The Washington times., 1923-07-20
RESERVE BOARD
WON BY DOING
NOTHING
Deaf to All Appeals for Higher
Discount Rate, Judgment
Now indicated.
BY WILLIAM HARD,

stories of Washington by just doing
nothing.
1t did not raise the discount rate
Today it is happily defying Magnus
Johnson of Minnesota to blame 1t
for the price Of wheat or for any
thing.
Yes. we did not debate you TO-.
day" That is the song Of the
Federal Reserve Board as it con.
templates the present sag in bust
ness and reflects that nobody this
time can say that the Federal Re-
serve Board did 1t.
The fact is that the Federal Re.
serve Board has won q spectacular
victory for itself in it's own reputa-
ton for business judgment and a
spectacular victory also for the
whole country in saving 1t from a
possible outright business panic.
Appeals Were Denied.
A few months ago a rain of APP
peals was beating upon the board
to persuade 1t to let the discount
rate be raised. Experts in large
numbers were declaring that lin
flation" had set in. They demanded
that the board do something to
check It,
The board did nothing. Eminent
bankers rebuked it and urged 1t
to act. Some of it's own regional
reserve banks urged it to act. 1t
was told that neutrality-suspicious.
must be done. Still it did nothing.
Business analyzers sent it long
statements showing that the bust
ness boom was going to be a
balloon ascension which would rise
till it got lost. in the sky unless
something was done. The only
the discount rate.
In the midst of all this pushing
and prodding the board stood stock
still. It made the decision most
difficult for any modern meddle-
some governmental board to make.
1t decided to let nature take its
course.
1t decided that the business boom
was natural. 1t decided that it was
Expansion" and not Initiation" 1t
decided that it would come down
to earth by itself If any coming
down was necessary.
1t refused therefore to go and
tie any artificial weight to it; and
it refused to tie a placard to 1t
saying Everybody Please Take
Alarm"
Today, with the boom slowly
sinking, everybody sees that the
weight and the placard might have
brought it crashing to the ground
in hysteria and disaster.
New Senator L. Foe.
Magnus johnson might have got
twice his majority in Minnesota
and the rural radical movement
might have spread over many
times the area which it now seems
destined to occupy.
Mr.. Johnson says that when he
gets down to Washington he is 60
ing to labor to throw all the pres
ent members Of the Federal Reserve
Board out of their jobs. He is 60
ing to labor to give the board a
complete outfit of entirely new
members.
Washington thinks that Mr..
Johnson is about two and a half
years behind the times. In 192O-21
we had "deflationist" Federal Re.
serve Board. That board seems to
be already buried.
1t put the regular discount rate
up to per cent and the progress
siVe" discount rate up to many per
cent more. It was one of the chief
roots Of the rural resentment and
rural radicalism of which Magnus
Johnson is the last highest growth.
When Mr.. Johnson gets here,
however, he will find a changed
board-changed much in personnel
and changed much in policy
Even in 1920-21 it had a minority
which was cautious toward de
flation." The boards records show
that Adolph Miller at that time
made speech in which he urged
a firm discrimination between the
initiation" which deserved to be
checked and the Expansion" which
deserved ito be let alone.
This year the "let alone" and
hands off" policy won. It won
after the severest attacks upon it
from outside. 1t won after the
severest anxieties within. 1t won
in the board and now it is winning
in the markets.
Business is slowing down with
out panic. The artificial alarm Of
1920 and 1921 is absent The best
present slowing down will soon be
succeeded by a quick speeding up.
Business, it is believed, is des-
tined for several years to go in
Jerks. It will not move steadily.
It will go fast and then go slow.
But 1t will neither hit the sky nor
roll into the ditch. 1t will move
with expansions and contractions
growing gradually less frequent and
gradually less violent until at last
for a while-a really normal steadi-
ness of pace will be reached.
Board Is Rejoicing.
Such is the theory highly influ.
entail at present in Federal Reserve
Board circles and 1t would seem to
portend a considerable continuance
of the 'hands off, policy.
That policy today has given the
board an occasion for both negative
and positive rejoicing.
Negatively it can face Magnus
Johnson and say:
WHO made the price of wheat go
down this time? Search us. We did
nothing"
Positively it can know-and does
that a raised discount rate would
have added .permA pessimism
to our present passing depression
and that it saved the country hv
precisely doing nothing to save If
Copyright, 1929 WaRhtn1ton De-