Perth Amboy evening news., 1922-07-12

the volume of the loans on the BOOKS
of the banks increased progressively.
A Change OF Policy
In the winter of 19l9-2O Cover
nor Harding announced the eman-
| CITATION of the board from the treas
ury influence saying that rates Woulu
be regulated independently OIL the
treasury bon rate.
Rates were increased with the re-
suit that within two or three
months $1,000, 600, 900 was squeezed
out of the stock market. This bill
lion had been borrowed by stock
market traders to speculate on the
Exchange. When their interest
rates were raised they paid back
the money and reduced their opera.
tons. This was the first effect OF
the new policy. The billion dollars
was freed to be lent to farmers ana
productive borrowers,
Next the board minated TO the
member banks that they should IN
| crease rates and reduce loans to
! profteers in food and other essen
tials. Especially was it desired that
people who had stored up foo TO
hold for higher prices and had Dor
rowed money to enable them 10
make this speculation should be
D1UuSIL W Lti llio' IL tlNoS pPSNe
| tors in necessities could borrow no
more money they would have to
sell their food at reduced prices.
This resulted and it constituted the
first successful step taken by any
governmental agency to reduce the
cost of living.
But the time had come for a re-
action. The Japanese silk market
collapsed and the beginning of de-
| preston extended to this country. A
Philadelphia and New York mer-
chant foreseeing a price recession.
overnight reduced every article in
his store 20 per cent. h buyers
strike spread and the overall move
ment came into evidence, people
wearing overalls in preference to
paying the high clothing prices.
1t was inevitable that all prices
should fall speedily. this included
food prices. AS the summer wore
on food products became cheaper
and cheaper.
Reserves Were Threatened
Food m from the farms. 1t
takes a year to make a crop. When
the farmers had bought their seed
and hired their planting and culti-
| waiting labor, the high prices were
still prevailing. When the time
came for them to sell their crops,
the prices had been cut in two.
They sought to borrow money at the
banks to enable them to hold their
crops in the hope of another rise
in the price. The banks extended
their credit up to the point where
reserve requirements were threat
ened. Then a halt was called.
To so beyond this reserve re-
quirement by lending more money
to farmers and others-for bust
ness generally also was demanding
loans-would mean to take the
American currency off a gold basis.
The Reserve Board had before it
the spectacle of the German and Po-
fish marks and the Russian rubles.
as we'll as other foreign currencies.
They saw what happened in those
countries when the gold basis was
lost by the issuance of currency be-
yond the reserve requirements and
decided that it would be better for
the United States to draw in its belt
for a few months than to put the
dollar in the same class with the
mark and the ruble. Reserve re-
quirements were not suspended, al
though money was lent right w to
the point where further loans would
have meant suspension.
Hundreds of millions of dollars
were sent out of Wall Street to be
lent to western farmers and business
men. Credits We're extended as far
as there was real credit to extend,
but the end came. There was nj
more credit, nc more money. Farm
ers and others had in their posses
sion more borrowed money than
ever before in the history of the
country.
This raised the storm. The farm
ers said they should have more
credit at any cost. 1t was said hat
they were willing to have the dol
lar enter the mark and ruble class.
The Federal Reserve Board stood
Ly the gold standard and insisted
il should be maintained %inviolate..
The result was the formation of the
agricultural bloc in congress, a
group of men determined to change
the law regarding farm credits and
ether farm matters.
The country's belt is still drawn
tight, but it is loosening and being
gradually filled out to its former
proportions. Also the gold standard
still stands. The vast volume of
loans is being paid back steadily
and the national currency has a