PAGE TWO
HEPPNER GAZETTE TIMES, HEPPNER, OREGON, THURSDAY, SEPT 5, 1935.
BACKGROUND
OF NEW DEAL DECISIONS
THE GOLD CLAUSE DECISION.
By JAMES H. GILBERT.
When the Roosevelt administra
tion came to power In March, 1933,
the banking system of the country
had broken down, credit was con
tracted, confidence strained, gold
was being hoarded by millions of
dollars and the outgo of gold was
threatened by the monetary policy
of foreign countries, most of which
had abandoned the gold standard
but were frantically striving to
strengthen credit abroad and sta
bilize international exchanges.
With the resolution and dispatch
characteristic of the "New Deal"
President, the United States joined
the leading commercial nations in
the abandonment of the gold stand
ard. There will always be economists
who will question the necessity and
expediency of the move. It is not
the purpose of this article to pass
judgment on this phase of financial
policy. Rather it is intended to re
cite the facts as a background for
the momentous decision in the gold
clause cases.
The abandonment of gold at the
old standard of weight and fineness
would of course have been of little
consequence if a vast volume of
pre-existing contracts to pay gold
had been recognized as valid and
other contracts of the same kind
had been sanctioned and encour
aged. Widespread monetary con
fusion would have resulted, prices
and the standard of value would
have rested on no certain basis.
To sweep every phase of the old
deal monetary policy out of the way
and to pave the way for the univer
sal use of the same medium of pay
ment whatever it turned out to be,
was the purpose of the Congress
ional resolution of June 5, 1933.
In this important piece of legisla
tion, contracts for the payment of
gold were declared to be "contrary
to public policy." Obligations to
pay money incurred either before
or after the law was passed regard
less of provision contained in such
contracts, shall be discharged up
on payment "in any coin or cur
rency which at the time of pay
ment is legal for public and private
debts."
The precise foundation or our
currency was somewhat in doubt
until the Gold Reserve Act of 1934
(January 30) and the subsequent
exercise of the extraordinary pow
er granted to the President
By proclamation the bullion con
tent of the gold dollar underlying
the new currency was reduced from
the old standard of 25.8 grains
(nine-tenths fine) io 15 5-21 grains.
Thus the gold content of our dol
lar was shoved down forty per cent
If contracts to "pay gold of the
present weight and fineness" were
recognized, the devalued dollar, de
spite the resolution of Congress,
would not be legal tender for $100,
000,000,000 worth of pre-existing
debts and many more that might
make their appearance.
Despite the far-reaching import
ance of the legal issues involved the
devaluation of the dollar was of
little practical importance. The gold
dollar was merely shrunken to cor
respond with the depreciation of
the paper money that had taken
place since suspension of the gold
standard.
That the devaluation of the dol
lar was a matter of no serious fl
nal consequence is shown by the
fact that it resulted in no material
change in the price level. The new
dollar in purchasing power matched
the one in active circulation and
left the price level undisturbed.
Since debtors, corporations and
Individuals were obligated to pay
$100,000,000,000 insgold at the old
standard of weight and fineness if
the abrogation of the gold clause
by the Act of June 5, 1933, were
held unconstitutional, it would re
quire 69 billions more of current
funds to turn the trick.
Moreover, most of these debts
had been incurred in the prosper
ous period of the late twenties and
the fall in prices since the panic of
1929 had enormously increased the
value of the gold dollar of former
weight and fineness and increased
immensely the difficulties of laying
hands on the old-fashioned dollar.
Several cases involving substan
tially the same issue came before
the Court at the same time.
Typical of these was the tender
by debtor corporations of current
funds in payment of interest on
bonds where both interest and prin
cipal expressly called for payment
in the pre-devalued dollar.
Creditors had rejected payment
and challenged the power of Con
gress to tamper with private con
tracts calling for payment In gold
of a specified weight and fineness.
The precedents were confusing
and conflicting. On the surface at
least the opinion, Bronson v. Rodes
made such contracts agreements
"to deliver a certain weight of
standard gold" "not distinguishable
from a contract to deliver a certain
weight of bullion." Literally such
contracts would have to be fulfilled
"by assay and the scales" and not
"by count."
If, on the other hand, the court
followed the Supreme Court In the
legal tender cases after It had re
versed the decision in Hepburn v.
