I. A. A. Record — February, 1934 



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Gold and f 

 the Commodity 

 Dollar 



Prof. F. A. Pearson Tells How Commodity 

 Prices Can Be Raised By Gold Revaluation 



ONE of the highlights of the three-day session was 

 the address of Prof. F. A. Pearson of the New 

 York State College of Agriculture before nearly 

 3,000 people Friday morning. He presented a difficult and 

 intricate subject clearly and interestingly with the aid of 

 mimeographed copies of numerous charts, tables, as well 

 as his remarks which were distributed to everyone in the 

 large audience before he began speaking. 



"Coming down from Chicago to Danville on the 

 train," the professor said, "I noticed that most of 

 your barns and buildings need paint. I saw no new 

 construction work. Many buildings are in need of 

 new roofs and repairs. Since I left Illinois more 

 than ten years ago (he was formerly on the staff of 

 the Illinois College of Agriculture) I notice two big 

 changes. You have more hard roads and you get 

 up earlier in the morning to call hogs." . V .V'' 



The great obstacle to rapid business recovery is the low 

 level of public and private construction. Dr. Pearson said. 

 He heartily endorsed the world-wide policy of raising the 

 price of gold to raise commodity prices. 



The speaker reviewed many phases of the gold question, 

 touching on the present crisis, supply and demand for 

 gold, price and value of gold both here and abroad, the 

 relation of debtor to creditor, and rebuilding of the price 

 structure. 



This low level of construction, he said, results from re- 

 duced national income caused by collapse in commodity 

 prices. Decline in property values, he added, plays havoc 

 in enterprises with large capital investment and slow 

 turnover. "If bonds of the federal, state, and other gov- 

 ernmental units are eliminated, most capital of the cred- 

 itor class is now invested in mortgages and bonds in 

 enterprises of this type. 



"When creditors cannot collect," Dr. Pearson said, "they 

 are very cautious about making new long-term commit- 

 ments. Restoration of commodity prices will increase na- 

 tional income and enable creditors to collect. When this 

 occurs, bank credit will be easy to obtain, and long-term 

 capital will be readily available for new investment, public 

 and private. 



"The capital of life insurance companies, endowed col- 

 leges, hospitals, public libraries, research organizations, 

 welfare agencies, banks, the white collar class, and others 

 is invested in the bonds, mortgages, and other forms of 

 credit which are extended to home owners and farmers 

 and to industry and transportation. When capital moves 

 freely from debtor to creditor, and when interest and prin- 

 cipal payments flow from debtor to creditor, the nation 

 proceeds on an even keel." 

 -, Dr. Pearson said "it is to the advantage of the creditor 



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liett to rlKhti Prof. F. A. Pearaon. Ithaca. N. Y.; C. V. 

 Gregory, editor, Prairie Farmeri and Walter \j. Rn«t, pre«l- 

 dent. Federal Land Bank, St. Ijonla, Mpeaking; to Treaaurer 

 Robt. A. Cofvlea of the I. A. A. 



class that prices should be increased to and maintained 

 at a level where the incomes of the debtor class will be 

 more than sufficient to (a) take care of subsistence and 

 an ever-increasing standard of living, and (b) to meet the 

 increasing cost of expanding public services. 



"The collapse in commodity prices so reduced the na- 

 tional income that it became impossible for the creditor 

 class to collect. Remedial legislation was drafted to pro- 

 tect the creditor as well as to relieve the debtor." 



It was commonly believed. Dr. Pearson continued, that 

 the creditor class gains when paid in dollars that are more 

 valuable. These apparent gains, he added, are small com- 

 pared with losses of principal that invariably accompany 

 a collapse in commodity prices. He said it is now .com- 

 monly believed that creditors will lose by a restoration of 

 a balance in the price structure, and that the slight loss 

 in purchasing power of the creditors' income is more than 

 made up by the elimination of huge losses of principal 

 from which the creditors would otherwise suffer. 



"Therefore," Dr. Pearson concluded, "a policy to raise 

 the price of gold to re-establish a balance in the price 

 structure and thereby restore incomes and profits is of 

 inestimable value to the creditor class of this country." 



Concerning commodity prices, he said, one of the most 

 spectacular advances in history occurred from April to 

 October, 1933. He pointed out that in only one six- 

 months' period, during the World War, did prices of basic 

 commodities show a larger percentage advance. 



Dr. Pearson credited the American crisis to the collapse 

 in commodity prices. "Never before in the peace-time 

 annals of American history," he said, "has this country 

 experienced a 54 per cent decline in prices of basic com- 

 modities in 41 months." He said it could be explained in 

 one of four ways: a decrease in demand for goods, an ad- 

 vance in the supply, or a change in the supply of gold or 

 in demand for gold. 



Dr. Pearson discarded the idea of decreased demand and 

 increased supply of goods as the major cause of the price 

 decline. He said decreased demand arose from lower in- 

 comes which, in turn, resulted in under-consumption of 

 some commodities. "The United States and the world 

 suffer from malnutrition due to under-consumption of 

 goods," he stated. 



"Neither was the collapse due to a great shortage of 

 monetary gold," he added. "From 1914 to 1928, commod- 



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