The CHAIRMAN. We will hear Mr. Elbert. STATEMENT OF ROBERT G. ELBERT, MANHASSET, LONG ISLAND, N. Y. The CHAIRMAN. Give your name and address and occupation and whom you represent. Mr. ELBERT. I do not represent anybody but myself. The CHAIRMAN. What is your name? Mr. ELBERT. Robert G. Elbert. The CHAIRMAN. Where do you live? Mr. ELBERT. My business is investments. The CHAIRMAN. Do you operate on the New York Stock Exchange? Mr. ELBERT. No; I am not connected with anything or anybody; I am a director of some companies, that is all. The CHAIRMAN. Very well. We would like to have you make a statement. Mr. ELBERT. I would like to state this, Mr. Chairman, if I may, that I am not prepared to make a statement at all. I did not think to make a statement. I have some ideas about the fundamental situation as I see it. I do it with all humility, appreciating that this is an enormous subject. I appreciate that you gentlemen have been trying to help the situation out, and I have been thinking along those lines, naturally. I have money to invest and do not like to lose it when I get it. I think everyone is the same way. Personally, I feel that the situation is such that we have got to help the farmer get on his feet, so that we can increase the buying power. Now, my angle to the thing is that the gold standard is all right if we were really on the gold standard. We are not on the gold standard. We went off the gold standard when the Federal reserve bank was created. We went on a managed standard. The CHAIRMAN. What is that? Mr. ELBERT. We went on a managed standard; we went on a managed gold basis. The management of this gold is being done so that its value does not materialize; it does not function normally, and that has caused the dollar to fluctuate in its buying power. You take all the gold we have and put it on one side, and everything that has a price or value on the other side of the scale; if you take off some of the gold you make gold scarcer, in a sense, in buying power, and put down things. Now, then, if you again increase the gold circulation, you bring the value of things up. Now, as I see it, everybody in America, since 1929, has turned seller; everybody is trying to sell things; nobody wants to buy; everybody is trying to get rid of things and buy dollars, in other words. Now, I think that what is going to happen is that when this situation turns everybody is going to become a bear, or a seller of money, and try to buy things, and I am afraid we are going to have a worse situation in four or five years than we have now. Now, the Federal reserve bank, through market operations-in my opinion there is a machine already created that it is better to use, because Congress has already created it. If the Federal reserve bank would manage this value in other words, if they would try to stabilize the whole commodity price level-I believe this can be done, because I have read Governor Strong's testimony, in which he practically said that they did that thing, tried to maintain price levels, and that is why we had a price level from 1922 on through, and then when he died Senator BROOKHART (interposing). Now, do you claim that we had a fair price for agriculture all through there? Mr. ELBERT. No; but I think wheat should be kept a little above a dollar. Senator BROOKHART. Wheat is only one thing. Mr. ELBERT. Yes. Senator BROOKHART. A dollar is not enough for wheat. Mr. ELBERT. No; I would like to see wheat $3, but that is all relative. Everything will work out, really, relatively. I am not posing as an expert; I am just an ordinary fellow trying to do what I can. I am not an expert on farm things. I will try to answer any questions. Senator BROOKHART. So many, from New York particularly, talk about prosperity after 1923. But agriculture had no prosperity after 1920. Mr. ELBERT. No. Agriculture had prosperity during the war, as a result of the war. Senator BROOKHART. And during that time we had a board fixing the price of wheat. Mr. ELBERT. The farmer got a bad deal at that time, because it was regulated against him, I realize. Senator BROOKHART. No; the farmer got a bad deal, but the speculators got a bad deal because it reduced the speculators' price. In 1916 the farmer got $1.51, on an average, but it sold as high as $3.25 by the speculators Mr. ELBERT (interposing). Senator, I know you are an expert on all this. I bucked up against you before. I am not going to try to cross swords with you now. I would rather stay on my own side. The CHAIRMAN. Will you continue your statement, please? You were devaluating the dollar, and thereby increasing buying power of commodities. How