they sold 18,000,000 shares. Of course, it was just short sales. They ran that stock up. It started out in 1929, for instance, and the high point in 1929 was 5114 or 512. They ran it down in 1930 to 12. They ran it immediately back up, by pools, to 50. Then they began to sell it short and ran it down to 75 cents a share. Of course, that could not be done if they had to put up the stock or had to put up the money. Mr. HANCOCK. Gentlemen, it is about 1 o'clock. Doctor, have you anything further? Dr. SPRAGUE. No, sir. I think I have covered practically all the things I had in mind. Mr. HANCOCK. I want to thank you very cordially for having come here and having given us the benefit of your views regarding this legislation. Dr. SPRAGUE. Thank you. Mr. HANCOCK. What is the pleasure of the subcommittee with respect to hearing Mr. Moser? Mr. CROSS. I think we agreed a while ago to come back at 3 o'clock. Mr. WOLCOTT. I may not be able to be here, but if I cannot, I hope I may be excused. Mr. HANCOCK. The subcommittee will be in recess now and reconvene at 3 o'clock this afternoon. (The subcommittee thereupon recessed until this afternoon.) AFTERNOON SESSION The committee reconvened at 3 p.m., Hon. O. H. Cross presiding. STATEMENT OF C. O. MOSER, VICE PRESIDENT AMERICAN COTTON Mr. MOSER. My name is C. O. Moser. Mr. CROSS. And the business you are engaged in? Mr. MOSER. Vice president, American Cotton Cooperative Association, New Orleans, La. I have made a particular study of the effect of our monetary policies on the prices of farm products and commodities in general, and the effect of commodity prices on business prosperity of the country. It is from this standpoint especially that I want to present here some views for the record. I have prepared a short formal statement that I would like to read. It has a couple of exhibits attached, which I would like to put into this record. Mr. CROSS. That is all right. Mr. MOSER. It is generally known that the commodity price level is the criterion of the standard of living of any people. In this enlightened age there is no need to support such statement with argument; it is axiomatic. To raise the commodity price level to the 1926 level is the avowed purpose of our national administration. It is a carefully considered and duly proclaimed national policy. The all-important key to our national economic recovery is, How may the price of commodities be brought up to the desired level and kept there? American argriculture is genuinely interested in the b lish the Federal Monetary Authority and to control th of the United States because it provides an effective me elevate and maintain whatever price level may be require back economic security to our farmers, business solven merce and industry, and jobs to our unemployed. It should be made clear to everyone that the terms "de and "cheap commodities" are synonymous; and cheap 1 high-priced commodities are the same. No intelligent n in favor of higher commodity prices and continued defla are inconsistent, incompatible, impossible. Since the American people have unmistakably chosen to the depression by restoring the 1926 price level and p power and paying our enormous public and private debts than 250 billions of dollars rather than resort to whole closures, bankruptcies, and repudiation with the general l equities of debtors, we must discard deflationary policies tices and embrace constructive measures of recovery. The people are not afraid of change; neither are they devoid dence in the future, nor in their leaders. But they war They are impatient with the cause for delay. They only be led out-all the way out. We have made wonderful progress toward recovery in ag during the past year, especially in those industries which ha fited by the depreciation of our currency in terms of for change, but we are still far from our desired goal-about h to our destination. As long as the index of commodity prices is under 100 to consider further monetary adjustment. It is now about Incidentally, the farmers' dollar is still 61. If one or more commodities are subnormally low in the F of a normal all-commodity price level, it is evidence of a ma ment of supply and demand for that particular commodity remedy in case of known excessive supplies and a fallacious tary policy is obviously to attack the problem on both fronts. is what the administration has been doing. Cotton producers are concerned with adjusting supply to d through the Bankhead bill and with permanently adjusting th etary situation through the proposed Federal Monetary Aut bill. We have full confidence not only in the efficacy of the ciples of these two measures in specifically meeting our needs storing a satisfactory price level, but also in being able to ma prices at approximately such a level. We obviously have had no adequate monetary devices of Go ment to exercise