오랜만에 보는 좋은 청원이다.
나는 <대한민국, 이렇게 망한다>에서 망국의 한 요인으로 민주제, 구체적으로 국회의원을 들었다. 그래서 현재의 대의제 대신에 무작위로 뽑은 500여 명의 국민이 국회의 역할을 하는 로또 민주제를 주장한 바 있다.
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오세훈
<야릇한 지지율>
문재인 대통령 지지도가 50%를 회복했다고 합니다. 우리들이 현장에서 체감하는 민심과는 크게 다릅니다.
가만 생각하니 ‘퍼주기 복지’ 탓 아닐까 싶습니다. 즉, 퍼주기 복지를 위해 ‘돈’을 부담하는 사람보다, 공짜 현금을 받는 ‘수혜대상’이 더 많은 탓은 아닐까요? 양육수당, 보육수당, 청년수당, 기초연금, 고교무상교육…표를 돈으로 사는 ‘공짜의 중독’이 갈수록 깊어집니다. 그렇다면 그 많은 복지비용은 누가 부담하는 것일까요?
2017년 기준 총급여 상위 10% 고소득자의 소득 및 납부세액 비중이 전체 근로소득의 32.1%, 근로소득세 납부액의 75.0%를 차지합니다. 반면 근로자 1800만 명 가운데 41%인 740만 명이 각종 공제·감면을 받아 근로소득세를 한 푼도 내지 않습니다. ‘국민 개세주의’라는 조세 원칙은 사라졌습니다. 세 부담이 지나치게 한쪽으로만 쏠리고 있습니다.
정나라 때 재상 자산(子産)이 어딘가를 가다가 어떤 백성이 개울을 건너고 있다며 수레를 멈췄습니다. 자산은 그 백성을 수레에 태워 건널 수 있도록 했습니다. 그런데 맹자는 그런 자산을 도리어 비판했습니다. 나라 안의 수레를 죄다 동원한다고 해도, 모두를 태워서 건너게 해줄 수는 없습니다. 재상이라면 재상의 할 일을 해야 한다는 것입니다.
여기에서 나온 말이 ‘매인열지(每人悅之)’입니다. ‘모든 사람을 기쁘게 해준다.’는 소리입니다. 돈으로 표를 사고, 지지율을 지탱하는 것은 오늘의 인기를 위해 내일을 죽이는 행위입니다. 참된 국가지도자는, 곳간을 풀어 인기를 구걸하는 사람이 아니라, 오늘을 개혁하고, 미래를 준비하는 사람이어야 합니다.
---> <대한민국, 이렇게 망한다>에서 내가 주장한 첫번째 망국의 원인은 복지국가정책이다.
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태영호 전 공사:저는 김정은 정권이 20년 이상 지속되지 못할 것이라고 완전히 확신합니다. 10년으로 예상하기에는 짧고, 20년 내 이 정권은 붕괴할 것입니다.
| 지유의메아리 2019-05-29 오전 8:24 | ||||||
| 태영호 전 북조선인민공화국 영국주재 공사님 지금 잠고대 하십니까 아님 자다가 남의봉창 뜯고 계십니까 20년이라뇨 20년이면 강산이두번 변합니다 전 북괘 공사님의알고계시는 정보로는 북괘정권이 망하지 않는다는 말씀이네요 20년이라뇨 차라리 북괘는 영원할것이라는 이야기를 하세요 그렇게해야 북괘의 암살조로부터 죽임을 당하지는 않겠지요 20년이면 인간도 나라도 세계도 변하고 변하지 않는게 없읍니다 북괘정권이 20년은 간다구요 차라리 영원할거라고 이야기하세요 님의생각과 글 잘보았읍니다. (조갑제닷컴) ---->중국이 계속해서 북한을 지원하는 한, 북한은 쉽게 붕괴되지 않는다. 그것이 객관적인 사실이다. -----------------------------------------------------------------------------------
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천안문 사태로 죽은 사람들을 부정하면, 어떤 거짓말도 가능하다.
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이라크인은 이라크로 돌아갈 수 없고, 터기인도 마찬가지고, 러시아 여성은 망명중이고, 나는 중국에서 추방되었다. 모두 나와 같은 사람들이다.
