takes time, but the knowledge that the funds of the corporation are available in proper cases and on good security helps to take the pressure and anxiety off the situation. A bank that feels reasonably certain of getting an advance is almost in the same position, mentally and financially, as a bank that has actually obtained a loan.

HELPING TO RESTORE CONFIDENCE.

As I frequently take occasion to state, the value of the work of the corporation is not to be measured in terms of the dollars advanced. Financial collapses are partly tangible and intrinsic, and partly due to fear. The prompt improvement that the corporation has been able to bring about by a general restoration of confidence is of far greater importance than the actual amount of money loaned. Vast numbers of farmers who have had no financial aid, directly or indirectly, from the War Finance Corporation are nevertheless getting the benefits of the general improvement of the credit situation, due to the financial relief that has been given to the district in general or to the neighboring territory.

No one has ever claimed that the War Finance Corporation, or any other agency, can cure the woes of the world. There is a distinct and separate problem involved, for instance, in the fact that two bumper corn crops have produced over 6,000,000,000 bushels of corn in the last two years. We exported more corn in 1921 than during any other year in the last decade, but corn is not essentially an export commodity. Eighty per cent of it is consumed on the farm, and the ability of the farm to consume it, by converting it into live stock, can not be increased in proportion to the increased surplus, except in the course of considerable time. The corporation has, however, I believe, rendered material assistance in connection with the corn situation-at least it has prevented the situation from becoming very much worse-by the extensive loans it has made to banking institutions in the corn belt, thus averting in no small measure the forced liquidation which otherwise they would have been compelled to carry on. In addition, the corporation has stimulated the feeding of live stock; and large numbers of cattle, which long ago would have gone to slaughter if it had not been for the funds of the corporation, are to-day quietly munching corn on the farm.

What corn is to the corn belt, sugar beets are to certain sections of Utah and Idaho. A short time ago the beet growers in these sections faced grave difficulty. They depended for their yearly income upon the proceeds from the sale of their beets to the sugar companies, but when the beets were ready for delivery the companies did not have the cash to pay the growers and the banks were unable to furnish the amount required. A financing company with substantial capital-the law does not permit the corporation to lend direct to the farmer or producer-was therefore organized, and the War Finance Corporation advanced the money on adequate security and thus brought relief to the growers. And large advances also have been made to assist the beet growers of Colorado, the fruit and rice growers of California, the wheat growers of the Northwest, the peanut growers of Virginia, and other agricultural producers throughout the country.

STRENGTHENING OF WEAKER BANKS AN IMPORTANT FACTOR.

One of the most important factors in the work of the corporation— a factor which can not be accurately measured or properly appraised-is this: Where a number of banks in a given territory find themselves in a difficult position due to loans which, though good, are nevertheless slow and temporarily uncollectible, and where those banks are compelled to meet the demands of their depositors for their current needs, a disastrous situation might easily develop if the long rediscounts offered by the War Finance Corporation were not available. This weakness, which all those familiar with agricultural conditions appreciate, is not only a factor with the banks immediately concerned but with the stronger banks as well. If the weaker banks had not been reinforced by the corporation's rediscount facilities, as they have been recently, the stronger banks would not have been as willing as they have been to do their part in the situation. And, as our work progresses, one of the most important effects will be that the stronger banks of the country, seeing that the position of the weaker banks is improving, will come into full, courageous, and helpful activity throughout the agricultural territory.

WORK WARMLY SUPPORTED.

I am glad to present to the conference this summary of the work of the War Finance Corporation in connection with some of the problems which you are here to consider. What the corporation has accomplished is due to the whole-hearted cooperation and warm support it has received from the President and every member of the administration; from both Houses of Congress, which have ever evinced their confidence in its work; from the great group of bankers who are assisting us all over the United States; from the great farm organizations; and from the loyal staff of hard-working assistants who have never spared themselves and who have worked nights and Sundays and holidays when necessary to speed up the work.

MUST PROVIDE MACHINERY TO MEET CHANGED CONDITIONS.

