PATTERSON, A. B., M. A., Ph. D. President, American Academy of Political and Social Science. Professor and Head of Economics Department, University of Pennsylvania. Visiting Professor, Institut Universitaire des Hautes Etudes, Internationales, Geneva, Switzerland. Lecturer, Academy of International Law, The Hague, Holland. Member: American Economic Association, American Philosophical Society. Author: The operation of the New Bank Act 1914. Western Europe and the United States. Europe in 1927. Tests of a Foreign Government Bond. The World's Economic Dilemma 1930. AmericaWorld Leader or World Led. BRINGS A GRIST OF FACTS FROM THE MILLSTONES OF THE WORLD TO YOUR READER'S PAGES. YOU AND YOUR NATION'S AFFAIRS THE UNITED STATES IN ACCOUNT WITH THE WORLD By ERNEST MINOR PATTERSON, President, American Academy of Political and Social Science Our government's estimate of the economic relations between the United States and the rest of the world for the year 1934, has just been made public. Such estimates have appeared regularly since 1919. They reveal the development of serious maladjustments in the post-war period, the reaction after 1929 and the more recent developments. Stated mildly, the present situation is far from reassuring. Before the War the people of the United States were debtors. We owed other countries more than they owed us. Our farms and our factories were adapted to that relationship. Their operations were geared to the exportation of commodities. About $500,000,000 in goods, more than we imported, were sent abroad each year. This was suitable. We were obligated to pay abroad each year more than foreigners were obligated to pay us. They owed us large sums, but the balance was against us. We owed considerable amounts to them as interest, for one reason. Then, too, we had no merchant fleet and paid foreign vessels for carrying our trade. All this was altered from 1914 to 1919. We suddenly became creditors. We built our own fleet of merchant vessels. This new situation meant a reversal of relationship. There was a persistent, heavy pressure of goods into the country instead of an easy, steady flow outward. Our farms and factories were still adjusted to large exports. They could not change over night. We carried on absurdly and illogically. We solemnly demanded that both public and private loans already made should be honored. We vigorously pushed the sale of our goods in foreign markets. Thus we added to the amounts due us. At the same time we imposed a series of obstacles to the possibility of foreign payments to us. The combination was an economic monstrosity. What we received in response to our pressure for payment were more and more promises to pay. Our investment bankers marketed billions of dollars of new foreign securities. These piled up huge claims of our government against various foreign governments. So long as this continued proceeds of the loans could be used to pay interest on past borrowings and to buy our exported commodities. When it ceased our exports declined and borrowers in other countries, of course, began to default. We blindly kept on. We maintained our efforts to sell abroad instead of relaxing them. Instead of devising ways to receive payment, we maintained barriers against them. The two most definite actions were the Hoover moratorium in 1931 and the "devaluation" of the dollar in 1933 and 1934. The moratorium was only a temporary device, however, and the "devaluation" of the dollar was designed to encourage exports and to discourage imports! What would we think of a grocer who crowded goods on a customer, already behind with his bills, and then made it as difficult as possible for the customer to pay. Where do we stand today? During 1934 we experienced what many believe to be an improvement. Our imports increased, but our exports gained still more. In 1934 we shipped out $478.000,000 more goods than we shipped in. The figure was $225,000,000 for 1933. To those who look with enthusiasm on what is unfortunately called a "favorable" balance of trade, this seems encouraging. But what else has happened? The excess of commodity exports was roughly that of the pre-war period. At that time, such an excess was necessary to meet the interest we owed abroad and to pay foreigners for carrying our goods in their vessels. We are now creditors, however, not debtors. Since 1925 foreigners have had to pay us more on shipping and freight service account than we have had to pay them. We need not become hysterical over the possible conclusions from this array of facts, but there is no ground for optimism. Everything depends, of course, upon what we desire. If we wish to continue an irregular economic relationship with other countries, to repeat the experiences of the last few years, all we need to do is nothing. Lowering our barriers against imports would bring relief, but apparently we are not yet ready for such wise change in policy. Even the moderate efforts of our State Department in negotiating reciprocal trade agreements are arousing opposition in Congress. We do not yet realize the impossibility of eating cake and still having it. "All agoin' out and nothin' comin' in" may do as a theme for a variety stage song, but it won't work as a foreign trade policy. (Questions on this article or other economic subjects will be answered by leading economists. Address Dr. Patterson in care of NAME OF PAPER.) SPAHR, A. B., M. A., Ph. D. Professor of Economics, Chairman of Department of Economics, Accounts and Finance, New York University. Secretary-Treasurer, Economic Association, American Statistical Association. Author: Clearing and Collection of Checks. Methods and Status of Scientific Research. Questions and Problems to Accompany Ely's Outlines of Economics. The Federal Reserve System and the Control of Credit. Economic Principles and Problems (Joint). Famous monetary authority-pithy, writer and radio and platform speaker on money and banking. YOU AND YOUR NATION'S AFFAIRS HOW CURRENCY INFLATION AFFECTS THE FARMER By WALTER E. SPAHE, Secretary, Economists' National Committee on Monetary Policy While currency inflation is taking place some classes appear to benefit, notably the farmer. For this reason the principal farm leaders are advocating currency inflation. Drives for currency inflation in this country have been, and are today, to a large extent agrarian movements. The benefits in the case of the farmer, as with other classes, are apparent and not real. They fade into dismal disaster. Several important factors contribute to the relatively favorable position given the farmer by currency inflation. The prices of his products rise rapidly. At the same time he tends to hold his expenses per unit of product down for a considerable time. He delays buying new equipment. He does not add to his investments in land or buildings. He holds down his labor supply. These things give the farmer an