Abstract

Editorials

This article focuses on the political developments in the U.S. and other countries. According to the U.S. Federal Reserve Board, increasing the reserve requirements of member banks by one-third reduces but does not eliminate the danger of credit inflation. As the board points out, the total amount of deposits in banks and the Postal Savings system, plus currency outside the banks, is already two billion dollars larger than in 1929. Even with the new reserve requirements, there will be at least a half-billion dollars in excess reserves, which might be transformed into four or five billion dollars' worth of new credit. While it is true that the Federal Reserve Bank could further cut these reserves by selling its holdings of government bonds, such action would probably lead to an undesired increase in interest rates and impair the government's borrowing power.