The more orderly marketing of our crops, which is necessary to meet the changed conditions of the consuming foreign markets and of our own markets, is one of the subjects which may well occupy the attention of this meeting. We must recognize the necessity of selling our agricultural products more gradually than we did in former years, and the corresponding necessity of carrying our commodities for a longer period of marketing. We need the machinery that will make possible a 12-months' marketing of our annual production. If we provide financing for the gradual marketing of our commodities, we will be doing only what any sensible merchant would do in handling his business.

Before the war, the bulk of our agricultural exports went forward within a short period after the harvest, but this is no longer the case; and we have here a concrete problem which calls for careful consideration. To be specific, in the years before 1914, about 80 per cent of the cotton exported-and I believe this to be true also of other

agricultural products-was sent abroad during the six months after the opening of the harvest. In recent years, the figures indicate that only 50 per cent of our annual exports have gone forward in the same period. In other words, the foreigner is not buying ahead, and we must carry our agricultural products for a longer period. This fact must be recognized and our financing activities and our warehousing facilities must be organized to meet it. It may mean longer rediscounts with the Federal reserve system, or it may mean new agencies if these longer rediscounts are not deemed suitable to the structure of that system.

The collapse in the live-stock industry was due not alone to general economic conditions; it was hastened, to say the least, by unsound methods of financing. The financing of the live-stock industry, second in importance to none of the other great agricultural activities, is worthy of the most thoughtful consideration.

The cooperative marketing organizations with which we have been brought in contact have demonstrated the value of the loans made by the War Finance Corporation in facilitating the orderly marketing of farm products; and this conference may well discuss the methods by which these organizations may be assured of continued financial support, on a sound basis, after the emergency work of the corporation has terminated.

Though there is still great distress in the agricultural industry, conditions are on the mend. Out of the experience of the corporation, I have acquired a conviction which enables me to look forward to the future with confidence. We have in the United States everything fundamental that is necessary to the restoration of prosperity. We have the resources, the money, and the men. We have demonstrated, both during the war and since, that we have the power to organize. What is most needed now is the adjustment of our resources and our organization to the new conditions.

COMMON INTEREST IN AGRICULTURAL PROSPERITY.

The agricultural credits act, I believe, will prove to be of incalculable benefit to the farmers of the country, and because of its benefits to the farmers it will also be of great benefit to business men, to bankers, to manufacturers, and to labor. The interrelation and community of interest between agriculture, commerce, and finance is a fact that is coming home to the minds of the people generally. It has been my privilege to emphasize frequently the common interest that we all have in agricultural prosperity, and I am glad to note, from the public utterances of our bankers and business men in the financial and industrial centers, an increasing appreciation of this common interest, which is so clear to those who have had occasion to study the matter closely.

During the period of depression it has become more and more apparent that the interests of all classes and all sections are, if not identical, at least parallel. The business men, the bankers, and the producers are each learning that a sure way to help themselves is to help the others; that in the long run the best policy is to live and let live; that the way out of a bad situation is for all to work together with a common purpose and toward a common end-the prosperity

and well-being of the Nation as a whole. And as this principle of action comes more and more into practical application in our economic life, I believe we shall see a rapidly increasing tendency toward the restoration of business and agriculture to equilibrium and stability. The agricultural interest is not a sectional or a class interest. It constitutes the economic foundation of the country. Directly or indirectly, the interests of agriculture are the interests of all people.

THE FINANCIAL POLICY IN ITS RELATION TO THE PRICE LEVEL.

By Dr. WESLEY C. MITCHELL, of New York.

