Evening star., 1921-01-17
NEW RECORD MADE
NPAPER RETIRED
DefIation Process Is Swift
and Promises Favorable
Future Loan Conditions.
By DAVID LAWRENCE.

More paper money has been retired
from circulation in the last eighteen
days than at any other previous
consequence the wrinkles have passed
from the brows of our government
officials
The process of defation has fol-
lowed normal lines. Nature has taken
it's course. Liquidation has been ex-
tensive. And the entire financial sit
uation is healthier than it has been
in some time.
Various statements issued by the
Federal Reserve Board indicate, when
analysed. that about $245,000.000 fed
eral reserve notes have been retired
in the last three weeks. which is
about $50.000.000 more than was the
case for the corresponding period last
year. Similarly, since the middle of
December loans have decreased about
$160, 200, 900, corresponding to the re-
6uction in the amount OF currency.
Expect Quick Business Change.
Officials are drawing optimistic in
ferences from these figures and are
confident that it means quick
change fer the better in business as
a whole. For IS soon as the taking OF
stock in January is completed. the
buying of spfing goods and the gem
eral demands of spring business will
begin to be financed. The financial
condition of the business world, as
reflected in the data gathered by the
Federal Reserve Board, is satisfactory
and the natural expansion of currency
and increase of credits which occur
in the early spring are confidently ex-
pected.
The retirement of $345.oo0,000 in
federal reserve notes has another
meaning. The decline signifies re-
duction by more than two dollars of
the per capita circulation of money.
Fortunately the cost Of living is
tumblins, so that as the amount of
money in circulation diminishes. the
purchasing power of the dollar is
rising.
of more than two dollars establishes
a new record. Certainly no such change
has been recorded in an equal space
Of time And as further evidence Of
the success of the deflation currents
in American finance. the earning as
sets of the Federal Reserve Board
have dropped below the three billion
mark for the first time since Janu-
ary 3, 1920.
More Rapid Than Expected.
In a nutshell. the policy Of contrac-
ton of credit which the Federal Re-
serve Board instituted last spring has
had the desired effect, only 1t begins
to appear that the results were ac-
people thought would be the case.
And it begins to look as il the con-
tracing machinery had operated SO
far that relaxation may be expected
henceforth. The prospect is that
bankers will not find justification
stantial curtailments on the notes
thAy hold,
The Federal Reserve Board itself
will probably remain silent. taking no
official action, but there are more
ways than one for the board to indi-
cate informally to the bankers Of the
country that the pinching process has
gone far enough, and that it would do
no harm to give the business world
easier breathing on pending loans.
has a delicate problem to face in say
ing anything on the subject, for the
farmer or producer who has been
obviously turning his goods In to mar
ket at practically any prices so as to
get money to pay pdif loans ne,ic1 m1sns sleW sta
that he could get new loans and thus
hold his goods for higher prices.
Insists Its Policy Only Way.
The Federal Reserve Board will
urob0bly do nothing that will inter-
fere with the steady. though painful,
decline in the cost of living, NO mat
ter who il affected by the prices of
commodities The board has insisted
from the start that its policy Of con-
traction was the only way to force
the cost Of living down. So while
there are soma who think the process
of liquidation has gone far enough.
there are others who want the Fed
eral Reserve Board to hold steady
and compel prioes to go down even
farther. It's Ike q delicate surgical
operation; the surgeon must cut deep
enough and yet not too deep. It re-
ouiroe a skilled hand. But there is
abundant evidence that the cutting
process has gone far enough and
chat q change for the better in the
credit situation is imminent.
(Copyrieht 1a21.)