xt7wwp9t2q46_26 https://exploreuk.uky.edu/dips/xt7wwp9t2q46/data/mets.xml https://exploreuk.uky.edu/dips/xt7wwp9t2q46/data/59m61.dao.xml American Liberty League 37 linear feet archival material English University of Kentucky This digital resource may be freely searched and displayed.  Permission must be received for subsequent distribution in print or electronically.  Physical rights are retained by the owning repository.  Copyright is retained in accordance with U. S. copyright laws.  For information about permissions to reproduce or publish, contact the Special Collections Research Center. Jouett Shouse Collection (American Liberty League Pamphlets), No. 29 "How Inflation Affects The Average Family" Speech by Dr. Ray Bert Westerfield, Professor of Political Economy, Yale University, April 18, 1935 text No. 29 "How Inflation Affects The Average Family" Speech by Dr. Ray Bert Westerfield, Professor of Political Economy, Yale University, April 18, 1935 2013 https://exploreuk.uky.edu/dips/xt7wwp9t2q46/data/59m61/59m61_29/Am_Lib_Lg_29_001/Am_Lib_Lg_29_001.pdf section false xt7wwp9t2q46_26 xt7wwp9t2q46 et I I ,
Pamphlets Available ,* ·k
* •
Copies of the following pamphlets may    
be obtained upon application to the
League’s national headquarters:  
t Why, The American Liberty League?
‘ Statement of Principles and Purposes *
Recovery, Relief and the Constitution-—Speech     F 
by Iouett Shouse
American Liberty League-—Its Platform
An Analysis of the President’s Budget Message ‘
N. R. A.—Its Past, and Recommendations for I * * *
the Future
Analysis of the $4,880,000,000 Emergency Relief
Appropriation Act.
Economic Security—A Study of Proposed Legis- A
lation Speech of
The Bonus—An Analysis of Legislative Proposals
TIE! Constitution Still Stands—Speech by Iouett ])R_ RAY BERT WESTERFIELD,
ouse
Inilation—Possibiliti•es Involved in Existing and Professor of Political Economy, Yale
Proposed Legislation _ _
The Thirty Hour Week—Dangers Inherent in University, and member of the
Pmpvwd Lésislaiivn National Advisory Council of
The Pending Banking Bill—A Proposal to Sub- . .
ject the Nation’s Monetary Structure to the the Amcrlcau Liberty L‘·’“g“°’
Exigencies of Politics over the Red Network of _the
The Holding Company Bill—An Analysis of National Broadcasting
Proposed Legislation C A ,1 18
“What is the Constitution Between F riends?”— 0mpany’ pm ’
Speech by Iames M. Beck 1935
Where Are We Goiug?—Speech by James W.
Wadsworth t ,
Congress at the Crossroads——Speech by Iouett ·
Shouse
Price Control--An Analysis of Experiments and QE  C4
Recommendations for the Future V   I
Yesterday, Today and Tom0rrow—A Review of 5   .,1
Factual Analyses issued by the American Lib-  "’;$‘*ii  
‘ erty League and a discussion of the Legislative H ’?I‘y tj}
Situation. , A
The Labor Relations Bill—An Analysis of an _
Undesirable Measure W
Government by Experiment—Speech by Dr. Neil
Carothers AMERICAN LIBERTY LEAGUE
* National Headquarters
NATIONAL PRESS BUILDING
AMERICAN LIBERTY LEAGUE WAsmNoToN, D. c.
NATIONAL PRESS BUILDING
WASHINGTON, D. C. · * *
¤%4 Document No. 29

 j How Inflation Affects the
Average Family
ir
L ZBECAUSE I believe we are on the threshold
1 of a devastating inflation, it took no effort to
persuade me to embrace this opportunity to
  address the radio audience tonight. Indeed I
A am deeply grateful to the American Liberty
f League, under whose auspices I speak, for giving
, me this chance to make the American people
i more conscious of the peril of inflation and of
what it will mean to the average family.
The American Liberty League, for the seven
months of its existence, has vigorously striven
to arouse the nation and to make it sensible of
the momentous current changes which unless
impeded spell the breakdown of our traditional
institutions, our system of government, and our
economic philosophy. It has been challenging
the need and wisdom of Executive encroach-
ments on the legislature and demanding that
_ Congress awake from its complacent self-efface-
ment and resume its role of law-making. For
want of an aggressive and well·organized minor-
ity in Congress to force debate and discussion
of the New Deal proposals, it has seemed wise
and expedient for it to study and report on
important legislation under consideration by
Congress, not in a narrow partisan way attack-
ing the present Administration, but rather com-
mending or criticising fearlessly in the public
interest. Among these efforts is its presentation
of the dangers of inflation and its support of the
President in using as little as possible the in-
flationary powers given him in May, 1933.
