Milford chronicle. [volume] (Milford, Del.) 1878-1974, 1927-11-25

1T should not be overlooked. THAT tne
deposits of the Federal Reserve
Banks are the cash reserves of the
member banks, that these reserves
are equal to only about 8 per cent
of the member bank deposit liabili-
ties. In other words, the gold re-
serve of the Federal Reserve Banks
is equal TO not much over per cent
of the deposit liabilities of the mem
Der banks after provision is MADE
for reserve against Federal Reserve
notes. Therefore, it is obvious that
the greater part of the immense res
ervoir of banking credit created by
the alteration of the law governing
tbe reserves of American bankers
and bv the immense gold imports
has been already exhausted ana tnaC
for the future the supply OF new
banlxing credit must be on a much
more modest scale.
It may be said that at present
there are no signs OF monetary
stringency in the United States. In
fact. according to the New YORK
Commercial and Financial Chronicle
the issues of new capital in the New
York market, for the first half OF
1927 amounted to over $4,000 OO,OOO
and S7OO.OOO,OO0 of this total were
lent to foreign countries. This shows
that these issues of new capltal
were greater than ever before, anu
that with this immense supply OF -
yestment credit, banking money IS
So abaundant that the Federal Re
serve Banks have reduced their dis
count rate to the unusually low lev
ell of 31s per cent. Nevertheless
should new credit continue to De
created after the manner OF recent
wear. it is evident that the available
sunnlies will be exhausted in the not
distant future. In such clrcum-
stances the present period OF rapid
w expanding credit will be followed
nv another period in which new
credit will be granted only as old
credits are redeemed, and possibly
by a period of severe credit restrlc-
ton with all it's unpleasant conse7
uuences. If this is true, the time is
approaching when it will become
imperatiye for the American Gov
eminent and bankers again to sur
vey the situation as they did under
the new conditions which were Gre
ated in the early days of the war,
with a view to such revisions OF
nolicv as the situation demands.
AMERICAN BANKERS WILL NOT
CONTINUE TO LOAN VAST
AMOUNTS
AI,o4 AY,ooT,iaan
bankers and investors will not con-
tinue indefinitely to create such vast
amounts of new credit year a1ter
wear as they have created since 1914
it is necessary to face the question
of what is the best method of MAIN
tanning the demand for American
products both abroad and at home IN
the absence of any further great
expansion of credit?
Any examination of this question
at once reveals the necessity OF
maintaining confidence and of pur-
suing a policy that will enable Dor
rowers, both at home and abroad,
who have incurred such vast liahil-
tiles to meet their obligations for
interest and capital. In considering
this matter it is essential to realize
that the unprecedented expansion IN
business in the United States since
1914 had it's origin in the exception
al demand for American products
for export. This means that were
American exports greatly to decline,
the industries which gained so much
advantage from their expansion
would be the first to suffer. The
maintenance of American exports is,
therefore, essential to the solvency
of those more important of her in
dustries, which have not only been
stimulated by the expansion of her
foreign trade but which have OBJ
tanned very large amount of credit
in consequence of the increased de-
mand for their products. On the
other hand, it is equally essential
to appreciate that if American CX-
ports are to be maintained the ma
tons foreign customers must be
able to purchase them and at the
some time meet their obligations to
the United States on the great sum
of American capital which has been
supplied to them since 1914.
AMERICAS INCOME $50, 1000 100000
Fortunately Americas large pur-
chases of rubber, silk and other
goods, together with her tourist and
other expenditures, are already per-
hitting her foreign customers to
purchase American goods with in
creased freedom. If the United
State would now spend abroad an
extra $1,O0O,OOO,0OO or better still
$2,000,00O,000 per annum out of her
vast income of $90,0OO,OOO she could
not only maintain but expand her
export trade. At the same time, she
would enable foreign countries to
meet their obligations to her for
interest on the large amount of cap
ital she has supplied to them. Nor
would such expenditures reduce the
sums available for the purchase of
American goods.
If the United States does not buy
abroad in sufficient volume to per-
nit foreign countries to purchase
her produce in return she cannot
sell that produce and her income is
reduced. Under existing circum-
stances this would be suicidal. Am
erica's exporting industries are