New-York tribune., 1919-06-11
WarburgWarns
Public Against
More Initiation
Says Easy Money Boom May
End in Crash Unless Elk.
travagance and Specula-
ton Are Checked

DETROIT, June 1o.-Pau.. NJ. War
burg, former vice-governo1 OF the Fed
eral Reserve Board, in an address be-
fore tho National Association Of Credit
Men in the Board Of Commerce here
to-day declared the moment was near
at hand when 1--WE must not permit this
reserve (of credit in the Federal Re-
serve banks) to be encroached upon for
the sake of added credit expansion at
time when the healing process must
be sought in contraction"
The banker added: "To apply tho
remedy may be q harder task than to
follow the lures of fictitious prosperity
born Of easy money, but in the long
run l believe it will be a moro pru-
dent and more charitable strategy.
such course would not imply that
we should be slackers in shouldering
our full share in attacking and solv-
ing the worlds burning economic prob
lens. 1t means only that we must
manfully and painfully husband our
resources instead of squandering them
by personal extravagances and head
long speculations, and concentrate our
efforts on doing the big constructive
things with wealth bottomed upon solid
production and saving instead of rest
ing on the quicksand Of further in
f1ation Of credit and prices.
ut is a pathetic fact that peoples.
like children, apparently can learn only
from their own experiences, but not
from the experience of Others
I'VE know that war prosperity usu-
ally ends in crash; shall we be able
TO avoid 1t? If we wish to we must
beware OF booms based on a fake pros
perlty which has it's roots in inflated
credits and prices. 1t is an ungrateful
and 1T presents an almost superhuman
task to stop the easy flow from our
credit reservoirs that created the en-
larged foundation for our growing
credit pyramid.
1T has now become the country's
very serious duty to Gquidate as rap
idly as possible the war paper and
holdings of government bonds in tho
hands of banks and trust companies.
This item, representing undigested
government bonds amounting, it is es-
tlmated, to more than $4,000, 900, 900,
constitutes one of the fundamental
causes of banking imitation In order
to promote their absorption by the saw
lngs of the people and in order to en-
courage thrift, if not by compelling
borrowers, If necessary, to reduce their
loans, Federal Reserve bank rates for
loans secured by government bonds in
due course will have to be increased.
They would have to approach moro
closely the governing rates for com
merclal paper, while rates for bank
ers acceptances should be held at
rate sufficiently lower to provide for
an ample margin in their favor against
single name paper. And between these
TWO rates the trade acceptance should
ind its proper level
"As this process of ABSORPTION takes
place, and as the government reduces
the volume of outstanding certificates
OF Indebtedness, acceptances NAV be
expected to reoccupy their proper posi-
ton as the most available and safest
pass-key to the facilities of the Fed
eral Reserve banks Ultimately accpt-
ances are bound to become the main
investment and rediscount field for
Federal Reserve banks, and this de-
mand alone will create a large market
ior them at favorable rates.
ut may take year or two before the
course here contemplated will gain full
sway, but it is to be hoped that at an
early date we may see the beginning
OF a definite policy pointing in that
direction"
Extension Of American trade through
out the world, maintenance of the
leadership in world trade by this coun-
sry and methods by which these things
may be accomplished were considered
by the National Association of Credit
Men 10 annual convention here to-dav.
Speakers discussed trade acceptances
at length and the convention adopted
the report of its committee on bank
ing and currency which favored the
principle of trade acceptances as a
desirable credit instrument both for
the ordinary transactions of the nation
and for foreign trade.
The convention, attended by over
two thousand delegates, was the larg-
est ever neld by the organization. For
the first time in many years a contest
Tor the presidency is in prospect. Cur
It's K Burnett, Of Newark, is a can
dldate by virtue Of his occupancy of
the first presidency, and Roches-
ter delegates are seeking the honor
for Ira D. Kingsbury. There also js
talk of compromise candidate.
T. r Maddox, president of the
American Bankers Association. also
spoke on the trade situation confront.
ing the country. Although the Amer
,can business man must do an export
business on credit basis, MI. Maddox
pointed out, he finds himself in an ad-
vantageous position by reason of
present exchange rates, which, he said.
virtually amount to protective tariff