The county record. [volume] (Kingstree, S.C.) 1885-1975, 1920-06-17
The Expansion of Credit.

1919: "The expansion of credit set in
motion by the war must be checked.
Credit must be brougt under effective
control and its flow be once more reg
ulated and governed with careful re-
gard to the economic welfare of the
country and the needs of its producing
industries.
"Deflation, however, merely for the
sake of deflation and speedy return
to 'normal'-deflation merely for the
sake of restoring security values and
commodity prices to their prewar lev
els without regard to other conse-
Quences. would be an insensate pro-
ceeding in the existing posture OF ma
tional and world affairs.
at must never be forgotten that
productive industry is profoundly at
fected by credit conditions. Modern
business is done on credit. One of its
lse-giving principles is credit. The
mood and temper of the business COM
ninnity are deeply affected by the
state of credit and may easily be dis
trTbed by ill-considered or precipitate
action. A system Of credit control
mist always be judged by what 1t
dSes to maintain a healthy condition
ofsmind on the part of all sections
and classes of the producing commu-
n&S. The ultimate test of the func-
tjSaing of a credit system must be
fSaind in what it does to promote and
iSsSease the production of goods. True
id8$eneral, the truth of this observa-
tSA deserves to be particularly en-
p&Ssized in the present deranged.
s3S2e of world industry and world
tile when production is the crying
III of the hour everywhere.
8&oo rarpid or too drastic deflation
W6&ld defeat the very purpose OF q
Va regulated credit system by the
t&less unsetlement of mind it would
tk8fluce and the disastrous reaction
~ such unsettlement would have
pn productive industry.
E8Radical and drastic deflation is
~ therefore, in contemplation, nor
i@a policy I further expansion.
HHher S.es would in the end lead
8 TO- a1@must not be per
ut4ed ~ de1elop. The credit situa-
TIA in tke ehited States is at bottom
sSahd and safe. Our economic and
fsnancial position is essentially strong.
Tasre need be no occasion for appre-
hshsionr@ @s 70 oYr, ability TO effect the
tsshsitiOn ffoh wartine to peace
time conditions if reasonable safe
guards against the abuse sof credit
are respected. Thehe is, however,
no need for precipitate action or ex-
hsme measures Extremes must be
avoided, IL the iH process p Of adjusting the
volume. of credit to a normal basis
should be- laffe ectsdi IN an sfdefly nanAA
nsf, and tits rapi4ts smhst ibs4 govtl
srned bya conhit6nf ,a1ds fssqmstaan55I
css as they develop Much viii depend
u6on tis-coSoperations sofrths. business
ala general community. Indeed with
eat such cooperation progress can be
nsaher rapid nor substantial. Much
Sit depend also upon the rapidlty
Nth which the unabsorbed portion OF
tbs outstanding issues of war securi-
kss passes ift6 the hands, Of pernar
heft holders. As the national debt is
tASs absorbed and as it is reduced
Afough the operation sPf the sinking
Hhd, tsesleA saespgnta of As bapkS
skSuld BaK&uSeat Fire bpondhk =
E the 3SgSBf bAsnd3 bettHA a4s
fS,ume Of credit and the Volume of
sbncrete things, which credit helps
Haproduce and which are the normal
BASIS Of credit, is restored. rThis sgei-
hrium, it can not esBa tHTsptly
srStoo emphaticallyl #Esd shabe fe-
stored only by speeding up the pro-
sesses of production, by the orderly
distribution of goods, by the avoidance
sf wastefu1 consumption, and by the
increased accumulation of savings.
Fhese are the fundamental economic
,oaocesses upon which the proper func-
fiening of the Federal Reserve Banks
must depend. The Federal Reserve
system can do much to assist these
processes but it cannot of itself and
laibne compel them. Efficacious ac-
ton along these lines involves the IN
feIigent and earnest cooperation OF
ttJe business and general community
While the Federal Reserve Board Will
always be mindful of the interdepend-
sefce of credit and industry and of the
Influence exerted ON prices by the,
General volume of credit, the Board
~ .,,,,,ot N aSs,,rna to ba an