National Affairs: What Next?

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President Roosevelt was well aware that unless he was able to make a substantial showing toward recovery by Jan. 3 when Congress next sits. Senator Harrison's prophecy would doubtless be fulfilled and currency inflation would be foisted on the country by an hysterical legislature. To head off such a development the President last week went off on a sharp credit inflation tack.

Cheap Billion. Because commercial banks see no good business reason to lend to industry to meet the additional wage burdens of the NRA codes; because the Federal Reserve's open-market operations had piled up an all-time record of $2,202,660,000 in U. S. securities without materially loosening credit; because Federal Reserve member banks had reserve surplus of $600,000,000 available for commercial loans. Reconstruction Finance Corp. was marched into the breach with $1,000,000,000 worth of cheap short-term loans for NRA members.

R. F. C. will let banks have six-month money at 3%, provided they pass it on at 5% to NRA-ers. The 2% bank profit was expected to supply the necessary incentive. For collateral, R. F. C. will accept merchants' and manufacturers' notes on products, raw materials, plant equipment, any odds & ends not already mortgaged. The loans are to be used chiefly to finance higher payrolls until buying orders catch up with NRA wages. Such lendings will put R. F. C. into direct competition with the Federal Reserve system as a discount agency. Declared R. F. C. Chairman Jesse Jones": "This is inflation—the best kind of inflation—credit expansion."

R. F. C. also announced that on Oct. i it would reduce its longterm' interest rate from 4½% to 4%.

Last week President Roosevelt paused long enough to take stock of his recovery program, to weigh its achievements against its failures. He agreed with General Johnson that the nation was about 25% out of the Depression. In August 750,000 persons found new jobs, bringing the total of re-employment since March up to about 2,200,000. But the nation's jobless still exceeded 7,000,000, most of whom would have to go through another bleak winter before getting work. From Feb. 15 to Aug. 15 the index of all farm prices rose from 49 to 72, with 100 (the 1914 level) as the ultimate goal. In 1932 gross farm income was $5,143,000,000. This year it will be about $6,360,000,000. The 1914 level was over $9,000,000,000. Since the President took office, mass purchasing power has increased 16%.

The Farm Front on which he had already fired his heaviest guns was giving President Roosevelt his chief concern. Prices, he declared, must go up another 50%. How this was to be accomplished he did not say.

One-quarter of the cotton crop had been plowed under. For this Agriculture Adjustment Administration was slowly paying out $100,000,000 bonus. Good weather made the yield of the other three-quarters far above normal. Last week spot cotton was selling for a shade over 9¢ per lb. (last year's price: 7¢). Southern planters were demanding currency inflation and 15¢ cotton. A loose law made possible the pyramiding of the 4.2¢ per Ib. cotton processing tax from manufacturer to retail consumer, with the result that the A. A. A. last week had to warn the country against profiteering and price-gouging in the textile trade.