The Washington herald., 1920-12-06
us. ADJUSTING
ITSELF LFSAFELY,
REPORT SHOWS
Federal Reserve Board In
Years Review Has Op-
timistic Note.
PRODUCTION Is SAFE
Reconstruction Period Far
Less Severe Than Those
Of Other Periods.
PRODUCTION Is SAFE

VI SihSA SktSAos
The United States is passing safe
ly and with unusual smoothness
through the period OF read;ustment
from a war TO a peace basis. ac-
cording to a statement issued yes
terday by the Federal Reserve
Board reviewing the financial and
economic conditions OF the nation
during the year just closing.
Production. says the board. while
falling off In some RESPECTS and in
some trades, shows a GtronS incIi-
nation to right itself. Developed to
a high degree as a result OF war
necessities, it was Inevitable that
the adjustment period would involve
/ some decrease In output But. the
ration is encompassing this period
safety and with little of the rigors
, OF former adjustments.
Larger Note Circuiation.
In the banking field. says the
statement, the Federal Reserve note
circulation is about 100000 900
larger than at the end "f Ju:y.
There has been also a tendency to
retire long-term .or speculative pa
per and substitute for il notes based
upon bona fide commercial trans
ACTORS.
In international trade the return
to normal conditions is in progress
to a marked degree.
80 far as concerns the Euro
pean countries" says the Reserve
Boards report, the year has been
noteworthy in international trade
for a decided evidence OF increase
OF productive power which, although
interrupted from time to time by
internal difficulties of one kind or
another. has nevertheless been the
dominant feature in the foreign eco
nomic movement.
Relief I'm Price Situation.
Very sharp reduction ip prices
coupled with heavy decreases in
production. extensive unemployment
and business reaction. often inyolv-
ing bank failures, have been the
o1tstaAding features OF readjust-
ment IN former years. The transit
tion through which the community
is now passing. while necessarily
uncomfortable, has thus far been
accompanied by only a minimum o.
the unfavorable symptoms developed
on other occasions.
while the present process Is as
yet incomplete and while some lines
of business may be expected to pass
through a still further period of
Reorganization, there is good rea-
son for believing that with our pres
ent strong banking structure the
difhculty of the transition will not
be much further aggravated and
that a normal situation will be re-
stored with far less than usual dis
tress."
marked decline in price levels is
one of the encouraging features of
the Federal Reserve report. which
states that in January prices stood
at 242 per cent of the prewar level
The maximum reached in April,
when Wholesale prices were 263 per
cent of normal. This was followed
| by a steady decline to zoo per cent.
Consumption Value Is index.
Commenting upon this important
phase. the report states:
while much is said of declines of
prices as an indication Of economic
retrogression, it is to be remem-
bered that the real income Of the
community is the quantity of goods
available for consumption and not
the money value of goods"
The output Of primary wealth
the product of the farms-has been
of more than average size, the re-
Port states. in commenting upon the
unusual success % the year from
! the standpoint OF the volume OF
commodities available.
In Industrial lines, the report
notes a natural decrease from
heavy war,production. especially af-
fecting shipbuilding, the iron and
steel Industries and textiles.
Tt is in the quantity Of output
| supplied by a nation that the best
test is found OF its true position
from an economic standpoint" con-
tinues the report.
Changes Comparatively Small
Although 1890 shows a DOWN
ward movement in some branches
of production and trade and a les
sening Of the activity with whicn
credit media are employed, a graft
flying aspect is seen in the fact that
the changes thus far reported have
been so small. especially when the
great activity of production ami the
greut'extensicn of credit which &C.
CURED during the war period ere
borne in mind.
: Considering the year 1920 in
comparison with similar periods. re-
action rs in most cases relatively
minor as compared with the volume
of prediction and trade when at its
high point"
European countries already are
displaying marked economic reha-
Utilization following the war. with a
decided evidence of increase OF pro-
ductive power. This is Indicated by
the volume of imports, the report
states. which already have exceeded
the prewar level. while our exports
sho/a lower level. some of the
months of 1870 being lower than
the average mcnthly exports du1nT
1919. That this trade balance may
be swung farthtr in favor of Eu-
ropean cocItries is the prediction
of the Federal Reserve Board.
m nI- VA. :. nsvkuess