What We Knew in 1938 That We Have Forgotten


The St. Louis Fed has posted an Address by Former Fed Chair Marriner Eccles, 1938, Responding to Criticisms Leveled by Orval Adams.

Now, just what is it that has been lost that we must save? Have we lost something? I agree that we have, but I doubt that Orval would agree with me as to just what it is. He seems to think that all we have lost is the money the Government has spent in the effort to bring this country out of the deepest depression we ever experienced. What I think we have lost is something different. Rather, I would say, that we have wasted our human and material resources to the extent of far more billions of dollars than are represented in our Government deficits in recent years. And I contend that we cannot afford to go on wasting these resources or failing to put them to better use tha nwe have in the past. Let’s look at the substance and not the shadow. The substance of our wealth is the production of our mines and factories. The shadow is our money. As a nation what we cannot afford is the idleness of millions of able-bodied workers and of the facilities which they should be using to produce the substance.

Now here is something that he said, that does give me pause.

Isn’t it about tiae that we learned this simple truth? Is it so hard to understand that ehen an individual owes money he generally owes it to another individual, but when a nation owes money it owes it to itself? When an individual pays a debt, he pays It to someone else. When a nation pays a debt, it pays it to its own people.

We now know that it isn’t the point that it owes it to its own people so much as it owes in the money that it creates from nothing. If it pays its debts, it can always create more money for other uses, if there are things available to use it for. This gets back to the point that “The substance of our wealth is the production of our mines and factories. The shadow is our money.”

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