THE EFFICACY OF CHANGES IN THE DISCOUNT RATES OF THE FEDERAL RESERVE BANKS.

The article focuses on the actual efficacy of changes in the discount policies of central banks in the United States and Europe. For many, this policy has confused the public opinion rather than clarifying it. The differences of opinion that arise are usually due to divergent views as to the stability of the current business situation and the probable developments of the immediate future. The discount policy of central banks may be discussed either from the point of view of actual efficacy, or conceding that, of general expediency and temporal wisdom. The effective opponents of advances in central bank rates of discount were usually as hostile to the idea of further credit inflation as were the spokesmen for higher rates. Two methods of contracting the money are, the amortization of government and municipal debt, and the other is the rationing of credit under the guidance of the bank of issue. Trained opinion in this country would seem to harbor a belief in the potency of the discount rates of the federal reserve banks, as an instrument of credit control.