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Heterodox central bankers II

"At the present time we are still in the depths of a depression and, beyond creating an easy money situation, there is very little, if anything, that the Reserve organization can do toward bringing about recovery. One cannot push a string. I believe, however, that if a condition of great business activity were developing to a point of credit inflation, monetary action could be very effective in curbing undue expansion. That would be pulling a string."
Marriner S. Eccles
Chairman, Federal Reserve Board
March 4-20, 1935.

"The factor of unutilized capacity appears to furnish the decisive answer to the argument that if the budget had been balanced the resulting restoration of confidence would in itself have led to recovery. There is nothing in balancing the budget that would lead to an absorption of excess capacity and hence make it profitable for business to increase its disbursements for plant and equipment. On the contrary, balancing the budget, by curtailing the incomes of people receiving money from the Government and by reducing buying power through increased taxes, would heve been expected to decrease demand and hence increase excess capacity."
Marriner S. Eccles
Chairman, Federal Reserve Board
June 8, 1936


  1. Quite appropriate quotes. Eccles is a fascinating person, and should be read more these days. A new paradigm for central banking could benefit from his insights. Thanks for posting.

  2. I did not know about Chester C. Davis, but Marriner S. Eccles has fascinated me for a while.

    From his remarkable hearing at the U.S. Senate in 1933:

    "If our problem is then the result of the failure of our money system to properly function, which to-day is generally recognized, we then must turn to the consideration of the necessary corrective measures to be brought about in that field; otherwise, we can only expect to sink deeper in our dilemma and distress, with possible revolution, with social disintegration, with the world in ruins, the network of its financial obligations in shreds, with the vary basis of law and order shattered. Under such a condition nothing but a primitive society is possible. Difficult and slow would then be the process of rebuilding and it could only then be brought about on a basis of a new political, economic, and social system. Why risk such a catastrophe when it can be averted by aggressive measures in the right direction on the part of the Government?" (Marriner S. Eccles, Hearing before the Committee on Finance, U.S. Senate, February 13 to 28, 1933.

    I know you'll find that quote very evocative. As you'll probably find this little exchange suggestive:

    "Senator WALSH of Massachusetts. It [i.e. the Federal Budget] would not be balanced immediately; it would be balanced in the future.
    "Mr. ECCLES. I am saying that when that is done it would automatically balance as with an individual or corporation, because you create the source of wealth by labor and employment, which is the only source of wealth."

  3. Yep, his his five-point program, in that hearing, came so close to the actual New Deal policies that Fortune argued that if one compared Eccles "earlier general statements of economics with the economics of the [FDR] administration [one] will be forced to conclude that M. S. Eccles of Ogden, Utah, was not only a Mormon but a prophet."


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