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행복은 사람들이 말하는 느낌에 의해 정의되지 않는다. 그보다 그들이 하는 행동에 의해 정의된다. --- 탈레브
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빅터 프랑클: 나는 2차대전 이후로 집단적인 죄의식 개념에 반대하는 말을 공개적으로 해왔다. 하지만 집단적인 죄 의식의 허구를 깨닫게 하기는 쉬운 일이 아니었다.
한번은 미국 여자가 나에게 이렇게 말했다.
"당신은 어떻게 아돌프 히틀러의 언어로 책을 쓰고 있나요?"
나는 이렇게 대답했다.
"당신은 어떻게 아직도 칼을 사용하고 있죠? 너무나 많은 살인자들이 칼로 사람들을 찌르고 살해했는데?"
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국제 자위의 날(?) 정말 이런 날이 있나?
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변희재 대표 "탄핵주범 황교안 아니다"
김평우 변호사는 나무는 보았지만 숲을 보지 못한 경우이다. 너무 법에 몰두한 나머지, 당시 사회, 정치적 상황을 고려하지 않고 있다.
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웰스 스플레이닝, 재미있는 조어이다. 갑부들에게 그들의 돈을 어떻게 써야 하는지 설명해주는 한심한 인간들. 그들의 돈이지 당신 돈이 아니다. 혐오스럽다.
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자신의 확증 편향과 싸우기 위해 다윈이 습관들인 버릇은: 자신의 생각과 반대되는 의견을 메모하기
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빅터 프랑클: 나는 2차대전 이후로 집단적인 죄의식 개념에 반대하는 말을 공개적으로 해왔다. 하지만 집단적인 죄 의식의 허구를 깨닫게 하기는 쉬운 일이 아니었다.
한번은 미국 여자가 나에게 이렇게 말했다.
"당신은 어떻게 아돌프 히틀러의 언어로 책을 쓰고 있나요?"
나는 이렇게 대답했다.
"당신은 어떻게 아직도 칼을 사용하고 있죠? 너무나 많은 살인자들이 칼로 사람들을 찌르고 살해했는데?"
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안정된 가격 수준의 유혹에 빠져
대공황의 도래를 인식하지 못한 1920년대
1920년대에 대부분의 경제학자가 인플레 문제를 인식하지 못했던 원인 중의 하나는, 금융 정책의 목적이 안정된 가격 수준의 광범위한 채용이었기 때문이다.
그로 인해 1920년대에 일반적인 가격 수준은 안정되었고, 경제학자들은 인플레 우려가 없다고 믿고 있다가 대공황을 맞은 것이다.
1920년대에 도매가와 소비자가는 안정되어 있었다. 하지만 부동산, 주식, 임금, 임대료 등을 모두 포괄하는 스나이더 인덱스의 일반 가격 수준은 13%나 상승했다.
역사상 최대의 가격 수준 안정 실험의 최대 성과는 최대의 불황이었다.
케인즈를 비롯한 영국의 경제학자들은 미국의 연준이 성공적으로 가격 수준을 안정화 하고 있다고 믿었다.
일찍이 1911년부터 어빙 피셔 교수는 미국에서 “안정된 화폐” 운동의 지도자로 자신의 경력을 시작했다.
가격이 하락하고 가격 안정 추종자들이 인플레를 요구할 때, 가격 안정 조치는 큰 부작용을 낳는다.
1929년 4월 포스터와 캐칭스는 신용의 규제는 가격 수준을 내리고 경기를 후퇴시킬 거라고 경고했다. 당시 통화 팽창으로 인한 경기 호황을 비판하는 사람들은 비애국적이라고 비난 받았다.
당시 연준의 책임자들은 안정된 가격 수준을 통화 통제의 목표로 삼는, 당대 유행하던 경제 이론에 좌우되었다.
