Salt Lake Telegram | 1934-08-08 | Page 1 | Inside Stuff

i INSIDE E EJ J STUFF By PAUL MALLON MALION i WASHINGTON Aug 8 First Fir First t dass will wilt tell you privately private that the main thing wrong with th this country now is not the lack of ot mone money or the value of it but the stagnation of what there is is Little Js is said about that subject There ere are no official figures on i it I Current talk has S Stagnation atlon centered mainly Of ot Money loney I II around the moun mount mount- Chief Trouble ing total of excess reserves in federal federa I. I reserve banks These reserves have hav i more than doubled in the past year yea and now amount to some or Big as that fig ure tire is it is only a hint of ot the inner inne I i problem If you make a little invest Ration nation in the right place you OU wil find that the banks of this countr country h have i ve today about of or j jr stagnant money they could lend In addition there is yet about one bill billion bil- bil l lion or a billion and a half haIr in actual k hoarding in safety deposit boxes and andt 8 t in socks t t In other words the stagnant money In Jn this country amounts to about 12 billions in round numbers numbers 12 12 b billion 1 late Idle le dollars which are are re not doing anyone anyone any any- lone one any particular good i 4 eo 0 An idea of oC how staggering that sum is b may be obtained from the fact that thal it is twice as 38 much money as there is 1 You may suspect offhand that Y 1 therefore it is a mistake but it is really a most conservative estimate 1 The amount of gf money in circulation has little littleto to do with lending capacity 4 t TChe e same money is loaned over ovet ant and t over o again by banks Loaned money noney I spent and redeposit d in some some som l bank by the fellow who ultimately l gets ts it It really does not leave the thet t banks It only goes to work there 1 t c The proof of the figure lies In the fact that bank loans now amount to or half hall o of ot what they l am amounted to be be- Loan Figure fore ford the depres Are One hall sion sian the average Of Boom Doom Days Days' for the sion period was round around I From the comparative rat ve condition of banks today oday the the- 1 b deduce d broadly that at least ten billions more e or 01 PaSe Pae Twos INSIDES INSIDE E STUFF S TU F F I Continued from Pa Page Face e One could be bc loaned if the public wanted the he mone money and the banks wanted to lend end it iL There Is only one for thc hs situation Either the banks have Insufficient confidence to lend freely or r the business public has insufficient insufficient confidence to want to borrow freely That may sound like two explanations explanations ex ex- ex- ex but it is really only one Banks will lend only when they believe believe be be- lieve loans are are good Business men will seek seck to expand their loans only when when- they see good profits coming from rom getting gelling into debt It boils down downto to o the same same- essential underlying cause Some people will say the banks are areat areat areat at fault It may be popular to take that hat view but it is not good sense Most bankers Jik like that good old 5 or 6 per cent interest coming in when they can get it They cannot make money out of stagnant money They certainly cannot go on long paying 3 per cent interest rest unless they can put those thos savings deposits deposit out at 5 or 6 per cent They actually have nave fallen into rito the predicament ament of th the woman in Ire the shoe They rhey rhe have so much money they do not know what to do One good toed effect clIett of this condition isto is isto isto to sustain ustain the government bond mar mare ket keL In the absence of oC commercial outlets banks nat nat- Government seek invest invest- Bond Prices ments in quick as- as Benefited sets the best of which are government government govern govern- ment securities As long as the condition continues the government will not want for money to borrow The hoarding Is being done this time by the well to do and not by bythe bythe bythe the poor A private checkup shows that most of at the hoarded money is in Jo bills of ot large denominations Most of it unquestionably unquestionably un un- un questionably is in in safety safely boxes The poor are spending and putting pulling their little savings i if any in guaranteed banks The total amount of ot hoarding toda today to to- da day is Js about half halt what it was at the peak before the bank closings If all this money could be spent in inthe inthe inthe the next three months and only hallof hall half of the available bank money could be put putto to work in loans the upswing would make you dizzy Copyright 1934 for The Telegram