[ Pobierz całość w formacie PDF ]
lion. Of this, $700 million came from state and local governments
(the major categories: $170 million increase in salaries to employ-
ees; $300 million increase in construction spending). The Federal
government increased its expenditure by $130 million, of which
$50 million was new construction. The Hoover policy of stimulat-
ing public works was already taking effect.22
22
While the data in the Appendix below list the rise in Federal expenditure to
be $200 million, this is the effect of rounding. The actual increase was $133 mil-
lion.
256 America s Great Depression
During 1929, the Federal government had a huge surplus of
$1.2 billion ($4.1 billion receipts, $2.9 billion expenditures exclud-
ing government enterprises; an estimated $5.2 billion receipts and
$4.1 billion expenditures including government enterprises), and it
is to the Hoover administration s credit that as soon as the depres-
sion struck, Hoover and Mellon suggested that the top normal
personal income tax rate be cut from 5 percent to 4 percent, and
the corporate income tax be reduced from 12 percent to 11 per-
cent.23 This suggestion was speedily enacted by Congress at the
end of 1929. As a partial consequence, Federal receipts fell to $4.4
billion in 1930 (or $3.3 billion excluding government enterprises).
Federal expenditures, in the meanwhile, rose to $4.2 billion ($3.1
billion excluding government enterprises), still leaving a consider-
able surplus. The Federal fiscal burden on the private product
remained approximately the same, falling from 5.2 percent to 5.1
percent of gross private product, and from 5.8 to 5.7 percent of net
private product. The main onus for increasing the fiscal burden of
government during 1930 falls upon state and local governments,
which increased their rate of depredation from 9.1 percent to 11.3
percent of the gross private product, from 9.9 percent to 12.5 per-
cent of the net product.
23
See Sidney Ratner, American Taxation (New York: W.W. Norton, 1942),
p. 443.
10
1931 The Tragic Year
he year 1931, which politicians and economists were sure
would bring recovery, brought instead a far deeper crisis
Tand depression. Hence Dr. Benjamin Anderson s apt term
the tragic year. Particularly dramatic was the financial and eco-
nomic crisis in Europe which struck in that year. Europe was hit
hard partly in reaction to its own previous inflation, partly from
inflation induced by our foreign loans and Federal Reserve
encouragement and aid, and partly from the high American tariffs
which prevented them from selling us goods to pay their debts.
The foreign crisis began in the Boden Kredit Anstalt, the most
important bank in Austria and indeed in Eastern Europe, which,
like its fellows, had overexpanded.1 It had suffered serious financial
trouble in 1929, but various governmental and other sources had
leaped to its aid, driven by the blind expediency of the moment
telling them that such a large bank must not be permitted to fail.
In October, 1929, therefore, the crumbling Boden Kredit Anstalt
merged with the older and stronger Oesterreichische Kredit
Anstalt, with new capital provided by an international banking syn-
dicate including J.P. Morgan and Company, and Schroeder of
England, and headed by Rothschild of Vienna. The Austrian Gov-
ernment also guaranteed some of the Boden bank s investment.
This shored up the shaky bank temporarily. The crisis came when
1
Benjamin M. Anderson, Economics and the Public Welfare (New York: D. Van
Nostrand, 1949), pp. 232ff.
257
258 America s Great Depression
Austria turned to its natural ally, Germany, and, in a world of
growing trade barriers and restrictions, declared a customs union
with Germany on March 21, 1931. The French Government
feared and hated this development, and hence the Bank of France
and lesser French banks suddenly insisted on redemption of their
short-term debts from Germany and Austria.
The destructive political motive of the French government can-
not be condoned, but the act itself was fully justified. If Austria was
in debt to France, it was the Austrian debtors responsibility to
have enough funds available to meet any liabilities that might be
claimed. The guilt for the collapse must therefore rest on the bank
itself and on the various governments and financiers who had tried
to shore it up, and had thus aggravated its unsound position. The
Kredit Anstalt suffered a run in mid-May; and the Bank of Eng-
land, the Austrian Government, Rothschild, and the Bank of Inter-
national Settlements aided by the Federal Reserve Bank of New
York again granted it many millions of dollars. None of this was
sufficient. Finally, the Austrian Government, at the end of May,
voted a $150 million guarantee to the bank, but the Austrian Gov-
ernment s credit was now worthless, and Austria soon declared
national bankruptcy by going off the gold standard.
There is no need to dwell on the international difficulties that
piled up in Europe in latter 1931, finally leading Germany, Eng-
land, and most other European countries to renounce their obli-
gations and go off the gold standard. The European collapse
affected the United States monetarily and financially (1) by caus-
ing people to doubt the firmness of American adherence to the
gold standard, and (2) through tie-ins of American banks with their
collapsing European colleagues. Thus, American banks held
almost $2 billion worth of German bank acceptances, and the Fed- [ Pobierz całość w formacie PDF ]
zanotowane.pl doc.pisz.pl pdf.pisz.pl akte20.pev.pl
lion. Of this, $700 million came from state and local governments
(the major categories: $170 million increase in salaries to employ-
ees; $300 million increase in construction spending). The Federal
government increased its expenditure by $130 million, of which
$50 million was new construction. The Hoover policy of stimulat-
ing public works was already taking effect.22
22
While the data in the Appendix below list the rise in Federal expenditure to
be $200 million, this is the effect of rounding. The actual increase was $133 mil-
lion.
