Our Economic Plight
["A radio discussion over station WOL, of our
economic plight and the cause thereof, in which discussion Prof.
Irving Fisher participated. The honor of having the economic wisdom of
this gentleman incor- porated in the Congressional Record goes to Mr.
Jerry Voorhis, Representative from California. The reader we believe,
will enjoy the following excerpts." Editor, Land and Freedom,
MR. VOORHIS. This particular broadcast took place Tuesday, March 7,
1939, the guest speakers being Senator George W. Norris, of Nebraska,
and Prof. Irving Fisher, professor emeritus of economics at Yale
University, both of whom are depended upon in a great degree to guide
our great Nation in the solving of its economic and social
MR. BINDERUP. ... I introduce Prof. Irving Fisher, professor emeritus
of economics at Yale University, from whose words and pen we have
gleaned the plan for constitutional money, Government monetary
control, and in whose philosophy the Nation sees today the only hope
for continued democracy. ...
PROFESSOR FISHER. Years of study have convinced me that the
depression has been primarily a monetary matter. The simple failure to
have a sound and stable monetary system has been the most fundamental
reason for business and bank failures, foreclosures, bankruptcies, and
unemployment in a word, for the depression. It was the depression, the
pressure of starving and disillusioned men and women, which mainly
caused and still causes the great world upheavals economic, political,
social, and even religious. ...
Money has become a prime necessity in our civilization. Without it,
goods cannot be sold and will not be produced. There may be crying
need for the necessities of life; there may be all the iron, coal,
lumber, and other raw materials used for manufacturing; there may be
millions of able-bodied men anxious to work, yet, if there is no money
there is no production; there is unemployment and starvation. ...
If the banks loan freely so as to generate money, we have a boom. If
there are few borrowers or if the banks do not wish to lend we have a
Fluctuations in the volume of our active money do great harm. Our
check-book money shrank $8,000,000,000 between 1929 and 1933, causing
the great depression. That eight billions was more than a third of our
money more than a third of the Nation's purchasing power. How can we
expect to buy the same amount of goods with two-thirds of our money?
The restoration of a portion of this destroyed check-book money by
Government borrowing from the banks made our partial recovery. A
second destruction of check-book money in 1937 caused the recent
recession while a second restoration is making a second partial
We should never have permitted the destruction of the vast sum of
check-book money which was destroyed in 1929 to 1933. We should not
have permitted the destruction of check-book money which caused the
recent recession. These fluctuations of check-book money could not
occur if there was 100 per cent real pocket-book money in the banks in
our checking accounts if the banks were not permitted to create this
imaginary money bank credit. That 100 per cent reserve was the
original banking system. Banks did not create credit. They received
for deposit actual cash and they loaned actual cash, but they loaned
only the cash which was deposited in time deposits, and which were
deposited for the specific purpose of being loaned by the bank. There
were no low-reserve checking accounts in those days. All business was
transacted with actual cash. Deposits of cash which the depositor
expected to use in his business remained in the bank in cash at the
disposal of the depositor. ...
The banks now, as a system, hold cash and Government bonds equal to
the total balances in the Nation's checking accounts what we call
demand deposits. If all these bonds were made instantly convertible
into cash at the demand of the banks, the banks would now have, as a
system, all their checking account balances in cash or its equivalent.
A very simple law would preserve this desirable situation. Thereafter
it would only be necessary for the Government to issue any additional
money needed to promote full recovery. This would be in cash, which
the Government would deposit in the banks and spend into circulation.
If this is done, it is my belief that we shall never again see another
depression like the 10-year depression which we have just had, and if
this had been done 10 years ago we would never have had this
depression at all. Senator Norris, if you will get such legislation
enacted in the Senate and your fellow Congressmen at the other end of
the Capitol will do their part, you will have accomplished, in my
opinion, more for the good of your countrymen than has been
accomplished by legislation for a generation. I take this opportunity
to express my gratification that you are now adding this problem to
the many which you have handled so successfully already.
Comment? We're bewildered. It is all so simple, as the Professor
says, but in the absence of anything that remotely resembles facts, in
this day of trial, we are speechless.