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follow false leaders who propose the wildest vagaries. This is what happened during the reconstruction period following the Civil War. At that t.me George Bancroft, the historian, and a staunch advocate of a sound credit, declared that the pronounced opponent of inflation must look to future generations or his just reward, while the advocates of inflation were never thought well of by even those of their kind in the next generation. Nearly half a century has passed since Bancroft made that declaration, the accuracy of which has been fully demonstrated.

“ There are now pending in Congress numerous bills providing for the issuance of warehouse receipts against agricultural products stored for future sale. It is difficult to conceive of a worse scheme of inflation than that proposed in those measures. Nothing can be safer for a basis of credit than the paper representing the actual sale of commodities, provided the paper be of undoubted solidity and is payable at short and fixed periods. This is because civilized man's very existence depends upon being clothed and fed, and to acquire those necessary commodities man will make every sacrifice. But the paper which finances such a transaction must never fail to represent production, and when it contains this element, together with the other elements of solidity and short maturity, it embodies all the essentials of ‘liquid' paper.”

That, I think, in sum and substance is the kind of paper that should be provided for in rural credit bills. With respect to the element of orderly market. ing, the line is so indistinct between what is legitimate and what is speculative that we have to watch it all the time.

“Assume that such paper instead of representing production represents the sale of the commodity to the actual consumer. That paper can never be liquid' because such a credit does not reproduce itself, and when pay day comes the purchaser-consumer must look elsewhere for funds for the payment of such a debt. That is, he must sell securities or commodities, and if the market therefor be depressed a situation arises such as occurs when loans are based on permanent investments; and a precisely similar condition develops when the credit is based on loans on commodities stored for future sale. In the lastmentioned case the pledged commodity must be sold, and if this bad credit practice is carried on to a considerable extent we find a violent decline in commodity prices, which may not only endanger the whole credit system but bring ruin and disaster to the very people who engage in the practice.

The farmer is naturally optimistic on the prices of the commodities he raises. He is busily engaged in production and lacks the facilities to study the ramifying factors that control market conditions, which are world wide. To encourage him, therefore, to use the credit system for speculation, as the numerous measures of 'commodity credits'do, is little short of a crime. Moreover, when we make provisions for the farmer to borrow money on his commodities with the hope of securing higher prices, we offer him increased facilities for overconsumption, for the gratification of his pleasurable des res. No one would deny to the farmer the privilege of using his money as he sees fit. but let it be done with his own money, money owned by his own labor, and not borrowed money. We are at present suffering as a result of such bad practice, and every thoughtful citizen should strenuously oppose a progran. which will increase the facilities for extending the evil.”

That these people are in the position that we have been talking about here is evidenced by the latter part of that article.

Mr. SILVER. There seems to be a failure generally to understand that thit farmer has the lowest rate of indebtedness on his capital or has less borrowe money than any other group. The railroads, as an example, have as much deb as they have capital.

The CHAIRMAN. My point in reading that was to get your angle in anstrer tu it as far as possible at this time. I would like to know your answer to the last part of that article.

Mr. SILVER. Do you mean as to the farmer?
The CHAIRMAN. Yes.

Mr. SILVER. Will you read that last part again in order that I may formulate an answer?

The CHAIRMAN. Moreover, when we make provisions for the farmer to borrow money on his commodities, with the hope of securing higher prices, we offer him increased facilities for overconsumption, for the gratification of his pleasurable desires. No one would deny to the farmer the privilege of usit. his money as he sees fit, but let it be done with his own money. We are ai present suffering as a result of such bad practice, and every thoughtful citizen

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should strenuously oppose a program which will increase the facilities for extending the evil."

Mr. SILVER. I think the answer is a very e:isy one. The thought is that he is speculating or living it up.

The CHAIRMAN. Yes.

Mr. SILVER. The actual records, as gathered by the (ensus, indicate that on $78,000,000,000 of property there are only $12,000,000,000 of debts and mortgages, $3,000,000,000 of which, approximately, has been added during 1921 and 1922. So the farmer must be very economical and a great husbander of his resources; in fact, the most economical of any of all these groups, for no other group can claim so small an obligation against its capital.

The CHAIRMAN. Of course, you recognize the fact, Mr. Silver, that money used in production comes back into common use; money used in consumption destroys itself.

