OCTOBER 27, 1933
The first 4 days of the experiment tend to disprove the government theory that raising the price of gold will raise the price of commodities. On the first day, both stock and commodity prices went up but in last 3 days they went down—even tho the price of gold was boosted daily to almost $32 per ounce.
The government buys only domestic gold as yet and pays for it in short term debentures.
On Foreign Exchange the dollar goes up. This can be controlled by buying gold on the international markets.
The whole subject is very confusing and for this reason seems to retard business more than help it.
For the first time since the depression Republic Steel showed small profit last quarter. Sheet & Tube lost over a million as compared to a 3 million loss the preceding quarter.
Law and other professions are still hard hit. Most lawyers and doctors do not take in enough cash to pay office rent. I think the large offices with big pay-rolls are hit the hardest.
I am going to speak on NRA next Friday at a mass meeting in Columbiana.
Since the government has gone into the business of buying gold, a great many old abandoned gold mines are now bustling with activity.
OCTOBER 31, 1933
U.S. announces she will now buy gold on international markets. Stocks and prices go down. Adverse criticism against the President’s plan is being openly expressed for the first time. I think we will hear more of this in near future. France is being forced to point of going off gold. If U.S. intends to further depress the dollar it will hurt England and France and may result in a money war because neither country wants to lose its gold. If U.S. merely proposed to stabilize the dollar then probably the other countries will cooperate and no harm will be done.
I handled a small case yesterday involving violation of the NRA rules by a local merchant. Many of these matters are now ending up in court.
NOVEMBER 4, 1933
I talked at a Columbiana NRA mass meeting last night. It was preceded by a parade, bands, torch lights and all the trimmings of a patriotic demonstration.
Groups are being formed all over the country to oppose the President’s monetary policy and to demand a return to the gold standard. Yesterday the New York Chamber of Commerce passed a resolution to this effect.
In five Western states the farmers are on a “holiday strike” again. By picketing they will prevent the sale of wheat etc. at present prices. They demand inflation and a guaranteed level of prices high enough to absorb the increased cost of the things they buy.
In Cleveland over 200 lawyers have had their office phones disconnected because of inability to pay the bills.
In spite of all the excitement, business is again on the downgrade. There has been no fall upturn. My own business is at a complete standstill. The attitude of the public toward NRA has become very cynical.
NOVEMBER 7, 1933
Business has slumped so badly this fall that we seem to be in another “panic.” Steel mills in Youngstown are down to 25% production; men hired under NRA are being laid off; farmers are on strike in 5 states; buyers won’t buy on account of high prices; the dollar depreciates to almost 60¢ and makes the pound worth 4.92; a currency war threatens with Great Britain; France threatens to go off gold. All in all it seems as tho the President’s plan is facing a crisis. He is fighting back over the radio and by sending speakers to the troubled farm areas. Both public opinion and the Republican Party are voicing criticism of the monetary policy and of the NRA. The constant threat of possible inflation keeps the stock average up to 84. Truscon sells at 4 1/2; Sheet & Tube at 17; Republic 10, etc.
A client came in this morning who is being sued for balance on a “financial service” he subscribed to in 1931. Refuses to pay because they gave him bad advice. Told him to sell good stocks and switched him into more speculative issues now in receivership.
NOVEMBER 8, 1933
In yesterday’s election the 18th Amendment (Prohibition) was repealed. It all happened in less than 18 months and the 1st 36 states voted repeal. Two—North and So. Carolina—voted dry.
Present unrest was shown by election results. In almost every city the “ins” were replaced by the dissatisfied “outs.” Cleveland and New York substituted Republican mayors for Democratic and in other cities the reverse was true. Voters are dissatisfied and are ready to make any change. If this continues long it may create a Republican Congress next fall.
NOVEMBER 10, 1933
Because of the depreciating value of the dollar government bonds are beginning to slip. During the past week they went down from 100 to 96. Large investors are buying foreign bonds and stocks payable in gold. Europe seems convinced we are headed for wild inflation and says we can no longer stop it. The “new deal” will add about fifteen billion dollars to the government indebtedness.
I have been hearing “armistice day” speeches all week. They are all cynical. Sixteen years ago under Wilson we became “internationally minded.” We fought in the “war to end war” and today the world is in chaos with constant threat of war. We loaned billions to Europe and now can’t get it back. Time and again in this period the U.S. interfered in European affairs as a good Samaritan and every time we got a spanking. Because of these huge loans and the neglect of our internal affairs, our country is today facing one of the most serious crises in her history. With all its dangers it seems that the world is not yet ready for internationalism and our best policy for the present is to keep our fingers out of Europe. If the war debt is never paid it may stand as a monumental warning against committing a similar failing again. War veterans are most bitter because most of them were uprooted by the war and were never able to get started again. For a good many of them this depression ended all hope.
The U—family of Youngstown is following the policy of the Mellons of Pittsburgh. They are buying downtown real estate that has been foreclosed for the price of the 1st mortgage and paying even this low price in bank books which they bought as low as 50¢ on the dollar. Yesterday legal news showed the purchase of 49 feet on E. Federal St. with building (lot 181) from Home Savings & Loan for about $25,000 in pass books—or about $13,000 in cash. In normal times the property was considered valuable enough for a 1st mortgage bank loan of $25,000.