In such service the League deserves the sup-
port of the American people. It welcomes to
membership any American citizen, man or
· woman, who believes in the principles enun-
ciated in our Constitution and the Declaration
of Independence, and who wants to continue
_ our traditional form of government and our
economic and social system. In order to join
all one needs to do is to write to the American
Liberty League, at the National Press Bldg.,
3

 Washington, D. C., for membership blanks and existing supply of money and credit; and the
free literature. Although it is supported by higher rate of turnover may be caused either
subscribing members, no money payment is re- · by greater confidence in the business situation,
quired and all are welcomed to membership. or by fear of the currency itself-—the desire to
My remarks this evening A spend one’s money or bank balance for goods
Impertgnee will be directed to the   gr Services before it loses value. The expendi-
of The American home and fam- ture for anything means, of course, a greater
Family ily. This relationship still , demand for that thing, and a consequent boost
` dominates our social and   of its price. Not all prices will rise simultan-
economic life. lt is the welfare of the individual eously or by equal amounts, because increased
as a member of a family rather than as an in- expenditures for different things are not made
dividual that is significant. More than four- at the same time and to the same extent; it is
fifths of consumers’ outgo centers on family life possible indeed that the price of some things
and only a minor fraction consists of spendings may not rise at all or may even decline; but
for strictly individual enjoyment. In most the average of all prices will rise, and one
families, the incomes of the various earning measure of the inflation is that average price,
members are consolidated and used as a unit to or the index number based upon it.
maintain and advance the welfare of the group. The effect of inflation on the family, as upon
The current depression has resubstantiated the everything else, be it economic, social, political,
Hnancial bonds and responsibilities of the religious, international, or what not——comes by
family group. lf inflation comes, dependence way of price change. Changes in the price of
upon paternal, filial and fraternal relations will different economic categories affect the family’s
grow even more, in the mad effort to sustain earnings, its expenditures, its savings and prop-
social security. erties owned, and its debts; and even personal
Time does not permit nor is it my purpose _ relationships within the family and between
to develop at any length the reasons why it families, as well as with other social institutions,
seems that inflation is inevitable in our country, feel the disrupting Hand of price.
why the monetary, banking, budgetary and The strength and havoc of this disruptive
other policies of the Administration are driving force varies with four features which character-
us fast toward this inevitable outcome, and why ize it:
it is improbable that inflation can be stopped 1. The extent to which the price level rises.
or controlled; or to estimate how high the price The price level in the United States during the
level will rise and when the ascent will start late war rose to 247 per cent of the 1913 base;
and when it will reach its height. I intend that of France reached 854 per cent in 1927;
rather to dwell on the economic and social while that of Germany soared to a trillion times
havoc wrought by inflation in the American · the 1913 level; and the damage in the different
home and family. countries was somewhat proportionate to this
Let us use this term in- depreciation of money.
What flation to mean an in- 2. The rapidity with which prices rise. If
Inflation crease in the general prices rise slowly, it is possible for the parties
Means level of prices caused by to contracts of debt or purchase to anticipate
an increase in total ex- and avoid the worst damage and for consumers
penditures at a time while the goods available to change `their standards of living without
for purchase are not correspondingly increased utter collapse; but if the price level jumps say
. in amount. These larger expenditures may be 50 per cent a year, only the most astute and
effected by a greater supply of money or credit facile can save themselves from ruin.
or simply by a more rapid turnover of the 3. The degree to which prices of all kinds of
4 5

 goods, wages, rents, interest rates, and other and currency. The total monetary gold stock
Y forms of income move together. Probably the of the United States on April 5, 1933, was $4,-
most paralyzing and destructive feature of in- 283,000,000; from that date to April 1, 1935,
{lation is that these items move at different through gold importations and the devaluation
rates and times and directions. These disparate {_ of the dollar, these holdings were jumped to
movements break the regularity, synchrony, and $8,563,000,000, or almost exactly doubled. The
equality of receipts and expenditures; all con-   reserves of the member banks are also now
tracts are vitiated to the favor of one of the p more than double the required legal reserves,
parties, and one group loses its purchasing and there is no abatement in the growth of
power over another. these excess reserves. This in spite of the fact
4. The consistency and steadiness with which that on March 27, 1935, the deposits of member
prices rise. lf prices move by a well-defined banks were only 3.3 per cent below their figure
and measurable trend, the parties to contracts on March 27, 1929, when business was at the top
of loan or sale can partially protect themselves of the boom. Since May, 1933, when Mr. Roose-
against loss; for instance, if the price level is velt first allowed reports of condition, the de-
rising 5 per cent a month and this rate of rise posits have expanded 27 per cent.
