Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-11-15

special Dispatch TO The star.
NEW YORK, November lS.--In the
preceding chapters Of this series It has
been shown that apparent overproduc-
ton in industry is directly due to none
tary deiiation.
Normal distribution and consumption
cannot be expected during q period Of
steadily declining prices.
During the last year wholesale COM
modify prices Of Great Britain and the
United States declined 10 per cent.
other countries, except France, show
similar conditions.
TO arrest or stop the defiation movement,
which has caused such havoc In the
world during the last 10 months.
Remedy Suggested.
The Royal Bank Of Canada in its Oc-
tober monthly letter made q suggestion
worth consideration. It asked for resto-
ration Of prices to the level OF 1925, and
the Sterilization Of the general price
index at that level.
But how can the price level Of 1919
serve System, the central bank Of issue
in the United States, do to aid in meet
ing this problem?
T. B. Macauley, president Of the sun
Life Assurance Co. of Canada, has sur-
gested that the Federal Reserve system
buy Government bon Is up to the
amount of the contraction of the United
States currency in the last year.
During the seven months ending
can circulation decreased 94S9 900 900.
Suppose such policy as mentioned is
adopted and the Federal Reserve buys
from $500 000,O to $500, OOO, 900 in
Government bonds. Just how would
such action help to restore the price
level? The Federal Reserve would nay
commercial banks and individuals for
these bonds and deposit the credit in
the Federal Reserve banks.
These deposits are the equivalent
OF circulation and ct any time can
be converted into actual outstanding
circulation" said Mr.. Macaulay.
Would Aid Bond Market.
The bond market would be stimu-
lated, and as American bonds became
scarce the obligations of foreign coun-
tries would again come into the market.
This, in turn. would give foreign coun-
tries new lease on life with the new
credits so secured from the sale of
their obligations in the United States.
This would stimulate vast purchases in
bA4C OA1AbC.A 0guOCo AOA AOACA8i dCCOuL1t.
During the last 10 years foreign Sc
curities publicly offered in the United
States exceeded $4,000, 100000. This
vast credit was used primarily to buy
goods from American factories for
foreign use. 1t Is one of the big fac
tors that contributed to the prosperity
Of the United States from 1870 to
1880. Prof. Gustav Cassel, in discuss
ing this policy, has stated:
by coming forward as a purchaser
Of bonds the Central Bank conduces TO
raise the price of bonds and thus to re-
duce their yield. The Central Bank at
the same time puts more money into
circulation. The results are thus quite
the same as when the Central Bank
| grants loans at rate Of interest some-
| what below that charged on the money
market, thus bringing out its own cur
rency. The final outcome in both cases
will be to raise the level Of prices or to
check further fall of prices.
we have thus passed in review va
| rious expedients for controlling the
supply Of money, which In recent years
/ have actually been adopted on a large
scale and can doubtless be applied on
still larger scale. In face of these
| facts what foundation Is there for the
contention that the Central Banks are
unable to give proper erect to the meas
ures which they adopt for regulating