National Affairs: Inflation Pox

When Congress assembled on Jan. 3 many a hard-money man's heart fluttered apprehensively lest Congress should inflict inflation on the U. S. Fortnight later Franklin D. Roosevelt dosed Congress with some homeopathic medicine, asked authority to devalue the dollar to the 50¢-60¢ level. Thereupon the Congressional demand for inflation all but disappeared. Last week it made a new appearance. Inflationary bills, like bright red pock marks, appeared on several parts of the U. S. legislative body. Three bills in particular—proposals to give somebody something handsome—promised inflation. They loomed particularly large because they threatened to make serious trouble for the Administration's legislative program. The three: Frazier-Lemke Bill would give U. S. farmers a release from heavy mortgage charges. It proposed to have the Government take over the $9,000,000,000 of U. S. farm mortgages. The Government would pay off these mortgages in cash. The farmers would give the Government new mortgages for the same amount but bearing only 1½% interest. To this would be added a 1½% amortization charge. Against these mortgages the Government would issue an equal amount of 1½% bonds—for sale to the public. Since even in these times of low interest rates the Government cannot sell long term bonds at less than 3%, obviously the bonds could not be sold. In that event, the Federal Reserve Banks would be ordered to buy the bonds and issue currency against them— thus using the printing press to turn out some $9,000,000,000 of new money to pay off farmers' mortgages. Until last week this bill reposed harmlessly in committee. Then Congressmen began to pass around an unofficial petition to bring it out on the floor. When the official petition was opened, within one day it had 139 of the necessary 145 signatures. Alarmed, Administration leaders got busy, induced 15 Congressmen to withdraw their signatures. Meantime Representative William Lemke from financially radical North Dakota also got busy, collected seven new signatures.