New-York tribune., 1918-05-26
By r. L. Rutter
prvsideat Spokane Gsad Eastern
- Trust Company, Spokane,
Washington

pve&ideSat ,SpoEdH6 U71d Eastern
Trust Company, Spokane,
Washington
(Nosc--Mr. Ruttcr, who 10 one of
The leading bankers of the Pacific
Coast, after extensive study Of the
.rb;ecs comes to the conclusion that
,,a.tion has already reached dam
,erous stage and that it is a growing
menace; SO serious, in fact, that he
f.It IL necessary recently to submit
memorandum on the subject to the
hoard of directors Of the institution
af which he is the head. The follow
mo article consists Of extracts from
that memorandum. Financial Edi-
tor.)
I'm VIEW of the service rendered
by the Federal Reserve banks
- in absorbing the financial shock
connected with the war, it may seem
ungrateful to point out the imminent
danger of diverting the Federal Re-
serve system so as to make it the
means of an enormously costly infa-
ton of our currency. The prospect,
however, is so serious as to demand
the best thought of the whole bust
ness community. Aside from the out
come of the war, there is no menace
more threatening than the imitation
already actively in progress. It's ex-
istence is everywhere recognized, al
though instead of being known by it's
true name we refer to it as the
rising cost Of living.
Consider some of the most con-
spicuous evidences of that imitation.
In 1896 Bradstreet's index number
or the average price of typical COM
modities was 5.9124. 1t has slowly
risen until the index in 1914 was
.S.9034, or an increase of so per cent
in eighteen years. Since the begin
ring of the European war, however,
the index number has gone forward
with degree unprecedented in the
history Of the generation. On the
first of March, 1913, it stood at
lS.0732, or a shade more than twice
the figure for 1914, and three times
that of 1896.
Rising Costs
In England
1t Is interesting to. observe how
closely the American advance CORE
spends with the British record. "The
London Economist" which maintains
an index number based on entirely
different factors, shows that English
commodities since 1896 have exactly
trebled, which parallels the Ameri-
can experience. Since the beginning
OF the war, however, British COM
modities have advanced 120 per cent,
as against 100 per cent in the United
States. The prime cause for the in
crease in commodity prices in the
United States has, of course, been
the steady growth in currency. Cir
culation per capita in the United
States has grown from 1896 in Au-
gust, 1914, to S48.37 in March OF
1913, or gain Of AZ per cent.
The net deposits in the national
banks from September 12, 1914, te
December 81, 1917, have made 81 pei
cent gain, and at the latter date
stood at s11,o74,oO0,OO0. AS a mat
ter of fact, while the population Of
the country has increased about {
per cent since the beginning of the
war, circulation per capita has in
creased AZ per cent, and actually
therefore, has gained little less
than deposits in bank.
Growth Of Federal
Reserve Notes
The operations of the Federal Re
serve Bank in this connection ar
significant. The Federal Reserve
Bank had in circulation notes as fol
lows:
April 7, 1916. ... r$1es,ooo,ooo
October 6, 1916. 272,O0O, 900
April Z, l917...... 376,000,00
October S, 1917. 741 100000
April 12, 1913. ,409, ,OQO,O 900
During February, 1918, membe
banks borrowed from the Fedora
Reserve Bank $1,126, 100000, o
which s763, 100000 was based, not O
commercial paper, but on the Sc
curity of Liberty bonds or govern
ment notes. The amount of sue
loans on hand at the end of Marc
was $472, 100000. The imitation i
the currency through note issu
based on government debt is alread
amazing. If this imitation had bee
effected by the direct issue of greer
backs the situation would be obvious
1t is, however, effected through tn