America's Money Machine

T HROUGHOUT
26.
New Bridles for Old
THE FIRST YEAR of his administration Roosevelt
clung to his policy ofa balanced budget and fiscal integrity, but it
became increasingly apparent that the condition was stronger than the
theory. The condition was the political demand that government powers
be used to restore the economy and get more people back to work.
It was at this juncture that there appeared on the scene a figure who
was ideally suited to resolve this dilemma and to provide Roosevelt with
a less assailable philosophical framework than the Warren thesis had
proved to be. This was Marriner S. Eccles, a millionaire banker and
capitalist of Ogden, Utah, whose various banks and financial enterprises
had managed to stay afloat during the storms that raged during 1931 and
1932 .
Eccles asserts in his Recollections that he had never read Keynes and was
not familiar with his theories; nevertheless his proposals were in the main
stream of Keynesian economics-or perhaps in another but parallel
branch ofthe stream fed from the same source. l In an address to the Utah
State Bankers Convention, inJune, 1932, he had diagnosed the depression
as due to "our capital accumulation getting out ofbalance inrelation
to our consumption ability." The difficulty, he went on to say, was that
"we were not sufficiently extravagant as a nation."2
Keynes had argued that employment marched with investment. Eccles
sensed one of the errors in this thesis-that it rested on the belief that
people and banks will not indefinitely hold money in idleness. Government
may flood the economy with credit, he saw, but banks will not lend,