Mr. SILVER. And the farmer has been using his money in production all the time. He has had to produce every year. That is the complaint to-day, that he has not had a margin sufficient to make his life comparable with the life of the people who handle his wares. For instance, a man living in a town who deals with the farmer's commodities will in the evening buy a dinner that will cost as much as the farmer will get for his week's work. That is a bad arrangement. The farmer is unhappy because he has not a reasonable margin of money that can be expended for comforts.

The CHAIRMAN. That being the case, we are all agreed that money lent to the farmer for productive purposes reproduces itself. That is a perfectly legitimate line of credit.

Mr. SILVER. Yes, sir.

The CHAIRMAN. Why shouldn't we specify that it is to be used in the production?

Mr. SILVER. Then you defeat the whole production purpose if you do not market it right. In other words, for three years we have been producing economically, but we have been selling for less than the cost of production. That does not help the farmer or the balance of the country. He has exhausted or is exhausting his substance. The result is that there are tens of thousands of cases where the farmer is in actual distress. There are possibly more bankrupt farmers in this country than there are bankrupt men in any other phase of activity. And what is the reason? Bad marketing. The reason is not that the farmer did not produce. He did produce. The reason is that he has sold for less than the cost of production.

Mr. LUCE. Don't you take into consideration the fact that there may have been too much production?

Mr. SILVER. Have we had too much?
Mr. LUCE. Yes.

Mr. STEVENSON. That brings another proposition before us which now comes up. You say it is due to bad marketing. Another group of gentlemen tell us it is not due to bad marketing, but that it is due to the destruction of the market—the inability of the market to buy. Now, is the trouble bad marketing or is it failure of the market? Here you have a head-on collision. These groups are on the same track going in different directions, The Norbeck hill, for example, proposes a billion of credit to European countries for the purpose of taking care of the farm products. Those people contend that the condition about which you complain is not due to bad marketing but to the failure of the market itself.

Mr. SILVER. Let me go into that for a moment. The American farmer is the most economical producer of all the producers in this country. He is in competition, not with horse power, gasoline power, electric power, and so on, but with the man with the hoe. The American farmer sells his surplus of crops produced in this climate in Europe in the main. The Liverpool market, with its prices on wheat and corn, reflects what? It reflects the buying power of the peasant and the laborer in Europe. There are rich people there, of course, but it is based on what the peasant and the laborer can buy and the price which he can afford to pay.

The CHAIRMAN. I understood you to say that our farmers are not in competition. Isn't it a fact that the farmers are in competition with each other? What I mean by that is that we have two classes of farming industry in this country: We have the big production in this country where organized industry is manifested in farming. In the East and the South we have the small farmer who with his family works tlie farm. We have that kind of conpetition. In a situation of the kind we have before is now, with proposed low prices, aren't those big farm production men in competition with the small farmer, to his detriment? In other words, if the big areas produce large quantities of products in excess of the ability to market them, it affects the little farmer and keeps him from exurning his living. In that sense aren't the farmers in competition with each other; that is, the big producer is in competition with the small farmer, as Mr. Stevenson and Mr. Luce know them m the smaller communities?

Mr. SILVER. The farmers in the main part of the United States, the part that produces food and raw material for clothing, are best off from the viewpoint of maintaining the family unit. The ideal situation is to maintain the family unit until such time as the young people are old enough to 20 a way without being subjected at too tender an age to the risks and dangers of fight. ing their battle in the world. That being the case, our land in the main is supplied upon the family-unit basis--some large and some small. Some individual farmers, it is true, may produce cheaper than others, but all of them are bound by the selling price that is reflected by the sale of the exportable surplus to the peasant and the laborer of Europe. In other worils, neither the big farmer nor the little farmer can oversell his market. There may be some economies practiced by one and not by the other, but that is because some people are naturally more clever than others.

The CHAIRMAN. There is this thought also: In these big production areas one farmer raises wheat and another cattle, and they buy what they need, whereas the farmer in the East diversities, Isn't it, then, a question of the diversification? Isn't that the whole problem before us?

Mr. SILVEP. If I can grow cotton so that I can take care of all the charges in connection with it and have a greater net than if I grow wheat or corn. I had better grow cotton. If my soil enables me to grow one thing better than another, I had better make the change. As a general thing. I believe in diversification, but I do not want to go to the extent of saying that the cotton farmer should grow wheat or hogs or corn and the corn farmer should grow cotton or wool, possibly.