control over commodity prices required to the purchasing power of money at par. We have had a quasi ernmental agency controlled by private interests that has exer control over currency and credit. Under Federal Reserve mai ment we have had a restricted credit policy, with forced liquid. of bank credits, with its accompanying destructive evils; but a ently Federal Reserve policies were unable to reverse the down trend of commodity prices. We charge the Federal Reserve System with no worse shortcom than helplessness in overcoming the disparity between the valu money and commodities, and continuously using its influence to avert the remedy which was finally adopted, and which practically every other great nation has used advantageously to advance commodity prices and arrest the forces of deflation. Among the first of the countries going off the gold standard was Australia. The Australian experience, from which we have much to learn, was summarized by Dr. Douglas Copland, the economist who piloted that agricultural country out of the depression. Dr. Copland spoke recently to a group of congressional, business, and agricultural leaders at a private breakfast in Washington. His story of Australian recovery was broadcast by Mr. Earl Harding over the Farm and Home Hour of NBC, January 20, and is submitted herewith as an exhibit. Likewise, the fallacy of our financial policy since the World War is amazingly and convincingly portrayed in the attached letter-exhibit from G. M. Googan, Chicago bank economist, and student of the effects of monetary policy on commodity prices. The record of our financial policy since the World War and until recently clearly indicates a series of obvious alternatives, of which there is no acceptable choice so far as farmers are concerned. The constitutional right to issue currency and determine the value thereof cannot safely be entrusted to an agency controlled by any one class of people engaged in business for private gain. The influence that controls so vital a function of business and commerce as the expansion and contraction of currency, the expansion and contraction of credit, the policy of buying and selling foreign exchange, must be a direct agency of the Government itself-free from undue financial influence and undue political influence. This Authority should have sole and complete control over the issuance of currency, determine the gold content of the dollar, buy gold and silver bullion, finance short-term Government obligations and engage in open market operations in short-term Government obligations. In short, the Federal Monetary Authority should be charged by Congress with the task and responsibility or establishing and maintaining whatever commodity price level Congress finds necessary in the interest of the public welfare. To this end the board should be made up of men of unimpeachable character, integrity, and ability, and representative of banking, commerce, and agriculture. Their position in the Government should be comparable in dignity, prestige, and importance to the Supreme Court. While the American people, and particularly the cotton producers, have full confidence in President Roosevelt and Secretary Morgenthau in exercising the emergency powers in managing our currency, I am convinced that early attention should be given to creating a permanent authority for managing our new monetary policy along the lines proposed in this bill. I believe such a mechanism is necessary to assure attainment of the President's monetary objective, which he described to the World Economic Conference as "the kind of a dollar which a generation hence will have the same purchasing and debt-paying power as the dollar value we hope to attain in the near future. Mr. CROSS. I notice that you referred to the purchasing power of the dollar, the farmers' dollar being 61. 66 Mr. MOSER. Yes, sir. Mr. CROSS. Do you base that on the pre-war dollar, and by tl pre-war dollar "I mean the dollar in the period 1910 to 1914, th 5-year period. That is what we generally call pre-war or the 100-cer dollar. Mr. MOSER. Yes, sir. Mr. CROSS. That is the same period which Dr. Warren used i his book, too. Then you say that the purchasing power of the dolla in relation to that is 61. Is that your idea? Mr. MOSER. That is right. In other words, it is the exchange valu of farm products, the price of the things that farmers buy as com pared with the price of the things they sold during the 1909-14 period. Right at the present time the all-commodity price level is around 72. The things which the farmers buy are around 117. In other words, the price of farm products is much lower, as much lower as 72 is under 100, and we are paying as much as 117 is over 100. The exchange value of farm products, even in 1909 to 1914 was far from equitable. We think that was one of the major causes responsible for