Statement by President Herbert Hoover on March 8, 1932

This statement was issued by President Herbert Hoover on March 8, 1932:

“The whole of the administrative officials are cooperating with the special Economy Committee appointed by the House of Representatives in the drive to bring about further drastic economies in Federal expenditure.

“You will recollect that the budget sent to Congress represented reductions in expenditures for the next fiscal year of about $365 million below the present fiscal year. The House Appropriations Committee has reduced the amounts of bills so far reported out by about $112 million. Of this, however, between 60 and 70 million is a deferment until Congress meets next December when they will be compelled to meet positive obligations by deficiency bills. To this extent, therefore, the reductions do not help next year’s expenditures.

“In order to meet the requirements of the Ways and Means Committee that expenditures must be reduced by $125 million in order to balance the budget, it is necessary that further cuts be made. There is very little room left for reductions by administrative action and the House Appropriations Committee has passed upon the major supply bills except the Army and Navy. Further economies must be brought about by authorization of Congress, either by reorganization of the Federal machinery or change in the legal requirements as to expenditure by the various services.

“The Director of Veterans’ Affairs has proposed to the special House Committee on Economy some changes in the laws relating to pensions and other allowances which would produce economies of between 50 and 60 millions per annum. The Postmaster General is placing before the committee changes in the legal requirements of Post Office expenditures. The Secretary of Agriculture has suggested changes in the law requiring expenditures in the Department of Agriculture, and the other departments are engaged in preparation of similar drastic recommendations.

“I believe the Committee on Economy, through administrative reorganization and such methods as I have mentioned, will be able to find a large area of economy.

“Nothing is more important than balancing the budget with the least increase in taxes. The Federal Government should be in such position that it will need issue no securities which increase the public debt after the beginning of the next fiscal year, July 1. That is vital to the still further promotion of employment and agriculture. It gives positive assurance to business and industry that the Government will keep out of the money market and allow industry and agriculture to borrow the monies required for the conduct of business. I cannot overemphasize the importance of the able nonpartisan effort being made by the Ways and Means Committee and the Economy Committee of the House whose work are complementary to each other.

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28 Responses to Statement by President Herbert Hoover on March 8, 1932

  1. Dan Kervick says:

    I just shared this on Facebook.


  2. RG says:

    Scott Sumner responded to your post on his blog, The Money Illusion.

    Warren, You said;

    “reserves balances are best thought of as a residual
    of lending.”

    In my view reserve balances are best not thought of at all. (Unfortunately with IOR that’s not possible.) But the monetary base is quite important, and has a strong influence on the amount of loans and deposits. When there is no IOR, then countries that increase their monetary base by 50% per year will tend to also increase loans and deposits quite rapidly (except obviously at zero rates–but zero rates are unlikely to persist long if the base keeps rising by 50% per year.) Slow the growth of base money and you will usually slow deposits and loans.

    I wouldn’t say loans create deposits, rather banks make a joint decision as to the profit maximizing level of loans and deposits. Of course none of this has anything to do with monetary policy. Drug dealers probably have a bigger impact on the demand for base money than banks, and no one models the demand for base money from drug dealers. Banks are just firms that use base money, like Walmart and other firms. The price level is detemined by changes in the nominal supply and real demand for base money. No reason to even discuss banks.

    The question of whether loans create reserves is very complicated, and depends on the Fed’s policy for adjusting interest rates. If they target the base, loans may create some reserves by attracking cash held by the public into the banking system.

    If they target interest rates, then you need to look at the Fed’s policy for adjusting rates. If they follow a Taylor Rule, then if an increase in loan demand threatens to raise inflation, this will cause the Fed to riase rates, which will prevent the base from rising as much as if the Fed didn’t raise rates. One can’t make any simple generalizations based on accounting identities, it depends on the equilibrium outcome of many decisions made by many parties.


  3. Charles Yaker says:

    What I find interesting is it doesn’t seem to matter whether we are on aGold standard or Fiat currency. Maybe it’s because everybody other then MMT thinks we are still on a gold standard.


    Mario Reply:

    @Charles Yaker,



  4. Tom Hickey says:

    I’d put the world now at about 1930-1931, with a Credit Anstalt moment in the offing, considering the way the Europeans are acting. This comparison would have Obama reflecting Hoover in the US at that time. Hopefully, we will escape a repeat, but the parallels are eerily similar in some ways.


