Mr. SPENCE. Mr. Eccles has been on the stand and testified that the powers that were exercised recently by the Federal Reserve Board in regard to reserve requirements had no effect upon the price level.

Mr. OWEN. What I understood he said recently was that the increase by the Federal Reserve Board of the percentage required in reserves against deposits did not have any effect, and of course it did not, because they still had their wide margin to make loans if they wanted to, but the banks do not want to make loans when there is doubtful stability, and when they have reason to fear that there may be a change in the value of property upon which they are lending money. And the banks are quite right. They have had experience. It has killed about half of them.

Mr. SPENCE. Do you think the reserve requirements should be increased?

Mr. OWEN. Yes; but I do not think that is a very important matI think that should be increased to give a greater stability to the banks, and I think that the banks in lending money should be required to lend money for constructive purposes and not for speculative purposes and at a lower rate. I think the banks are pursuing that policy

now.

Mr. SPENCE. To what extent do you think the reserve requirement should be increased?

Mr. OWEN. I think it should be substantially increased, so the country will have a sense of complete security, and the ability of any bank to be immediately liquidated without loss to the depositors or any serious loss to the insurance corporation.

Mr. SPENCE. Are there any other agencies of the Government to which this legislative mandate should be directed?

Mr. OWEN. I think the Treasury Department should be required to have a representative to sit in with the Federal Reserve Board, and the Agricultural Department and the Department of Labor also should have a representative to sit in, to keep those departments coordinated as far as possible.

Mr. SPENCE. Do you think the most effective agency would be the Federal Reserve Board?

Mr. OWEN. There is no doubt about it at all. They can absolutely increase to whatever extent they please, and they can contract to almost any extent they please. They have done it, and they can do it again.

The Government is doing this expansion to meet the cost of this preparedness program, but if you will only realize the power that the American people now have under the safeguards which I have so often placed before the committee, when we realize their capacity, you will realize that the United States is under no danger at all in increasing the indebtedness of the United States for the purpose of preparedness.

There is one great mistake which I think nations make with each other, and that is to send enormous supplies of war materials for war-making purposes, with the expectation that it will be paid back. It should be regarded merely as a contribution of human labor from one continent to another continent and not be expected to be paid back.

That happened during the last war. The taxing power of the people was not sufficient for them to pay it back in gold and they could not pay it back in commodities because of our tariff laws. So there was no alternative.

Before concluding my remarks I call your attention to the index of industrial production and that it has varied with the volume of check money as shown by the tables heretofore referred to in Senate Document No. 23, Seventy-sixth Congress. I submit herewith in conclusion a letter from the Federal Reserve Board and the table therewith with the observation that this index without the expansion of credit following the beginning of the European War, August 1939, the index should have been at least 160, whereas it was only about 100. (Table 107.)

And now Mr. Chairman and gentlemen of the committee permit me to express my thanks for the opportunity of laying before you testimony and records which will fully justify your perfecting the Federal Reserve System and giving to the people of the United States the greatest of all public services, the establishment of a stable dollar, a sound currency of uniform permanent debt-paying purchasing power. You have the opportunity of giving the world an international monetary unit of world-wide stability and an example to every nation in the world of the simple means by which they can stabilize their own currency permanently and thereby achieve maximum employment and the more abundant life through the processes of production, modern machinery, scientific methods already developed in the United States of America. I thank you for your gracious permission to cooperate with you in this great objective, for the abolition of poverty will mean world peace and a new era of human happiness with benevolent international cooperation.

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM,

Mr. ROBERT L. OWEN,

Washington, D. C.

Washington, October 20, 1941.

DEAR MR. OWEN: In accordance with your telephone request today, we are enclosing a table showing figures for the Board's index of industrial production from 1923 to date.

Very truly yours,

WOODLIEF THOMAS,

Assistant Director, Division of Research and Statistics.

TABLE 107.-Industrial production

[1935-39 average=2
=100]

Jan.

Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.

Year

Mr. WILLIAMS. Senator, we have enjoyed very much having you with us. You have given us a very interesting and very instructive statement.

Mr. OWEN. I am pleased to have had the opportunity to come before you and discuss this very important subject, and I thank you for your attention.

(Thereupon, the committee took a recess until 2:30 o'clock the same day.)

AFTERNOON SESSION

The committee reassembled, pursuant to the taking of recess, at 2:30 p. m., Hon. Clyde Williams, presiding.

Mr. WILLIAMS. The committee will be in order,

We have with us this afternoon Mr. Moore, who represents the Grange organization of the State of Texas, and also the commissioner of agriculture.

Mr. Moore, we will be very glad to hear you at this time.

STATEMENT OF RALPH W. MOORE, PAST MASTER OF TEXAS STATE GRANGE AND MEMBER OF EXECUTIVE COMMITTEE

Mr. MOORE. My name is Ralph W. Moore. I am a farmer and live on a farm 10 miles from Granger, Tex. I am past master of the Texas State Grange and a member of the executive committee.

