New-York tribune., 1918-01-01
Federal Board
Makes New Year
Plea for Economy
Calls on Banks to Place
Financing of War on
Sound Basis

The Federal Reserve Board, in "The
Federal Reserve Bulletin" for January,
describes tho Federal Reserve banks as
tho keystone Of the banking arch"
recognizes the services Of banks in
general to the nation in the stress of
war, and points out certain fundamen-
tai methods in which it believes the
banks can help in placing tho financing
of the war upon foundation Of un
shaknblc strength"
War financing in the last anslysis,"
says the board, "means putting the
government IN possession of goods and
services. Financing by loans means the
sale as toe government Of goods on
credit. TO win the war, our government
and tho governments with which we are
associated, must have goods and SER
wees. 1t is Of as much Importance,
'hereforc, that the government should
be helped to obtain the goods it re-
quircs, as it is that it should be helped
TO procure the credit it requires with
which to pay for goods. In neither re-
spcct arc tho American people AS yet
cooperating to a sufficient degree; pri-
marlly because they have not yet been
adequately impressed with the para
mount Importance of their cooperation.
lhev have not yet been made thorough
~ to realize the fact that the success
or failure Of the war--in brief. the fate
of the country-lies in their hands. In
inc great work of educating the people
or the country to an appreciation Of
their part in the effective conduct of
the war, the banks Of the country havo
AN opportunity to make themselves
leaders. In the communities they serve
they should endeavor to mako it clear
that the amount of goods that can be
produced, even in country as large and
as rich as ours, is limited; that saw
ing, therefore, IS necessary and that
by saving goods the people are serving
their country in four ways:
Ways of Saving
"1) They enable our own govern
mcnt and our allied governments to
obtain the gooos required with the
requisite speed. AS everybody knows.
time is most important factor at this
luncture. Coal, copper steel and food
stuits arc cases in point.
~ ny saving goods not required
by the government they release CORE
spending quantities for export to other
countries, III exchange for which need
"a supplies may be secured. To- illus
would cut down consumption of cotton
and woollen goods, even TO a slight
amount goods to the value Of millions
OF dollars would be available for ex-
port and could be made the basis Of
cxchangc to pay for much needed sup
Illes OF copper and nitratcs for our
selves and beef and wheat for the use
OF our allies, obtained in South Amer
ica
"(3) BY consuming goods in smaller
"noehts' not only are goods saved, but
money IS saved, and the people thus
put IN position to absorb and paw for
the war loans of the government out
of savings.
,Nl) by Diminishing the consumption
OF goods and by paying for government
ponds out of savings instead of from
funds borrowed from the banks
the rapid rise of prices Of goods is
retarded as we'll as banking imitation.
"hlch accelcrates the rise Of prices.
1T cannot have escaped the at
tention OF the banks, that, since the be-
ginning OF tho war deposits have in
creased at a rapid rate and that loans
discounts and investments have grown
at an even more rapid rate. 1t is true
that the Federal Reserves holdings of
gold have also increased to a point
where they are larger than those Of
any other country, but the percentage
or the gold reserves against deposits
and notes has decreased. This is
1amll1ar phenomenon in time of war
and to certain extent perhaps un-
avoldable, but it must nevertheless he
our constant concern to keep everv
dangerous tendency in the banking
situation under control and particu-
larry to retard the too rapid expansion
OF banking credit as far as this can
be done without jcopardizng the main
business of the country at this time
the winning of tho war.
An Economic Problem
events are, however, everv dav
making it clearer that the conservation
of our financial strength is not of it,
self sufficient to insure successful
financing of the war. The financing of
the war is only l. part a money
problem; in very large port it is an
economic problema problem of con-
serving the economic as we'll as the
financial strength Of the nation and
developing our resources and pro-
ductlve power to the point where thew
VIII be equal to sustain the great mil
ltary operations which are in prospect
and all that is incident to them
!-NOpOuy SHOulu, CnerefOre, consume
goods except to the extent that their
consumption is necessary to maintain
health and vigor.
"Nobody should draw upon the credit
resources of the country excent to
finance transactions which are essential
for a nation at wsr.
"Crcdit should be saved as much as
goods.
"Conservation of credit as regards
non-essential enterprises is necessary
IN order to provide, without undue ex-
panslon, the credit required by the
government and by business essential
to the success of the war and the welt
being of the country.
ihe board most earnestly invites se
rlous consideration Of these and kindred
steps in the development of a pa.o.
gramme of national economy and be-
speaks the cooperation of all the banks
of the country in behalf Of their adop-
ton IN their several communities The
banks are urged TO teach in their dis
trlcts the meaning and necessity Of
saving and its relation to the success
1ul financing Of the war; to tell the
city merchant and the country store
keeper that this is not the time to
bay and stock up. especially with luxu-
ries. Let the people everywhere be en-
couraged to consume fewer things. and
let those be the simple and substan-
tial things that are necessary to health
and strength. Let the public realize
that 1T is more respectable IN such