The Big Sandy news. [volume] (Louisa, Ky.) 1885-1929, 1922-02-03
HACKING AT THE
FEDERAL RESERVE


IThe following remarkably clear ar
ticle which appeared recently in the
Saturday Evening Post written, by
win Payne. should be read by every
body. Congress is inclined to NEEDLE
with this wonderful system and the
people ought to understand the law In
order to protest.)
CONTINUED from last week.
To agriculture especially defiation
was q monstrously oppressive process.
within a year prices Of an farm pro-
ducts taken together fell more than
-half--to level. in q great many
cases, below the cost OF production;
and much OF this drop occurred Just
when the main crops OF 1920 were
coming to market.
Farmers, like other manufacturers
operate good deal on credit, buying
cattle and hogs and feed with borrow
ed money and borrowing In the spring
to carry through until harvest. The
drop in prices caught farmers when
the crops of 1920 were ready for mar
ket, after all costs OF production had
been met, with high priced labor and
materials. and when their liabilities
Swere largest. Farmers by the ten then
sand could not pay their debts.
Now the big drop In general prices
scoincided to degree with rise in the
rediscount- rates OF the Federal Re-
serve Banks. Without looking further
quite a lot OF people charged the fall
in prices to the rise in reserve redis-..
count rates because the two things
happened more or less at the same
ofl
five years ago used to charge low
prices to the demonstration OF silver,
but ,as prices afterwards rose greatly
while silver still remained demonetiz-
ed II was evident that silver had not
been keeping prices down. So discount
rates had practically nothing to do
with the fall in agricultural prices, as
a little candid examination Of the sub
ject will show.
Agriculture, taking the net product,
not the gross. produces about one-fifth
OF the wealth of the nation. In 1919
this net product amounted to around
SIT, 900, 000,0 600 1t is produced by s.
100000 persons In the mainland
this is particularly true of the big
items, such as cotton. wheat. cattle,
hogs-these producers are quite unor-
ganized Each of them just produces,
puts his goods on the market and takes
what the market gives him in the way
OF price. Usually the selling is done
as soon as the goods are ready for
market.
But we produce much more cotton,
wheat and meat than we consume at
home, the surplus being sold abroad
AS to cotton, for forty years before
I. the World war two thirds Of the crop
was exported-we grew one pound for
ourselves and two pounds for Europe.
OF course the export price largely gov
erned the price = OF the whole crop.
Many of you will remember that when
the war, in 1914, shut off exports cot
ton became almost unstable at any
price and President Wilson Joined the
zbiiy "a -bale-of cotton movement. War
reduced exports somewhat, but stimu-
lated domestic consumption, cotton
being used for many war purposes. AL
most one-h half of the 1918 crop was
exported in the raw state, however,
and the export demand continued to
be a great factor in fixing the domes-
tic price.
OF the wheat crop in late years we
nave COllouLlcu LHiOC-QdditSio eihN Ca
ported quarter. But by weli-,i
known economic law It is the last
bushel that largely fixes the price. You
put ten bushels of apples on a market
in which there are ten buyers each
wanting a bushel The whole ten
bushels will move Off smoothly at a
normal price. But when you put ten
bushels on a market in which there
are buyers for only nine bushels, in the
haggling of the market the price Of the
whole ten bushels will fall until some
body turns up to take the final bushel.
So although the domestic demand for
wheat remains unchanged the price
viii fall until the surplus one quarter,
normally exported, is disposed of. In
1918 we easily worked off bumper
yield at high prices because hungry
Europe still had buying power left
and took nearly third of the crop off
our hands.
Before the World war our exports
of agricultural products ran about ST..
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