The Birmingham age-herald., 1921-12-18
By HUGH ". ROBERTS Washington Bureau, The Age-Herald.


 800 Davidson Building.
 Washington, December l7-(Spe- cial)-In an address before the Washington Chamber of Commerce. W. P. C. Harding, governor of the federal reserve board declared that business had passed through the acute stage of reaction, and that while ''normalcy" had not been reached there were many indications that revival was setting in.
 He indirectly paid his respects to his critics in Congress. He used the term certain reckless criticism He declared the success of the dis armament conference would have a splendid effect on world business. II advocated a tariff which would pre- vent European dumping" but that would be sufficiently low to permit foreign trading.
 He said: "There are many indica- tions that the beginning of the re- Nival is not far distant When It does definitely set in it will be fol- lowed in due course by new era of prosperity. While the losses dur ing the last two years have beon great, much experience has been gained and the present generation of business men has several years of business activity ahead of it."
 NormnIcy Not Yet
 Further. Mir. Harding said.
 Business has passed through the primary stage, the~acute period of reaction, but we have not yet reached normalcy.' for the readjustment has not been uniform, and there is not yet established natural and equi- table basis for the exchange of goods for goods or goods for services. For example, farm products in many cases are now below the pre-war level, and in some instances below the cost of production. Prices O. some manufactured goods have de- clined sharply, while others have not. and tho general price index and the cost of living are still much above the 1913 level. Manufacturers and merchants are vitally interested in conditions in the aricultural sections. The farmer is the great consumer of manufactured goods. His pureha sing power at present is much impaired, partly because of the lower exchange value of his products and partly be- cause of unliquidated indebtedness Until the purchasing power of the farmer improves 1t will of course, be idle to look for any rapid or sub stantial improvement in domestic trade.
 Outlook More Hopeful
 T think, however, that the outlook for the farmers is more hopeful They have, no doubt, been benefited through the activities of the war fi- nance corporation, although it can not make direct loans to individuals, is rediscounting paper for banks which, because of long maturity. is not eligible for rediscount with the federal reserve banks.
 The remuneration of farm labor depends mainly upon the price of farm products, but in manufacturing industries labor costs are not always immediately related to the cost of the raw material used in those indus tries nor, indeed, to the price of the finished product. Other important clements of cost are taxes, freight rates, rents and fuel. The federal government must necessarily raise large revenues in order to meet ob- legations incurred as result of the war, and our system of taxation is designed to levy the highest rate on large incomes.
 How to Escape Taxation
 This taxation can be escaped Rl- together or in part by investing in state and municipal bonds, which are exempt from the income tax, and the ability of municipalities to sell their obligations more readily because or this fact has had a tendency to in- crease the volume of their indebted ness. Consequently, local taxation has increased materially, and unless the issue of tax exempt obligations is checked, the ultimate results are like ly to be serious.
 Much depends also upon the results of the conference for limitation of armaments now being held in this city. This conference is the most im- portant which has ever been held in this country and if the program sub mitted by the Secretary of State is adopted it will have a profound eff feet upon the finaces of the world In fact. the proceedings of the confer ence up to this time and the proposed treaty between the four great powers which control the Pacific are accept ed as harbingers of peace and have had already a stabillzing effect. The notable advance in sterling exchange, which began with the assembling of the conference, is not mere coin cidence.
 When great nations enter Into competition with each other in the extension of huge naval and military establishments. the large sums neces- sary for these additions and mainte- nance must be met by taxation in some form or other. Money expended TOT armament IS devoted 10 non productive and destructive purposes These sums released for constructive or productive use in the creation Of new wealth will stimulate the revival of business activity.
 Cause of Troubles
 Most of the business troubles through which we have passed and which still confront Us today can be attributed either to the war or to the course of events during the year 1919. It was realized that the sign ing of the armistice which ended the war from military standpoint did not end it in a financial sense and during the year 1919 there was a luli and much hesitation in business. The successful Notation. however. of the Victory loan in May of that year was regarded as the end of the war in a financial sense and a period of great activity set in.
 Tt was evident that four years of war had greatly impaired the produce tive capacity of Europe and had re- duced. almost to the vanishing point. stocks of goods and supplies of all Kinds There was a general impress sion that there was worldwide