Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1920-02-23

! IL
exert the full power of the reserve bank :
ing system in regulating and control
ling the credit situation--a course de =
signed to aid commerce and industry
In restoring a pre-wa equilibrium
was disclosed in the boards annual re :
port. made public today.
| With this as It's announced peace
time policy, the board was prepared to
test the ability Of the system to check
expansion and to induce healthy liqui :
dation." The board explained il was
aware of the implied power to rectify
the condition which confronts the coun :
try. This power, necessarily, followed
the authority for, and employment Of.
an elastic system of reserve credit and
note issue, il was added.
| ~ Recommendation also were made to
Congress for amendment Of the reserve
act which would permit reserve banks,
with approval Of the Federal Reserve
Board, to establish normal maximum
lines Of credit accommodation for mem
Der banks. An ascending scale Of rates
would be provided in the event msney
was borrowed above the maximum line.
This, the board believed, 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.
Warning Against Rapid Defiation
Warning was given that the country
must guard against too rapid de1ation.
While the board was in entire sympathy
with measures to overcome this evil, it
pointed out that remedies employed to
correct imitation might create condi-
tions worse than imitation itself.
"DeAation merely for the sake of de-
hntion and q speedy return to normal
-dehation merely for the sake of re-
storing security values and commodity
prices to their prewar levels without
regard for other consequences-would
| be an insensate proceeding in the exist
mig posture of world AFFAIRS the report
said.
1T must never be forgotten that pro-
ductive industry is profoundly affected
by credit conditions. Modern business
is done on credit. One of its life giving
principles is credit. The ultimate test
| Of credit system must be found in
what it does to promote and increase
the production of goods. True in gen
eral. the truth Of this observation de-
serves to be particularly emphasized in
the present deranged state of world in
dustry and trade, when production is
the crying need Of the hour every
where
In explanation Of it's increase in dis
count rates, the board said that this
had been the traditional method of credit
control Is use, however, presupposes
normal conditions. and these, it was
pointed out, do not all exist at this
time.
While high reserve bank rate was
shown TO act as restraining influence
upon borrowings, it may operate, as
well. to attract supplies of credit from
other Ccnters. 1t is this condition,
among others. that was said by the
board to make imperative the use of its
power in controlling credit and starting
debating.
Forces at Work to Check Expansion
In setting forces to work to check
expansion, the board declared much de-
pended upon co operation of business
and the community generally.
There is. however, no need for
drastic or precipitate action" the re-
port continued. "There need be no ap-
prehension as to our ability to affect
the transition from wartime to peace
time conditions. if reasonable safeguards
against the abuse of credit are re-
spected."
Our economic and financial position
|
tremes must be avoided, the processes Of
adjusting the volume of credit to a
normal basis should be effected in an
orderly manner. and its rapidity must
be governed entirely by conditions and
circumstances as they develop. Much
will depend upon the co operation of
business. Without such CO. operation
from the general community. progress
can he neither rapid nor substantial +"
A plea was made. in this connection.
for complete absorption by investors Of
outstanding portions of war securities
issues, As these pass into the hands
Of permanent holders and the national
debt is reduced by the operation of the
sinking fund. there gradually will come
n proper balance between the "volump
Of credit and the volume of concrete
things the board explained.
Greater Production Specific
The specific of greater production
was urged again as one of the method,
by which the proper balance" might
be materially aided. But the board
directed attention to dangers which lie
in the path Of great production, unlcSe
Iu