256 America s Great Depression
During 1929, the Federal government had a huge surplus of
$1.2 billion ($4.1 billion receipts, $2.9 billion expenditures exclud-
ing government enterprises; an estimated $5.2 billion receipts and
$4.1 billion expenditures including government enterprises), and it
is to the Hoover administration s credit that as soon as the depres-
sion struck, Hoover and Mellon suggested that the top normal
personal income tax rate be cut from 5 percent to 4 percent, and
the corporate income tax be reduced from 12 percent to 11 per-
cent.23 This suggestion was speedily enacted by Congress at the
end of 1929. As a partial consequence, Federal receipts fell to $4.4
billion in 1930 (or $3.3 billion excluding government enterprises).
Federal expenditures, in the meanwhile, rose to $4.2 billion ($3.1
billion excluding government enterprises), still leaving a consider-
able surplus. The Federal fiscal burden on the private product
remained approximately the same, falling from 5.2 percent to 5.1
percent of gross private product, and from 5.8 to 5.7 percent of net
private product. The main onus for increasing the fiscal burden of
government during 1930 falls upon state and local governments,
which increased their rate of depredation from 9.1 percent to 11.3
percent of the gross private product, from 9.9 percent to 12.5 per-
cent of the net product.
23
See Sidney Ratner, American Taxation (New York: W.W. Norton, 1942),
p. 443.
10
1931 The Tragic Year
he year 1931, which politicians and economists were sure
would bring recovery, brought instead a far deeper crisis
Tand depression. Hence Dr. Benjamin Anderson s apt term
the tragic year. Particularly dramatic was the financial and eco-
nomic crisis in Europe which struck in that year. Europe was hit
hard partly in reaction to its own previous inflation, partly from
inflation induced by our foreign loans and Federal Reserve
encouragement and aid, and partly from the high American tariffs
which prevented them from selling us goods to pay their debts.
The foreign crisis began in the Boden Kredit Anstalt, the most
important bank in Austria and indeed in Eastern Europe, which,
like its fellows, had overexpanded.1 It had suffered serious financial
trouble in 1929, but various governmental and other sources had
leaped to its aid, driven by the blind expediency of the moment
telling them that such a large bank must not be permitted to fail.
In October, 1929, therefore, the crumbling Boden Kredit Anstalt
merged with the older and stronger Oesterreichische Kredit
Anstalt, with new capital provided by an international banking syn-
dicate including J.P. Morgan and Company, and Schroeder of
England, and headed by Rothschild of Vienna. The Austrian Gov-
ernment also guaranteed some of the Boden bank s investment.
This shored up the shaky bank temporarily. The crisis came when
1
Benjamin M. Anderson, Economics and the Public Welfare (New York: D. Van
Nostrand, 1949), pp. 232ff.
257
258 America s Great Depression
Austria turned to its natural ally, Germany, and, in a world of
growing trade barriers and restrictions, declared a customs union
with Germany on March 21, 1931. The French Government
feared and hated this development, and hence the Bank of France
and lesser French banks suddenly insisted on redemption of their
short-term debts from Germany and Austria.
The destructive political motive of the French government can-
not be condoned, but the act itself was fully justified. If Austria was
in debt to France, it was the Austrian debtors responsibility to
have enough funds available to meet any liabilities that might be
claimed. The guilt for the collapse must therefore rest on the bank
itself and on the various governments and financiers who had tried
to shore it up, and had thus aggravated its unsound position. The
Kredit Anstalt suffered a run in mid-May; and the Bank of Eng-
land, the Austrian Government, Rothschild, and the Bank of Inter-
national Settlements aided by the Federal Reserve Bank of New
York again granted it many millions of dollars. None of this was
sufficient. Finally, the Austrian Government, at the end of May,
voted a $150 million guarantee to the bank, but the Austrian Gov-
ernment s credit was now worthless, and Austria soon declared
national bankruptcy by going off the gold standard.
There is no need to dwell on the international difficulties that
piled up in Europe in latter 1931, finally leading Germany, Eng-
land, and most other European countries to renounce their obli-
gations and go off the gold standard. The European collapse
affected the United States monetarily and financially (1) by caus-
ing people to doubt the firmness of American adherence to the
gold standard, and (2) through tie-ins of American banks with their
collapsing European colleagues. Thus, American banks held
almost $2 billion worth of German bank acceptances, and the Fed- [ Pobierz całość w formacie PDF ]