Atlanta tri-weekly journal. [volume] (Atlanta, Ga.) 1920-19??, 1921-05-17
ONE YEARS ECONOMY
PUTS j. s. BUSINESS
ON FIRM FOUNDA7 ION
BY HARDEN COLFAX
Geased Wire Service TO The Journal)
Copyright, 1921

Copyright, 1921
WASHINGTON, May 14.-Ten bill
lion dollars in potential credit for
financing the legitimate demands of
business a tower of financial
strength so huge that it's dimensions
stir the imagination to bewilderment
has been built up through thrift,
economy and sound policy by the
banks Of the federal reserve system
during the twelve months ending to-
day.
That vast su moi credit capaciy,
stands untouched, an unswerable eX-
ponent of the soundness of American
banks and of the skill with which
they have weathered the storm.
One year ago today the strength
of the federal reserve system was
at it's lowest. On May IA, 1920, there
was available in the keeping of the
system free goid-gold which could
be used as the basis for credit
amounting to only $201, 100000. 1t
had never fallen so low before. The
reserve percentage at that time was
down to 1922 per cent, but little more
than two points above the safety
line of 40 per cent.
Today the amount of free gold in
the SYSTEMS keeping, available as the
foundation for credit, stands at ap-
proximately $810,000,000, the highest
figure ever reached, topping the rec
ord of 1904, 100000 attained June 81,
1918. And the reserve percentage
stands at $50. setting a new high
mark for the wear,
Analysis of the statement just is
sued by the federal reserve system
shows. therefore, that the American
people have been practicing the
homely virtue of economy for year
today. The systems records show
accurately by the measure of the dol
lar mark, as applied to the amount
of free gold. that the recovery be-
gan from the week of May Ia, 1920,
and that nationwide economy was
slow and faltering during the first
few months thereafter.
BY fall it was in general more in
favor. On January !, 1921, nearly
everybody was practicing 1t to a de-
gree for free gold reserves had risen
on that date to $S50,O0O,00O.
Gold Piles UP
During the winter, the records
show, the buyers strike came into
it's own. There was a tremendous
shrinkage in the demand for money
with which to buy goods, SO much so
that $600,000,000 in reserve notes
currency in circulation. That means
that the volume of federal reserve
notes in circulation is less today by
nearly Sc for every man, woman and
child in the United States than it
was the first of the year. 1t also
with which the buying public APP
piled the lash to wartime prices.
Another factor that helped might
lily to build UP the vast reservoir of
credit to which legitimate business
may turn in it's hour of need was the
great amount of gold which poured
into the country during the winter.
1t is estimated that nearly $500. 000.-
900 in gold has come to our shores
from abroad since January 1, al of
which is so called free gold, or gold
available for extending credit.
Thus, as the reserve banks stand
today, they have a fund of $S10,-
900, 900 in actual gold on which loans
can be made to their member banks.
And as the law provides that cur
rency loans edualling two and one
half times the amount of free gold
banks have a lending capacity today
of more than $2,000,000,000.
While $4,000, 100000 measures the
potential credit capacity of the fed
eral reserve banks, it by no means
measures the credit capacity of the
lending banks who came in contact
with the man needing money in his
not available for direct loans to bust
ness men, but for loans to the 10000
banks in the federal reserve system.
Those 10000 banks, in time of neces-
sity, can take that credit and theoret-
ically expand it ten-fold through the
nrnUi slim Of tho iayu rannirinp them
to keep with the federal reserve bank
one dollar out of every ten Of de-
mand deposits.
In actual practice the banks could
expand the $200,000.000 credit re-
serve fund from six to-. seven
bankers would admit that it could
expand five times. Taking the
most conservative basis as the
proper one for computation, the ST.
000, 100000 reservoir of credit in the
federal reserve banks could thus be
changed to a $4,000, 100000 reser-
voir in the member banks with which
the man needing money must do bust
ness.
There is, of course, no need for
tapping measurably this vast credit
fund on which American business
can draw if need be. Nor would it
be wise to utilize it, or any portion
OF it at this time except for the
soundest business practice. Nor
would it be possible in the temper of
most American bankers today, to OBJ
tain any portion of it for any enter
prise that would not stand the acid
test. But the big point is that it is
there and that it's length and breadth,
greater than the human Imagination
can conceive, stand today between
legitimate American business and
failure.
Sixteen Dead in Crash