America's Money Machine

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Doubtful Victory 225 sleeping on his decision, gave it to the New York Times, the Washington Post, and the Washington Star, where it was front page news in the Sunday editions of February 4. 8 At the same time Eccles gave an interview td the Times' Felix Belair,Jr., in which he declared, "I am astonished. The only answer 1 can make is to give you a copy of the record of what took place at the White House meeting. 9 The Federal Reserve-Treasury differences were now a national issue, no longer to be ignored. Eccles was no longer in control of the Federal Reserve, butjust a month later, on March 4, the Treasury and the Federal Reserve issued a joint announcement that read: The Treasury and the Federal Reserve System have reached a full accord with respect to debt management and monetary policies to be pursued in furthering their common purpose to assure the successful financing of the government's requirements and, at the same time, to minimize the monetization of the public debt. 10 As a result, the Treasury undertook to exchange for outstanding long term bonds new long term bonds not directly marketable, an operation that paved the way for the discontinuance of Federal Reserve support of government bond prices by purchases in the market. The new bond issue bore 2 3/4 per cent (as against the 2 1/2 per cent rate at which the Federal Reserve had held the market), with a maturity of twenty-nine years, but were redeemable by the holder by conversion into five-year marketable Treasury notes. Following the agreement also, the Federal Reserve withdrew its support ofthe general structure offederal credit and allowed the market to seek its own level. Shortly afterward, McCabe found it convenient to resign as Board chairman and member ll and in June Eccles retired to private life. The new Chairman, William McChesney Martin, had distinguished himself as a compromiser, and this quality of disposition, despite a conservative tendency, kept him in office and in favor through both Republican and Democratic administrations for the following fourteen years, and' permitted him to lead the'Federal Reserve System to its jubilee year intact but shaken as to its independence.* *Martin had been made president of the New York Stock Exchange in 1938,when he was only thirty-one years old, as a compromise candidate between two contending factions. After the war he had been made president ofthe Export-Import Bank and later, as Assistant Secretary ofthe Treasury, had helped negotiate the "accord" that compromised the differences between Eccles and the Treasury. Republican Eisenhower found his views on credit restriction and currency discipline congenial, but when Kennedy was elected Martin went
PART III/DEBACLE OF AN IDEA The bold action of Marriner S. Eccles seemed to have restored to the Federal Reserve System its statutory independence, and indeed this may have continued to be the case, but for a new set ofcircumstances, arising out of post-war foreign policy, that gradually drew the Federal Reserve System into a new entanglement and subserviency-now not to Treasury as much as to State Department. This was the embarkation of a new foreign policy of world-wide military alliances and a cultivation of world opinion and support through a massive expenditure under a program of assistance to other countries. along with the new Administration's desire for easy credit and a monetary policy ofstimulation. In 1965, however, through some slip, he made a speech pointing out the parallels between the conditions preceding the Great Depression and the prosperity which President Johnson's Great Society was enjoying-a speech that catalyzed a stock market break and that threw the Administration into consternation.
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BOOKS BY ELGIN GROSECLOSE Money: Th
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For My Beloved Louise with especial
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Vlll CONTENTS 22. The New Thermopyl
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x PREFACE sprawled under the weight
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Preface XIU cash, lawful money, leg
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Preface xv tary expansion and a che
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4 PART I / THE ROOTS OF REFORM An i
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8 PART I / THE ROOTS OF REFORM them
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T HE 2. The First Shock Wave SIGNIF
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T HE 3. The Lapping at the Dikes YE
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The Lapping at the Dikes 19 On Mond
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4. The Rich Man's Panic T HE STOCK
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The Rich Man s Panic 25 bocker Trus
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PART I / THE ROOTS OF REFORM The cr
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A FTER 7. An Interlude for Debate T
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PART I / THE ROOTS OF REFORM of New
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PART II The Great Reversal
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84 PART II / THE GREAT REVERSAL Wha
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I T 12. The First Inundation WAS A
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The First Inundation 89 $43 million
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The First Inundation 91 and at a ti
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13. Collapse of a Theory THE SPLEND
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Collapse ofa Theory 95 should be re
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Collapse of a Theory 97 such paper
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Collapse ofa Theory 99 plete contro
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The Path of Retreat 101 Under Warbu
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The Path of Retreat 103 Along with
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15. When to Reef Sail DURING THE FI
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Rediscount rate Date New York Feder
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When to Reef Sail 1 17 You have the
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1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
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158 PART III/DEBACLE OF AN IDEA tio
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The Crumbling of the Dikes 161 day
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T HE 22. The New Thermopylae EFFORT
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166 PART III / DEBACLE OF AN IDEA S
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23. The Keynesian Influence JOHN MA
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Page 224 and 225: Where Two Tides Meet 207 billion. I
Page 226 and 227: Where Two Tides Meet 209 The conser
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Page 230 and 231: The Reversals of War 2 13 the world
Page 232 and 233: The Reversals of War 2 15 per cent
Page 234 and 235: The Reversals of War 217 three-mont
Page 236 and 237: 29. Doubtful Victory No HEAD of the
Page 238 and 239: Doubtful Victory 221 sury and the F
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Page 244 and 245: 3 o. The Role of Atlas THE FIFTH DE
Page 246 and 247: The Role ofAlIas 229 dollar deposit
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Page 278 and 279: Out of the Pit 261 A fourth misconc
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SELECTED BIBLIOGRAPHY Harding, Will
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About the Author ELGIN GROSECLOSE f
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Achesont Deant 19 1-g2 t 196 t 198
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