The Washington herald., 1921-11-01
1mmittee of Unemploy-
ment Parley Looks
To Future
ASAIDTO FEDERAL
RESERVE SYSTEM
&ufhDr of Business Cy-
des" Reviews Ffzns
Proposed
ny wEHH CLAIR MITCHELL

ThB ,dspnzsstm fSum which we
ars beginning IN emerge hU had
Dus most h0pHful fBRture-fhe Or
gelupment tnf a cnnstructfSB inter
eu in ths question whether such
periods cannot be prspEntHd from
recurring in thu future, or nj 1east
be rendered less severe.
The long histny OF business
-cychss. roughly ons CENTURY In the
-Untted States and twD centuries m
England, dnes nut prove that the
problem nf qrnntrm Is hopeless- On
the .cuntrxrx. Tins history supports
the beIEHf TINT cHrEfnIT dsxtsed
-mszsures taken in HsKHOn may 2c-
-compIish substantial results. In
deed, substantial results have al
ready been achieved in controlling
one phase Of the business cycle
p Crises in England formerly grew
into panics But their centralized
banking system enabled the Eng
lish to develop a plan Of panic
financi ering" which has proved eff
feCtfye in every crisis since 1856.
The vital feature of this plan Is
giving practical assurance that
every business enterprise not act
uaIly insoIvent can by paying a
stiff rate of interest, obtain bank
leans to meet its maturing liabili-
ties This assurance sufficed to
prevent the spread of panicky fears
among business men however dark
the prospect in other respects A
marked change in the character of
British business cycles was pro-
buced by this new policy. Crisies
host much Of their dramatic inten-
lsity, and the subsequent deprcs-
k4on became the matter Of chief
concern
Our banking System
In this country the organization
Of the banking system long made
II fmpossisfe to assure solvent bor-
rovers- -arhat they could get the
credit they needed under crisis con-
ditions. The device of issuing clear
ing house loan certificates was an
reflective measure in comparison
with the suspension Of the law
limiting the unsecured" circula-
ton Of the Bank of England. Con-
sequently. we had real panics in
1873, 1898, and 1907. But the eS-
tablishmant OF the Federal Reserve
5, stem in 1914 put American banks
a. a position TO help solvent yet
embarrassed business houses as ef-
.fectively as the English banks
help their clients. Hence our crisis
81 1920 was much more like tAe
crisis of 1907 in England than like
the crisis OF 1907 in this country.
Cur first application Of this plan
Of panic preTentiOn may prove t.
S- less skillfuI in some "details than
Iiritish practices based on half a
century of experience; but II we
rave made mistakes. they are mis-
takes by which we shall profit on
the next occasion. ~
We have learned. then, how. to
mitigate the violence of crises. The
rext step Is to devise methods of
mitigating the severity OF depres-
sions. Several such methods have
Teen proposed. Though not yet
tiled on a large scale, some of the
proposals req on a careful stCdy
81 experience and merit thorough
consideration =,
The Fall In 1855.
Concerning one line of action
there is no room for doubt. The
more men of affairs understand the
cynical factor in business activity
the more they plan to take advan-
tage of the opportunities it presents
for gain and to avoid the losses it
threatens. and the better the data
at their Disposal for judging busi-
ness prospects the less violent will
oscillations become. When a fu-
ture danger is so clearly perceived
that every one prepares to meet it,
that danger seldom proves serious.
A notable illustration is afforded by
the extraordinary fall of prices IN
1865. Everyone expected that when
the ConfederaCy collapsed the credit
of the Federal government would
Improve, that the United States
notes which were the standard
money of the day would rise in
value, and that prices would tum-
Bile. OF course this anticipated fall
of prices was a grave danger
against which every business had
to provide. Nearly all business men
made such provision. The anticipat-
ed fall began in January, 1865, and
IT proved more violent than any
previous decline. Yet the fall OF
prices passed on without. producing
severe financial stringency or a
long depression. No troubles os-
Cured comparable with those which
accompanied the corresponding drop
in prices last year, although the
banking system was by no means
so well organized to withstand :
strain in 1865 as it was in 1870.
Every measure which aids the
business public TO foresee coming
dangers, as they did in 1855, Will
prove helpful In particular the sta
tistical data which summarize cur
rent conditions should be, and can
be. rendered far more useful than
they are at present. Gaps in our
knowledge should be filled in by
compiling fuller statistics of stocks
on hand and on order, of manufe-
turing output, OF construction, o.
numbers Of men at work part time.
full time and overtime. and Of their.
Earnings. of the leading factors az
feeting cost OF production and fiuc-
NATIONS in demand. Not less inn
portant is the effort to make the
so1netimes bewildering array of ffg-.
ures more inteuigible and more sIg-I
Hincant- Finally. these more COM
continued on Pa0e FoHrtesH.