow?

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Mr. STEAGALL. I want to say parenthetically right there to the gentleman that he is not accurate in his reference to the two parties with reference to tax reduction. Both parties want tax reduction, but one wants to give it to one set and the other to another.

Mr. LUCE. But there is a difference in the total of $70,000,000.

Mr. STEAGALL. But it can not be stated that one party wants to pay everything that exists on the debt and the other does not. That is not an accurate statement. I am sure the gentleman does not want to put an inaccurate statement in the record, although it is beside the issue.

Mr. LUCE. Whether I have righly[rightly]read the political signs of the times or not, and possibly I have misconstrued the political aspects of the situation Mr. STEAGALL. SO far as this discussion is concerned, your contention is absolutely all right, but in its details it was not entirely accurate.

Mr. LUCE. I am simply trying to bring out that Congress is composed of 531 men, and very few of them have had any economic training and must in large measure rely upon the information furnished to them and in considerable measure upon the advice given to them by the experts in these most important questions before Congress of taxes and the debt, and there is allied with them the future price level in its bearing upon the obligations of the United States and upon individuals.

I know of no agency in the Government that is so well equipped and so well trained as yours to furnish us the facts upon which, so far as you can get them, we must act. I do not expect you to do the impossible; I do not expect you to be clairvoyants and read the future.

If any of us could do that, we would be millionaires overnight; but the whole scheme of your conduct, of your system, now is to attempt to serve the interests of the country by information and such action as you can take based upon your estimate of what the future is going to bring forth.

Why should we not turn to you, rather than to anybody else, to help us?

Doctor MILLER. I think, if you want information upon these subjects, if you feel it is really obtainable, the Federal reserve system is, on the whole, the best situated of any governmental agency to make the necessary studies.

I do not know that I have anything to add beyond what I have already said, except this: I think most men who are dealing with policy matters are very apt, if certain things begin to lodge in their mind as facts which are not actually determined or determinable facts, to see things differently and possibly less truly and competently than they otherwise would.

I always have this in the back of my mind: It is my general attitude that in matters of credit and banking policy, as a reliable guide to an administrative body, you can place more reliance in the gold standard than in any set of devices or formulae that can be invented as a substitute.

I think Doctor Commons would probably agree that we had before the war, on the whole, a tolerably stable price level. There was occasional criticism that over a period of years there was a slow but nevertheless steady and perceptible rise of prices. Opinions differed

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Labor, however, was not liquidated; it would not be liquidated, and the history of past inflations similar to the one we had in 1919-20 inflations, during and following a period of war, pretty generally shows that labor does not liquidate, that it is one of the surest and solidist gainers from the inflation war brings, that it tenaciously holds to the abnormal wage level attained under war conditions, and that this is particularly true where labor is as well organized as it is in several countries and in our own, where its position has been strengthened by a statute restrictive of immigration.

Now, then, what happened? The American business man was up against a condition. His labor costs were increased. In order to keep his total costs down he had to invent new sources of efficiency.

He did it. It is one of his great achievements. It is one of the wonders that European observers come here to see. But in the process of doing it we find, according to the statistics of the Bureau of Labor and of the National Industrial Conference Board, that American factory productivity has been increased from 20 to 30 per cent in many lines, with the result that there are fewer men to-day engaged in many of these industries turning out a bigger product than was the case three or four years ago.

Now, then, what does this mean from the point of view that we are discussing here ? It means that industry, business, in undertaking to save and stabilize itself, has brought about at least a temporary instability in the condition of labor within those particular industries.

From my point of view, that is a very regrettable result for the laborer who is displaced and obliged to find a new connection. But I think it is more less inseparable from a state of society, so to speak, in which there is continuous and rapid progress in industry.

The great question, to my mind, is whether the instability that you and I regret as such is not really inseparable from a highly competitive industrial society. I do not think you can get away from it, and I am afraid that in the attempt to, as it were, control it through a monetary-policy device of the kind set up in this bill you will either accomplish nothing, or if you succeed, you will succeed only by actually putting at times a strait-jacket upon the forces of growth that inhere in the American industrial system.

Mr. LUCE. The problems you have just been discussing, important problems, are covered by paragraph (4), which refers to stabilization of agriculture, industry, commerce, etc. My inquiry had been meant to be addressed particularly to the factor covered by paragraph (3).

Now, let me recall to you just hastily half a dozen very important happenings in this country, the panic of 1818, due to the inflation of currency by the creation of State banks; the panic of 1837, having much the same cause; the panic of 1857, due to the discovery of gold in California, in part at any rate; the panic of 1873, also a financial problem; the development of the Populist and Greenback Parties following the resumption of specie payments; and the campaign for the election of Mr. Bryan in 1896, the most fiercely fought campaign in all my own political experience.

These are but the high lights which indicate that in the past this very problem that we are facing here has at intervals been paramount in our public life, of the greatest concern to all of those who

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control what economists sometimes call secular movements of prices, which means the long-period swings of prices.

Personally, I have the gravest doubts as to whether that can be done. I think the most that any mechanism like the Federal reserve system can do with regard to these factors of instability is limited to those that are, generally speaking, confined within a comparatively short period of time—swings that modern economists are very apt to describe as cyclical as against those which are secular—short-period trends as against long-period.

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