New Britain herald., 1920-02-23
Hopes for Restoration of Pre- War Financial Equilibrium
URGES GREATER PRODUCTION
Country is Warned Against Too Rapid Deflation1 -EStension of U. S. cred- it to Foreign Competitors Causes H. C. of l..

Washington, Feb. 23.-DeteTmina- tfon of the federal reserve board to exert the full power of the reserve banking system in regulating and controlling the credit situatlon-a course designed to aid commerce and industry in restoring a I're-war oquil ibriun1-was disclosed in the boards annual report, made public today.
 Recommendations to Congress-.
 Recommendation were made to congress for amendment of the re- ' serve act which would permit reserve banks with approval of the federal reserve board, to establish normal maximum lines of credit accommo- dation for member banks. An ascend ing scale of rates would be provided if money was borrowed above the maximum line. This, the board be- Gevad, would induce banks to hold their own large borrowers in check and thus work to the end that credit expansion on large scale would be stopped.
 Warns Of DcflstiOA
 Warning was given that the coun- try must guard against too rapid de- f1ation. While the board was in en- tire sympathy with measures to over come this evil, it pointed out that remedies employed to correct imitation might create conditions worse than deiation itself.
 "Defation merely for the sake of detiation and q speedy return to nor mar-detlation merely for the sake of rest oring security values and com- 9lodity prices to their pre-War levels without regard for other consequence ps, would be an insensate proc teedlng in the existing posture of world af- fairs,' the report said.
 plea was made in this connection for complete absol ption by investors of outstanding portions of war secur- ities issues AS these pass into the hands of permanent holders and the national debt is reduced by the oper- sttion of the sinking fund there grad sally will come q proper balance be- tween the volume of credit and the volume of concrete things,' the board explained.
 Urges Greater Production.
 The specific of greater production was urged again as one of the meth ods by which the proper balance might be materially aided. But the board directed attention to dangers which lie in the path of great produc- lion unless that pl oduction is imme- tiately followed by distribution and avoidance of wasteful consumption IL emphasized that hoarding must not be practiced or the stimulant of pro- 'duction will avail nothing.
 The granting of extensive credits to foreign trade and the resultant keen competition in our own markets with the foreign buyer was charged by the board as being "one of the potent causes of high prices It was shown that the demand for comm odities from domestic &s well as foreign sources was so far in excess Of the s;1ppIy that the increased cost of credit can be and is absorbed by the Srice Speculation therefore has nor been effectively checked by advances in interest rates because of the anti cipated-and recently realized, large profits according to the analysis.
 oppose Financing Exports.
 The board took occasion to restate its opposition to the financing Of eX- ports which require long term credits through banking operations as dis 1inguished from appeals to the secur- itieS markets.
 Treasury advances during the year amounted to $1,757,9 ,9S9.00o but this was not regarded as sufficient to off, set the corresponding measure of ex- mansion necessitated by the carrying of the credit balance.