Speech

Remarks delivered on Television Program NBC Studios, Vardman Park Hotel Washington, U. C. September 17, 1950 BATTLE REPORT—WASHII- GTON J I am happy to have this chance to speaK with you about the dollar. Because everywhere the American dollar has been a symbol of strength. And inflation reduces the value of our dollar and makes us weak. But we can avoid inflation by a well-balanced relationship between the dollnrs We have to spend and the goous on which we can spend them. The scales should be evon'ly balanced. If there are too many dollars and too few Goods, prices go up. That's inflation. Our supply of dollars increased greatly during the last war. We still have a very big supply, it threatens to become much bigger. Even before Korea there were clear signs of renewed upward pressures prices. And now the need to bring bacK the balance between dollars and goods is very evident—because more dollars are being supplied and less goods will become available as a large part of the goods will be di- verted to defense. If this gets out of hand it may become ruinous. The German inflation after World War I ushered in Hitler. The more decent Chinese inflation paved the way for Communism. How then can we restore and maintain this balance? We can do it first of all by taking dollars away through taxes. But also we must curb the further growth of credit. It accomplishes nothing to tax dollars out °f our pockets if we can replace them with borrowed dollars to be spent °n a limited supply of goods. The facts are that™credit extended by banks has been sharply ex- panding. And borrowing by you and me to buy automobiles and other goods— called consumer credit—has been growing rapidly. Real estate credit has been going up and up and up. Borrowing from the banks creates more and more dollars, whether done by our Government or by you and me. Since our Government must have more dollars to spend for our defense, it is important that what our Govern- ment doesn't get through taxes it borrow not from the banks (which is in- flationary) but (so far as possible) from the public and nonbanking insti- tutions. It is likewise important that all of us—business and you and I—curb our borrowing. 32. Therefore, the Federal Reserve System must use the means it.has to restrict the growth of borrowed dollars. The three general means we have to accomplish this are technically known as—open market operations--dis- count rates—and reserve requirements. They influence lending by'banks* Later we may need additional general means. But we also have thrae selective mesne: First, to restrain stock: market credit; Second, to restrict credit on automobiles and household appliances (known as consumer credit); And, third, to curb credit expansion for new construction in real es- tate. These three selective means restrain the borrower or the buyer—you ar.d me. All these means are weapons—to fight inflation—and are as essen- tial as the weapons to fight on the battle front. Therefore, you'll agree that we must strive for balance—which is economic stability. r Ve must keep our people employed and we must keep our factories and shops making goods—goods we absolutely need in our daily lives—but, above all, making everything we must have for our national defense.

M.S. Szymczak (1950, September 16). Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/speech_19500917_szymczak

@misc{wtfs_speech_19500917_szymczak,
  author = {M.S. Szymczak},
  title = {Speech},
  year = {1950},
  month = {Sep},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/speech_19500917_szymczak},
  note = {Retrieved via When the Fed Speaks corpus}
}