The CHAIRMAN. The point I am getting at is this: We are creating here additional agencies without regard to the geographical use of those agencies; and in making those facilities available to increase production in these sectons of the country where the farmer is conducting his industry with improved machinery and large acreage, and where diversification does not exist, are we not creating a situation which affects the small farmer to a great extent and perhaps inflicts an injury instead of bringing a benefit to a great number of people employed in the farming industry?

Mr. Silver. How can you work an injury by furnishing more money to the farmer so that he may equip his farm in a better way and take drudgery out of his home?

The CHAIRMAN. But overproduction always lowers prices, and that affects the little man, who depends on his own efforts and on his own labor to provide a livelihood and support for his family. The same rule would apply there as applies to the big industry swallowing the small industry.

Mr. SILVER. Overproduction in that sense would mean that we produce more crops than we could consume.

Mr. LUCE. Ourselves?
Mr. SILVER. Yes.

The CHAIRMAN. Isn't that one of the conditions that existed immediately after the war? We had some five or seven billion dollars' worth of goods, as I remember your stating it to the committee, that we wanted to ship abroad. We had a great surplus. If our people were to produce now to the fullest extent, we would have overproduction in almost every line.

Mr. SILVER. That sounds all right, but the facts of the case do not bear it out. The point is that we are not getting the price for it. All that we have produced is being consumed, but we are not getting the prices that we are entitled to. It is being consumed on a basis that is out of line and at a price that does not enable us to live as we should. This is because of the lack of a proper instrumentality. This condition is absorbing our whole capital resources, hecause we are producing and then selling for less than cost. That is our situation.

Mr. STEVENSON. Isn't that materially affected by other conditions, so far as the grain situation is concerned?

Mr. SILVER. The cost of commissions, the cost of transportation-in fact, all those things enter into what we call the high cost figures. They should be removed, so that we could produce more economically, which would mean a fair deal for the consumer and a better return for the farmer.

Going back to your question of a moment ago, we feel that we must have an extension of credit in connection with the people abroad in whatever form is sound and right. These people will become productive and thereby develop a consumptive market for the surplus that we have. The farmer, in fact, has only one market after he leaves the domestic market. We have only one customer in this world. That customer is Europe. In that connection I want to tell you a story. It will take but a minute or two.

In 1920 things went bad. In 1921 we had, for the first time in the history of the country, an overproduction of rice. We had an exportable surplus; and the question was, What are we going to do with it? We appealed to Secretary Hoover. He said, “What can we do with it?” I said, " If there is anything that we can handle and must handle, unless the farmers are wrong about this cooperative business, it is rice. We must do something with this exportable surplus of rice, for we have 60,000 tons of rice more than we can ordinarily consume." He called in his people and said, “Find a buyer; we must have a buyer for this rice.” It was the one staple in this country that was cooperatively controlled. They sold that rice. To whom do you think they sold it? To some one in China. They sold it—why? I will go back for a moment and tell you. Several years ago, in talking to a manufacturer in this country, I called attention to the fact that the farmer is on a man-power basis, and not on a horse-power basis. I said, “Won't you tell me what that would mean in connection with your pay roll? Suppose that your men were doing these things that they are doing by hand instead of by the use of applied mechanics."

He took more than year, and then he came back and said to me, Cons: dering my 10,200 men, if they did this work by hand, it would require over 400,000 1 em.” That is fine so far as it goes," I said ; “ but it does not go as far as I want it to go. Can you interpret it in terms of dollars and cents? After five or six months more he came back with splendid charts and graphs and a great deal of information that showed that using 10 men as one horsepower those 10,200 men on his pay roll, based on a low price, figured at around 2 cents a day, would run into a figure of almost $4 a day; in other words, that the machines useil were in the neighborhood of two hundred times cheaper than man power. When our rice men used binders and other mach nery they produced in competition with coolie labor in China, but despite higher prices in this country generally prevaling, they produced at a rate low enough to enable them to sell this rice in China. So I claim that the farmer is the most economical producer in the country. And I again call attention to the fact that we have at all times the market that the peasant and the laborer in Europe make for us. That shows that we are producing fairly; that we are producing efficiently; that we are producing abundantly. We have a great marketing problem before us in order that we may get a fair share of what we are entitled to in the way of a return.

