Grand Forks herald. [volume] (Grand Forks, N.D.) 1916-1955, 1920-02-23
ReserUc Board To I
Expect Full POwer ia Help
q s Regulate Credit System

remedies employed to correct infla-
ton might create conditions worse
than imitation itself.
"Deflation merely for the sakeAo of
deflation and speedy return to
'normaI-def1ation merely for the
sake of restoring security values and
commodity prices to their pre-war
levels without regard for other con-
sequences would be an insensate
proceadinE in the existing posture Of
world affairs" the report said.
Credit Is Essential.
1T must never be forgotten that
productive industry is profoundly
affected by credit conditions. Modern
business is done on credit. One of
it's life giving principles is credit.
The ultimate test of a cred
1t system must be found in what It
does to promote and increase the
production of goods. True in gener-
al, the truth of this observation de-
serves to be particularly emphasized
in the present deranged state Of
world industry and trade when pro-
duction is the crying need Of the
hour everywhere"
In explanation of its increase in
discount rates. the board said that
this had been the traditional method
of credit control. It's use. however.
presupposes normal conditions and
these. it was pointed out, do not all
exist at this time. While high re-
serve rate was shown to act as a
restraining influence upon borrow
ilgs it may operate as well to at
tract supplies of credit from other
centers. 1t is this condition. among
others, that was said by the board
to make imperative the s Of its
power in controlling credit and start
ing deflation.
Cooperation Necessary.
In setting forces to work to check
depended upon cooperation OF bust
ness and the community generally.
There is. however. no need for
drastic or preS.ipitate action the
report continued. There need be no
apprehension as to our ability to at
feet the transition from war time to
peace time conditions If reasonable
safeguards against the abuse Of
credit are respected. Our economic
tom, safe and sound. Extremes
must be avoided. the processes of adj
justing the volume of credit to a nor
ma basis should be effected in an
orderly manner, and its rapidity
must he governed entirely by condi-
tons and circumstances as they de-
velop. Much will depend upon the
cooperation of business. Without
such cooperation from the general
community, progress be neither
rapid nor substantial"
A plea was made. in this connec-
ton for complete absorption by in
vestors of outstanding portions Of
war securities issues. As these pass
into the hands of permanent holders
and the national debt is reduced by
there gradually will come a proper
balance between the volume of cred
it and the volume of concrete things
the board explained.
Cites Dangers.
The specific Of greater production
was urged again as one of the meth
DDS by which the proper balance
might be materially aided. But the
board directed attention to dangers
which lie in the path of great pro-
duction unless that production is i'm
mediately followed by distribution
and avoidance of wasteful consump-
ton. . It emphasized that boarding
must not be practiced or the stimu-
liant Of production will avail nothing.
These m the fundamental eco
nomic processes upon which the
proper functioning Of the federal, re-
serve banks must depend" the re-
port said.
The federal reserve system can do
much to assist these processes bur it
cannot Of itself alone compel them.
Ehicacious action along these lines
involves the intelligent and earnest