Griswold, these debts might be dis
charged by anything which the law
designates as legal tender at the
date of maturity.
Indeed, the language of the Con
gressional resolution of June 5,
1933, clearly suggests Chase's opin
ion in the legal tender cases. Debts
are to be "discharged upon pay
ment ... in any coin or currency
which at the time of payment Is le
gal tender ..."
The Court In the gold clause de
cision disposes of Bronson v. Rodes
as a precedent by pointing out that
monetary conditions In 1934 were
very different from those when the
debt owed by Bronson came up for
settlement in 1869.
Despite the issue of depreciated
paper in the Civil War, the United
States mint had not stopped coin-J
age of gold and silver at the old
standard of weight and fineness and
Congress had not withdrawn the
legal tender quality of metallic
money. Two forms of currency of
unequal value were equally recog
nized by law and debtor and credit
or might lawfully choose to pay and
be paid in either.
The resolution of Congress in
1933 and the delegation of the pow
er to devalue had set up but one
standard for the payment of debts,
namely, (devalued) dollar for dol
lar which alone is lawful tender for
debts maturing after January, 1934.
These bonded obligations despite
the gold clause contained therein
were merely contracts to pay a cer
tain number of dollars.
In the gold clause decision we find
the broadest assertion of the power
of Congress not only to coin money
but to establish a monetary sys
tem" and to invalidate the provis
ions of existing contracts that may
interfere with the exercise of this
power.
The Court, held, in keeping with
Julliard v. Greenman, that the pow
er to set up this monetary system
does not reside wholly In the coin
age clause of the Constitution but
resides also in the sovereign pow
ers that belong to the national gov
ernment
The full exercise of this power to
set up a monetary system can not
brook the existence of contracts
calling for the payment of some
other medium than that specified
by Congressional act.
Despite the sacredness of con
tracts in the realm of law, the pow
er to enter into contracts can not
remove the transaction from the
scope of Congressional authority.
Such contracts can not interfere
with the power of Congress to reg
ulate commerce, coin money, estab
lish postofflces, etc., and by the ex
ercise of sovereign power the na
tional legislature may sweep them
aside if they do.
The prevalence of the gold clause
in bonds and other contracts to the
extent of billions of dollars render
ineffective the clearly defined pow
er of the government to "create a
currency and determine the value
thereof."
These gold clause contracts if al
lowed to exist with the sanction of
the Court would increase the de
mand for gold as a means of pay
ment, enhance its value, stimulate
hoarding and export and make un
workable any attempt to regulate
the value of the dollar in the chan
nels of commerce.
Despite contractual obligations
and obstacles the Court concluded
that Congress had the right to re
ject a dual system of currency and
to establish a uniform system by
abrogating the gold clause and mak
ing all payments in one medium.
In the light of the emergency
and the far-reaching consequences
of an opposite stand, the Court was
wise in the selection of its prece
dents. PROPOSALS FOR LIMITING
POWERS OF THE SU
PREME COURT.
By WAYNE L. MORSE
Although there is probably some
truth in the comments of critics of
the United States supreme court to
the effect that the personal philoso
phies of the members influence their
decisions, still we should not over
look the fact that there has been a
marked consistency in the constitu
tional decisions of the court.
True it is that the flexible clauses
of the constitution have been
stretched so that they now cover
many situations which were not
contemplated when the court first
started to give meaning to them.
But for the most part the consti
tutional law decisions, as pro
nounced by the court from time
to time, show a clear resemblance
to parent constitutional law prece
dent and also a sensitivity to new
conditions and changed, social
needs.
The position, training, and ex
perience of the court, the power
ful tradition which surrounds it,
have undoubtedly made It the
greatest stabilizer in our national
life.
I believe that its power to exer
cise judicial review has exerted an
even greater influence on orderly
change than its exercise of Judicial
review. The number of unconsti
tutional proposals and schemes
which have not been approved In
legislative halls because of this
known power of judicial review
must be legion.
Nevertheless, it Is sometimes pro
posed that no act of congress should
be declared unconstitutional by the
court except by a unanimous vote,
or by some ratio other than the ma
jority vote rule.
Critics of the majority vote rule
contend that an issue so important
as the constitutionality of an act
should not be determined by a bare
majority vote because this practice
places too much power in the hands
of one man. The vote of one man
may, and often does, decide the fate
of important legislation in other
branches of the government.
