‘Ibt RURAL. NEW-YORKER 
A Primer of Economics 
By John J. Dillon 
Part XXXVI! 
The Federal Reserve Banks rediscount 
notes and bills of exchange for member 
banks. This simply means that when a 
local bank finds its reserve running low, 
and no longer able to make loans to its 
depositors, instead of refusing new loans 
and possibly calling in old loans, it may 
send the notes of its customers to its 
Federal Reserve Bank with its endorse¬ 
ment, and have it rediscounted. The 
proceeds replenish its funds, and restore 
its legal reserve. Of course, the national 
bank first discounted the note for its cus¬ 
tomer. The Federal Reserve Bank then 
discounted it over again for the national 
bank. This, we call rediscount. The 
Federal Reserve Bank loans to the na¬ 
tional bank, just as the national bank 
loans to the business man. The redis¬ 
count rate is fixed by the Federal Re¬ 
serve Board, and is less than the interest 
paid by the maker of the note, so that 
the member bank has a profit in the 
transaction. The Federal Reserve Banks 
are authorized to issue notes on the basis 
of the national bonds just as the national 
banks have done. The national banks 
may also continue to issue their notes if 
they wish. The Federal Reserve Banks 
may issue notes in exchange for gold, and 
they also issue currency on the discounted 
notes and bills of exchange which they 
hold. In effect, the Federal Reserve 
Bank may exchange its own notes which 
circulate as money in exchange for a mer¬ 
chant's or farmer’s note, endorsed by a 
national bank, and charge a commission 
for the service. Iu a horse trade it 
would be called “boot money.” Only 
notes and bills of exchange issued or 
drawn for agricultural, industrial or com¬ 
mercial purposes are rediscounted. Notes 
given to national banks for the purpose of 
trading in stocks, bonds or other invest¬ 
ments. except bonds and notes of the 
United States, may not be rediscounted 
by the Federal Reserve Banks. These 
banks, however, may buy notes and bills 
of banks not members, but they cannot 
use such instruments as a basis for the 
issue of notes. 
Through this system of rediscount of 
bank credits and issue of circulating 
notes, it is hoped to furnish an elastic 
currency that will care for the commercial 
needs of the country, furnish funds for 
the movement of crops and retire the cir¬ 
culating notes when they are no longer 
needed, thus affording an elastic cur¬ 
rency that comes into existence when 
needed and disappears when no longer re¬ 
quired. 
During the late World War, from 1014 
to 1018. and for two years after the 
armistice, the Federal Reserve system ex¬ 
tended its circulating notes freely, but it 
then adopted a radical policy of deflation, 
and this policy has been charged by many 
with responsibility for much of the com¬ 
mercial unrest an! industrial stagnation 
that followed. This criticism applies not 
necessarily to the system itself, but to the 
administration of it. Whether the criti¬ 
cism is justified or not is largely a matter 
of judgment based on the facts. 
On December 1. 1014. we had $637.- 
553.-^3 in gold, including coins and bul¬ 
lion. The Federal Reserve Banks began 
business that year, and their notes yet 
outstanding were only $3,310,000, and 
the national bank notes out amounted to 
$1,042,048,400; the total money in circu¬ 
lation was $3,630,218,232. The per capita 
circulation was $36.40. 
On December 1. 1020. just six years 
later, we had $870,529,142 in gold. The 
Federal Reserve notes had increased to 
$3,554,800,746. The national bank notes 
had decreased to $720,380,242, but the 
total money in circulation bad increased 
tn $6,363,498,999. The per capita circu¬ 
lation had increased to $50.41. That is 
to say. if all the money in the country 
had been evenly divided, every man. wom¬ 
an and child in the country would have 
had $50.41 apiece. It was an increase of 
63 per cent per capita in six years. The 
total increase in money during the same 
time was 75 per cent. The increase in 
Federal Reserve notes was substantially 
1.000 times the amount outstanding six 
years previous. 
In 1014 there were five and a half dollars 
of paper in circulation for every dollar of 
gold in the treasury and in circulation. 
In 1020 there were seven paper dollars 
outstanding for every dollar of gold in 
the country to redeem them. In six years 
the volume of gold increased 38 per cent, 
but the volume of paper money increased 
nearly 300 per cent, or three times its 
former volume. This is what we call in¬ 
flation. Everybody had money. Trade 
was brisk, credit was good, and, of course, 
prices were high. No one could get gold for 
his paper money anywhere in the world, 
but no one here wanted it or cared. The 
financiers, however, thought that seven 
dollars of paper money resting on one 
dollar of gold was too much. They de¬ 
cided on a policy of deflation. That is, 
they determined to reduce the volume of 
money and credit. The principal increase 
had been in the Federal Reserve notes, 
and these were now reduced. The rate 
of discount was increased from 6 to 7 
per cent. The volume of paper money 
was reduced, gold was increased, and by 
May, 1920, a reduction of 20 per cent 
was made in the Federal Reserve notes 
in circulation. In the meantime, foreign 
demand for our goods, especially food pro¬ 
ducts, fell off. Railroads advanced trans¬ 
portation rates. Wholesale prices began 
to fall, but trust organizations and re¬ 
tailers were unwilling to meet the new 
conditions, and maintained prices. Con¬ 
sumers protested against this condition 
and refused to buy. Money became scarce, 
credit was denied. Trade declined; 
wheat, corn, cotton and wool could not 
be sold at any price. Labor had become 
accustomed to ready employment and big 
wages, and not odI.v refused to adjust 
itself to the new conditions, but in some 
cases demanded more, and at the same 
time workmen reduced production in the 
blind hope that by doing so thoj would in¬ 
crease the number of the employed and 
help labor generally. Cost of production 
increased. Consumption decreased ; sales¬ 
men returned without orders, and fac¬ 
tories closed. Men lost their jobs. We 
called it a panic. How far the Federal 
Reserve bank policy was responsible for 
the business depression is hard to say and 
impossible to demonstrate. To say the 
least, the new policy of the Reserve 
Board was coincident with the beginning 
of the business disturbance. It may be 
that a more conservative change of policy 
would have caused less disturbance, but, 
in any event, a readjustment had to come. 
