New-York tribune., 1920-11-01
City Bank Sees
No Real Reason
For Pessin1isrn Now
Country Not Going Into a
Long Period of Depres-
sion, Institution Holds;
No Credit Contraction

the United States, observes the Ma
tlonal City Bank in its November let
ter on economic conditions, a period
Of expansion has been checked and
9rlces have turned decisvely down.
ard without banking panic.N Here
ore the turn has been always ac-
Apanied and the downward pace ac-
rated by collapse of bank credit.
This time instead of the situation
ing aggravated by the eff orts of
thousands of banks to reduce their
ans and increase the cash reserves
the situation. it is asserted, viii be
supported By an adequate banking
system.
Business houses who are entitled to
credit declares the bank, "will con
tlnuc to receive it. Valuations will
necessarily have to undergo revision
but the whole financial situation is al
together different from that which has
existed at any other time Of business
reaction. The business community is
protected from the shock, alarm and
Sttess which result from general
CONTRACTION of credit. Not only have
there been none up to this time, but
there will be none; liquidation viii
follow Its natural course as shaped by
condlt oas in the markets.
Emphasis is made by the bank that
the present tendency toward lower
prices is d Worldwide movement. The
agricultural districts, it is stated, have
been much disturbed by the price de
cllncs, and the idea prevails that some
body is to blame for the situation.
Ihe general movement of commodi-
ties the bank says, "rcfutes the idea
OF manipu atlon. The world is too big
to be readily managed, and yet so small
that what happens to any part of it
may affect every other part.
at was inevitable that this slump
would come whenever rising prices
reached the top and the public became
satisfied that the future course Of
prices would be downward rather than
upward. 1t came prematurely in 1919,
because the influences favorable to a
squirt OF private expenditures at that
Tune were too strong to be held in
check. 1t is better that the check
should come now than q year later.
although the reactionary swing has
gone iurthcr than most people expect
ed it to- there is no reason for extreme
pcsslmism about it. Undoubtedly some
prices have gone too low already. 1t
is unreasonable to suppose that prices
are going back at this time to pre-
war levels, and whore they do it is
safe to say that the things are too
cheap and can be bought to advantage.
"Thorc are good reasons for conf
IDENTIFY believing that this country is
not going into a long period Of de-
preston. Such experiences in the past
always have followed long periods of
internal development, including eXtcn-
sive construction work. such as rail
road building, town building, etc Our
periods of prosperity and credit OK
pansion have been of this character.
and ii has usually happened that the
movement has oVerrun the needs of the
country at the time and period of
growth was required afterward to
bring the country up to its new facii-
ties. This was the case in 1873 and
1898. the two most important crises of
cur recent history. In the period fol
lowing 1898 recovery was DELAYED by
the controversy over the money quos-
ton"
Occasion is taken by tho bank to re-
ply to the charges made in many quar-
ters that the Federal Reserve system
has been contracting credits and so
forcing liquidation. The most conclu
sive answer to this charge, it is pointed
out, and to all the current criticisms
of recent banking policy on the part
Of the iniiationists, is furnished by the
figures made public by the Comptroller
of the Currency on October Is. This
shows that on June 80, 1920 the total
of loans and discounts of all national
and state banks, trusr companies, say
ings banks and reporting private banks
was S30S9l ,693, 600, an increase of 50,
sos, 1855, 900 over June so. 1919
These figures arc offered for the
consideration of the persons who have
been talking about the contraction Of
credit or who hold that credit should
course the former are without standing.
for there has been no contraction. and
as for the latter. the facts and tAe
argument are heavily against them"