The Lure of a Stable Price Level
Murray N. Rothbard
One of the reasons that most economists of the 1920s did not recognize the existence of an inflationary problem was the widespread adoption of a stable price level as the goal and criterion for monetary policy. The extent to which the Federal Reserve authorities were guided by a desire to keep the price level stable has been a matter of considerable controversy. Far less controversial is the fact that more and more economists came to consider a stable price level as the major goal of monetary policy. The fact that general prices were more or less stable during the 1920s told most economists that there was no inflationary threat, and therefore the events of the Great Depression caught them completely unaware.
Actually, bank-credit expansion creates its mischievous effects by distorting price relations and by raising and altering prices compared to what they would have been without the expansion. Statistically, therefore, we can only identify the increase in money supply, a simple fact. We cannot prove inflation by pointing to price increases. We can only approximate explanations of complex price movements by engaging in a comprehensive economic history of an era — a task which is beyond the scope of this study. Suffice it to say here that the stability of wholesale prices in the 1920s was the result of monetary inflation offset by increased productivity, which lowered costs of production and increased the supply of goods.
But this "offset" was only statistical. It did not eliminate the boom-bust cycle; it only obscured it. The economists who emphasized the importance of a stable price level were thus especially deceived, for they should have concentrated on what was happening to the supply of money. Consequently, the economists who raised an alarm over inflation in the 1920s were largely the qualitativists. They were written off as hopelessly old-fashioned by the "newer" economists who realized the overriding importance of the quantitative in monetary affairs. The trouble did not lie with particular credit on particular markets (such as stock or real estate); the boom in the stock and real-estate markets reflected Mises's trade cycle: a disproportionate boom in the prices of titles to capital goods, caused by the increase in money supply attendant upon bank credit expansion.1
The stability of the price level in the 1920s is demonstrated by the Bureau of Labor Statistics Index of Wholesale Prices, which fell to 93.4 (100 = 1926) in June 1921, rose slightly to a peak of 104.5 in November 1925, and then fell back to 95.2 by June 1929. The price level, in short, rose slightly until 1925 and fell slightly thereafter. Consumer price indices also behaved in a similar manner.2 On the other hand, the Snyder Index of the General Price Level, which includes all types of prices (real estate, stocks, rents, and wage rates, as well as wholesale prices) rose considerably during the period, from 158 in 1922 (1913 = 100) to 179 in 1929, a rise of 13 percent. Stability was therefore achieved only in consumer and wholesale prices, but these were and still are the fields considered especially important by most economic writers.
Within the overall aggregate of wholesale prices, foods and farm products rose over the period while metals, fuel, chemicals, and home furnishings fell considerably. That the boom was largely felt in the capital-goods industries can be seen by (a) the quadrupling of stock prices over the period, and by (b) the fact that durable goods and iron and steel production each increased by about 160 percent, while the production of non-durable goods (largely consumer goods) increased by only 60 percent.
In fact, production of such consumer items as manufactured foods and textile products increased by only 48 percent and 36 percent respectively, from 1921 to 1929. Another illustration of Mises's theory was that wages were bid up far more in the capital-goods industries. Overbidding of wage rates and other costs is a distinctive feature of Mises's analysis of capital-goods industries in the boom. Average hourly earnings, according to the Conference Board Index, rose in selected manufacturing industries from $.52 in July 1921 to $.59 in 1929, a 12 percent increase. Among this group, wage rates in consumer-goods industries such as boots and shoes remained constant; they rose 6 percent in furniture, less than 3 percent in meat packing, and 8 percent in hardware manufacturing. On the other hand, in such capital-goods industries as machines and machine tools, wage rates rose by 12 percent, and by 19 percent in lumber, 22 percent in chemicals, and 25 percent in iron and steel.
Federal Reserve credit expansion, then, whether so intended or not, managed to keep the price level stable in the face of an increased productivity that would, in a free and unhampered market, have led to falling prices and a spread of increased living standards to everyone in the population. The inflation distorted the production structure and led to the ensuing depression-adjustment period. It also prevented the whole populace from enjoying the fruits of progress in lower prices and insured that only those enjoying higher monetary wages and incomes could benefit from the increased productivity.
