Los Angeles herald. [microfilm reel] (Los Angeles [Calif.]) 1900-1911, 1908-01-02

ana necessary improvements sellOuSiy IT,
stricts the demand for all construction
materials The collapse of the real estate
boom has had a similar effect; the big
modern structures now in vogue being
heavy consumers of many mineral pro.
ducts and large employers of labor at
very high wages. When easier monetary
conditions arrive and costs of produc
ton have been moderated, a resumption
In demand from railroads can be safely
anticipated; but liquidation in real estate
is still incomplete.
The course of, commodity prices has OF
late been decidedly downward Accord
ing to Sauerbecks London record-the
best world indicator-the index number
of commodity prices has declined from
S2.4 In May, 1907, to 1851 at the end of
November, 1907. This is a decline of i've
points in six months, the heaviest shrink
age being In construction materials, food
products remaining higher than year
ago The yearly commodities average OF
1906 was n; of 1905, ~, and for 1904, TO-
so that we have still some distance to
go before prices approach their normal
level. Our local index numbers also show
corresponding movements. This down.
ward tendency of commodities promises
TO be prolonged into the coming year,
because Of lessened demand, curtailment
of credit and commercial liquidation. So
far stringent money has had more to do
with depressing values than lessened con-
sumption. Very soon 1t will be different
and a shrinking consumption resulting
from compulsory economy and an In
crease of the unemployed will be the
main source of weakness.
Railroad managers have some knottv
problems to solve during the coming
year. During the ten months ending Oc'
t1I Ia fad M
of 1918, 0OO, 900. an increase Of nearly ST.
100000, or almost 9 per cent compared
with that of the previous year. This
would be eminently satisfactory did It
not belong to the past. The rate at
which expenses are increasing is Illus
trated in the returns for October, which
showed a gain of $13.0O0,000 in gross, but
growth of S17,000,00O in expenses, and
nearly 100000 loss in net. This enor-
nous increase In expenses which is not
confined TO railroads, is of course due TO
the rise in materials and labor and is a
serious matter, especially considering the
probability of some shrinkage in traffic.
Our railroads have also been seriously
embarrassed by other conditions, such az
limitations of the money market, and
hostile and unwise state legislation. Be-
sides they found themselves unable to
finance many of the improvements made
imperative by the growth of traffic; over
$3.50, 100000 of short-term notes having been
issued during 1907. These Improvements
are still incomplete, and many will have
to be indefinitely postponed until more
favorable conditions.
Money Rights Itself
Graduahy the money market is right
ing itself. The currency premium is
rapidly disappearing; bank reserves are
rising and clearing house certificates
should soon be withdrawn. While con-
siderable difficulty may arise in com
mercial circles within the next sixty days
in extending a large mass of maturities,
and some failures may ensue, this con-
tingency will simply prove to be bene-
fetal cleansing process, wedding out weak
concerns and clearing the ground for d
fresh and clear recovery. Before the
spring funds should be freely returned
from the interior and money may becom
drug; bringing lower rates than de-
sirable owing to heavy increase in cur
rency and the impossibility of contracting
when demand subsidies. So much for the
effects of imitation Congress owes the
country a remedy for the present defec
tive condition of our currency system
without further tinkering or procrastina
damaging neglect of duty. There is n
question today on which such a con
| fusion of ideas prevails as on thu
currency question, and Mr.. Roosevelt
might do well to place so complex a sub
| ject In the hands Of a body of recognized
| experts; mon of ability, reputation anC
experience. The worlds production Of
gold goes on apace at the rate of abou
$400 100000 annually. Our own stock o.
the precious meal has been augmented
| by the recent importation of over $780,
900, 900, largely drawn from the Bank 0,
England. The net gold movement, how
ever, for twelve months ending Novem
Der resulted in an excess Of imports ag
gregating only S5000O.00O, compared will
! 1040O0,00O the same time last year. Mex
/ spring we may lose a considerable portion
of recent imports.
There is but little doubt that finan
cial depression has passed through its
most serious stages, Liquidation has pro.
ceeded on an enormous scale, and the
shrinkage in values has been estimated al
over 49, 10000. In the better class OF
| securities depressing factors have prob
ably been over-discounted, and the ten.
dency is now toward a fair recovery
1t is not yet quite clear that liquidation
is complete, because OF the heavy mass
of undigested securities remaining. Some
time will elapse before the cleaning uI
process is complete, and a good many new
projects will have to be either reorgan-
lied or entirely wound up. The unsettled
condition of credit is also a disturbing
element, although this will disappear as
confidence revives. 1t may also as well be
recognized we are In for a period of divi-
dend reductions, although this contin-
gency has been largely discounted by pre-
vious declines. On the other hand, there
is enough In the prosperity of the farm
ing classes and the comparatively sound
condition of industry referred to above to
warrant more hopeful views than existed
a month ago. In the efforts to rebuild
confidence we must not expect immediate
recovery. The first step to take is to
cease calculating upon the old standards
, of values or from the old point of view,
and to candidly recognize that in bust
, ness values and volume must be thor
oughly adjusted to the new conditions.
Contraction must rule for a period.
There are still diseased spots exposed by
the upheaVal; credit is still disordered,
and in Wall street considerable clearing
up will have to be done before the effects
of the promoters debauch are over. A
great many unsuccessful enterprises will
have to be wound up involving more or
less liquidation. But all this can be done
quietly, as was the case in much of the
liquidation of the last three months; and