Chapter 53

The Spending Programme

The spending programme began in December of 1933 and was officially announced on January 4 of 1934. It was one more gigantic dose from the medicine man’s pharmacopoeia. The Administration had begun with the pledge of a reduction of 25% in the expenditures of the Government. The Democratic platform had promised it, and the President promised it in his campaign speeches. The President had apparently been in earnest about it as his Administration began. He had persuaded the Honorable Lewis W.

Chapter 54

The Silver Legislation of 1934

For a long time we have had a group of Senators from silver-producing States who have been alert to take advantage of every opportunity to increase the demand for silver and the price of silver in the interests of the silver mining industry. They constituted a very important element in the silver movement at the time of the Bland-Allison Act of 1878, of the Sherman Silver Bill of 1890, and, of course, in the Free Silver Movement of 1896.

Chapter 55

Governmental Confusion, Governmental Hostility, and Private Enterprise

The impact of all these multitudinous measures—industrial, agricultural, financial, monetary, and other—upon a bewildered industrial and financial community was extraordinarily heavy. We must add the effect of continuing disquieting utterances by the President. The President had castigated the bankers in his inaugural speech. He had made a slurring comparison of British and American bankers in a speech in the summer of 1934.

Chapter 56

Supreme Court Decision on Gold Clauses, February, 1935

To the end of 1934 there had been no resistance of an effective kind to the President’s policies. His domination over the Congress seemed complete. The Supreme Court had no important cases before it which would test his powers. In early 1935 there came a test. Four cases came before the Supreme Court involving the constitutionality of the legislation of June 5, 1933, which abrogated the gold clauses in public and private contracts.

Chapter 57

First Successful Resistance to New Deal—Banking Act of 1935

The Banking Act of 1935 as introduced into the House of Representatives was a bill dangerous in the extreme.

We do not here discuss Title I or Title III of the Act—Title I being concerned primarily with the Federal Deposit Insurance Corporation and providing for the insurance of bank deposits up to $5000, Title III being concerned with a variety of technical amendments to the Banking Act.

Chapter 58

Taxation Under the New Deal—The Redistribution of Wealth

Taxes in 1934 in Upper Brackets Highest in World—Redistribution of Wealth. The New Deal tax policy from the beginning has been more concerned with the redistribution of wealth than with raising revenue.

Chapter 59

The Undistributed Profits Tax of 1936

But the New Deal was not content with striking at the accumulation of capital by well-to-do men, or with forcing the dissipation of the capital already accumulated in great fortunes through estate taxes that could not possibly be paid out of income and that must be paid by the liquidation of capital assets. In 1936 it struck a heavy blow at the accumulation of capital out of corporate profits by proposing a confiscatory tax on profits retained for use in the business.

Chapter 60

Digression on Keynes

I. A Refutation of Keynes’s Attack on the Doctrine that Aggregate Supply Creates Aggregate Demand. The central theoretical issue involved in the problem of postwar economic readjustment, and in the problem of full employment in the postwar period, is the issue between the equilibrium doctrine and the purchasing power doctrine.

Chapter 61

Gold, Excess Reserves, and Money Rates, 1934-1941

Growth of Gold Stock from Four Billions to Twenty-three Billions, 1933-1941. Our gold monetary stock stood at 4 billion dollars (old gold dollars, 23.22 grains of fine gold) at the beginning of 1934. The devaluation by Presidential proclamation which followed immediately after the passage of the Gold Reserve Act of January, 1934, meant an immediate mark-up in dollars of our gold monetary stock of approximately 69%, to nearly 7 billion dollars.

Chapter 62

Gold Remains Standard of Value

France, Switzerland, and the Netherlands Abandon Gold Standard. The story of gold in the period from 1933 down to the time of Munich is a very interesting and dramatic one. By early 1937 the gold standard in its old form had ceased to exist. There remained no important country in the world where paper currencies would be automatically and regularly redeemed either in gold coin or in gold bars. First France and then Switzerland and the Netherlands had abandoned the gold standard.