The proposal to require a six-tO'
tnree or seven-to-two vote, or a
unanimous vote, likewise places a
great emphasis upon the vote of one
man because under such a plan a
very small minority of the court,
by holding out can prevent a two
thirds vote, or a unanimous vote,
and thus succeed In having declared
constitutional an act which a clear
majority of the court believe to be
unconstitutional. Thus is seems
that such proposals place a false
emphasis on the mechanisms of Ju
dicial review.
It should be remembered that pro-
posals to change the votes necessary I
to declare an act unconstitutional
would affect only a small part of the
problem. After all, the five-to-four
decisions on constitutional ques
tions are few In number when com
pared with the total number of con
stitutional law cases.
It is true that many of the five-to-four
decisions were rendered in
cases Involving vital social and
economic problems, such as the in
come tax, child labor, and interstate
commerce decisions, but in many
more instances the court has not
been divided even though the Issues
involved have been just as signifi
cant
Thus, the vote ratio proposals
would seem to exaggerate the Im
portance of split decisions and ig
nore the real problem of adjusting
legislative needs to constitutional
safeguards.
Another proposal is that congress
should be empowered to overrule a
decision of the United States su
preme court on a constitutional
question by a two-thirds vote of
both houses of congress.
This plan strikes at the very vi
tals of the doctrine of judicial re
view and would inaugurate a gov
ernment of legislative supremacy
rather than of judicial supremacy.
Its proponents contend that the
constitution reserves legislative
powers to the legislative branch of
the government and that the court
often functions as a superlegisla
ture when by way of judicial legis
lation, it declares acts of congress
unconstitutional.
Of course it Is true that the court
also legislates when it sustains acts
of congress as contitutional by in
terpreting phrases of flexible mean
ing in a light favorable to the leg
islation. Judicial legislation in this
sense is unavoidable and under our
present form of government can be
checked by the amendment process.
However, it is contended that the
amending process is too slow and
cumbersome and the history of the
income tax and child labor cases is
cited in support of the argument.
Although it cannot be said that
such a plan would destroy our con
stitution, neither does it follow that
such a plan would assure us that
the constitution would be more
readily adjusted to social needs
and ends, at least not until we have
a better trained class of political
servants.
After all, the doctrine of judicial
review has met with a great deal
of favor in this country because we
have come to distrust waves of hys
teria and populism which often con
trol legislative power and popular
assembly.
We have learned also that mi
nority rights are easily overridden
by popular opinion and are best
protected by the judiciary. Fur
thermore we must recognize that
private property and the rights of
the property class are likely to be
victimized by an unthinking public.
Undoubtedly the day of constitu
tional interpretation which placed
a predominant emphasis upon the
rights of private property often at
the expense of human rights has
passed, nevertheless, we are a
long way, let us hope, from a re
pudiation of the rights of private
property.
The preservation of the doctrine
of judicial review would seem to be
essential, if we are to preserve and
protect the contributions to our so
cial interests and national life
which the institution of private
property can make.
At the same time, we must not
permit political dogma to blind us
to the fact that millions of Ameri
cans are economically destitute,
made so, for the most part by econ
omic and social forces over which
they have had no control.
The maintenance of national sta
bility depends in a large measure
upon a program of social legislation
which will advance, protect and
balance their interests to the maxi
mum degree compatible with the
interests and welfare of all groups
within the country.
In accomplishing such an end, it
is essential that necessary social
legislation designed to protect and
advance human rights be adjusted
quickly to constitutional demands
and, incidentally, it is paramount
that the constitution be adjusted to
changed and changing social real
ities. In furtherance of such an ideal,
the slogan might well bo changed
from "Back to the Constitution" to
"Forward Into an ever-changing fu
ture with an expanding Constitu
tion." Hog Production Low Till
1937, Late Report Shows
Conditions are greatly Improved
In the meat animal Industries com
pared with a year ago, and the out
look is favorable for some time
ahead, according to a report just
released by the state college agri
cultural extension service. Produc
ers with hogs to sell are favored by
prices more than twice as high as
a year ago, with feed grain consid
erably lower. The Index of the av
erage farm price of hogs in Oregon
at mid-July was 84 per cent of the
1926-1930 average.
