Referendum on the report of the Special Federal Reserve Committee

Bibliographic data

Monograph

Identifikator:: 1827879114

URN:: urn:nbn:de:zbw-retromon-221388

Document type:: Monograph

Title:: Referendum on the report of the Special Federal Reserve Committee

Place of publication:: [Erscheinungsort nicht ermittelbar]

Publisher:: [Verlag nicht ermittelbar]

Year of publication:: 1930

Scope:: 53 S.; graph. Darst.

Digitisation:: 2022

Collection:: Economics Books

Usage license:: Get license information via the feedback formular.

8 COMMITTEE REPORT Regerye As to the reserve ratio—that is, the ratio of the total cash re- serves to the federal reserve notes and net deposit liabilities com- bined—it is an extremely artificial and imperfect test when gold holdings are high. Changes in this ratio may not agree either in direction or in intensity with the country’s need for more or less credit. Widespread speculation in any of the markets—real estate, com- modity or security—may make such demands upon the credit re- sources of the country as to impair their liquidity or dislocate the supply available for undertakings involving a normal business risk or unduly increase its cost. Speculation in a local or general market may arise from causes other than the immediate or prospective volume of money or credit. When widespread speculation is attribu- table in an important part, however, to an over-abundant supply of money or credit, it is clearly of concern to the system, since it pos- sesses some power to influence the quantity and cost of that supply. On such occasions the system can not avoid seeking or urging such adjustments in the credit supply or in the directions of the use of credit as will assist in restoring the proper balance between the volume of credit used for speculative purposes and that used in ac- commodation to business and industry. Special interest has been manifested in the security market uses of credit. Credit released in security operations is always tending to be distributed about the country and, on this account, a growth in the volume of brokers’ loans or other forms of security credit may not operate to restrict the supply of credit for commercial or agri- cultural uses. The volume of security credits will also be affected by the particular methods employed by business to finance its projects. When, for instance, capital issues, instead of short-term bank bor- rowings are relied upon, the growth of security credits does not mean that business is being deprived of credit but only that its methods of securing this credit have changed. Since capital issues may be merely a substitute for bank credit directly obtained, it is not pos- sible to determine with as near an approach to accuracy the amount required at any one time to service the security markets as it is to determine the total supply of credit needed for all purposes. There is, however, one respect in which any growth of security credits is peculiarly likely to lead to future credit strain. When the market for capital issues has been stimulated, business and industrial expansion is much more likely to take place at an excessively rapid rate than would be the situation if only short-term credit were avail- able in liberal quantities. Funds obtained by capital issues may re- lieve business managements of any worry about the immediate suffi- ciency of their financial resources. Speculation Credit in Security Markets Effect of Stimulation of Capital [esues (Continued on page 20)

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