The sun. [volume] (New York [N.Y.]) 1916-1920, 1919-09-08
Major Blame Put on Competi-
ton Between Europe and
Domestic Consumers.
pELUSI0NS IN BIG TRADE
America Must Increase I'm
Dorts and Decrease Exports.
to Rectify Exchange.
sUeciat Despatch to TIE SOS.

a, bepeft II may first appear to be.
"A the suggestion that foreign ex-
.,.nre. vitality linked with international
I'D. can be remedied by a better
,"uIlibrium between American exports
IA imports, are the outstanding
,.otures of the review of August in the
FEDERAL Reserve bulletin.
Tho so-caled favorable" trade
balance Of exports over imports, 1t Is
d so,nied out. from the point of view of
,hs ordinary American consumer. means
,Ss, the effect in many lines of industry
u 10 lessen supplies available for home
consumption, thereby affecting the price
syel here.
TO the extent that a sufficient per-
,sntage of American consumers do not
votmtarily reduce consumption by
,mounts sufficient to release for the use
A the European consumer great quanti-
tes OF goods which are being sent over
pas," says the bulletin, there results
m the American market competition be-
tween the European demand and the
American demand, the inevitable effect
Of which is to drive up prices and to in
duce the speculation which rising prices
usually occasion. Buying In COMPETE
lion with export demand undoubtedly
has been a major cause of rising prices
in the postwar period in the United
States"
Greatest Gain in Foodstuffs.
Exports for 1919 thus far are the
highest ever attained, It Is pointed out,
and the greatest increase shown Is in
foodstuffs, which show a gain Of 63 per
cent. Bacon, hams and lard increased
IS per cent. in value over the preceding
year and so per cent. In quantity. Re
garding the solution of this problem the
bulletin says:
THE whole situation is one that can
be met as pointed out by the board
month ago, only If the doctrine of work
and save is taken to heart by every
class in the nation and made it's guiding
principle until the trying conditions left
by the war are finally surmounted.
"0nly by keeping the cost of produc-
ton on its present level, by increasing
4 production and by rigid economy and saw
ing on the part of the people can we hope
FOR large decreases in the burdensome cost
Of living which now weighs us down.
aid the President in his address to the
ountry on August 25.'
The foreign exchange situation is
closely associated with the export trade
movement, the bulletin points out. The
large declines of foreign currencies in
terms of the dollar are noted and de-
CARED TO be due to the fact that foreign
Countries have large payments to make
IN dollars to the United States at a time
when large commodity shipments are not
oelng sent here to balance the commod-
giy receipts from the United States.
The correction Of the exchange situa-
ton SO much complained of by those who
look at the matter from the exclusive
standpoint Of the export interest" says
The bulletin, will therefore only find its
natural and permanent solution through
reduction Of our exports and an in
crease OF our imports until they reach a
point OF approximate equilibrium"
Currency Volume Not Excessive.
The statement deals briefly with the
living cost problem, saying:
Hlgh prices and the advancing cost
Of living have become the occasion OF
Widespread anxiety in the United States
ana recently have become the subject of
legislative attention. The President. in
an ADDRESS to Congress on August 8, de-
cared that the prices the people of this
country are paying for everything that
u IS necessary for them to use in order
70 1--we are not justified by a shortage in
suppy, either present or prospective"
me Federal Reserve Board, In q letter
VI the same date to the Senate Commit
se on finance and Banking, rejected the
uea mat excessive volume OF currency
was the cause of prevalent high prices.
ms is the view which has been consis-
.'nuy maintained by the board, the let
w ~lhg merely restatement with am
pnlea detail OF the position taken by the
'Osru on previous occasions.
III, IL us recent letter particular occa-
~, AZ" is taken by the board to point out
t. uIty, indeed the impossibility, of
epins IN circulation an excessive vol
G,,,. ~ rederal Reserve notes. They are
s,S S'u ol'iy as need for them develops,
u as they become redundant in any
Ocailty they are returned to the Treas
". at Washington or to a Federal re-
srVe bank for redemption. Thus there
an not at any time be more Federal
Ne notes In circulation than the
s.eus OF the country at the present level
prices require, and as the need abates
ue volume of notes outstanding will he
despohdingly reduced through re-
pplIUn' The increased volume of
ina TO- reserve notes in circulation dur
H. .'e last three years, in so far as Il
rois u'e result of direct exchanges for
sou ana gold certificates which have
80 "lthdrawn from circulation, is the
"a 80 OF advancing wages and prices
'ld not their cause.
FEDERAL Notes seIf-ReKuIatinr.
r,o' Isuer the elastic note issue system
r.Ss,iued by the Federal reserve act the
rss,I.., reserve not possesses q self
onssaashs quality quite automatic in its
,at'oh. While 1t is technically a true
,ss'' eht TO say that the Federal re-
FsS' e note when issued Is issued by The
in % reserve bank, the greater truth
UNDERSTANDING our present monetary
rsihery is missed unless II Is ner-
p mat the occasion of the issue of
M, eeISi reserve note is determined
bsn, the bank for itself, but for The
'srL ny the community.
bor,.- BOARD does not overlook the i'm
panstnt influence exerted by credit ex-
has IN Ihat the expansion of credit
snsratae,n considerable factor in our
hs, a. and price situation is clear
wbioh rs continuing factor and one
proca,. s'l'I calls for correction by the
savinas oI increasing production and
proceeSz ana oy the investment of the
covo,',u OF savings In the absorption of
''T Ttnment bonds is equally clear.
h.. most recent data available show
tn,a, Ior the year ended June 80, 1918.
bv ~ deposits IN national banks Increased
A., t me amount NJ ~ eo2. sbs, 600. or fror,,
tmbanVEl'eos,o0o TO s15,5s4, s66, 900. and
amon ioshs and discounts increased by the
IOs onn OF S954,436, 900, or from $500
N Az 10 SlO,574,SSS.000. The Increase
aeposits, therefore. exceeded the in
srno',s IN loans and discounts by the
bar VIZ OF sS4s'92O,o00, or close to 100
pos,ta ~ me rate OF Increase in de-