The Washington times., 1925-05-25
RESERVE BOARD
COLD CREDIT
APPROVED
Deal With Bank of England
to Help Restore Standard
Lauded by Council
Nv RlCMARD RATION,


Business and financial conditions
Of the country were discussed at the
meeting last week Of the advisory
council Of the Federal Reserve
Board. at which the various Federal
reserve directors were represented.
The recent arrangement between
the Federal Reserve banks and the
Bank Of England regarding a re-
volving credit OF sec. Zoo 900 was
taken up by the councikf and. in
this connection, the Rollowing
statement was issued today:
Since the last meeting sof the
: advisory council, Great Britain has
taken the long expected step of
removing the embargo on the ex-
portation of gold. and by re-estab-
fishing free gold market in Lon
don, has once more anchored her.
self unreservedly to the gold
standard.
This event marks an epoch in
the financial history of the post
war period. 1t means that the time
has definitely come te an end when
the world seemed to waver be-
tween monetary systems frankly
bottomed upon gold on the one
hand and fluctuating exchanges
and so-called managed currencies'
on the other. With the United
States, England, the Dominions,
Sweden, Holland, Germany, Aus
ira. Hungary, and other countries
now returning to gold basis. or
20 gold exchange basis. the sway
OF gold over the worlds leading
financial systems once more has
become an unchallenged fact.
OF Importance Here.
For the United States this de
Veiopment is of the vastest i'm.
portance. First, because we own
approximately one-hah of the
worlds monetary gold; second, be-
cause in order to preserve for our
selves conditions of a weIl-baIanced
prosperity. foreign markets absorb.
ing our surplus production are an
imperative necessity and it is idle
90 expect that without exchange
stability the purchasing power of
foreign countries may regain its
fullaf capacity; third, in present
world conditions the sale Of our
vast excess production to foreign
buyers can only. be maintained on
anything Ike the present scale as
long as we continue freely to abb
SVEO AOTC1&Hs securities,
Our ability to do so, however,
VIII depend upon the degree OF
credit these foreign countries will
command here. We have. there
fore, a vital interest in seeing the
credit OF our customers placed on
the strongest possible basis.
1T is with the deepest satisfac-
ton, therefore, that the council has
noted the arrangements now made
with the approval Of the Federal
Reserve Board between the Bank
of England on the one hand and
the several Federal reserve banks
under the auspices of the Federal
Reserve Bank Of New York on the
other.
Benefit to World.
These arrangements in the view
OF the council will benefit not only
the two countries directly involved,
but they will inure to the advantage
of the entire world. The council
feels confident that in the annals
of the Federal Reserve system
these arrangements will be written
down as one Of its proudest and
most constructive achievements
1t is an impressive demonstra-
ton of the efficiency of the Federal
tuted, that we are able to render
assistance on a liberal scale without
fear of adverse effect upon our own
financial conditions.
Concentration Of reserves and an
elastic note issue planned on broad
lines enabled US during these last
years to absorb flood of gold in
such manner as to deprive it of
the inflationary effects which some
Of our European friends had ex-
pected 1t inevitably to produce.
Conversely, we may now envisage
with equanimity the possibility of
an outgo of hundreds of millions
Of dollars of our surplus gold. The
same process that enabled us to
deprive the inflow of gold of it's
potential ill effects places us now
in a position to lose vast amounts
Of il without entailing the neces-
gtty of a marked contraction of cir
culation- or Of forced deflatiOn,"