People seem more optimistic now and talk of inflation dies down. Sheet & Tube lost 13 million in 1932 and Truscon lost 1,600,000. Truscon does not seem to be in very strong shape.
MARCH 17, 1933
The stock market opened on March 16th after being closed for 10 days. Stocks boomed for 2 days and are now settling down. Since the banks reopened people have gained considerable confidence and have become more optimistic. Retail sales in Youngstown have increased 300%. Banks permit check withdrawals but will not permit currency withdrawals. In this way currency is being slowly drawn out of hiding.
Roosevelt and Congress have made a record since March 4th by passing bills to (1.) Reorganize banking system (2.) To balance the budget (3.) To legalize beer and light wines. These are the 3 most important promises made in the Democrat platform. Quick passage was made possible by the emergency closing of the banks.
In 1907 most of our troubles came
after
the currency stringency. It is possible we still face a year or two of liquidation. U.S. Steel announces for 1932 the enormous loss of 39 million.
War clouds are again gathering over Europe and the situation begins to look serious.
MARCH 20, 1933
The stock market settles down and prices are back to where they were before the bank holiday. Also business settles down to “natural.” More fear of inflation. Out of $2 billion new currency that was printed only 6 million has been put into circulation thus far. I haven’t seen any of it. Scrip issued by local industries is being redeemed and no more will be issued. The time limit for returning hoarded gold has expired but it seems that threat of punishment or publicity was mostly a bluff.
MARCH 25, 1933
Reorganization and consolidation of closed banks take place all over country. It is interesting to note that lawyers were named to head large reorganized banks in Cleveland and Detroit.
Business continues at a standstill and the stock market drifts lower. Conditions in Europe are chaotic with continual threat. Hitler is named dictator of Germany and threatens to expel all Jews.
President Roosevelt signs bill permitting sale of beer and light wines—3.2% alcohol.
MARCH 27, 1933
The scarcity of gold and high prices of commodities has created a new interest in gold mining. In the west and in other parts of the country thousands of people are reworking old mines and streams. Most of them average about $2 per day. Likewise the sale of gold ornaments etc. has been spurred by the appeal of the government not to hoard gold.
The return of beer and light wines has caused considerable activity in this line. Already shares of stock are being offered for sale to the public in newly organized companies. Personally I think the whole thing is over-rated and that the excitement will die down in a few months.
MARCH 28, 1933
I have finally concluded that the issue of two billion new currency by Roosevelt will not mean inflation at this time. This is because the usual supply of currency has been cut down by hoarding, freezing of bank assets, etc. The one counterbalances the other and there has been no actual increase in the amount of money in actual circulation. If the government in the near future fails to balance the budget and issues new currency to pay its deficit—then inflation will follow.
We are now feeling the after-effect of the permanent closing of thousands of banks which were not permitted to re-open after the bank holiday. About six billion in assets have become “frozen” in this way. As a result, currency is more restricted than ever. The industrial reports for the 1st quarter of 1933 will be the worst of the depression. This will result in many more business reorganizations.
APRIL 1, 1933
The month just closed established an all-time low record in my law practice. My total cash receipts for the month amounted to $18. The same thing is happening to every professional man in town.
Unemployment, business stagnation and bankruptcy get steadily worse. Yesterday the Missouri-Pacific Railroad went into bankruptcy. This is the 8th railroad liquidation so far. The plan of re-organization contemplates exchange of bonds for preferred, preferred for common and practically the wiping out of the old common. Also the Liggett Drug Chain goes into bankruptcy with 450 stores in 340 cities. Blame is placed on high-priced leases.
Banking troubles are not over. Banks which were not permitted to reopen after the bank holiday are found to be in very bad shape. Indictment of bankers and investigations are the order of the day. Because the Union and Guardian Banks of Cleveland are still closed—84 small banks in Ohio cities cannot reopen. They used these Cleveland banks as depositories. Lawyer Burton will head the new Guardian Bank of Cleveland and lawyer Cannon will head the new Union. Likewise a lawyer heads the large new Detroit bank. None of them have previous banking experience.
In Germany the new dictator Hitler declares a boycott against Jewish merchants and professional men and arouses world protest.
Talk of inflation again appears. The powerful farm organization demands a “new dollar” with less gold content. They would raise the price of an ounce of gold from $20.67 to $30. They claim this would raise agricultural prices so they could pay their debts. If this is not done they claim they are ruined. This seems to be inflation pure and simple and I am afraid the long-run result will be disastrous. The same arguments are being used now as appeared in 1866, 1873, and 1893. I wonder if this will be a political issue in the next political campaign.
APRIL 5, 1933
The “gold” question comes to the front again. President Roosevelt issues an order forbidding any person to hold more than $100 in gold or gold certificates. Any amount above this must be taken to Federal Reserve Banks.