  5. beowulf says:

    Pentagon prepares for economic warfare
    Behind the scenes, the military are worried about the market. For who owns much of this debt? China, the US’s most powerful rival and threat… Rickards is not a soldier but a banker. He was joined in the war game by dozens of his Wall Street colleagues, flown in from Manhattan to this bunker at the Applied Physics Laboratory in Maryland for the two-day event in 2009, when the Pentagon started to get really alarmed… At the end of that Pentagon session, the 80-odd players returned from their bunkers and assessed the damage.
    China won, without so much as reaching for a gun. And the soldiers looked at each other and wondered if it was still only a game.”

    A Member of Congress should write the Pentagon a letter stating that “Unless the DoD includes economists and traders who can suggest ways to mitigate or avoid this alleged threat to our country and its people, then any use of appropriated funds to conduct these economic war games is, as former Air Force officer and current Texas Governor Rick Perry might say, an “almost treacherous or treasonous” violation of 18 USC 407. Please contact Mr. Warren Mosler of Valance Co, Inc. for a list of possible “Team B 2.0″ participants.”

    18 USC 407. Study or plan of surrender; use of appropriations
    No part of the funds appropriated in any act shall be used to pay
    (1) any person, firm, or corporation, or any combinations of persons, firms, or corporations, to conduct a study or to plan when and how or in what circumstances the Government of the United States should surrender this country and its people to any foreign power,
    (2) the salary or compensation of any employee or official of the Government of the United States who proposes or contracts or who has entered into contracts for the making of studies or plans for the surrender by the Government of the United States of this country and its people to any foreign power in any event or under any circumstances.

    Too subtle? :o)


    Adam (ak) Reply:


    Seems we both have agreed. Pushing MMT to the defense officials and their political associates is in my opinion the only serious option left as the rabid austerians’ march seems unstoppable – until the real productive economy is destroyed beyond repair.

    This is their new target: food stamps

    “Despite the bipartisan support for the program in the past, some of the recent political rhetoric has food stamp advocates worried.

    Presidential hopeful Newt Gingrich last year derided Democrats as “the party of food stamps”. And Republican leaders in the House of Representatives propose changing the program so that the funding is through a “block grant” to the states, rather than allowing it to grow automatically when needed due to an emergency, such as a natural disaster or economic crisis.”

    We can compare this with the next target of the Chinese, your main economic competitors:

    “With its new five-year plan, unveiled in March, the Chinese government is hoping to challenge the dominance of Western technology. The plan focuses on seven strategic industries, into which it could plough as much as $1.5 trillion (£921bn) in the hope of kick-starting the economy’s move up the value chain.

    Some of the highlights include: high-efficiency, energy-saving technologies, cloud computing, bio-technology, high-end manufacturing including aerospace, smart grids, advanced materials and composites, and electric cars.

    It is not an unusual shopping list – most governments in the world have expressed similar goals – but it is unrivalled in its breadth and in the scale of resources that are likely to be applied to it. ”


    Tom Hickey Reply:

    @Adam (ak),

    “Pushing MMT to the defense officials and their political associates is in my opinion the only serious option left as the rabid austerians’ march seems unstoppable – until the real productive economy is destroyed beyond repair.”

    Agreed. Most leverage.


    beowulf Reply:

    @Tom Hickey,

    Well if anyone knows any of the members of the House or Senate Armed Services committee, that’s who to talk with (other than Warren’s ole buddy Dick Blumenthal, I mean).

    While they’re at, they can get the Navy in the nuclear power business and boost Army’s existing authority over railroads and internal waterways. :o)

    Ralph Gardner Reply:

    @Tom Hickey,
    With 50,000+ of the total 500,000 or 10 percent of the factories moving to China in the past 10 years to take advantage of their devalued currency and who knows how many moved since they started devaluing in 1980 I’d say a big chunk is already destroyed at least as far as employment for US citizens goes.


    any reason why that particular type of employment is critical for the Us?

    zanon Reply:

    @warren, this type of employment is important for us because not everyone has capability of being hedge fund manager


    they probably do, but that’s another story.

    there is always more to do than there are people to do it. Life is a permanent labor shortage

    Ralph Gardner Reply:

    @Tom Hickey, A lot of other jobs are dependent on manufacturing such as product design and engineering, research, job accounting, planning and so on.

    It doesn’t seem to be good National Security policy to have our necessities like clothes produced by a foreign power that had been threatening to use capitalism to defeat the capitalists for years and seem to be doing it.

    When the US embargoed toilet paper and other things from Cuba it wasn’t pretty with libraries being raided for the paper in the books. Here in the Northern states warm clothing is a necessity in winter.

