The Big Sandy news. [volume] (Louisa, Ky.) 1885-1929, 1922-02-03

land produced new crop. In the ma
ture of the case. farm products and
farmers labor are more exposed to O
/ headlong drop In prices than manu-
featured products or other labor is.
A joint commission OF the Senate
and House of Representatives held
hearings on this subject for weeks
Much other evidence is available. There
is no reason to suppose that any ac-
ton the Federal Reserve Banks could
have taken would have had any no.
ticeable effect upon the fall in farm
prices. A bubble burst and farmers
were most exposed to the force OF the
explosion. Probably organized co-op-
erative marketing would have helped
to ease the blow. but there was no
such organization. No doubt, also,
farmers and cattle growers needed
better facilities for longtime credit
nine months and year credit. But such
credit is entirely outside the field OF
the Federal Reserve Banks,
Now, as to the part played by the
reserve system. The fall in farm
prices began in June, 1920, when bank
credit was already extended to the
limit--and beyond reasonable lin
~. 4<OtliAo anu AAotoahto VI Ike tAh ~
odd thousand banks which do the
country's primary banking business,
exclusive OF the Federal Reserve in
situations had riser. heyend 81, 0O0.-
100000 OF this expansion had occurred
In two years ami over s5sSSs1S.SeSsSs.SSeeee os
It had occurred in the last ~ months,
or long after the end OF the war. The
Federal Reserve Banks had already
extended credit to these individual
banks to the amount, In round num-
bers, of $4,000. 100000. Some Of the re-
serve banks were practically at the
end of their lending power--for that
power is by no means unlimited, and
1t ought to be understood clearly that
nothing but fiat and deprecated mon
ey can give unlimited lending power.
Danger signals We're flying. II was a
time for defiation not for further in
flation. Months before this. Federal
Reserve Banks had begun warning
member banks that credit was too ex-
tended. Six months before, they had
taken somewhat more effectual means
TO check further imitation by raising
their rediscount rates.
AS prices fell the first thought of
many farmers and stock raisers was.
quite naturally. to carry along on bor-
rowed money in the hope that prices
would rise again. They found the
country's credit structure already
loaded TO the danger point. II should
be remembered, however. that the
farming and stock-raising country
had its full share OF the credit already
extended. for expansion and imitation
had gone on as briskly in the country
as elsewhere. A report made by the
Comptroller OF the Currency as OF No
vember Is, 1920. Classics about 10 per
cent Of the total loans and discounts
OF the national banks according TO sife
occupation OF the borrower. Farmers
and stock-raisers' paper amounted to
a fifth or the whole. As a rule coun-
try banks that were soundiy managed
would not have materially Increased
their loans no matter what the Fed
eral Reserve rediscount rates had been.
Candid country bankers have so testi-
fed. They were loaned to the limit.
The band was stretched as far as 1t
would go without breaking
A great volume of credit was ex-
tended to farmers and stock raisers,
Federal Reserve Banks serving the
chief agricultural regions exhausted
their own lending power and borrow
ed from Federal Reserve Banks OF the
East in order to keep on rediscount-
ing. Agricultural products were car
ried to great extent; and farm stun
was held back from market to an ex-
degree. as the market sta
tistics show. Some 5000 900 bales OF
the 1920 cotton crop-or nearly half a
normal crop-were carried over into
the 1921 crop year, counting visible
and invisible stocks. Owing to bad
weather. boil weevii and some reduce
ton of acreage, the 1921 cotton out
turn was far the smallest In many
years. That caused the price to ad-
vance. So banker who loaned a cot
ton grower money to enable him to
carry his cotton over to 1921 did him
4 service. But as to wheat and most
other farm products the longer 1t was
carried the worse on the holder was
Carrying over crop is speculation |
N which one.is very likely to lose I'M
less a crop calamity, next year helps
him out.
Money Rates Kept Low.
Though great volume OF credit was [
to farmers and stock rails
ers, the supply was not equal to the |
iefhand. There was a demand for
credit which the credit resources OF
he country could not meet. BY that
line the credit resources of the coDn-