There is much evidence for the charge of Phillips, McManus, and Nelson that "the end-result of what was probably the greatest price-level stabilization experiment in history proved to be, simply, the greatest depression."3 Benjamin Strong was apparently converted to a stable-price-level philosophy during 1922. On January 11, 1925, Strong privately wrote,
that it was my belief, and I thought it was shared by all others in the Federal Reserve System, that our whole policy in the future, as in the past, would be directed toward the stability of prices so far as it was possible for us to influence prices.4
When asked, in the Stabilization Hearings of 1927, whether the Federal Reserve Board could "stabilize the price level to a greater extent" than in the past, by open-market operations and other control devices, Governor Strong answered,
I personally think that the administration of the Federal Reserve System since the reaction of 1921 has been just as nearly directed as reasonable human wisdom could direct it toward that very object.5
It appears that Governor Strong had a major hand, in early 1928, in drafting the bill by Representative James G. Strong of Kansas (no relation) to compel the Federal Reserve System to promote a stable price level.6 Governor Strong was ill by this time and out of control of the system, but he wrote the final draft of the bill along with Representative Strong. In the company of the congressman and professor John R. Commons, one of the leading theoreticians of a stable price level, Strong discussed the bill with members of the Federal Reserve Board. When the Board disapproved, Strong felt bound, in his public statements, to go along with them.7
We must further note that Carl Snyder, a loyal and almost worshipful follower of Governor Strong, and head of the statistical department of the Federal Reserve Bank of New York, was a leading advocate of monetary and credit control by the Federal Reserve to stabilize the price level.8
Certainly, the leading British economists of the day firmly believed that the Federal Reserve was deliberately and successfully stabilizing the price level. John Maynard Keynes hailed "the successful management of the dollar by the Federal Reserve Board from 1923 to 1928" as a "triumph" for currency management. D.H. Robertson concluded in 1929 that "a monetary policy consciously aimed at keeping the general price level approximately stable … has apparently been followed with some success by the Federal Reserve Board in the United States since 1922."9 Whereas Keynes continued to hail the Reserve's policy a few years after the depression began, Robertson became critical,
Looking back … the great American "stabilization" of 1922–1929 was really a vast attempt to destabilize the value of money in terms of human effort by means of a colossal program of investment … which succeeded for a surprisingly long period, but which no human ingenuity could have managed to direct indefinitely on sound and balanced lines.10
The siren song of a stable price level had lured leading politicians, to say nothing of economists, as early as 1911. It was then that Professor Irving Fisher launched his career as head of the "stable money" movement in the United States. He quickly gained the adherence of leading statesmen and economists to a plan for an international commission to study the money and price problem.
Supporters included President William Howard Taft, Secretary of War Henry Stimson, Secretary of the Treasury Franklin MacVeagh, Governor Woodrow Wilson, Gifford Pinchot, seven senators, and economists Alfred Marshall, Francis Edgeworth, and John Maynard Keynes in England. President Taft sent a special message to Congress in February 1912, urging an appropriation for such an international conference. The message was written by Fisher, in collaboration with Assistant Secretary of State Huntington Wilson, a convert to stable money. The Senate passed the bill, but it died in the House. Woodrow Wilson expressed interest in the plan but dropped the idea in the press of other matters.
In the spring of 1918, a Committee on the Purchasing Power of Money of the American Economic Association endorsed the principle of stabilization. Though encountering banker opposition to his stable-money doctrine, led notably by A. Barton Hepburn of the Chase National Bank, Fisher began organizing the Stable Money League at the end of 1920, and established the League at the end of May 1921 — at the beginning of our inflationary era. Newton D. Baker, secretary of war under Wilson, and Professor James Harvey Rogers of Cornell were two of the early organizers.
Other prominent politicians and economists who played leading roles in the Stable Money League were Professor Jeremiah W. Jenks, its first president; Henry A. Wallace, editor of Wallace's Farmer, and later secretary of agriculture; John G. Winant, later governor of New Hampshire; Professor John R. Commons, its second president; George Eastman of the Eastman-Kodak family; Lyman J. Gage, formerly secretary of the Treasury; Samuel Gompers, president of the American Federation of Labor; Senator Carter Glass of Virginia; Thomas R. Marshall, vice president of the United States under Wilson; Representative Oscar W. Underwood; Malcolm C. Rorty; and economists Arthur Twining Hadley, Leonard P. Ayres, William T. Foster, David Friday, Edwin W. Kemmerer, Wesley C. Mitchell, Warren M. Persons, H. Parker Willis, Allyn A. Young, and Carl Snyder.
