New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1918-12-28
Convention Advises Federal
Reserve To Be Less Lib
eral in RediscOunting
Opposes Gold Bounty
Calls Plan to Stimulate Pro-
duction Unsound Eco
Monies and Policy

RICHMOND, Va, Dec. 27.-The re
suits Of an extensive study of Amer
icas adventure in war finance, con-
verglng in set of specific recon-
mendations to the Treasury for the
restoration Of normal CURRENCY and
banking conditions, were TODAY laid
before economists, industrial leaders.
and bankers from various parts of the
country at the first days session here
of the thirty-first annual meeting OF
the American Economic Association
The report was prepared by a COM
mttec of twelve, of which Edwin r. A.
Seligman, McNickar professor of poll
tical economy at Columbia University
is chairman.
Six cardinal points summarize the
constructive recommendation Of the
committee. They are:
/. ut is advisable for the Federal
Reserve authorities to follow a less
liberal policy in the future than they
have been following recently in the
matter of rediscounts and collateral
loans for member banks. The com
mittee believes that the low discount
rates and the low rates for short term
collateral loans which the Federal Re
serve banks have been Offering to
I member banks have unduly encouraged
deposit currency expansion on the part
! Of member banks.
Overheard Borrowing
,. "A second remedial measure, and
one that is to a large extent a corol-
larry TO the one lust mentioned. is the
| exercise of greater effort TO discour-
age the borrow and buy policy in the
matter of Liberty bonds, in so far as
borrowing TO buy does not involve
immediate economies in consumption
IN the near future through the antici-
patton Of income soon to be realized
economies that will presumably pay off
the debt within a short period OF time.
The man who borrows TO buy Liberty
bonds and carries the bonds indcti-
nltcly by means oil bank loans renders
very little service to the nation
,. "lf the Treasury is to continue to
endcavor to meet its requirements by
recourcc to anticipatory borrowing
through the issue Of Treasury certif-
Gates Of Indebtedness. it should limit
its borrowings in this form to the lowest
possible figure by requiring the hold
( ing OF legal reserves against govern
ment deposits and By initiating a more
/ liberal discount policy. Certificate Dor
rowing has made it possible for the
Treasury TO supply its fiscal require
ment5 with great ease and with reason
able, though not maximum, economy.
But, on the other hand in has involved
| the creation Of hugh volume of ad-
/
spending contraction or dcnation Incl
dent to the liquidation or funding Of
the certificate issues.
Want War Bond Initiation Eliminated
d. ''The evil consequences Of a
large expansion of credit. accompanied
Ny the placing Of government bonds
With banks, cannot be overlooked, and
it is urgent that at the earliest mo-
ment they should be eliminated. We
are Of the opinion that the process
I of war financing by means Of large
issues of certificates which are placed
with banks and arc carried by the lat
ter until they can be funded into
long term bonds, which in turn arc pun
chased by investors on the strength of
bank credit extended to them bv the
very institutions which first took up
the certificates, should be brought to
1
be that of transferring as rapidly as
! possible to private ownership the great
holdings of certificates and bonds
which are now carried by the banks
in one form or another The practica
methods of bringing this condition Of
affairs about will, we think, be found
in steady reduction of the war pa
per to be carried by the Reserve banks
.. "1hc committee had noticed with
apprehension the increasing agitation
in certain quarters in favor of stimu-
lating gold production by means of a
government bounty or some other form
wishes to register its emphatic opin-
ION that the attemit by q government
bounty to stimulate the production OF
gold at a time like the present, when.
through the wide extension of the use
OF paper money and deposit currency
through the increasingly efficient use
oi gold in bank reserves. and through
other influences. the purchasing power
Of gold has been practically cut in
half during period OF four years
would be both husband economies and
unsound public policy. The plan
amounts to Il proposal to tax the poo
pie to provide bountics for stimulating
an industry whose stimulation would
raise still higher the cost of living
from which these same people are at
present suffering. II would artificiallS
enlarge the base of our credit struct-
ure with inevitably bad results.
Gold Embargo Opposed
6. "The committee refers particular
~ to the ACCESSIBILITY of terminating
al the earliest possible moment the
gold embargo and the control of in
ternationa exchange, which have been
features of our war emergency work
We're we TO remove the gold embargo
to-day the amounts for which foreign
countries could draw upon US would
be small. Perhaps a hundred millions
could be drawn by South America and
perhaps as much more by the Orient
If total of three hundred millions
should be drawn from the United
States it would be far more than
most students of the subject expect
while in all probability the act of re-
moving the embargo would in most
cases destroy the disposition OF foreign
countries to take advantage of the
freedom offered to them. The rees-
Enlistment of free international
market for gold and the opening of d
satisfactory basis for trading in for
eign countries are now an essential
basis for the restoration of normal
commercial relations with foreign
countries"
On the subject Of tax legislation
! which is considered in another con
, nection, the committee observes. "Ii