unusual and most welcome margin of profit with which to pay his debts. After these debts are paid, however, he will begin to consider ways and means of expansion. He will restore his depreciated property, by new equipment, increase his number of employees, and perhaps purchase new buildings and land. When he begins buying he will find that the prices are rising rapidly or have risen to startling heights. To buy before prices rise further will seem prudent. The tendency to borrow in order to buy will increase. Thus as inflation continues farm debts will mount steadily. The burden and distress associated with old debts will be forgotten. The steadily rising prices of agricultural products will appear to provide ample assurance that all is well. The more the currency is inflated the higher the prices will rise and the greater will be the amount of new debts accumulated. Then comes the headache. In time the inflation of the currency will come to an end, prices will collapse, and the dangers and burdens of the debts will become painfully apparent. Enforced liquidation will begin its destructive course. Distress and suffering will become widespread. Farmers will realize then that once again they are living through the hard times which invariably follow an inflation. The difficulties which farmers have experienced since the collapse of 1920 have been due largely to the credit inflation which took place during the World War and to the related maladjustments which the War and inflation generated. Periods of falling prices and liquidation are almost invariably caused by a receding period of currency inflation. Therefore to urge inflation as a means of overcoming the distress of a depression is but to prepare the way for another period of distress. Inflation brings only an illusive prosperity. Farm leaders urging currency inflation are asking that the way be prepared for plunging the farmers into another liquidation. Farm leaders seem unable to learn this very simple lesson. A feature every depression has is this misleading leadership. Their cure for a headache following a shot in the arm is another shot in the arm, leaving the victim with another headache. A sound recovery generated by the recuperative processes of nature seems to find no place in their thinking. Wise farmers realize that the rise in prices accompanying a sound recovery is one thing-the proper and desirable thing-and that a rise in prices caused by currency inflation is another thing-the wrong thing. An inflated currency is a defective currency. It leads to trouble. A sound currency provides a good basis for a sound and lasting trade expansion. The farmer with foresight understands, also, that probably no class, except the wage earner employed in industry, suffers more than does he when he is caught in a period of business liquidation caused by currency inflation. Unlike the industrialist, he cannot shut down his plant temporarily, or restrict sharply his overhead expense. The consequence is that the prices of agricultural products fall quickly and far, the farmer's debts become almost unbearable and his distress and discouragement become intense. He easily may feel that he may never live to see a new day of prosperity. The prospects of inflation seem most welcome. He is inclined to assume the risks and let the future take care of itself. This is understandable, but irrational. Two wrongs will not make a right. The rational man realizes that inflation caused his present distress, and is unwilling to sanction a dance for himself when his children must pay the piper. No farmer interested in anything beyond the immediate present or in the welfare of his children can afford to be an inflationist. (Questions on this article or other economic subjects will be answered by leading economists. Address Walter E. Spahr in Care of NAME OF NEWSPAPER.) ANALYSIS OF SIX STAR SERVICE, RELEASE No. 17, FEBRUARY 17, 1936, THROUGH RELEASE No. 108, NOVEMBER 20, 1937 Each weekly release contains six articles, one for every day except Sunday. Contributors: Articles of the following writers appear during the entire period: Gus W. Dyer, Professor of Economics and Sociology, Vanderbilt University. Ernest Minor Patterson, President, American Academy of Political and Social Science. Eliot Jones, Professor of Transportation and Public Utilities, Stanford University. Walter Spahr, Secretary, Economists' National Committee on Monetary Policy. Clarence W. Fackler, Assistant Professor of Economics, New York University (up to release 94). Articles of the following writers appear only the first few weeks of the period: Neil Carothers, Director, College of Business Administration, Lehigh University (up to #25). James S. Thomas, President, Clarkson College of Technology (up to #38). T. N. Carver, Professor Emeritus, Harvard University (to #26). Contributions from the following writers begin during the period and continue to the end: Harley L. Lutz, Professor of Public Finance, Princeton University (# 28 on). Erik McK. Eriksson, Associate Professor of History, University of Southern California (#46 on). J. E. LeRossignol, Dean, College of Business Administration, University of Nebraska (#65 on). Subject matter of articles in Six Star Service [Names across the top of the table are those of contributors to the Service. General subjects or topics are listed in the left-hand column. Such subject headings are necessarily abbreviated and are intended to provide merely a rough general classification of the contents of the various articles. The figures represent the number of articles on a given subject] This offer of "Uncle Abner Says" will be held open for the papers receiving it for one week. Wire for this exclusive service (FIRST RELEASE-MONDAY, JUNE 22, 1936) Supplied in Mats-Single Column-Without Charge [This service is supplied to you for exclusive use without charge, the cost being met by the National Association of Manufacturers] MEET UNCLE ABNER Uncle Abner is a plain farmer. He has no party affiliations. His life is easy going, carefree. He has never been on relief. He does not seek "benefits" and subsidies. Being without party he has no partisan venom. He reads his newspapers and farm journals from cover to cover. He listens to all radio addresses on public questions. His reading and listening has made him realize that the taxpayer must pay the bill for government. He clearly sees the I. O. U. that lurks behind the fine front of government enterprise. He knows that he is the "I." 89562-39-pt. 35- -26 them think. his sagacious, satirical comments on the problems of government he can make Uncle Abner has discovered that if he can make his neighbors smile with them with barbed partisan controversy. purpose better by approaching his neighbors pleasantly instead of jabbing at He wants to make others smile with him. He believes he can accomplish his Lafe Hawkins, th' boondoggler, |