The topic assigned me presents a combination of difficulties which I face with reluctance. It is exceedingly intricate, it is highly technical, and it is hotly controversial. The only satisfactory way to treat the relation of financial policy to the price level is to base the analysis on a solid statistical foundation. But in 25 minutes I can not present, let alone analyze, the elaborate statistics of commodity prices at wholesale and retail in the United States and foreign countries; of physical production and stocks; of exports and imports; of the quantity of money and deposit currency; of interest rates in financial centers and rural districts; of wages and employment; of clearings, car loadings, new construction, unfilled orders, bankruptcies, bank loans, notes, and deposits, and all the other types of statistics which must be taken into account by anyone who wishes to form an unbiased opinion and to distinguish what we really know from what we merely guess. All that I can do in the time allotted me is to give an oversimplified sketch of the processes that have led to the great fall of prices in 1921 and are now retarding a revival of activity. This sketch I have based so far as possible on a study of the facts revealed by statistics, but I have had neither the time nor the assistance necessary to make that study exhaustive. Hence the conclusions which I am forced by lack of time to state dogmatically are really tentative and subject to modification from the results of the more adequate research for which I hope this conference will provide.

Let me begin with an Irish bull: The fundamental reason why prices fell so far in 1920-21 was that they had risen so high in 1915-1919. To understand the fall we must first inquire what produced the rise. If we can make out whether the causes that produced the rise were temporary or lasting in character we shall know how to attack the problem of the fall.

In one respect the war-time rise of prices is unique in economic history. There have been more violent price revolutions than that of 1915-1919 in the United States-for instance, during our Civil War both in the North and the South, and in all the other belligerents and most of the European neutrals during the recent war. But never elsewhere has there been so rapid an advance in the price level of a country maintaining a specie standard.

Now, prices in a gold-standard country like the United States express the value of gold in terms of commodities just as truly as they express the value of commodities in terms of gold. What happened

in 1915-1919 was that gold lost more than half of its purchasing power over commodities, or that commodities more than doubled their purchasing power over gold. What caused that change? Were these causes temporary or permanent in character? If they were temporary in large part why should gold not regain much of its old purchasing power over commodities after the war was over? This way of putting the familiar question will help us to get clearer answers than the usual way of asking why prices fell.

Why, then, did gold lose more than half of its purchasing power over commodities in 1915-1919?

First, three of the greatest nations in the world-Great Britain, France, and Russia-wanted enormous quantities of foodstuffs and war supplies from the United States, wanted them as soon as possible and wanted them almost irrespective of price. This gave American producers a chance to charge exceedingly high prices. Indeed, the conditions on which the business was done compelled the Americans to ask exceedingly high prices, especially for all classes of war material that required new equipment for its manufacture. Nobody knew how long the war would last, and no prudent business man dared accept a war contract unless the price would cover his whole outlay for plant as well as materials and labor in short order.

This pressing foreign demand for goods at highly profitable prices started a domestic "boom"-a boom that surpassed in intensity even the great boom of 1906-7. Farmers receiving high prices for their staples, wage earners working overtime at high rates, business men making extraordinary profits competed for goods with the needdriven foreign Governments. By the middle of 1916 American productive capacity was booked to the limit. Further increase of supply could be provided only as fast as further plant and equipment could be built and put into operation. But the demand, foreign and domestic, was insistent and the people willing to pay the most for goods tried to buy them away from the less needy or the less rich.

Of course, this extraordinary combination of demands for commodities in American markets would have set prices soaring even had there been no change in monetary and banking conditions in Europe or the United States. But in fact there were great changes of this sort on both sides of the Atlantic-changes that contributed powerfully to enhance the rise of prices.

The Federal reserve act had been passed just before war broke out in Europe. By mobilizing reserves this measure was expected to increase the strength of the American banks so greatly that they would not need to carry in their vaults so much cash as formerly. It was expected that after the new system had become well established the superfluous gold would be redistributed over the world. Gold would be cheaper in the United States than elsewhere and it would move to markets where a better price was to be had.

These expectations seemed reasonable in the spring of 1914, but after the war broke out the European nations all suspended specie payments. Presently to pay their huge American bills the belligerents began shipping gold to us. Our imports of gold in 1915 and 1916 amounted to almost a billion dollars. So we, who had expected to dispose of a superfluous domestic stock of gold, received instead an enormous addition to our supply. This metal entered mainly into our