Evening star., 1932-06-05

DEBTS At RATE Of
15B|LL|ONS YEARLY
Figures Show Extent of the
Sharp DefIation During
Recent Months.
BANK LOAN REDUCTIONS
STAND AT TOP OF LIST
Federal Reserve Board Is Now Try.
ing to Check Enormous Shrink
age of Credit.
BY ]. r. BRACKETT,
Associated Press Financial Writer.


NEW YORK, June 4.-Americans
have been paying of debt at the phe-
/ nominal rate of about SIS, 900, 100000 q
year in the past two years.
This Is apparent from a compilation
of the Nations principal debt items,
and depicts vividly the drastic nature
of the deflation which has been going
on. 1t Is this shrinkage OF credit which
the Federal Reserve System, in its credit
expansion program, is seeking to check.
Economists explain that even though
there may have been an excess OF credit
outstanding in 1929, the fact that some
80 per cent of the volume of our busi-
ness is done on the basis OF credit makes
| it impossible to have business recovery
while such drastic defation Is in prog
ress.
Reduction Of S22 900, 100000.
The total debt paid or wiped of since
1929 is roughly s29, ,4O0, 100000. The
actual net shrinkage Of debt Is some
| what smaller, since some items have in
creased $500 900 900, making net re-
duction of $22 900, 100000.
The largest item in the reduction OF
debt is found in all bank loans, which
tumbled SIS 900, 100000 in the two-year
period. A large portion Of the shrinkage
| of this item has been in loans on secur-
| tty collateral, both brokers loans and
| loans to individuals. AS the value OF
security collateral declined bankers sold
| the collateral to make good the loans
| when borrowers could not put up more
collateral or cash. AS collateral was
sold it depressed the market further,
| impaired collateral behind other loans
and brought more selling-a sort OF
| endless spiral.
The sharp shrinkage in the value
of commodity prices likewise resulted
| in reduction of the volume OF bank
loans against commodities. AS the
volume of business shrunk less credit
was needed. Impairment OF financial
| conditions generally resulted IN a
| diminished number Of borrowers 10
whom banks were willing to lend.
Total bank loans have been reduced
| from s42, 900 900, 900 to about $21,oOo.-
| 600 900. The most severe shrinkage
| in loans against security collateral Is
shown in the Stock Exchanges monthly
| tabulation of the borrowings OF Hs
| members, which reached record 10"
! for the tabulation at $500, ,222 on
May 81. meager fraction OF the huge
| total OF S6,04SSo0,S lCdSiiS0 q. oAIS
| end of September. 1929. Total bank
loans on securities have declined less
! drastically.
Retail Credits OF.
Retail credits to customers granted IN
small amounts by the Nations retail
| merchants, are estimated now at
around. $4,000. 600, 900, as reduced from
a peak of 4,5O0,O00. 900 in 1929. About
So. 500 900 coo has been paid of In
similar period on installment pur-
| chases.
The major items Of debt increase
are in loans on life insurance policies
! and in the debts of the Federal Gov
! ernment and the various local govern
ments. Life insurance loans are be-
| lieved to have increased about $1,000
600, 900 and Government or public debt
by about s5,5OO,O0 900. The Federal
Government owed about $16,00O,OOO,-
600 at the end of 1929 and now owes
about s19,OOO,0 100000. In the same
| period States, cities, towns, etc, have
| increased their debt by about $2,50O,-
OOO, 900 to total of $4,000 100000.