    It doesn’t seem that prices dropped when production moved to China either, profits increased greatly and it seems if competition was effective prices should have dropped and profits should have become more normal.


    manufacturing to day is less than 10% of global gdp and it’s mostly all commodity like products where anyone can buy the machine tools and have at it.

    therefore basic manufacturing tends to drift to the nations who figure out how their workers can live on the fewest calories

    Adam (ak) Reply:


    I have never disagreed with you in regards to the principles of Functional Finance and the absurdity of the austerity.

    However I think that there may be a serious side-effects of the de-industrialisation of the US in the future which I think should lead to reconsideration at least a few things.

    By de-industrialisation I mean a diminishing role of the manufacturing sector in the American economy:

    BTW the manufacturing share of the global GDP is about 17-18% and falling very slowly – source:

    Manufactured products are nowadays relatively cheap compared with these services which cannot be outsourced overseas.

    This process is in my opinion more a result of globalisation than using more advanced technologies.

    What will happen if the exchange rates affecting the prices (and share of the global GDP) adjust? What will happen when the Chinese workers demand higher wages (what has already been accommodated in their 5-years plan) and China switches to a different model of development? Will the inflation in China lead to even more extreme austerity in the West (due to fighting the imported inflation – like in the 1970ies) – or will the manufacturing move to other cheap countries?

    I don’t know for sure but if the Chinese wisely invest in the developing countries they will be able to control the whole manufacturing food chain for certain groups of products.

    We have already seen what has happened when China dominated the rare earths market by undercutting the competition and then started dictating prices on their own terms. How long does it take to reestablish mining, processing and refining of these metals? We are essentially talking about digging out dirt and then smelting metals (which is not trivial because they need to be separated).

    What about more sophisticated products?

    This is all about achieving a certain level of monopoly. That’s why Apple sued Samsung for infringement of bogus patents:

    If companies can do that what about whole countries? China Inc is vertically integrated with the almost every American industry. If the Saudis could have influenced G.W.Bush what about the country which is much larger and has created much higher dependency of the leading American corporations?

    In the future the Chinese may simply use American corporate world as their proxies to subvert the Congress and Administration. They don’t really need any missiles to win any conflict with the country which has so dysfunctional “democratic” political system where the lobbyists and the NGOs like Peter G. Peterson Foundation can dictate the macroeconomic policy.

    This is in fact the key National Security issue – how to defend the country when a stealth trade war breaks out.

    The possible influence of the foreign wife of a certain media mogul on the austerity propaganda line peddled relentlessly by his Corporation is worth investigating in that context.–534

    What is wrong with the German and Japanese model where manufacturing contributes to 24% and 21% of GDP respectively? Shouldn’t the money be spent wisely on stimulating manufacturing the strategic products in the US?

    The key question remains not about manufacturing in general but about manufacturing of the high-tech products. Once these capacities are lost – how can the US pay for all the imports? One day the exporters will demand something else not just USD created by pressing keys on someone’s keyboard. This is inevitable even if the American government is doing everything they can do (including imposing austerity) to defend the global reserve status of the Dollar.

    We must also take into consideration the future evolution of commodity prices. Once China and India increase their own consumption the price of oil must go up.

    How well is the American prepared economy prepared for that event? What is the Congress going to do then?


    worst case imports are limited to export revenues.

    meanwhile, china is fighting our tariffs on tires and most everything else, and every country in the world is begging to be allowed to sell to us and net save our currency.

    Ag used to be near 100%, now it’s less than 1%.

    And while manuf is 18% of world gdp, do you happen to know what % of people are employed in it?

    And like ag, my guess is it’s probably going to continue to decline as an employer over time.

    also, we’re all interdependent, from the individual level on up. So I’m ok as long as we
    make and source things of militarily strategic importance here in the states, and, of course, sustain full employment policy.

    Mario Reply:

    @Adam (ak),

    god damn it!! Since when did it become “more American” to let China blow past us in R&D and technology?!?! WTF is wrong with this country!!!

    The only thing we might be beating China on is the percentage change of the population that our government is royally f-ing over on a yoy basis!!!!


    Tom Hickey Reply:


    Let’s not overestimate China at this point. The comparison of the Chinese and American economies is often blown way out of proportion wrt the facts. But we shouldn’t underestimate China either.

    Mario Reply:

    @Tom Hickey,

    agreed and if we keep these rates of change for 10 more years for example, the gaps get closed quite quickly.

    Adam (ak) Reply:


    If some low-value added manufacturing jobs go to developing countries and workers sacked in the US or Australia get an alternative employment nobody will cry. International trade leads to a win-sin situation.

