Economic deterioration went on relentlessly during the year between Tugwell's presentation of his probing of Hoover's program and Roosevelt's inauguration. The new administration faced a situation which Moley called "superdeflationary." Accordingly, by early 1933 Tugwell's views had changed somewhat from those he held in early 1932. Previously he had called for a lowering of prices and positive measures to restore purchasing power as policies which would provide a basis for putting the economy back on a rising course. Hoover's failure to adopt these policies had resulted, as Tugwell anticipated, in further decline. If a timely lowering of prices at first would have helped prevent continuous decline, it was now too late for price decreases to do much good.
Tugwell still stood for a balanced relationship between production, costs, prices, and purchasing power, but by late 1932, he remembered, there was "another range of fact to be considered . . . which loomed larger as the campaign progressed. And it was more important [than direct changing of prices] in shaping the New Deal program. . . ." Tugwell referred to the dislocation of established relationships caused by prolonged deflation. Such dislocation was not only a matter of debts but also of exchangeability. Panic had taken hold when "evidence of ownership had moved toward worthlessness."1
A person repaying, in 1932, a debt contracted in 1928 found that 1932 dollars were worth more than 1928 dollars, and they were harder to come by. With a reduction in the value of dollars to the level at which debts had been contracted, debtors would be able to get enough dollars to satisfy their creditors. "The incurring and discharging of debt- one of the central mechanisms of capitalism-could," Tugwell recalled, "then go on freely."2 This kind of inflation, which the increase in the value of the dollar in a deflationary period subsequent to the contraction of debt made necessary if debtor-creditor relationships were to be going ones, was called "reflation."
Reflation, which contemplated the raising of commodity prices, was a middle course according to Ernest K. Lindley, whose two volumes on the early New Deal are indispensable. Rigid deflationists wanted to bring the overhead weight of debt and taxation, built up at a higher price level, down to the lower price level. They assumed that the price