The sun. [volume] (New York [N.Y.]) 1833-1916, 1914-02-09
FINANCIAL REVIEW
OF The PAST WEEK
Causes Of the Ease Of Money
and Changed Conditions
Denoted Thereby.
PROBLEMS WHICH REMAIN
Confidence Reviving, but 1t
Needs to Be Strength
ened Further.
PROBLEMS WHICH REMAIN


Because there has been such a .yeren-
dous loossning In the money markets OF
the world since the year opened, accom-
panied by a rather rapid recovery OF
financial and business confidence from the
gloomy depression OF sentiment which
persisted until two or three months ago
we are now hearing OH all SIDES that 1919
was a year Of false alarms II Is true
that a good deal which was only recently
expected to happen did not como TO pass.
but the recovery of confidence and the
expansion Of trade volumes and of values
In all fields 10 not to DO safely promoted
by distorting the facts OF the economic
crisis from which civilization Is appar-
entity emerging. one OF tho reasons why
tho worst expected year ago was not
realized was because the financial COM
inunty everywhere arrived at an un-
| usually early appreciation OF the gravity
OF conditions and adopted swift and per-
| emptory measures to deal with them.
Undoubtedly In the Consequence L dis
tortion of tho record is possible for the
sake OF encouraging the revival OF bust
ness and financial confidence but danger
lies that way.
Not long after the panic Of 1907 the
country began to hear that the panic was
causeless and that It was only TO be ac-
counted for on psychological grounds. We
| were told that the violent disturbance OF
business following the CONFUSION OF the
security markets was wholly uncalled for
| and that Il only remained for merchants,
manufacturers and bankers TO 20 ahead
as though nothing had happened and the
lost state OF prosperity which seemed to
flourish In 1906 would be readily restored.
'hp .tf snf Nx4I O.
swift swelling out of volumes and values
In 1909. during which the country per
suaded itself Indeed that nothing worth
considering had happened IN 1907 and
that the upheaval then was only n bad
ami baseless dream. When 1909 was sue
caeded By genera! collapse and breakdown
in 1910. with It's coHcomltant Of credit
strain and high rates for capital, Il be-
gan 10 be believed that perhaps 1907
had not been a transitury phs rumehon
without relation to developments imme-
diateiy preceding ii and without bearing
upon the train Of economic events which
must follow.
All this has some lessons for the ST
uation to-day. IL is mstak. 10 pre-
tend that nothing very much happened in
1913 because tho worst that was appre-
'hended did not occur. 1t is equally IL fall
lacy 20 argue that what We are now Wit
Messing In the financial markets. the wide
. spread ClaNlllOU OF money anu me Els II
Of funds into investment securities, shows
that there was nothing III. matter with
the world d year and moro asu except u
sudden and complete loss OF cpniinehce
which was not warranted hy any thing
actual and tangible. Coniidcrce, i Is
being said. has returned ana IL return
was ali the cure tho world Needed Tor :,
. wholly imaginary maiady from which Il
had been suffering. The description does
not square with circumstances. Both the
loss OF confidence and Its return has 10
be reckoned with. but the state OF conf
denee has TO be an effect before 1t can be
! IA cause There were other causes opera
tive In the last year or so which contrib
uted 10 a loss of confidence and t. the
extcnt that confidence has been reeaili"d
| 4 IL the result OF the elimination OF some
! of these other causes
! Monetary ease is now conducive 20 the
prevalence OF q confident feeling that IL
OF hopeful ausury for III. near economic
future because during the last year the
! world set about reversing the proccs-tS
| when almost eliminated In "a worldwide
! panic IN the middle Of 1913. | was not
| through lack of confidence that an
, economic debacle was very Hearl" pre-
I c!p!tated then, but through universal
| condition Of overconhdence o. long uura-
tion. The outbreak OF war in the Bal
/ Rans aided to the difficulties OF AN exist
ing situation OF enormous difficulty which
however. II did more TO illuminate than
aggravate. For several years the invest
ment markets NJ the leading financial
centres mad been displaying Increasingly
frequent signs OF increasing congestion in
securities. This token that tlc world -
supply OF capital had become dispropor-
| tioHatey converted into iixed forms was
matched by the almost inial!blc Index of
capital exhaustion furnished 10y the de-
pletcl gold reserves of the principal bank
Ing systems, The present relaxation of
the money markets, both in their credit
and capital aspects. Is not owing so much
to return Of confidence. which Is itself
rather h product of monetary relaxation,
bu, is owing chiefly to the 1913 liquidation
un u world scale of securities and OF bust
,ess positions. Of Indebtedness In short.
Through liquidation there was released
and returned To the money market large
supply OF capital which had been so locked
up In fixed forms that the liquid supply
available for current needs OF production
! ard distribution of goods and commodities
had becomc clearly insufficient. New
enterprise which had been booming
throughout the world. had been suffering
rapidly recurring checks because the sup
ply Of capital available for fixed invest
iuent had become Inadequate through too
much previous engagement OF capital for
future profit. How eNtravagant had been
! the drafts on the money market for capi-
tai purposes was demonstrated by the
fact that current supplies Of money for
| the credit purposes Of commerce and
| Industry had been further contracted by
| drawing on credit funds for long term
capital requirements. The evidence of this
| was furnished by tho short term note
problem which doomed up In such dis
ouieting dimensions not long since and
| resulted from the insatiate insistence Of
both governmental and corporate bor-
| rowers on financial accommodation when
4, thu ,ay,t .rlra
| absorb bonds. II 10 not surprising also
that such conditions found their corOllary
| In the fiotation of an inoriinate amount
If commercial paper which came to repre-
! sent not goods and commodities moving
INTO consumption but the expenditure OF
the proceeds OF the paper FOR plant and
equipment to produce and distribute
articles for consumption.
II was this situation which had 60 be
relieved somehow and the processes OF
relief we're expressed IN the economic rec
ora OF 1918. Those processes have brought
obo,,t a pOsition IN which ia