New-York tribune., 1918-05-13
Military Prowess
Hinges on Economic
Conservation
Federal Reserve Board Warns
Against Unnecessary Ex-
pansion of Credit

(F'rom the Annual Report of tho
Federal Reserve Board for 1917
g. INCE the beginning Of the war, and
~ more especially since the entry of
this country into the war, deposits
in banks have increased enormously,
but it should be remembered that loans
and discounts and investments have in
creased in an even greater degree. The
countrys gold holdings in three years
have increased more than billion dol
lars, and are now larger than those of
any other country, but at the same time
the percentage Of gold reserve against
deposits has decreased.
These conditions are not unusual in
times of war, and to a certain extent
they cannot be prevented, but the banks
Of the country should make it their
business to keep these tendencies under
control and to prevent too rapid an OK
panson Of credits as far as possible
without placing in jeopardy the su-
preme object Of our national effort
the winning of the war. We should
realize that in the accomplishment of
this purpose the conservation Of our
economic and financial strength is just
as important as the augmentation OF
our military power, and that upon this
conservation our military strength de-
pends.
The Need to Conserve Credit
+ There must be conservation Of
credit as we'll as of goods, and credit.
generally speaking, should not be used
except where it is required for the COM
mon welfare, as in planting crops, the
manufacture of necessary articles. the
extension of transportation facilities,
or in such construction work as may be
essential in bringing about increased
production. Limitation in ordinary
lines of credit is necessary to make
government for the purchase of sup
plies essential for war purposes.
1t must be expected that the war
activities Of the government will bring
about a further expansion of deposits
and loans in banks, and to keep our
credit structure strong it is necessary
that the banks should exert their in
fuence and lend their energies to a
more general absorption of government
loans by savings. and to limitation of
private credits wherever practicable
without causing hardship. We must
look to the future and prepare unceas-
ingly for further demands which may
be made upon us.
How the Public Can Help
The products of the fields, the for
ests, the mines and the manufacturing
establishments of the country are not
generally speaking, in the nature of
luxuries They can, as rule, be classed
as necessarics, and with the outlook
ahead of US there seems to be no pos
sibility of overproduction. 1t seems,
therefore, that the banks of the coun-
try. from the standpoint of good bust
ness as we'll as from patriotism, should
lend their funds and credits freely to
those engaged in these productive en-
terprises. and their power to serve the
country in this way will be increased
its and by the adoption by the people
generally Of a policy of common sense
practical economy.
Great as is the admitted power of the
Federal Reserve system, equipped with
its new resources and supported by the
greater part of the banking reserve of
;hc country, there are. nevertheless,
year there have been, very naturally,
some expressions of anxiety on the
part of the financial community as to
expansion of credits. The board has
fully recognized the dangers of over
expansion and has endeavored in evcrv
way not hurtful to war financing to
prevent such a condition. The question
as to how far expansion may drift tow
ard the danger point, despite concen-
tration and careful use of our banking
resources: should be carefully consid-
cred in the development of sound
policy for the future. :.
1T is proper to point out that while,
during the year 1917 there has been a
lessening of the fuidity and immediate
availability of the country's banking
resources, the change is not surprising
when there is considered the extent of !
the requirements which have been
made upon our banking system. It is |
evident also, from an analysis of the !
figures. that the decrease in reserve /
strength is attributable only in a
MINOR degree to normal commercial |
discounts and that it is mainly the re-
suit of government financing and the
consequent demands upon our re-
sources.
The Rise of Food Prices
What. effect the credit expansion
which has taken place in the United
States during the last year and the
years preceding-since the beginning
of the European war-may have eX-
crted on prices should not pass un-
noted. Wholesale prices are estimated
by the Bureau Of Labor Statistics to
have advanced during the year 1917 by
about "a per cent. which may be com
pared with an estimated advance of Al
per cent from July. 1914, to December
81, 1915. Retail prices of principal
articles of food are shown by the same
Office to have risen 90 per cent between
July Is, 1914, and December 81, 1916
and "a per cent between the latter date