would you get that done? Mr. ELBERT. May I ask you to repeat that question? The CHAIRMAN. You were discussing how you would devaluate the dollar and thereby increase the buying power for commodities. Mr. ELBERT. Yes, sir. The CHAIRMAN. How would you do it, immediately? Mr. ELBERT. I would have the Federal reserve bank do as they are doing. Senator SHIPSTEAD. What do you mean? Buy Government bonds? Mr. ELEBRT. No, Senator. The Federal reserve bank, up to the last three weeks, has been letting all the eligible paper-letting the bills run out and replacing them with bonds, since the Glass-Steagall bill came into effect. Senator SHIPSTEAD. Yes. Mr. ELBERT. In other words, it looked to me like they were trying to fool the people, and the papers were talking about buying bonds. But in the last three weeks, according to the papers, they expanded the basis of buying bonds. Now, when they buy bonds they put more credit, or money, into circulation. Senator SHIPSTEAD. Where did they put that money? Mr. ELBERT. If they buy $1,000,000 worth of bonds from you, they give you a check for it. Senator SHIPSTEAD. Yes. Mr. ELBERT. You take that check to the bank and deposit it, and the bank has your $1,000,000. Senator SHIPSTEAD. Yes. Mr. ELBERT. And the bank would use that $1,000,000 any way it sees fit, and you have credit for it. And you buy something else with that $1,000,000, and you give a man a check, and this thing multiplies throughout the credit system if the member banks are cooperating, passing this money on in loans, and things like that. When they get that money in there, they should normally increase loans and help the credit system. Senator BROOKHART. Do you think it would help the farmers to loan them more money? Do you not think we need to increase their prices? Mr. ELBERT. I do not think it will help the farmer merely to loan him more money. Senator BROOKHART. What you suggested is more loans. What he needs is more prices so as to get money. Mr. ELBERT. This would increase it. Senator BROOKHART. You are beginning at the wrong end. He has to get the prices for his stuff. Mr. ELBERT. It should make possible for the farmer to get money. I do not think the farmer is overproducing. I think it is lack of consumption. Senator BROOKHART. You are right on that, and this came about when they knocked the farmers' prices down so that they could not buy normally, and that has put millions of workers out of work in the factories, because it broke down the buying power of the farmer. Mr. ELBERT. It broke down everybody's buying power. Senator BROOKHART. In 1923, as the Manufacturers' Record said, $13,000,000,000 was the deflation in the price of farms and farm products, and other things deflated at that time, but the farms six times as much as other things, by this same institution. You want to cure that situation. The farmers' prices went down and the buying power went down, and it has never come back. Mr. ELBERT. No; but if we could distribute this thing and get the farmers' goods to the people-for instance, we have a number of people in the world who are starving to death, and we have this surplus, and it is said that the farmer is producing too much. I would not say that. Senator BROOKHART. You are absolutely right, and if we the farm surplus to the people, that would restore prices. can not be done by loaning more money to the farmers. to be done by some central power, and Uncle Sam is the that can do that. could get But that That has only one The CHAIRMAN. Will you go on with your statement, Mr. Elbert? I must go in a minute, and I would like to hear your statement, and would like to have you finish it. We will hear the expressions of opinions at some other time. Go ahead and finish your statement. You were in the middle of it when you were diverted. Mr. ELBERT. All right, sir. I think the trouble is now the Federal reserve is putting out credit, buying bonds, and they are expanding the credit base or credit structure. If they keep on what they are doing we are bound to have a return of prosperity, in my opinion; that is, decrease the unemployment and make people happier again by giving them work, and start things going back on an even keel. Now, the trouble at the present time is-up to recently, and up to date, so far as I know from reading-member banks from the Federal reserve bank statements that are put out, the member_banks are still refusing to pass this credit on to the public in loans. Money is cheap, and loans they are making plenty of loans on good collateral security, like Government bonds, and so forth, and member banks, as I see it, instead of functioning as