The ideal of a stable price level is relatively innocuous during a price rise when it can aid sound-money advocates in trying to check the boom; but it is highly mischievous when prices are tending to sag, and the stabilizationists call for inflation. And yet, stabilization is always a more popular rallying cry when prices are falling. The Stable Money League was founded in 1920–1921, when prices were falling during a depression. Soon, prices began to rise, and some conservatives began to see in the stable money movement a useful check against extreme inflationists. As a result, the league changed its name to the National Monetary Association in 1923, and its officers continued as before, with Professor Commons as president.
By 1925, the price level had reached its peak and begun to sag, and consequently the conservatives abandoned their support of the organization, which again changed its name to the Stable Money Association. Successive presidents of the new association were H. Parker Willis, John E. Rovensky, executive vice president of the Bank of America, Professor Kemmerer, and "Uncle" Frederic W. Delano. Other eminent leaders in the Stable Money Association were Professor Willford I. King; President Nicholas Murray Butler of Columbia University; John W. Davis, Democratic candidate for president in 1924; Charles G. Dawes, director of the Bureau of the Budget under Harding, and vice president under Coolidge; William Green, president of the American Federation of Labor; Charles Evans Hughes, secretary of state until 1925; Otto H. Kahn, investment banker; Frank O. Lowden, former Republican governor of Illinois; Elihu Root, former secretary of state and senator; James H. Rand Jr.; Norman Thomas, of the Socialist Party; Paul M. Warburg; and Owen D. Young. Enlisting from abroad came Charles Rist of the Bank of France; Eduard Benes of Czechoslovakia; Max Lazard of France; Emile Moreau of the Bank of France; Louis Rothschild of Austria; and Sir Arthur Balfour, Sir Henry Strakosch, Lord Melchett, and Sir Josiah Stamp of Great Britain.
Serving as honorary vice presidents of the association were the presidents of the following organizations: the American Association for Labor Legislation, American Bar Association, American Farm Bureau Federation, American Farm Economic Association, American Statistical Association, Brotherhood of Railroad Trainmen, National Association of Credit Men, National Consumers' League, National Education Association, American Council on Education, United Mine Workers of America, the National Grange, the Chicago Association of Commerce, the Merchants' Association of New York, and Bankers' Associations in 43 states and the District of Columbia.
Executive director and operating head of the association with such formidable backing was Norman Lombard, brought in by Fisher in 1926. The association spread its gospel far and wide. It was helped by the publicity given to Thomas Edison and Henry Ford's proposal for a "commodity dollar" in 1922 and 1923. Other prominent stabilizationists in this period were professors George F. Warren and Frank Pearson of Cornell, Royal Meeker, Hudson B. Hastings, Alvin Hansen, and Lionel D. Edie. In Europe, in addition to the above mentioned, advocates of stable money included: Professor Arthur C. Pigou, Ralph G. Hawtrey, J.R. Bellerby, R.A. Lehfeldt, G.M. Lewis, Sir Arthur Salter, Knut Wicksell, Gustav Cassel, Arthur Kitson, Sir Frederick Soddy, F.W. Pethick-Lawrence, Reginald McKenna, Sir Basil Blackett, and John Maynard Keynes. Keynes was particularly influential in his propaganda for a "managed currency" and a stabilized price level, as set forth in his Tract on Monetary Reform, published in 1923.
Ralph Hawtrey proved to be one of the evil geniuses of the 1920s. An influential economist in a land where economists have shaped policy far more influentially than in the United States, Hawtrey, director of financial studies at the British Treasury, advocated international credit control by central banks to achieve a stable price level as early as 1913. In 1919, Hawtrey was one of the first to call for the adoption of a gold-exchange standard by European countries, tying it in with international central-bank cooperation. Hawtrey was one of the prime European trumpeters of the prowess of Governor Benjamin Strong.
