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Show liiiisr RAPID DEFLATION U. S. RESERVE BOARD TO USE FULL POWER TO CONTROL CREDIT SITUATION. Course Will Be Adopted to Control Credits and Restore Normal Industrial In-dustrial Conditioni in Course of Time. . Wn-iiington. Iioii-rniiiiathm of the federal reserve board tu exert the full power of I lit; reserve banking system lo regulating and controlling tliii credit sll nation, ii course designed to iihl commerce iiml linliistry In restoring restor-ing 11 jn--w it r I'ljiiililiiiinii, wus disclosed dis-closed In the board's annual report, iiiinle public February li.'t. The board wits iirepit red to "test the nhilily of tin: system to check expansion ex-pansion mill to Induce healthy liqul-tlulioii." liqul-tlulioii." The board explained It wus aware of tltt.' Implied power to rectify the condition which confronts the country. This power necessarily followed fol-lowed Hit! uulliority for mid employment employ-ment of an elastic system of reserve credit mid noli; Issue, It was added. Ileiouitiiondut ions also Wert; made to tin- congress for amendment of the reserve act which would permit re-syerve re-syerve hanks to eslahlish normal maximum max-imum lines of credit accommodat ion for memher hanks. An ascending k.ale of rales would lie provided in cwnl money was borrowed above the maximum lint!. This, I In; board believed, be-lieved, would work to the end that credit expansion on tt large scale vtiiild be stopped. Warning was given that the country must guard against loo rapid deflation. defla-tion. It was pointed out, however, that some remedies employed to correct cor-rect Inflation might create even worse conilllions. "Deflation merely for the sake id (lel'lalion and a speedy return to 'normal' 'nor-mal' deflation merely for the sake tit restoring security values and commodity com-modity prices to their pre-war levels without regard for oilier consequences would In; an Insensate proceeding," the report said. |