can be depended upon, a lender of money for There are clearly present today, therefore,
30 days can ask of the borrower a sufficiently r the elements of a credit inflation of an explosive
high rate of interest to cover foreseen deprecia- and dangerous character. The mere existence
tion of principal and interest. And similarly of this vast inert body of credit will not of
wage, salary, and rent agreements can anticipate itself produce inflation. It must be made to
the depreciation of purchasing power of money, circulate through the development of a mass
and the buyers and sellers of goods can adjust psychology of great fear or great confidence.
their prices to fit the prospective changes of Whenever the public psychology changes, either
value. But if the inflation proceeds by jumps through fear of inflation or of government
and reactions, without apparent rhyme and credit or through sanguine forecasts of busi-
reason, utterly unpredictable, all business rela- ness activity and profits, the basis exists for a
tions are reduced to gambling and losses mount tremendous expansion of bank credit. The
and are inescapable. In actual fact inflation - Federal Reserve Bank of New York in its last
utterly disrupts business and industry, breaks annual report estimated that existing reserves
down all traditions, stabilizers and codes of if would support $80,000,000,000 of deposits. Pro-
normalcy, and raises the psychological factor to r fessor J. F. Ebersole of Harvard University,
the delirium height. The shift from boom to estimates that if business does not recover, the
panic to boom is evanescent. lu this t0pSY- monetary expansion can run to $65,000,000,000,
turvey state, defense of fortune through fore- and if it does recover, to $93,000,000,000. The
casting is all but impossible. figure of $65,000,000,000 is confirmed by Pro-
The listing of these four fessor Hudson M. Hastings of Yale University,
Foundation t€atu1‘€S of intiati0¤ that who declares “that we can finance full business
Has Been m€aS¤1`€ itS St!-'€ngti1 and activity at about 3% times the present level and
Laid havoc helps US to oon- still maintain” the legal reserves. Moreover, if
06iVB h0W i11fiati011 will the velocity -of circulation rises, as it always
react on the average American home. The 1*380- does during inflation, and if we continue to buy
ti011 is $6611 to depend, among 0ti1€1‘ things, on gold and silver, and still more if we devalue the
the extellt to which tha P1’i0€ level 1’iS€S· I do dollar further, this potential inflation is multi-
not know how high it will rise, but I can con- plied accct·dingly_
Hdently say that the basis is laid for the greatest It appcat-S, thcrcfctc, that unless ccmc tm.
°XPanSi9n in ine niSi9i'Y of American banking foreseen preventives are originated, we are faced
6 7

 with an iniiation that will exceed anything our parably with his cost of living, but the deficit
country ever experienced. If it is allowed to may be in whole or part offset by the steadier
run its course and merely controlled when it employment and extra over-time. Some of the
reaches the maximum expansion possible within family’s expenditures will not rise as fast as in-
the existing legal reserve limitations, the infla- _ come, others will go skyrocketing. The land-
tion will apparently approach that of France in J lord will not advance the rent at once and never
the post-war period. In default of such control, , adequately; the insurance premiums will stay
the experience of Germany will be more com- constant; the rates for streetcar, bus, railroad,
parable to what we may expect. gas, telephone and electricity service will lag;
The most profound re- the taxes will rise dilatorily; the interest pay-
Dispersion cult gf ini-lotion is the ment on the mortgage on the home will remain
of Property redistribution of wealth fixed- On the other hand, the cost of food,
and Income and income among the el0lil“1eS, and lt1X11I'ieS will rise quickly and much,
. different classes of in- Since debts are in fixed amounts, higher money
come recipients. This redistribution is effected illeomes make it easier to liquidate do})tS_ On
through the differences in extent, time, and the other hand, all receipts of interest and prin-
direction with which different prices and rates cipal are in dollars of declining purghasing
move. Economists call this phenomenon the power, and all bank deposits, bonds owned, and
“dispersion” of prices. insurance policies are losing in purchasing
The reasons why prices disperse greatly dur- power faster than interest is accumulating on
ing inflgtign oro gggy to Seo, Tho use of rnoro them. It is painful to see these objects of thrift
money and credit in the purchase of certain dissipated in thin air through ng faint of the
things means a greater demand for them, and if SaVe1‘·
it is not possible to increase their supply equally The whole picture is a
fast, their prices rise. The more perfectly the Disheartening disheartening one — of
market is organized and the freer is competi- Picture unearned and undeserved
tion, the quicker is the response of price; for Presented riches of a newly rich
this reason the basic raw materials lead the way - class, who were so cir-
and real estate lags, and Wholesale Prices risc (X CuIHSta.HC€d or WCYC able to   thCIn.SC1VCS i.ntO
sooner and more than retail prices. Some prices _ Stten circumstance that they received forms of
crc lethargic on account of tradition oi- con. ' income which were rising faster than their ex-
tract, for instance, rents, wages, and salaries,   Pendtttn`eS—tne induetrialist, the speculator in
interest on bonds, and bank balances,_public Steeka and commodities, the proiiteerwiio mo.
utility rates, hospital fees and university tui- n°P°nZed Some Commodity or service! And on
tions, and insnrcncc Premiums. the other hand, a picture of undeserved losses
The welfare of any family in this mélee of and deeeendtng Standard of nVi¤g f01‘ people
changing prices depends upon the sources of its whe ned tttWeY$ been 1‘ega1‘ded the very back-
income and the distribution of its expenditures. bone of the Dation!
