The Birmingham age-herald., 1922-09-22
LETTERS TO EDITOR
RESERVE BOARD DEFLATIoN

To the Editor of The Age-H Herald:
 Referring to your editorial of yesterday com mending the administration of Governor Hard- ing of the Federal Reserve banking system, regardless of the fact that Governor Harding is an Alabama product, must differ with you and say that you are letting your state pride run away with the facts. Your state ment that we came through the period of de- pression with minimum of failures" is abso- lutely incorrect. The whole truth is that the federal reserve system, created to prevent panics, created the greatest panic ever known in this country, and instead of there being minimum of failures, 90 per cent of the farm- CTS of the south and west were broke. They don't show in Bradstreet's or Dun's, and therefore you have not taken them in account It was their innocent heads that the full force of Harding's wild orgy of deflaton fell.
 Deflation was decided on almost overnight. Loans to member banks in the south and west were stopped. Outstanding loans were called. The agricultural banks called their customers and the first call of the federal reserve was satisfied Every few days the federal reserve would issue another call, always in the south and west, and the widest confusion reigned.
 
 nothing but call their agricultural customers. Cotton tumbed from 40 cents to 10 cents, hogs from 20 cents to cents, syrup from $1 per gallon to 10 cents per gallon, wheat from S3 to 90 cents peanuts from $200 per ton to $35 per ton; corn, then selling at $1 per bushel, lost its value entirely and was consumed as fuel by the grower. And still the federal re- serve called. It was then that young mules which cost $500 each eight months before were led in and delivered at $50 each, and good milk cows were freely sold at $7.50 each, all to satisfy the blind brainless and cruel call of the Federal Reserve bank. Still it called again. This time we dug up the Liberty bonds which we bought as patriots and sold them at 80 cents on the dollar-obligation of our own government, sold at discount of 20 per cent and to satisfy the demands of the same gov ernment. Can you think of anything, MT. Ed itor, that could be more oppressive? During all this time of deflation, and for the first and only time since this government was founded. we of south Alabama could not bor- row $5 bank note bale of cotton or a Liberty bond-the governments own obliga- tion-no, not even from a member bank of the federal reserve system. When it was all over agriculture in the south and west went
 
 bankrupt
 Now, let's examine the other side. We are all agreed that certain amount of orderly de- flation was necessary, but have you ever be- fore heard of doctor who cut of fhis patients head, hands and feet to effect cure? Do you not think MT. Harding was operating with a meat axe instead of surgeons knife?
 What was the economic result of this drastic deflaton as it effected the different sections of our country? First, these calls resulted in the greatest accumulation of gold in New York that has ever been piled up in one pile since the dawn of history. The east had all the money wanted at 8 1-2 per cent They used it literally to buy our products while the prices were demoraized. and also our Lib erty bonds. Within a few months the cotton we forced to sell them at 10 cents by the federal reserve board had again reached it's true value, and the eastern buyers were able to resell it at 25 cents to the mills Thus profit of 150 per cent on the great staple crop of the south was handed eastern capi- talists by the operation of the federal reserve board. The Liberty bonds we were forced to sell them at 80 immediately went above par, thus extorting $200,o00,000 more from the south and transferring it to the favored east. One banker in Charleston, S. C., told me his bank "got wise" and bought $2,000 ,0o0 worth of Liberty bonds at 80, margned them only 5 per cent, and the remainder was car ried for them in New York at 3 per cent inter- est. Their profit on the transaction was more than $225,0oo. And they were merely pikers! The biggest banker in south Alabama told me