New Britain herald., 1916-12-02
Henry Cleu,s
 Weekly Letter
Special to the Herald)

Under the stimulus of war imitation the situation had become very one-
 sided, and the danger of too violent reversal was becoming more and more apparent, unless the brakes could be applied with discretion. The first check came from a perfectly natural cause.-the desire to take profits. A great deal of liquidation has already occurred during the month just closed, insiders in a position to know being fully aware that it was advisable to lessen their holdings before the move ment had reached a climax. To this extent the technical situation has been improved especially by this weeks decline.
 But other influences have also been at work temporarily favoring a re- action. The first of these was the general uprising against high prices, especially in commodities. Dear food was breeding serious public discon- tent and paving the way for further government interference with busi- ness Again there were signs that our prosperity wave while not ended is approa ching, if it has not reached, it's zenith, and that owing to the greatly increased cost of doing business there will be no such profits in 1917 as in 1916. Labor is securing a liberal proportion of these profits, and when the increased costs of labor, raw ma- terials and distribution are taken into consideration the margin of profits it will be discovered, has been materially affected. Moreover, high prices are already causing 1essened consumption and increased production. Thus does natural law in the form of supply and demand automa atically correct ab- normal conditions more surely than any of the fads and nostrums ad vanced by those who believe in gov ernment regulation. Natural law is still superior to all human interfer- ence, which usually results in a new set of ills, worse than those attempted to displace
 Another cause of reaction was the increased tightness of money. The expansion of credit has been enor- mous and in spite of the marvellous growth of banking resources, the de- mand for accumulation was growing at pace that rendered a slowing down inevitable. The immense volume of business at abnormal profits, the great expansion of credit, the absorption of foreign held securi- ties, the huge amount of money in- vested in various foreign loans and the demands of new enterprises at home, all meant heavy demands upon the local money market. Lenders and investors are consequently asking and securing better rates; in other words capital like other things, is rising in value because demand is overtaking supply and owners are enabled to hold for more advantageous terms.
 Still another disappointm was the unexpected attitude of the Federal Reserve Board toward the forthcom- ing issue of British treasury notes, in which investment was discouraged Concerning the wisdom Of this pro- nouncement there was 8 decided di- vision of opinion, there being no ques- tion about the safety of these treasury bills, which are simply unrenewable short term obligations of the British government. The advice to bankers to go slow and not absorb these se- curities in too large amounts may have been conservative and timely, but would have done less harm if more discreetly offered. The natural effect of this announcement, which was not generally understood, was to depress foreign bonds, and it may temporarily interfere with their mar keting in this country, especially in view of the new issues anticipated early next year. Should the market for these bonds here be affected, 1t l would also tend to check munition orders and such exports as have de- 1 pended upon this method of payment. 1
 Thus far during the war this coun- try has taken over S1, 0,000,O00 in foreign bonds, an amount much less 4lo hn Yo1 iYarr ,fc >FI American railroads for the same period. These sums were not loans in the ordinary sense of the term, but legitimate payment for munitions, more acceptable to us than gold or our own securities. It is not desira ble 1 that we take back all foreign hold ings of our shares, since a good inter- national market for them adds to their stability in times of stress at home. Moreover, 1t is we'll for our own sakes to maintain a good market | abroad for American securities in case this country ever meets crisis in which it might be obliged to cross the Atlantic for financial assistance.
 On Monday next congress opens and a new set of conditions will be. faced. It is a short session and there is con- siderable leftover business of an in- portant nature that should be finished before the new congress comes in a year hence. Fortunately there are no disturbing issues imm ediately in sight
 The money market continues to show a hardening tendency, and as a result funds are flowing more freely in this direction from the interior Gold imports from Canada were re- newed, about $25,Oo0,0oo having ar rived this week with prospects of more following. December disburse- ments were estimated at nearly $17O,- 100000, or about twenty millions more