Writing in 1932, at a time when Robertson had come to realize the evils of stabilization, Hawtrey declared, "The American experiment in stabilization from 1922 to 1928 showed that an early treatment could check a tendency either to inflation or to depression.… The American experiment was a great advance upon the practice of the nineteenth century," when the trade cycle was accepted passively.11 When Governor Strong died, Hawtrey called the event "a disaster for the world."12 Finally, Hawtrey was the main inspiration for the stabilization resolutions of the Genoa Conference of 1922.
It was inevitable that this host of fashionable opinion should be translated into legislative pressure, if not legislative action. Rep. T. Alan Goldsborough of Maryland introduced a bill to "Stabilize the Purchasing Power of Money" in May 1922, essentially Professor Fisher's proposal, fed to Goldsborough by former Vice President Marshall. Witnesses for the bill were Professors Fisher, Rogers, King, and Kemmerer, but the bill was not reported out of committee. In early 1924, Goldsborough tried again, and Representative O.B. Burtness of North Dakota introduced another stabilization bill. Neither was reported out of committee.
The next major effort was a bill by Rep. James G. Strong of Kansas, introduced in January, 1926, under the urging of veteran stabilizationist George H. Shibley, who had been promoting the cause of stable prices since 1896. Rather than the earlier Fisher proposal for a "compensated dollar" to manipulate the price level, the Strong Bill would have compelled the Federal Reserve System to act directly to stabilize the price level. Hearings were held from March 1926 until February 1927. Testifying for the bill were Shibley, Fisher, Lombard, Dr. William T. Foster, Rogers, Bellerby, and Commons. Commons, Rep. Strong, and Governor Strong then rewrote the bill, as indicated above, and hearings were held on the second Strong Bill in the spring of 1928.
The high point of testimony for the second Strong Bill was that of Sweden's Professor Gustav Cassel, whose eminence packed the Congressional hearing room. Cassel had been promoting stabilization since 1903. The advice of this sage was that the government employ neither qualitative nor quantitative measures to check the boom, since these would lower the general price level. In a series of American lectures, Cassel also urged lower Fed reserve ratios, as well as worldwide central-bank cooperation to stabilize the price level.
The Strong Bill met the fate of its predecessors, and never left the committee. But the pressure exerted at the various hearings for these bills, as well as the weight of opinion and the views of Governor Strong, served to push the Federal Reserve authorities into trying to manipulate credit for purposes of price stabilization.
International pressure strengthened the drive for a stable price level. Official action began with the Genoa Conference, in the spring of 1922. This Conference was called by the League of Nations, at the initiative of Premier Lloyd George, who in turn was inspired by the dominant figure of Montagu Norman. The Financial Commission of the Conference adopted a set of resolutions which, as Fisher puts it, "have for years served as the potent armory for the advocates of stable money all over the world."13 The resolutions urged international central-bank collaboration to stabilize the world price level, and also suggested a gold-exchange standard.
On the Financial Commission were such stabilizationist stalwarts as Sir Basil Blackett, Professor Cassel, Dr. Vissering, and Sir Henry Strakosch.14 The League of Nations, indeed, was quickly taken over by the stabilizationists. The Financial Committee of the League was largely inspired and run by Governor Montagu Norman, working through two close associates, Sir Otto Niemeyer and Sir Henry Strakosch. Sir Henry was, as we have indicated, a prominent stabilizationist.15 Furthermore, Norman's chief adviser in international affairs, Sir Charles S. Addis, was also an ardent stablizationist.16
In 1921, a Joint Committee on Economic Crises was formed by the General Labour Conference, the International Labour Office (ILO) of the League of Nations, and the Financial Committee of the League. On this Joint Committee were three leading stabilizationists: Albert Thomas, Henri Fuss, and Major J.R. Bellerby. In 1923, Thomas's report warned that a fall in the price level "almost invariably" causes unemployment. Henri Fuss of the ILO propagandized for stable price levels in the International Labour Review in 1926.