banks, they are functioning almost as investment trusts, because, after all, they should be retailers of credit. And they are holding it up at that point. Now by the Federal reserve bank keeping on putting money into circulation, or putting credit out, they will get so liberal they will be forced to loan to business, and they will loan to business, which will increase this surplus. The CHAIRMAN. Would that increase the volume of money in circulation, or would it expand the credit system of the country? Mr. ELBERT. More the credit system. That is really what we use; 95 per cent, really, is credit, a bookkeeping proposition, because we use checks, and everything like that. It is more or less of a credit basis. Senator THOMAS of Oklahoma. Is it not true that every time the Federal reserve bank buys $1,000,000 worth of bonds, that that $1,000,000 immediately becomes capable of $10,000,000 worth of credit? Mr. ELBERT. It should absolutely work that way, ten to thirteen. The economists agree on that. And the testimony by experts has been that way, if the member banks will pass that on. Now the trouble with the member banks is that they are scaring the dickens out of everybody, as I see it, because they are still calling people who have loans and refusing to renew loans and they are buying Government bonds themselves, and making the taxpayer pay the overhead, which is wrong. Senator KENDRICK. They are refusing loans based on legitimate security. Mr. ELBERT. And legitimate business, and all. And they are getting people scared. Also, one of the bad things, I think, the Federal reserve is doing, they are getting this country on the basis where we do nothing but short-term business. The banks are taking short-term loans, and everybody is on a six-months basis. When the gold standard operated naturally loans were put out for 100 years. If I loaned you $1,000,000 for 90 days you could not do much with it, but if I loaned you that $1,000,000 for 50 years, you can figure on what you can do with it. You can not eat it, and you will do something with it. Senator KENDRICK. Even for one year, if it was loaned for that time. Mr. ELBERT. It ought to be longer than that. We ought to get back on a sensible basis where the railroad men finance their equipment, and things like that, for 25 to 50 years. The Government, when they put out a bond issue, it ought to be for 50 years and give us a chance. This thing of turning it over, you have to be watching all the time, because you think that thing is getting nearer to you. You don't dare go ahead and expand yourself. That is the trouble. Senator THOMAS of Idaho. Mr. Elbert, are bank deposits going up in the country? Mr. ELBERT. Bank deposits? Senator THOMAS of Idaho. Yes. Are they on the increase or the decrease? Mr. ELBERT. Total deposits, you mean? Senator THOMAS of Idaho. Total deposits; yes. Mr. ELBERT. They are increasing. They are piling up cash in the banks. Some banks are on a 109 per cent basis. Senator THOMAS of Idaho. They are increasing the reserves. The deposits are not increasing, are they? Mr. ELBERT. I beg your pardon. The deposits are being depleted, more or less; yes. Senator THOMAS of Idaho. That is the country bank situation at the present time. The banks of the country are confronted with a decrease in deposits. Mr. ELBERT. Yes. Senator THOMAS of Idaho. And they are trying to reduce their loans to meet the decrease, and they are probably going beyond that. Mr. ELBERT. If you take savings banks, and banks of that nature, they are increasing their deposits. Senator THOMAS of Idaho. But, I mean, the country banks as a whole are decreasing in deposits. Mr. ELBERT. Do you know why? Senator THOMAS of Idaho. Certainly. Mr. ELBERT. They are forcing the people to use up their savings. Senator THOMAS of Idaho. No; you are mistaken. It is the price level of commodities that governs the deposits in the banks of the country. For example, when I get $500 for a carload of hogs, I make a $500 deposit in the bank. When I get $2,000 for a carload of hogs, I make a $2,000 deposit in the bank. Mr. ELBERT. Yes. Senator THOMAS of Idaho. The country is facing a decrease in deposits, and the banks are trying to adjust themselves, and are probably driving too hard. That is the reason for it. Mr. ELBERT. I think so, too, and because of unemployment and other conditions, people are forced to use up what little savings they have. Senator THOMAS of Idaho. Certainly. Up in New York, as I understand it, they are piling up deposits; that is, they are increasing reserves but not deposits. Mr. ELBERT. But people are willing to spend money if they can. |