The Birmingham age-herald., 1921-09-23
HARDING DECLARES BANKING SITUATION GREATLY IMPROVED
Need Cooperation for Great CT Prosperity, Says Re- serve Members-Must
 Push Foreign Trade
By Associated Press

Charlotte, N. C., September a. Gloomy forebodings of last winter with respect to the banking situation are no longer justified and can be dismissed Governor Harding of the federal reserve board declared in an address here tonight at the Made-in- Carolinas exposition.
 The banking situation has greatly improved" MT. Harding said, and although the process of readjustment has not been completed evidences are multiplying that the corner has been turned an dthat we have passed the most acute stage of the readjustment period"
 Governor Harding said that in the imme ediate future much would depend on agricultural developments and the manner in which this years crops were marketed.
 tho part of merchants and bankers, he said, those engaged in agricul- ture have opportunities which were not anticipated few months ago and it is Of vital importance that this CO., operation should be given.
 Must Push Foreign Trade
 'It should be remembered Gov srnor Harding continued that in order to maintain our production we must push our foreign trade. We cannot maintain our foreign trade on the basis of gold stock of other nations and some means must be de- vised for extending long time credits abroad or of interesting American in- vestors in foreign properties and securities in order that the exchange rate which now runs so heavily against other nations may be cor rected.
 we must continue to buy from foreign countries those things which they can produce better or more cheaply than we can and exchange commodities with them. If we de- termine to do business with and for ourselves alone, its seems inevitabla that we must reduce our production to meet merely American require ments.
 The recent advance in the price Of cotton was in no way due to any in crease in the loans of federal reserve banks or to any expansion in the cur rency, Governor Harding declared, but to operation of the inevitable law of supply and demand Federal re- serve notes actually In circulation, he said, were about $500, ,o00. 900 less than when cotton reached its lowest point last spring.
 Ia af lapufh in explanation of the workings of the federal reserve system about which he said there was Surprising lack of knowledge" Any belief that there was a preordained contraction of the currency during 1920 to reduce prices Is absolutely unwarranted,' he said.
 Not F'unction to Fix Prices
 Tt is not tho function of the fed eral reserve system, or of any bank ing system to fix or control prices" the Governor continued. Banks are concerned with prices only in so far as the security of their loans may be involved and they are interested more in the stability of prices and their margin of collateral than the price level itself.
 There was not only no contraction of federal reserve note currency during the year 1920, but on the other hand the total volume of federal re- serve notes in circulation shows an almost continuous upward trend dur ing the year, rising from s2,S44,o00,- 900 on January 23. to $34o4, 100000 on December 23, a record high mark. Since that time the volume of fed- erai reserve notes in circulation has been greatly reduced until on Sep tember 1, 1921 1t stood at s2,4si, ,66l,- 000
 "The volume of federal reserve ntoes depends entirely upon the &C., tivity of business. They are issued only as need for them develops and as they become redundant in any To- cality they are returned for credit or for redemption. The increase in vol ume of federal reserve notes in cir culation from 1917 to the end of 1920 was. in so far as 1t was not the re- suit of direct exchanges for gold and gold certificates. the effect of ad- vancing wages and prices and nor their cause. As long as federal re- serve notes are redeemable In gold and the required reserves are main tained. 1t is difficult to see how there can be any Imitation of the currency growing out of the issue of federal reserve notes.'