For four years the world had devoted 
itself to producing food and implements 
of war. which were all consumed and de¬ 
stroyed as fast as produced. It was all 
waste and destruction. It was all paid 
for in paper promises. We made the 
promises to ourselves. No one else is 
going to redeem them for us. We must do 
it ourselves, and they must be redeemed 
iu wealth that we create by our own 
Work. There is no other way to pay our 
share of the material costs of the war. 
Interest of Husband and Wife In 
Property 
Myself and husband sold our farm, both 
names on deed. My husband was satisfied 
to go on a farm with my brother and my¬ 
self, and brother bought a small farm. 
We moved to the brother’s. Husband 
stayed just a week, and left and went to 
my daughter, and there he works like a 
hired man for his board. At home he did 
not want to work. He has left home three 
times. My husband and I hold a heavy 
mortgage on farm we sold. I would like 
to know what is his share of the interest. 
If anything should go wrong with the 
place (I mean if buyers should back out) 
I would have it on my hands to look after 
it again. I had to see that taxes and all 
other business debts were paid before, as 
he would not see to anything. Is owner 
of farm allowed to sell timber? Can I 
come in for support, as I have to make a 
living? If so, what am I entitled to? 
Could I have, my money put in my maiden 
1015 
,name? The money in the bank is in my 
own name. mbs. b. s. 
New York. 
If the mortgage is in the name of both 
you and your husband, and does not 
specify what the interest of each is there¬ 
in, each is entitled to one-half. The owner 
of the mortgage on your farm should not 
sell the timber without your consent. You 
have no right to change your name. 
N. T. 
Will or Joint Deed 
How are joint deeds worded? Could 
you send me a sample form of a joint 
deed? When a joint deed is made and 
either party dies, is any legal process of 
any kind either in or out of court neces¬ 
sary? Can a will be made out in such a 
way that there is no chance for the law¬ 
yers to collect a lot of money in fees or 
otherwise after the death of the party 
making the will? j. x. H. 
Wisconsin. 
By inserting the word, “As joint ten¬ 
ants” in a deed, all the property at the 
death of one goes to the survivor without 
any proceedings in court whatsoever. As 
between husband and wife, in most States, 
these words are not necessary if the con¬ 
veyance is made to them as husband and 
■wife or as tenants by the entirety. 
As a general proposition a lawyer does 
not make a large amount of money iu the 
probate of a will or the settlement of an 
estate except in cases where the will was 
drawn by a layman or by an inexperi¬ 
enced or unscrupulous lawyer. A will 
carefully drawn is a saving to the estate. 
Much importance should be atttached to 
the execution of a will, for it is the most 
important instrument executed by a per¬ 
son during his whole life. A joint deed 
disposes of real property only, while a 
will disposes of both real and personal 
property. 
Lowest Prices 
Ever Quoted 
On Titan and International Tractors 
EFFECTIVE immediately, we make another big reduction in 
^ the prices of Titan and International tractors. These 
reductions wipe out all former advances and place Titan and 
International tractors at the lowest prices at which they 
have ever been sold . 
International 8-16 
$900 
This price is about one-fourth 
less than the price at which the 8-16 
sold prior to March of this year. 
The new figure is the lowest at which 
it was ever sold. The new price in¬ 
cludes all the necessarj'’ equipment 
—platform, fenders, governor, belt 
pulley — features which must be 
paid for extra on some tractors. 
Titan 10-20 
$900 
This is the lowest price ever 
quoted on the Titan, considering 
the equipment now included 
(formerly sold extra). Up to March 
of this year the price was $1,200 
—today it is $900. At this figure 
the Titan 3-plow tractor is the best 
value in the farm power field. 
The International 15-30 has been reduced to $1,750 —lower than it has ever 
been before. The man who needs a 4-plow tractor cannot find a better investment 
than the 1 3-30 at this price. (All prices f. o. b. Chicago.) 
Considering quality, power, equipment, and the service which follows every 
machine, Titan and International tractors at these new low prices are un¬ 
questionably the best buy in the tractor market. 
As the prices have been made regardless of manufacturing costs, we do not 
guarantee to maintain them. These prices certainly justify the immediate purchase 
of a tractor. Put it at the horse-killing work of hot weather plowing, and your fall 
and winter belt work. 
See our tractor dealer for full information on deliveries and terms. 
International Harvester Company 
of America 
• INCORPORATED' 
Chicago 
•incorporated* USA 
92 Branch Houses and 15,000 Dealers in the United States 
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