New-York tribune., 1918-08-05
Imitation w arning
In Chicago Banks
Crop-Trade Review
Must Offset War Credit
Expansions by Greater Pro-
duction and Utilization

CHICAGO, Aug. "A note Of warn
ing against undue imitation is sounded
in the annual crop report and business
review Of the Continental and Com
mercial National Bank Of Chicago is
sued to-day. In order TO sustain the
enormous expansion Of credits that has
taken place in the United States as
result of the war there must be a
larger production and utilization, the
bank says, of all the elements and fa-
cllltles available in the creation Of
new wealth.
"The percentage of gold reserve to
Federal Reserve note and deposit liza
blllties at the Federal Reserve banks
Of the United States," the bank points
out, "has gradually declined. For in
stance, at the time Of our entrance
into the war the percentage of gold
reserve to net deposits and Federal Re-
serve note liabilities was 83 per cent
and the money supply per capita was
S45.34. year later the percentage of
gold reserve to net deposits and Fed
eral Reserve note liabilities amounted
to COS per cent. while the money per
capita was S49.70. The last available
statistics show the percentage of gold
reserve to net deposits and Federal Re-
serve note liabilities for all the Fed
eral Reserve banks to be 56.5 per cent
and money per capita S5os6, indicating
tendency toward further expansion
of credits.
Nature Is Lending Aid
Against this expansion of credits is
the increased activity in the business
world, enlarged production of essential
products and the attendant rapid ex-
panding CT our industries of that class
engaged IN war production. Nature is
contributing its share, for seldom have
there been more favorable crop condi-
tlons than at the present time. Nat
urally the greater totals in trade and
production call for a broader use of
credit, but unfortunately the increased
activity in industrial lines is more gem
orally concentrated in the East. This
IS indicated by the trend in bank clear
lngs and the congested condition of the
transportation lines and of the manu-
featuring centres in the Eastern sec
tion compared with the Middle West
and the West. The conversion of plant
facilities in the West has not vet been
fully accomplished, and until these
plants are put to work more completely
on war production it is reasonable to
expect that the ability of the Western
banks to participate in government
financing will be somewhat restricted
because of the shifting of funds.
Necessarily there are some loans Of
non-esscntial manufacturers, which
may be termed dead credit to be
carried for time, but which will be
paid. Loans In the Middle West have
expanded. as they have in the East,
very rapidly, until they now reach the
highest aggregate in history. In view
OF this condition, together with the fact
that such heavy obligations are laid
on the banks by government financing.
II would seem conservative on the part
OF the banks to urge caution to pre-
vent too great an expansion. The in
crease IN prices extending to practical
~ every useful article has made it i'm
peratlve Tor borrowers to use in their
business greater amount of money
Tor the same volume of products than
IN pre-war periods. To meet this it is
necessary to expand borrowings by
commercial banks at the Federal Re-
serve banks. This is a condition that
money comes from every direction and
IS not for speculative or non-essential
purposes, but for the regular conduct
Of business.
THE country is in the process of
ilquefy1ng what heretofore has existed
IN the shape Of unliquid capital and
money. Necessarily this has led to a
very considerable expansion in credit
as reflected by bank loans; but so far
this has been kept we'll under control
and has not trespassed upon what is
commonly regarded as dangerous in
Hation. 1t is growth involving some
elements of imitation, it is true, but
tins expansion of credit has behind it
a development of our national re-
sources, the wealth of this country and
to some extent the wealth of its allies
1or very considerable part Of the
proceeds Of the Liberty war loans sub
scrlbed here has been reloaned to our
allies in Europe and hence is re. re-.
investments Furthermore, a large part
Of the funds raised through govern
mental war issues for our own use has
been applied to capital investment
which will be available in the develop
ment OF our commerce and of our in
dustries following the restoration OF
peace. These are facts we'll worth
keeping in mind, in studying statistics
showing the enormous expansion Of
credits and the attendant increase in
the circulating media"
Business in Sound Condition
Discussing general business condi.
tlons, emphasis is laid upon the activ.
ity and prosperity of trade. Tho out.
look is described as encouraging.
Ihe spirit of cooperation In the I'M.
dertaking that confronts the govern.
ment in conjunction with its allies ir
prosecuting the war against the Cen
l.