Evening star., 1931-12-30
MONEY SITUATION
SEEN AS MENACE
SoIvency of CapitaIistic So
Ciety Held at Stake in
Present Depression.

The solvency of capitalistic society
is at stake in the handling OF the
money situation in the present depres-
sion, DR.. Lionel D. Edie of New York
told the American Economic AsSocia-
tion here today.
He urged that measures be taken
Immediately to halt the contraction oi
bank credit, the progress of which, he
said. has made the situation constantly
worse This. he added, can be accom-
pliShed by use of Federal Reserve credit
to arrest the shrinkage Of member bank
reserve balances and to build up ar
effective amount of excess reserves.
Nothing less" he declared. than
the monetary foundations of Western
civilization are at stake in the present
Worldwide period of depression and
readjuStment The situation calls fol-
aggressive constructive action, and there
is reasonable assurance that such action
would check the di~lntegratiOn to which
economic society recently has been
exposed.
Driven OFF Gold Standard.
LAS the nation which holds the
largest share of the worlds gold sup
ply and as the nation which has the
largest unimpeded domestic market, the
United States stands in a unique posi-
ton of responsibility for preservation
of the monetary standard. The Federal
Reserve system was created for the
purpose. among others, of mobilizing
the resources and energies of this coun-
try to combat situations of the type
now existing. Are we willing to make
effective use of that instrumentality in
defense of the solVency of capitalistic
Society?"
Liquidation by def1ation Of bank
credits, he said, has driven most of
the world off the gold standard, has
forced default or threatened default Of
obligations in half the countries of the
world. and has raised apprehensions in
the minds of intelligent people Of the
safety and SolVenCy Of the banking sys-
tenn Of every country in the world, bar
ring none"
The liquidation formula of letting
bank credit contraction run its course
unCon bated he said. has already in
f1iCted large scale defaults and threatens
still larger ones Some II countries in
Latin America and Europe are in down.
right default. The reparationS mora
torium was simply step for removing
the onus of default from Germany. An
indirect and respectable form of default
is deValuation OF money unit by aban-
donment of the gold standard The
Bank of France lost very heavily in this
respect on its London balances. Sucn
indirect default is lust as costly to the
debtor as direct default.
Huge Defaults in United States.
"In America. a cautious estimate
places the defaults on real estate obli-
cations at S4,000.000000. Bank fail
ureS, which are in substance a default
by banks on payments due depositors,
involve liabilities of around $4,000
900, 900 during the last year. The Fed
eral Land Banks report 90 per cent Of
their loans to farmers delinquent at
the end of the current year. Never
thelesS, we have been exposed since
September ! to an acceleration Of the
credit contraction. We have seen credit
contracting during this period at a rate
equal to about 25 per cent per annum
If this process continues during the
next six months, new strata of de-
faults and receiverships may be un-
folded which would mean financial
disaster in this country"
Two forces, he said, are holding up
positive action to halt the depression
opposition Of private bankers in lead
ing cities to an authorization policy
and bureaucratic complications within
the Federal Reserve system"
The international gold situation, in
stead of tending TO cure itself, is in
tenSifying and prolonging the depreS-
sion. Prof. James H. Rogers of Yale
University told the economists. He
traced the course by which the great
bulk of the worlds gold has passed
into the hands of the United States
and France and the far-reaching re-
suits Of gold concentrations.
Emergency Measures Urged.
1.-THE easiest way to increase a gold
supply" he said, is to sell as much
and buy as little abroad as possible
and tie best way to bring this about
is by a protective tariff. So we see
tariffs going up the world over during
the period Of the greatest transporta-
ton advances in history and world
of walled States like those of the mid
die ages being built up"
Congress should enact emergency
measures to stop defiation and encour-
age business recovery Leonard P. AyreS,
vice president of the Cleveland Trust
Co., told the American Statistical As
SoCiation. The present depression. he
said, lis following in many respects
that pattern of those of the 40s and 70s,
which were the longest and most severe
in our history. If we are to escape
similar consequences 1t behooVeS us TO
discover and point out now the requi-
site conditions"
He suggested that Congress promptly
authorize the Reconstruction Finance
Corporation; that the Federal Reserve
System be given broad emergency
powers, including authority to redls-
count the debentures of the Recon-
struction Finance Corporation" and
that Congress quickly adopt budget
looking toward an early and definite
policy of limiting Federal expenditures.
Agriculture seems doomed TO become
a city-managed occupation, DR.. Newell
l.. Sims of Oberlin College told Sec
ton of the American Sociological So
ciety. The modern trend, he said, has
been to change agriculture from mode
of living to profit seeking pursuit.
Although the new type Is not gen.
eraIly successful" he said, its encroach-
ment is irresistible. Hence, the queS-
ton arises whether agriculture can re-
main partly the one and partly the
other in a city-made civilization. II
does not seem possible, for the many
have acquired the standards Of living OF
the profit making type. Since only q
few can make the necessary protltS TO
maintain these standards, they must
either forsake husbandry or abandon
tho standards THE latter they are not