The New York herald., 1920-12-06
FINANCIAL NEWS
AND COMMENT
Far Reaching Benefits Grow
ing Out Of Deflation and
Thrift Campaign.
PRICE CUTS EVERYWHERE
Salient Points of Situation in
Investment Markets in
United States.
n, WILLIAM Jrsrus soIEs.

The financial markets enter this week
the years most interesting period when
the great commercial nations balance
their accounts and clear their states for
new deals in trade. finance and industry.
This year end adjustment outranlzs all
other settlements of the kind. because
1920 has been a period of unremitting
credit strain with extraordinary happen
ings In International finance. Those
Governors who implored the Congress
last week TO amend the Federal Reserve
act. If necessary. to supply temporarily
additional currency and provide relief
from hardships of reconstruction over
looked the fact that loans and discounts
OF the banks had increased about
$1,000, 100000 since the arrnistice was
signed, and neglected to state that the
trials Of the readjustment period were
nothing more than the worlds greatest
economists had predicted would develop
when the day Of reckoning came.
Reconstruction Finance.
The world IS seeing the familiar
troubles of the morning after the huge
travagance of the war period. Although
the situation is attended with many
vicisstudes. this country is making the
best showing and will emerge safe and
sound II the reserve system is left
intact and the politicians keep their
hands off the Reserve Board. Any one
familiar with the tremendous strain of
the last nine months knows that the ac-
tion which saved the American people
from financial disaster was the insistence
by the Reserve Board that the banks
should cease all advances for specu-
lative ventures and finance only pro-
ductive enterprises. Amy other course
would have been suicidal and would have
continued the upward movement of COM
modify prices the further expansion of
an already overburdened loan account
and the evils growing out of an unsound
economic policy.
Playing Safe.
As w. p. G. Harding. governor of the
Federal Reserve Board, pointed out In
his caustic reply to criticisms Of SEN
ator Owen touching the discount policy
of the Reserve Board, the price recess
sions which farmers, IN common with
other producers. complained Of having
been due In part to worldwide causes
japan, and later developments here and
abroad showed plainly that certain price
readjustments could not have been
avoided. The history of those periods
shows that high prices are succeeded by
lower prices and that bank loans based
on an exceptionally high price average
for underlying collateral can be safe
guarded only by systematic deflation
and refusal TO make fresh advances TO
force the public TO pay war prices in
peace times. The readjustment there
fore, through which the United States,
In common with other countries, Is pass
ing is the only procedure which Will
avail to correct evils from which the
world is suffering. 1t Is not question
OF politics but Of hard common sense.
because slowly but surely the American
people are thinking again in the arith-
metic Of pre-war days. when a ten dollar
note purchased more than a derby hat
and the average citizen was unaccus-
toned TO think of suit Of clothes as
tho equivalent OF a 500 investment.
DeHatfon.
II is encouraging to know that COM
modify prices in this country have de-
clined 13 to 33 per cent. from the peak
level, against fall in Great Britain OF
from 10 to IA per cent and In Canada
been marked by the most abrupt decline
that has taken place in any six months
since civil war days, and although there
has been natural increase in CONNER
cial failures the dehatlon for the most
4