Evening star., 1932-07-24

were about S00,000,000 and the II
Federal Reserve banks held only about
5000 900 900 in eligible paper. SO lar
from the 60 per cent paper security was
lacking for currency coverage, that the
huge gold coverage was CONSIDERED
necessary. The free god" was down
to S43O 100000, which was drop from
Sl,7OO.OOO,OOl last August and from
81 GOO 900. 900 early in 1880. VII n a
steady outward flow of gold. chiefly to
France, in January and February. only
s430 900 900 of free gold" which means
the excess of gold above all legal re-
quirementS. was considered none TOO
much. to say the least.
The open market operations OF the
Federal Reserve System are cited as
having corrected this situation: 1t is
maintained they were successful in en-
abling the banks to keep themselves
LIQUID at all times end to pay off their
foreign balances. amounting % obou-
$500 GOO 900 since February "a. without
going heavily into debt to the Federal
Reserve banks.
Currency Supply Ample.
Today the currency supply is consid-
cred ample Money in circulation is
S.. 700 900 COO. the gold co"erage ratio
is 563 and the gold supply is increasing
Since the international financial crisis
assumed menacing proportion. more
than a year ago. it is pointed out. loans
and investments in this country have
shown a steady drop but the Glass
Steagall act is credited with exerting a
stabilizing effect. Note is taken of the
fact that. in recent weeks. the loans
and investments in the New York banks
have shown a tendency to increase
These banks also have bought con-
siderable amount of securities, sufficient.
it is felt, to offset the continuous drop
of loans Among Government econo-
mistS this IS considered sign that
credit liquidation may have run its
course.
On February "a. loans and invest
ments in all districts totaled Sl9606.-
100000. On May II. s19140 100000 on
July 13. sl8.478, 900, 900. The loans
alone were: February "a, $l2,600, ,O0O.-
600; May II. s11,7oo, ,ooOo 900; July 13.
s1l, ,149 100000 The investments were
February "a. s6.ss7 100000; May II,
s7.423, ,0O0.0 900: July 13. s7,329 900. 900.
These figures are cited by Govern
ment experts to show that while loans
continued to decrease. investments,
which are the banks voluntary acts,
were lIlCItdSlllS, llluo OAloClIlilS SOIIlc VI
the loan decrease.
Net time and demand deposits on
February "a, it is pointed out. were
Sl1 900 100000; on May IL. sl1.l46.-
100000: on July 13, $l0.879 900, 900.
Time deposits were: February "a. S56,-
O85. 900; May IL, $57,009, 900; July l3,
SIS. .O29 900.
From these figures the economists
here deduce that the situation in the
earlier period was better than the lat
ter period. From May to July. however,
there were number of bank failures
and runs in at least one of the largest
financial centers of the country, which
resulted in large-scale withdrawal of
deposits.
The Indebtedness of banks to Re-
serve banks. It is explained, decreased
from $685., 900 900 in February to SAIL
100000 in May. On June 13 it had
shown an upward turn to $516, 1000, 900,
which nevertheless left it still consid-
erably under the February "a figure.
With over $1,000 100000 of actual
currency and the velocity of turnover
dropping more than so per cent in
three years, it is contended that new
currency issues. such as the Borah-
Glass plan, will have little effect on
prices, this on the theory that new
paper currency. without any accelera-
tion OF its turnover, can have little ef-
feet Only a demand for the use of
deposit currency in productive enter
prIses can make the new credit a DO
tent factor in enhancing prices, it is
maintained, and only a return of con-
fidence to business and industry can
bring this change.