To tho dogtco the incomc is in the form of The outstanding economic and social result
dividends and profits, it is likely to expand fast cf etn`1'eneY depreciation is the sudden and cx.
and the equities owned in real estate, corporate PenStVe enalige produced in the distribution of
stocks, commodities, and trading or servicing Weettn and tn°°me· The gains of the agricul-
linos will grow in doutn. Va]no_ If tho inoomo turists, industrialists, speculators, and profiteers i
is in the form of rent or interest or salary, it are almost entirely at the expense of other
may not be able through private or collective etense interest, Wages, and other forms of Hxcd
bargaining to advance   l10u1`lY W&g6 1'8lZ€ 00m' mC0mc’ Sugcln and those who Pay them pI'0fit
a 9

 because they are paying less and less real value average 86 Pei, cent in value in the yesrs 1923
as the general price level rises. Similarly the and *24, and many were cXtjngujShcd_ The Pm.
Pe°Ple Wlie Own r’°nds» inertgages» insuranee fessor’s yearly salary fell to a fraction of a cent.
policies, bank balances, and other evidences of The tote] endewinent ei: the Pasteur Institute
i¤debted¤ess stand lielPlesslY by Wliile tlle Value I after inflation and stabilization was less than
of these sinks; and meantime the corporation, 40 pei. cent ei- ite nrewni, ninennn The Pup
the mortgagor, the insurance company and other chasing power and snisrnneying newer of su
debtors sein is properties es the erediters lese· i charitable, religious, and other foundations were
The industrialist loses least, because his income Sealed in siinihn. ni.enei,tiens_ The resi income
is largely is the ferm ef prefire sud his erirse of the German industrial population by Ne-
is fel-` wages, salaries, i`ents» interests Payrnents vember, 1923, was about 40 per cent of the 1913
ef PrineiPal¤ and taxess ell ef Wnien sre lag' level despite heroic efforts of the government
gards. The result is a tendency to the concen- to boost wages end sehn,ies_
tration of wealth in the hands of industrialists, But why repaint this terrifying Picture with
` agrieulturists» lierrewerss and sPeeulat°rs is which the civilized world is already too famil-
stocks and commodities and an expropriation ini.? Whether one thinks in terms of the s0_
of all 0tl1e1‘ elesses· called moderate inflation in France or the utter
ln general PaYrells lag inflation in Germany, can sane people deliber-
salaried fer llellind the rise is ately and wilfully flirt with such a dangerous
Employcs general Priees end in tne instrumentality? ls the Governor of the Fed-
Suffer eest ef living- lu Ger' eral Reserve Board justined in branding the
nianY» ter instance. dur" apprehensive as "silly” when they see our coun-
ing tlie Years 19224 tile working eless. despite try proceeding on exactly the same course as
iull and steadY einPleYrnent» Wes ehl`0nieellY France? Can we be reassured by the head of
underpaid and half-starved. The middle-class N R A that there can he ne innstien for six
in urban centers suiiers niest lieeeuse tlieY ere · years under Mr. Roosevelt when his every bank-
least able to defend themselves, composed as mg and monetary nehey is inflationary? To be
they are largely of PeePle with smell iixed in- indifferent and complacent under current con-
ccmes. such ss salaried eiiieisls and clerks. re-   ditiehe seems like the height of folly for those
elPients ef Penslensv and little irresrers liVing f who love our American home and other institu-
on interest and rent. Their savings disappear, i ticnss
their pensions and interest or annuities evapo- _
rate, and their salaries rise but little. _
The depositors in German savings banks who i
failed to withdraw their deposits lost all but an f
infinitesimal part of their savings; those who
were astute and quick rescued some of their
savings by withdrawing and investing them
frantically in anything whatsoever whether they n
needed it or not. Similarly Austrian savers who
failed to buy goods and services with their ac- ‘
cumulations lost all but 0.7 per cent, and the
French all but 23 per cent. By the end of 1923
the assets of German life insurance companies
contracted to 4.5 per cent of their 1913 value, A
and the French to about one-fourth. Univer-
sity endowments in Germany shrank on an
10 1]