Indiana daily times. [volume] (Indianapolis [Ind.]) 1914-1922, 1920-03-02
CREDIT MUST
BE CONSERVED


NEW YORK. March 1.-The chief
cause OF the presen, strain on the credit
situation In the United States is the fact
that tie volume OF credit has expanded
until the gold basis IS becoming made
Nquidify or credit is the Opiplon
pressed yesterday by J. s. Alexander,
president Of the National Bank OF Com
merce, in q statement. Because Of this
situation considerations OF public in
terest should be the determining factor
In extending loans by the banks and
that public interest requires the con
servation OF credit so that the needs OF
essential enterprises. rather than non
essential activities. will be provided for
The statement is as follows:
Credit expansion in the United States
has reached a point where Il must be
given earnest thought a. a serious pub
lie problem The banks and the business
definite public responsibility ia making
and using loans In view Of the condi-
lions aud special eXigencies that exist
today.
Considered individually. the banks, in
extending credit, are IN theory handling
private means. but viewed collectively
they are actually making use Of one Of
the nations greatest resources. since the
sum total Of bank credit constitutes the
country's chief instrument OF business.
HIGH MONEY RATES
INDICATE CREDIT STRAIN.
The strain under which the credit re
sources Of the country are now laboring
Is evidenced by the high money rates in
al classes If loans An analysis Of the
fundamental factors iu the situation
clearly reveals that the CHIEF cause OF
the strain Is that the volume OF credit
has expanded until the gold basis Is
becoming inadequate IN view OF condi-
uons affecting the liquidity Of credit
zone Index Of the basic situation IL
found in the seriously altered ratio be-
tween the total stock Of gold coin and
bullion In the United States and the
total volume Of other money and bank
deposits subject to check Both Of these
latter items are efficient Instruments Of
business because Of the mistaken and
uucxpressed faith Of the public that un
DERIVING them Is enough gold for the re-
demptiou Of all obligations incurred In
either Of them which might be required
in the course Of business. As long as
this faith is mistaken there Is rela-
lively small call for the gold, SO that z
comp aratively small ratio of the metal
normally sutfiCes.
Thus, in the last ANALYSIS. the sound
ness of the business situation requires
that the ratio Of the gold base TO the
credit structure be such that all prac-
teal needs will be easily met. maintain
ing unwavering public faith.
81 in no sense mean to imply that
the gold ratio is now down TO a point
that should unsettle public confidence
or that any fixed ratio Is advise bic. but
nevertheless It IS approaching point
that is lower than experience elbows best
serves the credit requirements Of the
nation.
BUSINESS MEN MUST
GIVE COOPERATION.
THE falling gold ratio, and the credit
stringency which we see as result are
sufficient warning that the time has
come when this obligation of the banks
must be taken most seriously. IL should
also be realized that the responsibility
IL not solely theirs, and that to make
readjustment complete and fundamental
business men must cooperate, by not
detracting credit from productive en-
ployment | believe that an observation
Of these principles constitutes the only
real correction to be found for present
conditions
but the effort Of the banks and bust
ness men In this direction would be
rendered difficult unless supplemented
by Increased public thrift In speeding
and consumption, so that the Ionserva-
ton of the nations credit resources for
essential purposes may work Its full
effect.
"Inis should result in keeping the
credit structure In a proper relationship
with the gold basis, and it should re
suit In restoring the proper degree of
liquidtv to banking resources.
Il believe that the reimbursement of the
present strained credit situation must
come from this direction aud not in any
effort to increase or maintain our supply
of gold at the present volume as q
support for more credit than actual essen
tial business requires. We have more
than our share of the worlds gold now
Europe should not send us more, and we
may expect some Of our gold to flow out
to other parts of the world where the
balance of trade is against us. In the
long run, that should better our own
business. since 1t Will serve to set up in
the world more solvent and more active
customers of this country"