The Chickasha daily express. (Chickasha, Indian Territory [Okla.]) 1899-current, 1922-11-10
THE RESERVE BOARD AND DEFLATIoN.

In judgment development OF the recent campaign was
calculated to work more serious injury to the country than the
disposition manifested by certain spokesmen both sides
make the Federal Reserve Bank the football OF partisan politics
Even President Harding took hand in the discussion when
statement he criticised the mistaken policy OF drastic deaon
adopted by those who then 1920 control OF government
policies On the democratic side the attacks OF Senator He
OF Alabama the Reserve Board we known and Senator
Owen of Oklahoma also attributed much OF the coun business
troubles to the boards policies Republicans declared that board
appointed by democratic president to blame for the slump
in business and democrats pointed that the depression all
about under republican administration, all OF which
the ordinary brand of political pffle.
With the campaign of the way it may by
that the point raised in this discussion important
but as matter OF fact it is vastly important for at least
reasons First the unmeted attacks the Federal Reserve Board
tend to work injury TO banking and financial system that is
admittedly the best in the world today and second hners
progress toward the solution OF the cout business problems
mpant in the popular mind misunderstanding of the
of these problems Until is generally understood that the
called defaton policy Of the Reserve Board the
OF our troubles but the other hand necessary
qence of conditions with the creating of which the board had
nothing to do shall not be ready apply the right remedy
our economic ills but shall be looking for relief from
where it does not exist.
Did the Reserve Board deliberately "deflate by raising the
discount rate? In speech in the United States senate Senator
Glass Of Virginia presented figures showing that between January
l. 1920 and January 1921 rdiscounted paper in the Federal
Reserve system had increased from $22l53OO0 $6 S0O
and notes in circulation from S30880 to $3628l000 the
increase being without exception especially large at Western and
Southern banks that loans of the Federal Reserve
banks on agricultural and livestock paper increased substantially
January to $24ooooO in December These figures are published
the Reserve Boards official report for 1920 where anyone may
verify them
Ii in the fall Of 1920 during which year it is shown that
the volume of bank loans steadily increasing that
the big business slump set in. How, then be soundy
argued that contraction of bank credit the of falling
prices? The truth is that the raising Of the discount became
absolutely imperative when the Reserve Banks ratio of
liabilities fell below the safe percentage prescribed by law by
of the continually increasing demand for credit and
financial crash Of untold magnitude have resulted had the
board failed to do its duty.
The business slump perfectly natural reaction from
the period during which the orge Of spending and speculation
prevailed and necessarily there with reduction bank
loans because the general volume of business fell off, with less
going into the banks by Of lower prices and less
buying and selling pupil the primary arithmetic would
have trouble at all figure that the banks
less money go Of business with attendant disaster their
deposors The cascof defaton the preceding initiation
during the period of prosperity and speculation Only harm
from fundamental msappehcrsion Of what took
place.