| AGRICULTURAL RELIEF

the records of the Federal Reserve Bank of New York, which is
usually accused of having a chief part in that action, and I was
unable to find anything in the record which indicated that purpose.
The fact was, apparently, that the volume of credit had been per-
mitted to be stimulated to a point where the reserve ratio was so low
that to permit further stimulation of credit would have reduced the
reserves below the legal limit and perhaps affected the stability of
the system. The primary object at that time was to limit the
expansion of credit.

Now, that did have an incidental and immediate effect upon
prices, due to the fact that we were then in the position of over-
production, not only as to agricultural products but as to a very large
volume of industrial products. Prices had been inflated, as credit
had been inflated, to a very high point. An increase in the discount
rate, coupled with the state of mind which existed at that time, car-
ried the prices to levels far below anything that could have been
anticipated, and certainly far below any levels which anybody could
have desired at that time.

Mr. Apxkins. Let me get your conclusions in the record right: It
is not your notion that the first object sought in raising the redis-
count rate was to lower the price of farm commodities?

Mr. AnpersoN. No, I do not think that is true at all.

Mr. ApkiNs. My impression has been just the other way. Now,
let me give you my reasons why: Along about that time you will
remember there was considerable talk and agitation about the high
cost of living everywhere and, in fact, the railroad men had publicly
stated that if the cost of living was not reduced that they would
necessarily have to have higher wages, and the country generally
was stirred up about the matter, fearing that the transportation
lines would be tied up. Our people were getting a fair price for
their stuff at the time—mnot as high as during the war, but they were
meeting their obligations. The impression I got was that the first
thought of the Federal Reserve Board was to reduce especialy the
price of wheat, and here is where I got my idea from: On August 8,
1919, the President of the United States, in his address to Congress,
set out the conditions of the country, and in his message he used the
following language—after reciting the condition of the country
and the state of mind of the public, then he offered a.suggestion as
to what Congress might do or what we might do, and he said (reading):

But what we can do we should do, and should do at once. And there is a
great deal that we can do, provisional though it be. Wheat shipments and
credits to facilitate the purchase of our wheat can and will be limited and con-
trolled in such a way as not to raise but rather to lower the price of flour here.

Now, following that, in December—this is August 8—the Federal
Reserve Board met to increase the rediscount rate, and on January
23, 1920, they met again and made a further increase of the redis-
count rate to 6 per cent; and on May 8, 1920, they had another
meeting, and I think they shoved it up to about 7, and taking from
their report verbatim—and I am not going to read that—where
Harding goes into details to the board to go back and be frank with
their member banks as to what they should do, and he predicted the
result in this way and said at the windup:

I am sure that the spirit which has manifested itself at this meeting here
to-day will spread throughout all the country to the member and nonmember

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