The Nezperce herald. (Nezperce, Idaho) 1900-1957, 1920-12-16
By w r Harding Governor Of the Federal Reserve Board

eSsary Tor a pane unless the blow
the fire starts when everyone is
feeling particularly prosperous.
Why we should have had panics
in the past, why there are periods Of
depression, and what the banks Of
the country hape to do with it all
is a good deal Of mystery to the
average person. He does not under
stand why money rates should be
high or low or why prices should
vary, and is likely to- think that
some individual or group changes
the conditions in order to profit by
them 1t is true that sharp individ-
.uals and groups do profit by every
change in conditions, but it is not
true that they bring the conditions
about. Neither is it true that any
one has marked down the purchas-
ing power of our dollar or otherwise
played ducks and brakes with our
currency
/, will help every ono IN his daily
tasks to understand what is behind
financial movements aud how the
affairs of the country are protected
and how very great part the feel
ings OF the average man play In
making for prosperity or for depres-
sion. For instance, probably some
people will be nervous when bank
deposits start to decrease and will
think that then trouble is surely
ahead; yet a decrease in bank de-
posits is not surprising and when ac-
companied by proportionate re-
duction in loans is a sign not Of dis
aster but Of a return to normal and
stable conditions. This | shall ex-
plain, but first let us get the fun
damentals.
Take depression. A feeling of de-
preston may exist when the coun-
try is very prosperous that is.
when production and consumption
are on large scale. A period of
prosperity is induced by many caus-
es that tend to provide buying pow
er such as big crops, the opening up
of new oil wells, or other sources of
wealth, as, for instance, the opening
of the West brought on a great era
of good times; or again, it may be
started, as in 1915 and 1916, by
enormous foreign orders.
What Accounts for the Temper of
Business?"
Men begin to feel optimistic; they
talk optimism, and that which is
known as the temper of business
becomes favorable. One has to reck-
on with the temper Of business,
with the feeling of men in general,
even though it is a condition which
it is all but impossible to define and
for which it is not usually possible
to find basis. The average man in
business cannot run counter to the
general disposition, although the
very strong man will oftentimes
find his greatest success in bucking
conditions. Many big fortunes were
founded by taking advantage Of fear
and buying businesses at low prices
When the people feel prosperous
they begin to buy and then prices
and wages go up, plants are extend
ed to cope with the demand until
we find that many business men are
trying to do more than their capital
will warrant. No one pays much at
tentlon to costs, for profits become
very large and this still further
stimulates extravagant buying and
consequently speculation People
always speculate when prices are
rising. Since the Armistice, for in
stance, literally tons of worthless Sc
,urities have been sold to small buy
ers who are lured into believing that
my kind Of an enterprise will be
By no means all people, however,
benefit by prosperity. The big de-
hand for goods is bound to increase
prices and this hits those who de-
bend for income on fixed salaries
uch as schoolteachers, bookkeepers,
Jerks, statesmen, Government en-
'loyees, or those who have invested
n bonds and mortgages They find
t increasingly difficult to make
nds meet. In the same class are the
always, the gas and electric cons
'anies that have to pay higher prize
s for all they buy and yet are I'M
bic to increase their revenues.
'hus, while the group with an in
reasing income is obtaining an ev-
+ higher purchasing power, anoth-
r group is being squeezed, and fin
lily the extravagant demands of the
irst group more or less overtake
heir increased purchasing power.
hen everyone begins to awaken to
he fact that prices are too high and
hat it is possible to get along with
ess buying.
The moment the mass of the peo-
lie begins to worry about the high.
rices the temper of business starts