"Benefit of Crisis"

Reginald McKenna is the bald, brainy chairman of the Midland, largest bank in the world. Three years ago he induced Britain's leading bankers, traditionally free traders, to reverse themselves sensationally and come out for the building of tariff walls around the Empire (TIME, July 14, 1930), which have since been built. Five weeks before President Roosevelt's inauguration Mr. McKenna asked: "Is it possible to raise our internal price level? Particularly can we do so by monetary management? ... I confess the thought of inflation, so long as it is controlled inflation, does not alarm me."

Last week Banker McKenna decided that the time had come to hail loudly Price-Raiser Roosevelt as an example to His Majesty's Government, who continue to keep sterling pegged at a stable rate of exchange in relation to the French gold-standard franc. In his personal organ, the Midland Bank's monthly review, Chairman McKenna minced no words of praise, called "perfectly right'' the President's action in blocking stabilization of the dollar's exchange rate by the London Conference and in shaping U. S. fiscal policy wholly with an eye to the dollar's internal value. "There are two sorts of stability," declared the McKenna review, "stability in internal purchasing power over other commodities and services, and in external purchasing power over other currency units. Notwithstanding the appalling experiences of recent years and their obvious association with the internal situation, it is the habit to think in terms of the second almost to the total exclusion of the first. . . . We regard as one of the major benefits of the crisis--for even a major crisis has some good results--that a statesman of Mr. Roosevelt's standing and power should have brought the world nearer to true prosperity. ... At all events it is evidently to the world's benefit to watch the American experiment, not only closely, but sympathetically. . . . The reward is the prospect of a share in restored prosperity. ... It will be bitterly lost if it is lost through the shortsightedness and practical shortcoming in the attitude of other countries toward the President's experiment." Two days later the Governor of the Bank of England, fox-bearded, deflationist Montagu Collet Norman, served notice on his entire staff that their pay will be cut 10% next March and cut thereafter every March for the next three years. Thus, by implication, Governor Norman set himself more strongly than ever against a policy of British price & wage raising. Indignant clerks in the Bank of England, now being completely rebuilt at a cost of some $25,000,000, pointed out that despite this expense its last dividend to stockholders was paid at the fat old rate of 12%. The staff's cut, they estimated, will save the Bank of England only a paltry $453,000 per year.

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