    However the current persistent imbalance is a symptom of a very serious problem. Western industry simply loses competition with China – often as a result of the currency exchange rates not reflecting the balance of trade.

    If fabs making computer chips are relocated (this is what Andy Grove wrote about a year ago) this means a potentially dangerous situation even if workers who work there are not highly qualified. But a fab is a quite sophisticated and capital-intensive structure. You can’t set it up in a few weeks time.

    Jobs in the service sector may be well-paid and there is no competition from overseas but millions of lawyers and bankers won’t be able to build a single electric powered car (especially if all the rare earth metals needed to make magnets have to be bought from China).

    It takes years to build from scratch or rebuild after a collapse any high-tech industry (as in Russia). Even in the IT sector startup companies usually need several years to mature (Google and Facebook are good examples).

    Markets cannot efficiently allocate resources if pricing signals are distorted due to currency pegs. In fact I am not entirely convinced that markets alone should do allocation at the macro level for example due to the environmental concerns which cannot be properly priced.

    The Chinese will never agree with the statement that objectively and regardless of the circumstances imports are gains and exports are losses. I agree with the Chinese on this point. I think that the simplistic interpretation of Adam Smith misses the point of creating the real wealth of the nation in the long run.

    The British colonised India mainly because of the superior organisation and military skills. The colonial order required colonies to make labour-intensive and low-value-added products. Industrial products were manufactured at the centre of the empire. The price paid for labour was different – because there was more productive capital in England than in India and England developed technological superiority. As a result colonies were poor and the centre was rich. This was called “exploitation”. If we voluntarily de-industrialise we will ask our trade partners to exploit us as well.

    If nothing changes here in Australia we will be soon an economic colony of Japan, China and India. We will be a cheap supplier of coal, iron ore and agricultural products. Because it is too expensive to manufacture anything else – or because our currency is simply overvalued. This will not last forever though. One day the currency will fall.

    I was born in Poland so I could tell the difference between the lousy stuff coming from the communist East and the technologically advanced products coming from the West.

    The last century was dominated by the US and Western Europe because of the technological and manufacturing superiority. I understand that globalisaton can be good for everyone but if the US loses the advantage nothing will help. What’s the difference between the average guy from China and an average American? These people from China study and work hard because they want to be rich. People in the West often just want to be rich and consume. Who will be able to consume more in 50 years time?

    The current crisis is not only about losing jobs it is about losing manufacturing capacities I am afraid. Capitalism is demand constrained but there are many capitalist countries which are underdeveloped (for example in Latin America) and any volume of aggregate demand won’t help there. They need skills and productive capital. You can print dollars but you can’t print human skills.

    MMT should be a tool enabling the state to direct real resources in the wisest way. I am not a supporter of central planning or state-owned industrial behemoths but neglecting investment in the infrastructure for the post-oil era is the gravest mistake the American government can make while the Germans and the Chinese are pouring funds into that area of technology. You either adapt or perish. A few more years of austerity will do.


    Neil Wilson Reply:

    @Adam (ak),

    The theory of Comparative Advantage is best dealt with by Chomsky’s quote (on the usual Ricardo example of England and Portugal).

    “if you want to know how well those theorems actually work, just compare Portugal and England after a hundred years of development.”


    comparative advantage assumes full employment


    when austerity means cutting back on education and and piling up teachers in the unemployment line i’d say it’s counterproductive

  6. Interesting. Must be great minds thinking alike. I just quoted from Hoover and from Obama on the Monetary Sovereignty site. The comparisons are frightening. We have not learned a single thing in the past 80 years.

    Rodger Malcolm Mitchell


    roger erickson Reply:

    @Rodger Malcolm Mitchell,

    Actually, we’ve learned plenty, as both you and Warren, and many others prove. It just so happens that key people in key places just aren’t listening right now.

    If America only knew what America knows, … no one would care about the CarpeTeaBaggers, Obamerites, or Hooverites or … CarpetBaggers .. (have we been through this all before?).

    If it’s important, then it’s ALWAYS an issue of making them listen.

    If yer mule ain’t listening, there’s a hierarchy of attention-grabbing techniques, right up to the 2×4.


    Ralph Gardner Reply:

    @roger erickson,
    I’m sending this and other posts to my local TV station and station personal, maybe a grassroots approach might help.


    Sidney Wolfe Reply:

    @Ralph Gardner,

    Warren you have to read the last paragraph on Fox sometimes, words of wisdom like these needed to known!

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