the business collapse. We do not believe that you can keep 35 millions of people directly engaged in agriculture, and probably 15 million more people living in the small towns who are almost as directly dependent on agriculture as the farmers themselves, with a buying power as low as it has been since 1920 and come to any other end than the end we have. We do not believe there is a sound ground or hope for the restoration of normal business conditions until this thing is remedied and permanently remedied. Mr. CROSS. The purchasing power of the dollar in 1926 was 642 cents as compared with the pre-war dollar. In other words, the prewar dollar is 100. I know if you take from 1917 to 1929, during that period, that 13-year period, is when the great mass of the debts of this country were accumulated. Is not that right? Mr. MOSER. That is right. Mr. CROSS. The purchasing power of the dollar, the average purchasing power of the dollar, spread over those years, was 642 cents and the purchasing power of the dollar in 1926 was 682 cents. So that if we go back to the purchasing power of the dollar in 1926, the creditor certainly has no kick coming, because he would still be paying a dollar that has 4 cents more purchasing power than the dollars he loaned. Mr. MOSER. Certainly, a creditor has no complaint under any circumstances, where he is repaid with a dollar that will buy the same volume and quality of commodities and services as it did at the time that he made the loan. Mr. CROSS. Now, the question, of course, is how this system will work. We have had different theories and different bills. I think this bill will work. I had a bill and my bill was this: That taking the 1926 wholesale price level, then the board would gradually decrease income taxes and pay all the expenses of the Government on obligations falling due by simply issuing currency, continuing to pay these expenses, and, if necessary, continuing to lessen the income taxes or suspend them, until the purchasing power of the dollar came back to where it was in 1926. Now, if the purchasing power became too weak, or it began to rop lower than it was in 1926, for instance, like it was in 1927 and 928, you would lay on an income tax heavier and heavier until you ook out of circulation a sufficient amount of currency to force it ack in harmony with the purchasing power in 1926. That is a detail, of course. Mr. MOSER. Mr. Cross, would not the plan you suggest, or any >ther device found necessary by the Monetary Authority be available o this Monetary Authority? Mr. CROSS. I was going to say that is a detail as to which they could do as they see fit. This Monetary Authority is given a certain length of time—and it was suggested and met pretty well with the approval of all the members-given a certain length of time to get the purchasing power of the dollar back to what it was in 1926. Then it was for them to keep the purchasing power of the dollar within 10 percent of what it was then. If it dropped 10 percent below or 10 percent above, they automatically went out of office. That was to make them keep the purchasing power of the dollar there. In other words, if they tried to be influenced or controlled by any selfish interest to do otherwise, they would just pass out of the picture and somebody else would come along. I think that is a pretty persuasive provision to put in that bill. Mr. SCRUGHAM. May I ask the witness a question? Mr. CROSS. Yes, sir. Mr. SCRUGHAM. Mr. Moser, you have before you a copy of H.R. 7157, introduced by Mr. Goldsborough? Mr. MOSER. Yes, sir. Mr. SCRUGHAM. That is the so-called "Currency Control Act of 1934"-to establish the Federal Monetary Authority and to control the currency of the United States. Mr. MOSER. Yes, sir. Mr. SCRUGHAM. Will you turn to page 3, line 8, section (b)? Mr. SCRUGHAM. In your statement which you just made you advocated the establishment of such a monetary authority as provided for in this bill and you state that this authority shall have "full and complete authority over the issuance of currency, determine the gold content of the dollar, and buy gold and silver bullion Mr. MOSER. Yes, sir. * * * Mr. SCRUGHAM. Are you familiar with the so-called proposed "Wheeler amendment " to the President's monetary bill, which failed of passage in the United States Senate by a vote of 45 to 43? Mr. MOSER. I am familiar with it in a general way. I do not know the details. Mr. SCRUGHAM. It is a silver exchange bill which does not authorize it but makes it mandatory. Mr. MOSER. My recollection is $1,000,000,000. Mr. SCRUGHAM. One billion dollars, or until the ratio of silver reaches a certain permanent figure which was in effect 16 to 1. Will that measure fulfill your views and beliefs? Mr. MOSER. My idea is that we would do well to broaden the metallic base for our currency system and to give the Monetary Au |