Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-11-13
CREDIT DEFLAT|ON
AFFECTS BUSINESS
Bond Market Also Reflects
Present Condition of
Tight Money.
By JOHN F. SINCLAIR.


BY JOHN F. SINCLAIR.
Special Dispatch to The Star.
NEW YORK, November l3.-Business
neii and bankers who continue to talk
about cheap money in the United States
should be asked to explain why the
average bond prices touched the lowest
levels of the year on November 8.
The situation Is not healthy. English
sterling is now practically at the point
where 1t Is possible to export gold to
the United States. AS result of this.
and the continued withdrawal Of gold
by France, money is stiffening consid-
erably in England at the present time.
No country in modern times has ever
recovered from a business depression
without a big bond market, and the
United States certainly has had no bond
market so far upon which to base BUSH
nets recovery.
DefiatiOn and Business.
There Is no question but that defia-
ton is having its whitening effect on
business. Still, one writer suggests that
there has been no def1ation in credit
in the United States, since the assets of
the member banks of the Federal Re
serve system have increased $500 900 900
within the year.
This writer apparently overlooks the
fact that these member banks have
taken over. from foreign banks and
others, total Of about $400O,O 900 900
in call loans. Therefore, in actual fact,
defiation in credit, operating directly
through the member banks, has been
about $3,500000 900.
In addition to this, there are a num-
Z. Der of other factors operating outside
the member banks, which have also led
to q contraction of credit other than
t1ot col dad hu
Deflation, resulting in a dropping
price level, continues while the Federal
Reserve looks on complacently.
Strong's Career.
The late Benjamin Strong governor
Of the Federal Reserve Bank OF New
York, was not college man. He quit
school at 18, after completing his high
school course, and went to work as
clerk in the office of the bankers Jesup,
Patton a. Co. of New York. His educa-
ton came from experience. His entire
business life was given over to STUDY
of the theory and practice OF banking,
both commercial and Federal Reserve.
In 1907, when he was IS years of age
and secretary of the Bankers Trust Co.
of New York, Mr.. Strong was called
upon to examine the various banking
institutions that were then threatened.
In this work he gained the commence
of Henry P. Davidson, Morgan part
ner. and the banking world. From that
time on he was a marked man. At AZ
he became governor of the Federal Re-
serve Bank Of New York. And until his
death, In 1928, he was its outstanding
leader
Now the speeches and writings OF
BENJAMIN Strong have been put INTO
book form, edited by DR.. w. Randolpn
Burgess, deputy governor OF the Federal
Reserve Bank of New York. In these
times, when Federal Reserve policy Is
under close scrutiny, no student OF
banking can ignore this latest contri-
button to Federal Reserve literature.
Probably Mr.. Strong's greatest con-
tribution to Federal reserve policy was
in the field of open market operations OF
the Federal Reserve System. 1t was due
largely to his far-seeing policy that no
imitation occurred in the United States
from 1922 to 1928, in spite of the TACT
that the United States accumulated
$1,000 ,OOO, 900 in gold during that
period. His method of the sterilization
of gold then is still considered q re-
markable achievement in international
finance.
What the business and banking
world needs right now is another leader
to measure up to his stature.
China's Money Standard.
T. v. Soong, minister Of finance In
the new Marking national government
of China, is using all the pressure he
can to have China adopt the financial
reform Prof. E. w. Kemmerer OF Prince
ton University and his staff of economic
experts recommended last year.
Prof. Kemmerer spent 1929 in China
studying the chaotic money conditions.
Finally, in q voluminous report to the
government he recommended the adop-
ton of gold exchange standard with
unit called "the sum-" equivalent to 40
cents in American money.
The "sun" would be circulated in the
form of silver token, receemable in
exchange either at New York or Lon
don through q gold standard trust fund,
which is to be administered by the
Chinese minister of finance.
According to D. H. Leavens Of Har-
ward University, the Kemmerer report
recommended the gradual adoption of
the new system. beginning in the more
advanced centers and gradually spread
ing throughout the country. So -Shang-
hal will be on the new gold exchange
standard, with other cities in the In
terror remaining on the old silver stand
ard.
Little progress has been made TO date,
but the plan is receiving wider and
wider support among governmental Of
ficials. When order and stability come
dHd4h W OL14tid Tic hSul1ucISE pan uti~
doubleday viii be put IN operation and
made a practical reality.
Scope Of A. q p. Business.
The Great Atlantic e. Pacific Tea Co.
takes in more than $3,500,000 a day
from its 5000, 900 customers at its more
than $4,000 stores throughout the
United States. This is the largest cash
business done by any company in the
world, running well over $1,000, 000, 900
q year.
These $4,000 stores aim to make net
profit Of 212 cents on every dollar of
sales. They have achieved this record
in the last few years. Inventories car
RED by these stores are not large. That
of February % last totaled not quite
$4,000, 000-a decrease of almost So
100000 under 1923. Yet the total vol
un1e of sales increased by nearly $780,
100000. More sales less goods spells
greater efficiency and more profits. On
the average each store in the chain
turned its stock over about once every
three weeks, or is times year.
In February its assets stood at
$4,000, 900. with liabilities of a little
over $25,000,000. It's working capital
amounted to $8S 900 900 and the item of
good viii was carried at 81.
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