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James P. Warburg Clarifies Finance in ‘the Money Muddle’

July 8, 1934
See Original Daily Bulletin From This Date

The Money Muddle By James P. Warburg. Alfred A. Knopf, New York.

As a result of the hectic activities of the twenties, the greater part of the 120 millions who comprise America’s population had become economists and experts in finance. Prior to this period, there were only a select few who understood the intricacies of finance, and the lay citizen cared little, if anything, whether his dollar was protected by a metallic cover to the extent of 100 per cent or 70 per cent, or, for that matter whether it had any cover at all.

The war and the period following the conflict changed all this. The speculative boom which developed had been too tempting to be resisted. The huge fortunes made during the spectacular advance, and the losses sustained in the subsequent and ###vitable collapse, decided those affected by the rise and fall of prices to investigate the causes, and to propound remedies. Those concerned with these questions most are America’s Chief Executive, elected in November, 1932, by millions who “had voted, not for Roosevelt, but against the distress that had befallen them since the depression started,” and “the supporting cast.”


How this has been done, why we have done it, and where it leaves us at the present time, is told in detail and rather convincingly by James P. Warburg in “The Money Muddle.” A banker of renown, a practical economist and trained expert in finance, with a background such as few of America’s financial leaders have been fortunate to acquire, Warburg knows whereof he speaks, and is worth hearing.

Following a somewhat elementary treatment of money, its origin and its function, abstaining from technical discussions which belong “in a long and scientific book, which is not,” the author ventures some observations on the war debts and the impossibility of their payment to America “so long as America has a favorable balance of payments,” without, however, reminding us that if Germany, the principal debtor, could see its way clear to reduce her huge military expenditure, there would be enough to pay reparations which, in turn, could be employed by the recipients towards the payment of the war debts to the United States.

He does, however, refer to the Fatherland’s dishonesty in regard to its obligations to its own citizens, by charging that it “has practiced the rankest kind of thievery upon all of its citizens who had purchased its obligations.” Parenthetically, Hitler’s Germany has practiced the same type of thievery upon Americans who have become owners of German state, city and corporate bonds.


One will read with considerable interest of the activities of the so-called Committee for the Nation, “a small group of industrialists, later enlarged . . . to propagate the idea of devaluating the dollar.” Warburg reveals what seems to be for the first time, that the committee, amply supplied with funds, had proceeded to spread “very ably-conceived propaganda” through all parts of the country, and that “an important tough unseen figure in this organization is a Dr. E. A. Rumely, whose colorful past history includes a conviction under the Trading with the Enemy Act.” He might have added that it includes also activities on behalf of the Ku Klux Klan and its leader, Stephenson, later committed to prison for a rather serious offense.

Since Rumely, convicted and sentenced for pro-German propaganda, is admittedly the spiritus rector of the committee, and since he began to advocate the abandonment of the gold standard at about the time Hitler came to power, is it not possible that he may have acted upon orders from across the sea, because a cheaper dollar would benefit Germany more than any other country, because the bulk of her debt was payable in dollars?

As remedies for our ailments resulting from the fact that “we have been on a physical, moral and financial drunk,” Mr. Warburg proposes:

(a) Improvement of our system of taxation.

(b) Adjustment of the nation’s debt burden (this reviewer has always found it difficult to subscribe to these who feel alarmed over the size of our national debt, because compared with our revenues, our indebtedness compares very favorably with that of practically every other important nation).

(c) Unemployment and old-age insurance.

(d) Recognition of the necessity for common sacrifice and support of self-government, rather than asking for government support.

If we attend to these “we might recapture some of our lost pride in good craftsmanship . . . we might recapture a little of our lost leisure . . . we might even recapture our vanished faith.”

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