The Joint Committee met in June 1925 to affirm the principles of the Genoa Conference. In the meanwhile, two private international organizations, the International Association for Labour Legislation and the International Association on Unemployment, held a joint International Congress on Social Policy, at Prague, in October 1924. The congress called for the general adoption of the principles of the Genoa Conference, by stabilizing the general price level. The International Association for Social Progress adopted a report at its Vienna meeting in September 1928 prepared by stabilizationist Max Lazard of the investment banking house of Lazard Frères in Paris, calling for price-level stability. The ILO followed suit in June 1929 terming falling prices a cause of unemployment. And, finally, the Economic Consultative Committee of the league endorsed the Genoa principles in the summer of 1928.
Just as Professors Cassel and Commons wanted no credit restraint at all in 1928 and 1929, so Representative Louis T. McFadden, powerful chairman of the House Banking and Currency Committee, exerted a similar though more powerful brand of pressure on the Federal Reserve authorities. On February 7, 1929, the day after the Federal Reserve Board's letter to the Federal Reserve Banks warning about stock-market speculation, Representative McFadden himself warned the House against an adverse business reaction from this move. He pointed out that there had been no rise in the commodity price level, so how could there be any danger of inflation? The Fed, he warned skittishly, should not concern itself with the stock market or security loans, lest it produce a general slump. Tighter money would make capital financing difficult, and, coupled with the resulting loss of confidence, would precipitate a depression.
In fact, McFadden declared that the Fed should be prepared to ease money rates as soon as any fall in prices or employment might appear.17 Other influential voices raised against any credit restriction were those of W.T. Foster and Waddill Catchings, leading stabilizationists and well known for their underconsumptionist theories. Catchings was a prominent investment banker (of Goldman, Sachs and Co.), and iron and steel magnate, and both men were close to the Hoover administration. (As we shall see, their "plan" for curing unemployment was adopted, at one time, by Hoover.)
In April 1929 Foster and Catchings warned that any credit restriction would lower the price level and hurt business. The bull market, they assured the public — along with Fisher, Commons, and the rest — was grounded on a sure foundation of American confidence and growth.18 And the bull speculators, of course, echoed the cry that everyone should "invest in America." Anyone who criticized the boom was considered to be unpatriotic and "selling America short."
Cassel was typical of European opinion in insisting on even greater inflationary moves by the Federal Reserve System. Sir Ralph Hawtrey, visiting at Harvard during 1928–1929, spread the gospel of price-level stabilization to his American audience.19 Influential British Labourite Philip Snowden urged in 1927 that the United States join in a world plan for price stabilization, to prevent a prolonged price decline. The London Statist and the Nation (London) both bemoaned the Federal Reserve "deflation."
Perhaps most extreme was a wildly inflationist article by the respected economist Professor Allyn A. Young, an American then teaching at the University of London. Young, in January 1929, warned about the secular downward price trend, and urged all central banks not to "hoard" gold, to abandon their "high gold reserve-ratio fetish," and to inflate to a fare-thee-well. "Central banks of the world," he declared, "appear to be afraid of prosperity. So long as they are they will exert a retarding influence upon the growth of production."20
In an age of folly, Professor Young's article was perhaps the crowning pièce de résistance — much more censurable than the superficially more glaring errors of such economists as Irving Fisher and Charles A. Dice on the alleged "new era" prosperity of the stock market. Merely to extrapolate present stock market conditions is, after all, not nearly as reprehensible as considering deflation the main threat in the midst of a rampantly inflationary era. But such was the logical conclusion of the stabilizationist position.
We may conclude that the Federal Reserve authorities, in promulgating their inflationary policies, were motivated not only by the desire to help British inflation and to subsidize farmers, but were also guided — or rather misguided — by the fashionable economic theory of a stable price level as the goal of monetary manipulation.21
This article is excerpted from America's Great Depression, part 2, chapter 6, "Theory and Inflation: Economists and the Lure of a Stable Price Level" (1963; 2008).
1. The qualitative aspect of credit is important to the extent that bank loans must be to business, and not to government or to consumers, to put the trade cycle mechanism into motion.
2. The National Industrial Conference Board (NICB) consumer price index rose from 102.3 (1923 = 100) in 1921 to 104.3 in 1926, then fell to 100.1 in 1929; the Bureau of Labor Statistics (BLS) consumer good index fell from 127.7 (1935–1939 = 100) in 1921 to 122.5 in 1929. Historical Statistics of the U.S., 1789–1945 (Washington, D.C.: U.S. Department of Commerce, 1949), pp. 226–36, 344.