Law practice is very disagreeable. A good deal of it consists of trying to collect money from people who are helpless. Grown men and women come into the office and break into tears when they try to tell their story. So far I have been able to work out every situation without causing any harm. It is a thankless job.
A woman just came in to consult me about some government Hungarian bonds she purchased during the war. They are today entirely worthless.
The “forgotten” men of today are the doctors, lawyers, insurance men, etc. They are down and out and can do very little about it.
NOVEMBER 15, 1933
This is the 5th winter of the depression and it is blackest of all. The weather has been biting cold and thousands of families in Youngstown are suffering for lack of food and clothing. About 50,000 people in this city will have to be put on public relief.
A growing list of substantial men express the fear that U.S. is now in for bad inflation and that we have gone too far to turn about. This is because the government is pouring an endless stream of money into all kinds of pet schemes to revive business—into the NRA, agriculture, frozen banks, public works, mortgage loans, slum clearance, industrial loans, etc. Total U.S. indebtedness will soon exceed $35 billion—and in meanwhile tax collection has almost disappeared, industry is stagnant and private initiative at low ebb. Industries can’t sell bond issues and turn to the government, banks won’t loan money, people won’t invest, expand or build b/c monetary uncertainty. People who have money buy foreign bonds or stocks. I think the time is ripe for an able leader to take up the issue for sound currency. Loyalty to the President ceases to be a virtue when he violates basic laws which may bring great harm to the country. The American dollar is listed on foreign exchange at 61¢ and the pound (without gold backing) at $5.15. A few weeks ago the pound stood at $3.40. Price of gold is over $33 an ounce. Government bonds are still going down. Stocks are stationary at 88. The threat of inflation is so imminent that many people are buying low priced common stocks—especially commodity stocks such as oil companies—where the companies have large sources of raw material which would increase in value.
NOVEMBER 16, 1933
Secretary of Treasury [William] Woodin resigns yesterday because he is not sympathetic to the President’s monetary policy. So far more than a dozen resignations have taken place since March and in each case have been replaced by men who believe in the “new deal.”
NOVEMBER 18, 1933
The U.S. formally recognizes Russia yesterday and this is hailed as the big news of the day. It is hoped we will be able to sell her machinery, etc. The old Russian monarchy still owes U.S. many millions for purchases before and during the war. When the Soviets took control they refused to recognize the old indebtedness and defaulted all bond issues. The Soviets now promise to “consider” these claims but probably nothing will come of it.
U.S. gov’t announces it will help the relief situation this winter by paying $15 per week for 1 million jobs to unemployed. In this way Youngstown is putting about 2000 men to work cleaning streets, parks, etc. Cleveland will employ about 40,000 in the same way.
It is interesting to note that so far the raising of price of gold has failed to raise domestic prices. Not many months ago farmers claimed that raising the price of gold to $30 an ounce would restore agricultural prices. This has not happened. The price is now over $33 and the farmers are in a worse plight than ever.
It is also interesting to note that the effort to create credit by having the Federal Reserve Bank buy U.S. bonds in the open market has failed. Huge reservoirs of credit are available but banks won’t make loans because business is too uncertain. It seems to prove that when business starts moving credit will expand automatically but the artificial creation of credit will not expand business.
The theory that raising gold prices will raise domestic prices and that this in turn will create prosperity also seems to be doomed to failure. Briefly the theory is as follows: When times are booming people earn more, buy more and prices go up. But is it true that raising prices will bring back prosperity by reversing the process? As it now works out, the higher prices go the less people buy because they have no earning power. It does not seem logical. Seems like putting the cart before the horse. Yet Pres. Roosevelt and his supporters insist that they will carry the experiment thru and that it is too early to judge results.
The U.S. Treasury will face the task in a few weeks of paying out a huge amount for bond interest and maturities. Where will the money come from—greenbacks?
NOVEMBER 20, 1933
Several thousand unemployed men stormed the Allied Council rooms today to get one of the government relief jobs. About 1000 will be put to work at once.
The U.S. Chamber of Commerce takes a public stand against President Roosevelt’s gold policy and demands a return to sound money and the gold standard. The President strikes back by calling them a bunch of “tories.” Remembering that George Washington would not accept Continental currency in his business dealings I do not quite see the parallel implied by the use of the term.
NOVEMBER 21, 1933
Prof. [O. M. W.] Sprague (formerly of Harvard) resigns from the Treasury and in a scathing letter made public criticizes the President’s monetary policy and calls on the public to fight for sound money. The issue is becoming clearly defined and he may be the leader needed to crystallize public opinion. Three years ago Sprague resigned his professorship at Harvard to accept a position as monetary advisor to British gov’t at $40,000 per year. When U.S. went off gold standard he accepted the call to the U.S. Treasury as a patriotic duty and at a yearly salary of $6,000. Since then his advice has been ignored and the only honorable thing left to do was to resign. Roosevelt studied economics under him at Harvard. His resignation is the big news of the day. This leaves the Treasury in full charge of men sympathetic to present monetary policy. Sprague bases his criticism on two points:
1. Raising price of gold will not raise the price of domestic articles as long as industry is stagnant and people are broke. Industrial production and wages must first increase thru normal recovery and the rest follows.
2. The new deal is bankrupting the credits of U.S. by pouring endless millions into various pet schemes. The inevitable result must be printing press money and wild inflation.