Arizona republican., 1920-12-04
Financial Review
What Is the Answer2
By ERIC kOB5E Of Blyth, Witter & Co.

The news items of the last two days pertaining to governmental aid for farmers are surely of more than pass ing interest, not only to the produc- CTS, but also to the consumers. The desirability of such aid and it's final consequences are certainly questions which involve very vital and funda- mental economic principles, and grave consideration from every point of view must be given the problem to ob- tain a successful and permanent so- lution. A temporary solution is noth- ing more than an evasion of the iS- sue. and when the final settlement would come, which it must sooner or later, the present procrastination would add many difficulties to the all ready intricate situation, and the final readjustment would be more damag- ing to all concerned.
 It appears to The Review that the following are the principal questions involved, granting the condition of the farmers to be as stated generally in the press.
 1. To what extent can legislative or monetary aid be extended to form CTS by the government without in jury or injustice to other industries, and without final injury to the farm CTS themselves?
 ?. Will such aid create a false high price level not commensurate with the ! level established by the law of supply and demand and how long and at what a sacrifice could such high | level be maintained?
 Would such a procedure be the | beginning of a growing evil?-the structure of false prices being built on a false foundation with the result | that when more stories were added to continue to bolster up the price level their weight would crush the whole to the ground.
 4. What would be the result of loans on commodities not actually sold?
 5. To what extent are the rights of the consumers to be considered?
 6. Can you ignore the law of sup ply and demand? | '. What othen solution of practical value can be suggested?
 We will discuss these questions in their order.
 l. There seems to be only one practical source of revenue from which monetary aid could be extended the farmers, and that is the earnings of the federal reserve banks. Under the present law no such use of the money could be made. as all earnings above operating expenses and the per cent paid on the capital stock, are paid to the Government of the United States, and it would take a special act of congress to change the dispo- sition of this money. Hence this question is past the authority of the federal reserve board, and is up tc congress. In the opinion of The Re view such a use of this money is un- warranted. It would work an injus- tice to other industries through the protection of one at the expense o1 the others. and it would create a false value for farm products which in tho end must react to the disadvantage of the farmers. After a period oi false imitation the drop 9s always more sudden and more pronounced 1T proportion to the heighth of the in flation.
 2. To make loans that will allow
 of the holding of commodities off th' market will create a high false pric, level not warranted by the law ot
 supply and demand. It is problemat ical how long such a level could b. maintained. but beyond question i
 could only be maintained at all at th' sacrifice of other industries and bl subordinating the legislative power O the country to the agricultural inter, ests.
 3. Where a false level is once es . tdDuSneu IL requires constant ald u hold it up, and the longer the posi- } tion is maintained the greater is tn 3 call upon the reserves. The situatio
 is like to a military one. A fals
 forward position may be won but
 maintain that position such a heav
 drain is made on the reserves that the end the position must be aban I doned. and the resultant losses to tn e army through the effort to hold
 false place. is much heavier than if
 had been given up at once, or bette
 yet, never taken
 4. To make loans on commoditie = not actually sold would certainly be Il step backward toward the recent day e of imitation which the country ha e been struggling so hard and so sue y cessfully to overcome. Regardless | whether the loans are made by tn h banks or by the government, the re t suit would be the same-that none o was being taken from legitimate pun
 poses and was being used to hol
 commodities for higher prices. or i E other words. for speculation. It woul
 also tend to undermine the financii Y, system of the country either throug St putting resources to uses for whic ~ they were not intended if the loar . are made by the government, " S------------- -