Worcester Democrat and the ledger-enterprise. (Pocomoke City, Md.) 1921-1953, 1924-05-24

war is over. We would never have
wars if people kept in the same frame
OF mind they are in just after one is
over. In 1922 we were cautious, not
because We are habitually wise e.
nough to be cautious but because and
only because we had just had our les
son. Various banks in their monthly
letters during 1923 gave reminders of
the disasters of 1920; the monthly let
ter of the National City Bank of New
York, for example, one of the most
widely read of. economic bulletins, in
January advised business men to op-
crate with caution. In February, it
remarked that business men "are fol-
lowing conservative policies and
showing little inclination to become
extended, which is the part of wis
dom in present conditions" In March
t warned its readers that every up
ward movement is in danger of run
ling away. In April, it again called
attention to the danger of imitation.
The industries of the country" it
declared, "are already working prac-
tically at capacity or to the limit of
the labor supply. Under this condi-
Ion they cannot use more credit to
advantage" These warnings are
!pical Of the state Of mind of bank
rs in the early months of 1928. In
february and March, 1923, the Re-
ave Banks of New York, Boston and
's.n, Francisco raised their redisccunt
'atcs. Due in part to this action, in
aerest rates of commercial banks rose
IN February and again in March, rates
on call loans on 60 to 90 day paper
and on 4 to 6 months paper being all
higher in March than any month of
the previous year. Raising of money
rates was followed promptly by curb
ing OF the upward movement of prices
and over production. Early in Janu-
airy the Federal Reserve Banks held
open market aceptances and United
States securities to the value of 734
million dollars. These they reduced
steadily throughout the period of in
cipient business boom. By July the
total holdings were less than 800 mil
lion dollars. Between October 18th
and the end of the year however, the
holdings increased from about 800
million to 473 million dollars. Thus
the open market operations took
money out of general circulation at
a time when, according to our in
dices, money in circulation was in
creasing faster than the volume of
trade and later in the year when
these same guides began to point in
the other direction the open market
operations put more money into cir
culat:on. We were cautious in 1923
because we had had recent lesson.
We will be less cautious as time goes
by and in a very short time when
credit begins to be demanded all over
the country for developments of all
sorts the. Federal Reserve Board,
without express legislative authority,
will not be able to restrain a period
of initiation greater probably than any
we have ever known. In 1920, with
our gold reserve down to 43.4 per
cent the index number was 226, OF
2 and one quarter times higher than
in 1914. In 1922, with a reserve per-
centage Of 77.9 the index number fell
to 1A9. With the present reserve per-
centage of 81 per cent the index num-
Der of wholesale prices is about 100,
so that determined demand for cred
it based on our gold reserve could
pull our reserve percentage down to
IS probably before it could be stop
ped. The index number would rise ia
around 300, which would mean prices
higher than this country has ever
seen and which would result in an e.
economic collapse greater than that Of
1921 and 1922. This problem, my
friends, is on the very verge Of be-
ing solved but we can't wait too long.
As said before, human memory is
short. Unless our obligations as a
world power and leader of civiliza-
ton are fulfilled shortly, the gradual
abolition of war never can be achiev-
ed until the lessons of the next war
direct the human mind to the solution
of the problem, and unless we have
promptly some legislation looking to
real scientific monetary stability it
will be too late until the next So
called business cycle has left in its
wake its dreadful toll of economic
waste, misery and human despair.
personally, am an optimist
When I compare conditions now with
what they We're 30 years ago / see TIL
Why Mr.. N. Windsor (R. ~ Put Up