New-York tribune., 1920-10-02
competitions Again
Being Established,
Says Reserve Bank
"'li Assure Gradual bul
eventual Return TO More
Healthy Business Condi.
lions and Costs, Is View

N"'"ra' forces are again asserting
themselves in tnc commodity markets.
according to the monthly review of
steo'' and business conditions Of the
1ederal Reserve Bank Of New York
out to-day, and prices in the future
VIII develop from natural causes
rather than as an accompaniment of
'"e constant creation Of new purchas-
ing power for war purposes.
Inc bank emphasizes the fact that
oemand is being overtaken by supply
!" many lines, with the result that com
petition between sellers is being re-
established in one industry after an
other. This competition during the
war had given way to competition be-
tween buyers, with the inevitable in
crease of prices and credit volume i'm
piled in such condition.
"Competition, when it is once more
generally reestablished,' observes the
bank, will determine the level at
which prices Will finally become
stabilized and the return of competi-
Won VIII assure our gradual but even
| ouai return to more healthy business
conditions and living costs.
Just as credit and prices went up
together they should come down to-
gether too. During the past month
there has been no decrease in the loans
and investment of the banks of the
country, but material reductions
should not be expected at present.
"Credit requirements are nearly al
ways at their peak in the autumn; and
besides the normal seasonal demands,
a period of transition to lower prices
IKE that which we are now experience
ing Is one which requires Temporarily.
at least, additional credit On the
one hand increasing inventories which
result from slowly moving stocks, and
On the other Cancelled orders and poor
coilectlons, produce a demand for credit
not unlike that of last spring. when the
railway and ocean freight movements
were temporarily congested. Such
period calls for a credit policy on the
part OF the banks looking to conserva-
ton OF sound business. Such addi-
tlonal credits as are required are not
Tor further expansion but are for the
protection of industry They are to
enable business men to undertake in
an orderly manner the reduction of in
ventorles and the descent to lower
price levels. That the readjustment,
which has been quite radical in many
industries, has proceeded quietly and
confidently has been due in very part
to the helpful and constructive attitude
OF the bankers, who, in spite of the
heavy Withdrawals of their deposits
and the unusual movements of funds
described in the following section,
have not hesitated, if necessary, to
increase their borrowings from the
Federal Reserve Bank to furnish such
credits for production and distribution
as conditions have required"
Figures compiled by the Reserve
Bank show the extraordinary move
ment of banking funds between New
York and other parts of the country
IN connection with the crop movement
and other operations. These transfers,
which ran into hundreds of millions of
dollars, were effected through the, Fed
eral Reserve system the machinery and
credit elasticity of which made it pos
s1ble to set against each outward flow
OF funds an inward flow, thus maintains
ing the equilibrium Of the credit reser-
weir and assuring to borrowers steady
credit facilities and rates. From July
2 to September deposits in the prin-
clpal New York banks decreased $780,
600 900, these Withdrawals causing a
steady drain of gold from the Federal
Reserve Bank Of New York in favor of
other Reserve banks
In the three weeks ended September
II the gold lost to other reserve banks
by the local institution amounted to
S19o 100000. This adverse flow Of funds
was substantially Offset, the bank
shows, by government transfers to New
York, by the sale of certificates Of in
debtedness by New York banks to other
Federal Reserve banks, and by redis-
count operations between Federal Re-
serve banks. Between September 8 and
Is the deposits of principal New York
banks rose $453, 900. as the result
OF certificate redemption and other
Treasury operations.
Attention is called by the bank to
the fact that there has been notice
able decline in bank clearings in New
York City compared with 1918, due in
part to much less active stock market,
but also due to the perfected method
of clearing stocks and paying for them
put in operation by the New York Stock
Exchange late in April. AS e result Of
the adoption of this method of clearing
stock transactions che Stock Clearing
Corporation since May has reduced
the face value of checks drawn by more
than $1,000, 100000.