Evening star., 1921-09-23
GOV. HARDING SEES
GOOD TIMES AHEAD
Head Of Reserve Board Says
Worst Business Period
Is Passed.
By the Associated Press.

By the 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 dis
Reserve Board declared in an address
here last night at the Made-in-Caro-
linas Exposition.
THE banking situation has greatly
improved" MIR. Harding said. land al
though the process of readjustment
has not been completed evidences are
multiplying that the corner has been
turned and that we have passed the
most acute stage of the readjustment
period"
Gov. Harding said that in the i'm
agricultural developments and the
manner in which this years crops
were marketed.
With proper cooperation on the
part of merchants and bankers" he
said, those engaged in agriculture
have opportunities and prospects which
were not anticipated few months
ago. and it is of vital importance that
this cooperation be given.
1T should be remembered" Gov.
Harding continued, that in order to
maintain our production we must push
our foreign trade. We cannot main
tain our foreign trade on the basis of
the gold stock of other nations, and
some means must be devised for ex-
tending longtime credits abroad or of
interesting American investors in for
e1gn properties and securities in order
that the exchange rate. which now
runs so heavily against other nations,
may be corrected.
Urges Foreign Trade.
I'VE must continue to buy from for
eign countries those things which
they can produce better or more
cheaply than we can and exchange
commodities with them. II we deter
mine to do business with and for our
selves alone. it seems inevitable that
we must reduce our productions to
| meet merely American requirements"
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. Gov. Harding declared, but to
operation of the inevitable law Of sup
ply and demand. Federal reserve notes
| about $500,O00,0O0 less than when cot
ton reached its lowest point last
| spring.
Gov. Harding spoke at length in ex-
PLANTATION of the workings of the fed
| eral reserve system, about which, he
|
| knowledge" Any belief that there
was preordained contraction of the
currency during 1920 to reduce prices
| is absolutely unwarranted," he said.
1T is not the function of the fed
| eral reserve system. or Of any banking
system to attempt 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 inter-
! ested more in the stability of prices
and their margin of collateral than
the price level itself.
Upward Trend of Notes.
There was not only no contraction
of federal reserve note currency dur
ing 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 that year. rising from $2,S44.O00,-
600 January % to S3.404, 100000 De-
cember 23. q record high mark. Since
that time the volume of federal re-
serve notes in circulation has been
greatly reduced until September IA.
I'll The e ] Volume e Of federal reserve
notes depends entirely upon the ac-
tivity Of business They are issued
only as need for them develops and
as they become redundant in any To-
Cdllly lHey arc TSlui hSu AoE VI cuil
or for redemption. The increase in
volume of federal reserve notes in
circulation from 1917 to the end of
1920 was. in so far as it was not the
result Of direct exchanges for gold
and gold certificates, the effect of ad-
vancing wages and prices and not
their cause. AS long as federal re-
serve notes are redeemable in gold
and the required reserves are main
tanned. it. is difficult to see how
rency growing out of the issue of
federal reserve notes."