The CHAIRMAX. I not ce, in that connection the wholesale price table prepared by the National Bank of Commerce in New York. They keep close tab on the wholesale prices. I notice by comparison with 1913 that No. 1 northern spring wheat at Chicago is quote at 87 cents. That was in 1913. At the present time it is quoteil at $1.213. That is February, 1923. Wool, clean basis. Boston. is quoted for 1913 at 58 cents, whereas the quotation for 1923 is $1.42. Wool. Ohio, one-quarter blood, is quoted at 40 cents, 1913, while at the present time it is quoted at 88 cents. I notice up here in the cattle list that in 1913 the price for fair to choice native steers, Chicago, was $8.25 ; in 1923, $9.30.

Hides in 1913 were 19 cents, and are now 20 cents.
Hogs in 1913 were quoted at $8.30; in 1923, $8.05.

Of course, I have gone back to the pre-war price level. That shows an improvement in prices as compared with 1913 on the products which the farmer has for sale.

Mr. SILVER. We are on a higher price level. The things that go into production are higher. They are on a higher level, and that is reflected by the statistics of the Department of Agriculture to the effect that the dollar is worth but 68 cents as against its full value in former times. The dollar of labor, as

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I understand it, is rated at $1.30, while the financial or invested dollar is worth but 75 or 80 cents.

Mr. STEVENSON. Let us take up another provision in this bill. There is a provision for $120,000 000 of capital. Then there is a provis on that the banks may sell ten times that amount. That would be $1,200,000,000.

Mr. SILVER. Yes.

Mr. STEVENSON. These debentures are limited to three years and necessarily will be put out and retired. As there is only a limited amount of paper, there will be a constant stream of it issued, paid and retired. The greater portion of the paper will not run over nine months. In many cases you are not allowed to use paper running more than nine months, except in such cases where it is secured by live stock being bred. As I say, there will be a constant stream of it that will be issued, paid, and retired.

Mr. SILVER. That is bound to be the case on any basis.

Mr. STEVENSON. What do you think about the inflation that is going to occur because of this constant selling and turning over at least every three years of $1,000,000 000 of that kind of paper?

Mr. SILVER. You are turning it over now. It is being turned over in another way or in another form. You know that we are not starting up a new business; we are just financing an old business.

Mr. STEVENSON. Well, in a way you are setting up a new business. You are setting up a concern to discount a certain class of paper.

Mr. SILVER. But only based on a going concern that has already developed its capacity, approximately.

Mr. STEVENSON. But with power to sell three-year bonds to the extent of one billion dollars, in round figures.

Mr. SILVER. Yes.
Mr. STEVENSON. And to do that from time to time.
Mr. SILVER. Yes.

Mr. STEVENSON. What effect is it going to have? You know what a time we had selling United States bonds, and what inflation that brought about.

Mr. SILVER. There will be only one difference, Mr. Stevenson. When we sell securities under the present situation, as to some banks, even a friend of the bank may stand around and charge a commission for doing it. Under this system we will have a proper way of doing it. The credit must be secured if agriculture is to go on. Our referendum of 1920 shows clearly that the farmers got the credit, but they had to pay about 6 to 10 per cent for money, and from 2 to 10 per cent commission on top of that. That was an awful thing.

Mr. STEVENSON. You spoke of a cooperative association being necessary, and seem to think that that was the primary feature in the financing. Is there or is there not danger when you concentrate pretty much of everything in one line in the hands of one concern? You know, of course, that the fellows who have control and the fellows who lend money have a string to everything. Is there not danger of there being manipulation in the marketing of that product? Is it not much more easily manipulated ?

Mr. SILVER. We are trying to get away from manipulation, Mr. Stevenson. We are trying to standardize the class of paper. It is just like the Govern. ment standardized bond. We want them so that they will be accepted and known and so that we will have an instrumentality that is not in the brokerage business. We want an arrangement so that we can enter the market and buy money for what it is worth without having to go through these hands to which so much sticks.

Mr. STEVENSON. I am afraid you did not get the drift of my question. I will try to illustrate the point I have in my mind. The Southern Cotton Growers' Association had about 9,000,000 bales of cotton. About 6,000,000, in round figures, had practically been sold. There were probably one and one-half million bales sold through cooperation. From the 1st of October until the 1st of January, fully 50 per cent or 60 per cent of the cotton was all marketed. Three million bales, in round figures, went into the hands of the cooperators. Those cooperators, of course, are holding it to bring about orderly marketing. Until the fellow who is rushing it on, who is not in the cooperative association, gets through, it is folly for them to throw the crop on the market. It is entirely destructive of the end in view.

Mr. SILVER. Yes.

Mr. STEVENSON. Because those 9,000,000 bales have to last the country a year. Sixty per cent was sold in three months.

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