At this point I want to say that I sent a copy of this statement to Mr. J. E. McDonald, the commissioner of agriculture, and he authorized me to mention the fact that he was filing it and that it met with his full recommendation and consent.

Just last week we had a 2-day agriculture conference at the Raleigh Hotel where 37 States were represented by commissioners, secretaries, and directors of agriculture, farm leaders and representatives of the governors, which I had the privilege of attending, representing the Texas Governor, and the results of which I will give you bears out, in my opinion, the thought of most farmers.

I am convinced that the passage of the price-fixing bill proposed by Mr. Leon Henderson is not only an un-American proposal, but will result in ruin and peonage to the American farmer and disaster and dictatorship to our Nation.

Even with the slight recent advances in the prices of commodities, the farmer who is producing cotton is receiving less than 18 cents per hour for his toil and labor compared to the industrial worker who is receiving $5 or $6 or more per day. We do not envy the industrial worker but we do consider it unjust to the farmers of the Nation to fix prices on commodities and especially unless they were fixed at a fair price parity which will take into consideration the cost of production, plus a reasonable profit, and at the same time the wages and all other costs to the farmers were fixed.

It has been proven that the so-called parity calculations of the Department of Agriculture are based on an old and antiquated formula that does a great injustice to the American farmer, so much so that the Senate Agricultural Committee is now working on a bill that will discard this old, unjust, and uneconomic parity formula and adopt a fair price parity.

The producer must continue to increase production, especially of certain commodities, if we are to be properly prepared to defend the Nation. The records of all time show when the price of commodities go down, the production decreases. When the price of commodities starts upward, likewise the increase in production increases.

During the past 12 years, the prices which farmers have received for commodities, which is the same as wages to farmers, have been so low that they could not exist on them and maintain a decent standard of living. Also, in the last 12 years the Budget has not been balanced. On the other hand the Federal debt has increased from $20,000,000,000 to more than $60,000,000,000. At the same time there is approximately 20 billions of dollars of gold being hoarded in the hills of Kentucky and elsewhere at the peoples' or taxpayers' expense. We know that approximately one-fourth of our people live on the farms. Yet during the past 12 years the farmers have received less than 10 percent of the national income. In other words approximately one-fourth of our people who are feeding and clothing the Nation have not been receiving one-tenth of the national income. I

do not think that any one will agree that this is justice. This is the reason the fariners cannot pay their interest debt and taxes and they are without purchasing power for the bare existence of life. This is the reason they have been losing their farms and have been forced to go to the cities and get on relief.

Are not our farmers entitled to an equitable share of the national income so they may have a decent standard of American living.

The vested wealth-the big Government bondholders and mortgage holders-are now trying to scare the entire country about inHation. Over the radio, and in the press they are trying to frighten the people, that unless prices are fixed on commodities and other goods, inflation will come and ruin the country.

These groups are not familiar with the conditions of the farmer, the worker and the small businessman. They are worried, because if prices and wages go up the interest and the principal on their bonds and mortgages will not buy so much.

The cost of the raw materials is less than one-seventh of the cost of the finished articles or goods to the consumer. For example, a $2.50 shirt has approximately 10 cents worth of cotton in it; a $30 suit does not have $4 worth of wool in it; or in a pair of $4 shoes, there is less than 60 cents worth of hide; or in the dollar dinner, there is not 15 cents worth of commodities. If the prices of farm commodities were increased 100 percent, it would not increase the prices to the consumer more than 12 percent.

The farmers must pay directly or indirectly a large part of the Government taxes and the principal on the Government debts if they are ever paid. This will be impossible with low prices on commodities, and it will mean that the farmer and his family must remain at a low standard of living and will eventually drift into peonage if prices for his products remain at such a ridiculously low level during the time of war economy.

Gentlemen, the condition that brought about the economic disaster to our country after the last war, were the inflated war debts and high taxes, coupled with the collapse in the prices of commodities. Now, with the Government debts many times more and the taxes at a staggeringly high point, if an attempt is made to fix prices on commodities around existing low levels, it is bound to result in complete disaster as well as the loss of our constitutional Government. Price control means economic control of the Nation. This control belongs to Congress alone. To give such power and unlimited authority to Mr. Leon Henderson or any such proposed administrative agency means virtual dictatorship for our Nation-the end of free economy and the loss of our constitutional form of government.

As stated before, the agricultural conference of commissioners, secretaries and directors of agriculture, representatives of governors of States, farm leaders from 37 States unanimously opposed fixing prices on farm commodities. I ask you in the interest of the American farmers, sound national recovery, and preparedness for national defense that you heed these resolutions, which read as follows:

(1) We oppose any price-fixing or price-ceiling legislation with respect to agricultural commodities that does not simultaneously