The Birmingham age-herald., 1922-04-25

days longer without exhausting the subject.
 Tt is not my purpose here to de- fend the system against the storm of criticism that has surrounded the federal reserve board the last six months. The defense has been ably made by others and all charges have been fully answered.
 Reduction of Prices
 we have Just passed through great war that convulsed the entire world. All wars are necessarily fol- lowed by imitation and high prices war prices. It was inevitable that prices had to come down when the war closedN and that readjustment had to comeA The public demanded it. It was like great flood going over mill dam-nothing could stop it. The only way to check the natural decline would have been the unlimited issue of fiat money or unsecured paper money. This involved aban- donment of the gold standard Rus sia tried it, and today Russian rubles are selling at a discount of 99 9-10 per cent compared to American money. Germany has an unsecured currency and one dollar will buy 33S marks. Poland. Austria and other countries haxe all tried the same ex | pertinent with disastrous results.
 Tt is as impossible to maintain war prices and the gold standard in | times of peace as it Is for water to l run up hill. When the armistice was | signed and the war closed the first thing the public demanded was the 1 reduction of war prices. The ciamor was irresistible.
 Everybody demanded a lower cost of living. In the reduction in the cost l of all commodities that soon fol- | lowed, 1t was inevitable that business l would be temporarily injured and that practically all classes of people | would suffer. The farmer, the labor ing man. the merchant along with the capitalist sustained losses. The 1 loss was not confined to any partc- ular class. While the farmer sui fered his share. there is no evidence that he any where was starving. On the other hand. in the industrial dis tricts millions of men were idle which caused starvation and extreme want.
 "IThe stRtements of nearly aIi
 the large corporations and uer-
 chants for the year 1921 show n
 loss in operations This shows that it was not only the farmer
 but, evrybOdy else that suffered.
 The value of all commodities such as corn, cotton, sugar, wheat, steel, | copper, pig iron, lumber and every thing else shows a shrinkage of from 40 to 70 per cent since the war, and it Is charged. that all this loss was caused by the federal reserve board
 "Fhe charge is absurb and cam
 not be sastained. As before
 stated, all grep< wars necessarily
 cHuae imitation. kt was the same
 after the Cfyi1 war. When peace returns, when the armies of men
 return to their usual employ
 ment. the demand for products Is
 satisfied and normal conditions
 are restored.
 The maintenance of war prices is not desiyable and would not be tol- erated by~N2e public in times of peace.
 vnrfeties of Critics
 The critics of the federal reserve board system are divided into sew eral varieties. One is composed of the people who are constructive in their criticism and who are sincere in their convictions. The management human and ts therefore not per | feet. All constructive and sincere criticism is welcome.
 Another class is composed of poll l ticians who by the usual appeal to l class prejudice and demagogery hope to mislead the public and thereby gain some advantage for themselves
 Another class of critics are those who believe in fiat or unsecured cur rency. They are sincere but mis- taken. 1t Is the old war over again between the advocates of sound money and those of cheap money This controversy has arisen after every great war. After the Civil war, the Greenbackers were strong in movement to continue the circulation or unsecured paper money. Then in 1896, the Free Silver movement was iVfara standard, thereby reducing the value of the dollar. The idea of getting something for nothing is a popular doctrine and appeals to many people
 The federal reserve system has proved of extraordinary value to the country in times of peace as well as war. A delusion prevails that the resources of the system are for the public disposal There is po such public interest or right. As stated before, not dollar of public money banks.
 The Great Danger
 ''The great danger to the system is the tendency to bring it into politics The entire system should be kept non-partisan in character and kept free rom any efforts to manipulate it in the interest of any class or | perty.
 Now as to the relations of tl z federal reserve system to the bust ness of the country. By business I do not mean merely the merchant O. the manufacturer. The term broadly means everybody engaged in working for living. It includes the | farmer, wage earner, mechanic, mer- chant. manufacturer and practically l n 1 inseparably linked and che can hard l ly prosper without the other.
 The basis of all business is credit. l Without credit few of us would have succeeded. Credit is a great thing for a prudent business man, but a bad thing for a reckless one.
 Eligible Credits
 The reserve syatem has provided ample credit for the prudent and sound business man. The err dit, however, must be of a liquid nature so that it can be collected at ma turity. As the deposits of fed ,ral re- serve banks are made up out of the lawful reserves of it's member banks (funds which the member banks themselves are not permitted to loan out) it is necessary that the loans of the reserve banks be kept liquid, as l provided by law. X merchant who is solvent and can make the proper statement showing that he has live, | quick assets, finds that he needs | funds to purchase more goods or to | discount his bills. borrows from his | depositing bank, and that bank being a member of the federal reserve sys- ] tenn, the merchants note is eligible l for discount in the reserve bank. The note, however, would not be eligible I x1yaq nf frr1e mt ff1r