New-York tribune., 1918-06-02

Liberty 8 1ss last week rose to with
in minute fraction of par, while
the second As and the third 4As
were declining to new low levels,
with the result that at the close
there was a difference Of approXi-
mately point in the yield of the
first issue and the others. Coinci-
dentally, the market for municipal
bonds became very strong, though
more or less nominal, owing to the
scant supply. The explanation is
simple. Faced with the certainty of
greatly increased taxation on their
incomes, the very rich are seeking
avenues of investment that will en-
able them to escape part of the
heavy burden that wealth is called
upon to bear. It is not surprising
that they should. Consider the posi-
tion of the man of wealth, taking for
purposes of illustration one who, in
1914, derived an income of, let US
say, $1,000,000 from taxable invest
ments. Out of that income he paid
what now seems negligible amount
in income taXes-apprOXimat tely
$4,000, or, roughly, per cent of
the total On the same income, from
the same sources, he paid in 1917
tax of S475,000, leaving a net in
come Of $625,000. But there is still
another factor to be considered,
namely, the decreased purchasing
power of money. Since 1914 COM
modify prices have risen 80 per cent,
so that the $625,000 represents
command over goods equivalent to
no more than could have been pur-
chased for $3.50, 900 in 1914. In
other words, the real income in 1917
was barely more than a third as
much as before the war. This year
ii will be reduced still further. Yet
there are those who talk of the ne
cessity of conscripting wealth as if
it had not already been conscripted.
Although an appearance of great
activity is created by the pyrotech-
MICS of such speculative footballs as
Marine Preferred and American Su-
matra, the market is really relaps-
ing into a state of somnolence COM
parable with that which prevailed
during the latter part of the Liberty
Loan campaign. Even brokers who
predicted a great bull market when
prices were skyrocketing fortnight
ago are now convinced that there
will be no big speculation for several
months at least, barring always a
sudden ending Of the war. But one
thing seems reasonably clear, that
is, the drastic reaction from the rise
which eliminated a little more than
two weeks ago has put the market
in a stronger technical position than
ever. During that rise many specu-
lators who had carried stocks at a
loss for months were able to get out
even, or with slight profit, and they
did so. The result is that the spec
rlative position is now very small,
and, according to brokers, much bet
ter margined than usual. Brokers'
loans are unusually light, in most
cases. Moreover, there is a steady,
if small, demand for the better in
dustrial and railroad stocks for in
vestment. Under the circumstances,
therefore, it is to be expected that
the market will show great resist
ance to the pressure to which it is
likely to be subjected as the battle
line sways back and forth in France
and the new taxation programme is
gradually unfolded in Congress-.
The non-essential industry prob
lem is being solved with greater
rapidity than might be supposed,
though much yet remains to be done
before the country can put it's full
effort into the war. The process by
which this adjustment is being ac-
complished is subtle, but effective; it
is simply through starvation in the
matter of supplies. The steel indus
try goes on 100 per cent war foot
ing-and inevitably non-essential
operations are crippled for lack of
the basic commodity. The govern
ment takes all the wool it needs,
leaving what remains for civilian con-
sumption-and that, too, must force
decrease in consumption, and,
therefore, in activity of those busi-
resses which are dependent upon an
adequate supply of wool. And what
has happened in these trades is hap
pening in many others, though slow
ly. The surprising thing is that the
readJustment should be attended by
so little embarrassment. The COM
mercial mortality record remains ex-
tremely low. Last week. for ex-
ample, there were only 155 failures
in the United States, compared with
277 in the CORRESPONDING neriod +ho