Albuquerque morning journal. [volume] (Albuquerque, N.M.) 1903-1926, 1920-05-05
THE FEDERAL REsERvE BANK.

The Federal Reserve Banking Act has not yet
justified itself. 1t is by means proven mat I'M
amended it is adeqpah, for the intended purposes
Every. one who has studied it is fairly wen sat-
isfed that it affords protection against an o'a-
fashioned money panic This is due TO i'a capacity
to, a,roost infinite expansion Of the clCrrency so
lint a panic caused by feA" of currency shortage
no longer exists The tendency TO hoard currency
is fairly well checked. NJ
The undemonsrated funct on of the banking
system s as to its ability to contract after PERIOD
Of expansion The severest kind of test upon thlS
point is now being undergone in an effort 10 pTl's
about deflation following the enormous period 81
expansion during the and during the postwar
period,
That deflation can be arbitrarily brought about
l. beyond question but whether it can be done
smoothly and without serious harm to iesit mate
business enterprises remains to be seen.
That the enormous expansion, which must not
60 on has been largely caused by the extravaganza
Of the people generally is beyond question lhSte'bl
Of an effort being made to absorb the Liberty hoiN
and Victory Loan issues by economy and saVihSa
tharebv paving off the money borrowed against
them and releasing this credit for other necessary
purposes there has been an almost unlNerSal tell
dency to continue to borrow against these Dohus anu
spend the money earned in riotous living mus inc
channels OF creGt being stopped up against
legitimate commercial borrowing. It is therefore
The plain duty Of every patriotic citizen to reduce
his living costs within such limit as Will allow
him out of savings to rapidly liquidate any dent
he owes with these bonds as collateral, ana therepS
relieve the congestion. Besides aiding in pa1roHc
service the owner is doing himself plain, common
sense service in thrift
To encourag &c this liquidation if not in fact 10
compel it, the Federal Reserve board has steadily
raised the rate OF al which will redscount
pauer supported by this class Of security until it IS
now six per cent although the bonds bear only from
three and one-half to four and three-quarters per
cent interest. This has resulted in great depre-
citation in the market value of the bonds, which mas
caused paper loss of hundreds of millions of dol
lars to the owners. This can be rectfied only BY
an economy and thrift which will pay for these
bonds and withdraw them from the channels OF
credit
Borrowing for speculative purposes. especially
for stock speculations is another chief source OF
distress. The big spectators in the cities refuse
TO offer the slightest voluntary help in eftecting a
reduction of demand for loans for such purposes
Even the little fellows in towns such as our New
Mexico towns help swell the volume of this class
Of credit demands.
II is q plain duty to stop making credit loans for
speculative purposes. If America doesn't stop IL
voluntarily she may soon stop it with duh thud
Money to build and TO carry ordinary commercial
transactions would be abundant the getrich-quicI'
Spectator who plays the rise and fall OF the
I market would quite business for while
The Federal Board has given the speculative
market hard jolt upon two occasions in the last
few months by raising the call rate for money as
high as seventeen per cent. This was done 10
brighten spectators and shrinkaGe of credit
demands Its practical result was to cause sudden
break in the market value of stocks, to the ruin Of
thousands of innocent and unintated holders.
Defation must be accomplished if the high cost
of living is to be reduced If it is not done WIN
the assistance of the public it will have to be done
without its assistance. The latter course will mean
more or less distress for everybody.
Smart financiers may plan patent remedies which
will help. but the real solution is the plain homeE
old remedy of economy and thrift. Save your dimes
Paw I'D YOUR loans. Return to sanity
The part which present absurd Federal taX-
alton laws play in present predcament Is a
proper subject for later discussion.
The attitude or certain labor leaders and man
ufacturers as a contributory cause is also worthy
of attention. But let the people begin to do their
part now.