APRIL 11, 1933
Business drifts along with a little optimism on account of a late Spring and Easter spurt. Talk of “controlled inflation” continues. In 31 states now loans on insurance policies have been restricted to $100. Death benefits and annuities are still paid in full. Since the bank closed, the hoarding movement turned against the insurance companies.
The return of “legal beer” caused activity in certain lines. I don’t believe it will continue after the first novelty wears off.
The Receiver in Bankruptcy of the Paramount Picture Corporation cancelled the leases on 3 local theaters (Paramount, State and Cameo) and returned them to the property owners. This is happening every day with large chain organizations.
The embargo on foreign exportation of gold from U.S. is still in force and so is the rule permitting paper money to be converted into gold on demand. Hence we are still technically off the gold standard. No change in commodity prices has resulted as yet. The value of U.S. dollar on foreign markets remains at par because of restrictions on foreign exchange and because of “pegging” by U.S. I don’t quite understand this foreign exchange situation.
APRIL 18, 1933
Business still in the dumps altho optimism comes back with the nice spring weather. Steel production jumps from 13% to 20%. Inflation talk grows stronger. Yesterday a 16 to 1 silver currency bill was defeated in the Senate by a narrow margin of 46 to 33. There is a great deal of radical legislation being proposed in Washington.
It now appears that Great Britain and other countries have been taking advantage of U.S. by manipulating their depreciated currency and foreign exchange. With use of appreciated currency, they have been dumping their mdse produced by cheap labor into the U.S. At the coming economic conference this question and also “war debts” will be taken up. Instead of raising tariff barriers against this depreciated currency the present administration is pledged to lower them. By technically going off the gold standard and forbidding gold exports the U.S. serves notice on Europe that if necessary we will manipulate our own currency in order to prevent an unfair advantage in foreign trade. It is hoped that the coming Economic Conference will iron this out and make further steps unnecessary.
In spite of much reading on the subject I am still confused by the inflation theories. Briefly the following inflation theories are now being pressed in Congress:
1. Devalue the dollar by reducing gold content and thus issuing more currency.
2. Use silver as a base—bi-metalism.
3. Simply print more money—fiat money.
4. Increase credit instead of money because a normal $40 billion credit has been reduced to $20 billion by frozen bank deposits etc.
a. One plan is the new farm plan to refinance mortgages with government bonds.
b. Loans to industry by the government.
c. Federal Reserve Banks to buy bonds and thus put money into banks. This was tried but the money stayed in banks and was not loaned out.
d. Put the money directly into hands of consumers by huge public works plans. Bonds are first issued to pay for these improvements and then under the emergency law new currency can be issued against these bonds.
All of these plans are directly or indirectly inflationary. In my own judgment none of them will help. I think deflation and reorganization will continue for another year or two until consumption equals production and we start at rock bottom again. This process is extremely painful but possibly the only way out. I can’t believe that legislation on tampering with the currency will provide work for the unemployed. In the end somebody will have to pay for all these improvements, etc.
In the meanwhile the stock market jerks up and down with each new threat of inflation. Most people believe that if inflation comes they should sell bonds and buy common stocks.
APRIL 19, 1933
In order to fight European depreciation in money President Roosevelt places a formal embargo on gold and indirectly promises to raise domestic prices by some form of inflation. The stock market rushes up on the news and has a hectic day. Many stocks jump 11 points. The dollar falls in value on European exchanges.
APRIL 20, 1933
The papers are full of details today of how and why U.S. went off gold standard. Stocks soar upward on theory that commodity prices will go up. I don’t see how or why prices should advance simply because we are off the gold standard unless real currency inflation follows by deflating value of the dollar. Everywhere the subject is being discussed and everybody seems to think they know all about the subject. A great deal depends now on further steps of the government toward inflation.
APRIL 21, 1933
Times are again exciting. Everybody is talking inflation and the stock market is booming. Hectic crowds fill brokers’ offices. U.S. is definitely off the gold standard both internationally and at home. The President asks wartime powers to inflate the currency:
1. By issuing $3 billion new currency
2. Lower gold content by international agreement
3. Take up to 100 million in silver because of war debts and issue new currency against it. The matter is being debated in Congress. The Democratic majority support and the Republican minority oppose. Personally I am with the Republican minority.
APRIL 22, 1933
It now seems that the “inflation bill” asked by the President is much broader than first anticipated. It really authorizes him to use almost every form of inflation. If he decided to use his full authority he could issue about $20 billion new currency (three times the present amount) as follows:
1. $3 billion thru purchase of U.S. Bonds by Federal Reserve and issue of new currency against them.
2. $3 billion in new greenbacks as authorized.
3. Cut gold content in half and issue $6 billion in currency against this additional gold.
4. $100 million in silver certificates.
5. The government has received almost $2 billion additional gold since the new law was passed penalizing gold hoarding. If gold content of dollar is lowered they could legally issue about $8 billion new currency against this new gold.