The Washington times., 1921-04-07

have had much to do with bringing
about the existing stagnation in
activity.
DEFLATION BECAME NECESSARY
| Defiation of both prices and credit
admittedly became absolutely impera-
tive last year. The bankers wisely
! began to apply the screws to bor-
rowers. The operation was beset with
difficulty.
| The bankers, however, handled tho
situation firmly and. on the whole,
effectively. They succeeded in check
ing imitation and in bringing about a
reduction in the inflated price level
| and contraction in loans.
But hasn't the time come to modify
| these tactics, for the sake Of infusing
| some life into industry and business?
The banks can no longer plead dire
| necessity for cutting down loans in
order to replenish reserves, for the
Federal reserve banks last statement
| shows that the ratio of reserve has
| risen to the highest point in mors
than two years
The reserve against deposits and
| note circulation combined is now 52h
per cent, while the reserve against
note circulation, after allowing the
prescribed 35 per cent against de-
posits, is above SO per cent
The need for piling up still higher
reserves does not begin to compare
with the need for doing everything
reasonable and legitimate to bring
about betterment in business and
employment. This should now be-
come the chief objective of our
bankers.
Bankers must not be governed
solely by considerations OF immedi-
ate pront. Dear money swells bank
profits, but banks earned SO much
last year that they can afford to
take lower rental rates for their
funds from now on.
Under existing circumstances they
ought to take a broad view Of the
economic situation and do their part
in contributing to bring about .
speedy revival Of general activity.
BUSINESS WANTS TO CONTRACT.
There are doubtless innumerable
concerns which would like to con-
tract for generous supplies at cur
rent prices. since many materials
are now clearly below the cost of
their production.
Standard Oil companies have been
raising scores OF millions of dollars
to lay in stocks of crude oil Num-
bers of enterprises having influential
financiers on their boards Of direc-
tors have also been supplied with
funds to purchase large amounts of
raw materials now available at bar
gain rates.
II the necessary funds were fur
nished on reasonable terms, large
users of such commodities as cotton.
copper. rubber, hides, etc, would feel
perfectly safe in entering into con-
tracts for future deliveries or for
spot stocks purchasable at extremely
low prices for cash.
For example, one very large manu-
featuring company has been stocking
up with rubber which 1t procured sew
eral cents a pound below the current
quoted market price. Were banks
to cooperate to the limit with sound
business concerns to enable them to
make extensive purchases of this
kind. 1t would do something to help
the general situation.
Cotton growers. for illustration,
could and would use money thus OBJ
tanned to reduce their indebte tedne ess to
Southern leaders and creditors. who in
turn would be able to put the funds
in motion.
Moreover, IL the buying thus start
ed reached sufficient volume to stifYen
prices of different commodities and
materials now selling at ridiculousIy
low figures. confidence and cheerful
ness would be stimulated, and IL
might be that the virtual deadlock
now existing would be broken.
SHOULD MODIFY RATE.
The Federal Reserve Board could
with safety and propriety now con-
the 7 per cent discount rate which
has ruled for a phenomenally long
period. Financial London fully ex-
poets a reduction in the Bank Of Eng
lands per cent rate in the very
near future. In addition to helping
business. lower interest rates here
would be helpful to our Federal
Treasury and, therefore, to all of us
who have to pay taxes.
The total needs confronting the
Treasury were recently put at seven
thousand million dollars by Secretary
Mellon. The lower the rate at which
the Treasury can procure funds, the
less burdensome will become the tax
load we are now all writhing under.
Business interests, the newspapers
and other publications throughout the
country should Immediately take up
this movement for lower interest
charges.
The banks could exercise Just as
much discrimination In making loans
at 8 per cent as they have exercised
in making loans at higher rates.
The argument that easier money
would foster a recrudescence OF harm
ful imitation is not tenable. Banks
have long since ceased to lend blindly
They demand to know for what pur-
pose money is being borrowed. They
could still continue to do so after
rates were reduced.
1t is now of far more moment to
hiring about hetter tip,es than 70 h,ino