With industrial activity and con
sumer purchasing power running
ahead of 1934, and even a smaller
supply of hogs expected to be avail
able for market until production
can be Increased, the immediate
market outlook for hogs Is strong.
If conditions are favorable, how
ever, the pig crop of 1936 may be
25 per cent larger than that of 1935
and by 1937 it will be possible for
hog production to be back to the
1932-1933 level, the report says.
Although beef cattle prices are
materially higher than a year ago,
cattle prices are not as high rela
tively as prices for hogs, and prices
for cattle feed have not declined
so much as for hog feeds, especially
in the west. The Oregon price in
dex is only 67 per cent of the 1926
1930 level. The demand for feeder
cattle this fall will be strengthened
by the abundance of hay and grain
in prospect In the East, while the
scarcity of hogs and Improved In
dustrial conditions are expected to
strengthen market demand for fat
cattle during the next several
months at least Market supplies
of fat lambs and poultry next fall
and winter are also expected to be
somewhat smaller than usual, the
report points out
In respect to the long-time out
look, the number of beef cattle and
sheep In the country next winter Is
not expected to be much changed
from last winter, but thereafter the
trend is expected to be upward for
a number of years, If feed condi
tions are favorable.
The report, which Is available
from county agricultural agents,
also gives outlook information on
poultry, dairy and wheat, and data
on numerous other farm commod
ities produced in Oregon.
Pectin for Jellies Can
Be Made Easily at Home
Fruit pectin extract for use in
making jams and Jellies of fruits
naturally low in acid and pectin
are easily made at home from the
white peel of oranges or lemons or
from apples. Directions for mak
ing the extract and a number of
recipes for using It are contained
in a mimeographed circular, HE
767, just issued by the home econ
omics extension staff at Oregon
State college.
To make the apple pectin, use
firm, tart apples, scrub and cut in
thin slices, discarding imperfect
spots. Use 4 pounds of apples and
4 pints of water for the first ex
traction. Boil, covered, in a large
pan, for 20 minutes, and then strain
through four thicknesses of cheese
cloth. Using the same pulp, add the
same amount of water and repeat
the process. This will yield about 3
quarts of Juice, which is then put
in a pan wide enough so that the
juice will not be more than 2 inches
deep, and goil rapidly until only
about Vi of the juice remains, us
1M
AS THE WORLD
MOVES
iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii
ually 30 to 40 minutes. This should
make about 1V4 pints of concentrat
ed apple pectin extract
Citrus pectin extract can be made
from the skins of oranges and lem
ons ordinarily used. Pare off the
yellow rind, which would impart
flavor, using a knife that will not
discolor the peel. Then remove the
white peel underneath and put it
through a meat grinder, using the
coarse blade. Add 1 tablespoon tar
taric acid to 2 quarts of water and
stir until dissolved. Put 1 pound
of the white peel into a large flat
bottomed pan, cover with the acid
solution, and allow It to stand for
an hour or two.
Measure the depth of the mater
ial in the pan and then boil it rap
idly, stirring constantly, until it
measures less than half the original
amount Strain through four thick
nesses of cheesecloth. Then, using
the same peel, repeat the process
twice, adding 2 quarts of water and
1 tablespoon of tartaric acid each
time, except that It Is not necessary
to let it stand before boiling after
the first time. There should be a
little less than a pint of liquid from
each extraction and the total
amount of peel should be about 2V4
pints.
If the extract is not to be used
at once it should be poured into
sterilized Jars or bottles and sealed.
Dallas More squirrel poison has
been used In Polk county this year
than for the past two or three years
according to records in the office
of County Agent J. R. Beck, with
an increase of 30 per cent this year
over 1934.
Wanted, Heppner residence prop
erty, preferably on hill, with place
for chickens. Will pay cash up to
$1000. Inquire this office.
O No greater tribute to the power of advertising can be
cited than the large automotive industry of today. Advertis
ing was the medium which told the people of the automobile;
which created in the people a desire to purchase. It was the
medium that brought about quantity production costs to make
possible the purchase of an automobile by people of small'
means.
O Had the story of the automobile never been told, we of the
West might still be travellin by horse and buggy over dirt
roads, slowly, laboriously and uncomfortably as the dust or
mud in season prevailed.
O As the world moves its story is told in ADVERTISING.
The intelligent shopper reads, and the intelligent merchant
tells.
m5(.
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