3. C.A. Phillips, T.F. McManus, and R.W. Nelson, Banking and the Business Cycle (New York: Macmillan, 1937), pp. 176ff.
4. Lester V. Chandler, Benjamin Strong, Central Banker (Washington, D.C.: Brookings Institution, 1958), p. 312. In this view, Strong was, of course, warmly supported by Montagu Norman. Ibid., p. 315.
5. Also see ibid., pp. 199ff. And Charles Rist recalls that, in his private conversations, "Strong was convinced that he was able to fix the price level, by his interest and credit policy." Charles Rist, "Notice Biographique," Revue d'Èconomie Politique (November–December, 1955): 1029.
6. Strong thus overcame his previous marked skepticism toward any legislative mandate for price stabilization. Before this, he had preferred to leave the matter strictly to Fed discretion. See Chandler, Benjamin Strong, Central Banker, pp. 202ff.
7. See the account in Irving Fisher, ibid., pp. 170–71. Commons wrote of Governor Strong: "I admired him both for his open-minded help to us on the bill and his reservation that he must go along with his associates."
8. See Fisher's eulogy of Snyder, Stabilised Money, pp. 64–67; and Carl Snyder, "The Stabilization of Gold: A Plan," American Economic Review (June, 1923): 276–85; idem, Capitalism the Creator (New York: Macmillan, 1940), pp. 226–28.
9. D.H. Robertson, "The Trade Cycle," Encyclopaedia Britannica, 14th ed. (1929), vol. 22, p. 354.
10. D.H. Robertson, "How Do We Want Gold to Behave?" in The International Gold Problem (London: Humphrey Milford, 1932), p. 45; quoted in Phillips, et al., Banking and the Business Cycle, pp. 186–87.
11. Ralph O. Hawtrey, The Art of Central Banking (London: Longmans, Green, 1932), p. 300.
12. Leading stabilizationist Norman Lombard also hailed Strong's alleged achievement: "By applying the principles expounded in this book … he [Strong] maintained in the United States a fairly stable price level and a consequent condition of widespread economic well-being from 1922 to 1928." Norman Lombard, Monetary Statesmanship (New York: Harpers, 1934), p. 32n. On the influence of stable price ideas on Federal Reserve policy, see also David A. Friedman, "Study of Price Theories Behind Federal Reserve Credit Policy, 1921–29" (unpublished M.A. thesis, Columbia University, 1938).
13. Fisher, Stabilised Money, p. 282. Our account of the growth of the stable money movement rests heavily upon Fisher's work.
14. While Hawtrey was the main inspiration for the resolutions, he criticized them for not going far enough.
15. See Paul Einzig, Montagu Norman (London: Kegan Paul, 1932), pp. 67, 78.
16. Sir Henry Clay, Lord Norman (London: Macmillan, 1957), p. 138.
17. Cited in Joseph Stagg Lawrence, Wall Street and Washington (Princeton, N.J.: Princeton University Press, 1929), pp. 437–43.
18.Commercial and Financial Chronicle (April, 1929): 2204–06. Also see Beckhart, "Federal Reserve Policy and the Money Market," in Beckhart et al., The New York Money Market (New York: Columbia University Press, 1931), vol. 2, pp. 99ff.
19. See Joseph Dorfman, The Economic Mind in American Civilization (New York: Viking Press, 1959), vol. 4, p. 178.
20. Allyn A. Young, "Downward Price Trend Probable, Due to Hoarding of Gold by Central Banks," The Annalist (January 18, 1929): 96–97. Also see, "Our Reserve Bank Policy as Europe Thinks It Sees It," The Annalist (September 2, 1927): 374–75.
21. Seymour Harris, Twenty Years of Federal Reserve Policy (Cambridge, Mass.: Harvard University Press, 1933), vol. 1, 192ff., and Aldrich, The Causes of the Present Depression and Possible Remedies (New York, 1933), pp. 20–21.
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