New Britain herald., 1919-12-27

lending power became narrower and narrower, these charges tended to in crease. When action was taken by the Federal Reserve Board for the purpose of controlling the growth of Stock Exchange operations, an in formal association of bankers prac- tically applied the brakes to stock operations by keeping rates for call money high whenever a disposition to increase demand manifested itself. In these circumstances call rates were at one time forced up as high as 30 per cent.
 Banking Situation.
 It has been clear as never before in the history of the stock market that the banking situation was of direct significance and that it's position could be clearly measured and understood. In former years this banking position was much harder to trace because of the scattered system of reserve hold ing. When New York banks were short of reserves high rates in the call money market drew funds from the interior The experience of form CT years has been i'll some measure re- peated during the last few months, but only in f very moderate degree. In the main it has appeared that the controlling factor in the banking sit uatIon was now no longer the posi- tion of the New Y ork Clearing House banks, lnasmuch as the surplus or deficit of reserves a these institutions meant nothing more than their re- discounting situation. but that the real factor to be closely watched was the reserve position of the Federal re serve banks, and particularly of the Federal Reserve Bank of New York. It has been a notable fact during later months of the year that the gen. eral level of reserves in the Federal reserve banks, which during the war was in the neighborhood of 50 to 55 per cent, has fallen to a point but lit tie above 45 to 46 per cent. This has been due not only to greater and stronger demands for funds but also to the fact that as the Government gradually withdrew from the market the credit thus released was trans ferred to the use of speculative and investment operation.
 Foreign and Domestic Investments.
 A marked feature of the years de-
  the investment yield of money, an in crease which may be figured at from 1 to per cent on the sounder secur- ities, or reckoning 5 per cent. as a normal basis of return before the war, an increase of 20 to 40 per cent. of the level. then prevailing. This is very moderate as compared with the level of prices, which has risen more Tic Sxro l, been more striking in the case of foreign than in the case of domestic securities, many foreign securities be- ing now on a 10 per cent. basis or better although at the beginning of the year they were on practically the same level as American offerings of the same class This is due to the de- preciation of foreign exchange, which has itself been one Of the most signi- ficant incidents of the years work After the withdrawal of the govern mental support of sterling, that cur rency steadily declined to low point of s3.65 1-4, from which there has since been a subsequent improvement. The maintenance of this improvem depends much upon the policy with regard to the granting of foreign credit which is to be adopted by American bankers and by our gov ernm ent. As things stand no perma- nent improvement seems to be detin- itely in prospect, and the change in investment values in foreign securities is very largely due to this fact. Even where a, dollar conversion privilege is guaranteed by the issuer of the se- curity the actual status of the invest ment remains to be determined by circum stances directly dependent up- on exchange conditions.
 Outlook For 1920.
 Facing the year 1920 the United States stands as the only free gold in the world, and by far the greatest holder of gold in the world, as the only important market for cap ital on a large scale and as the most extensive source of raw materials as we'll as of manufactures now in exist ence. It's labor is fully employed and it's productive energies have more 1 than an ample field for their applica- tion. This inevitably means a contin- uance of a strong and active business development. The shortage Ofimmedi- 1 ate loan funds, the tightness of money and the effort to contract credit are 1 clements in the policy of maintain ing stability and solvency, and they 1 may be expected to continue. It can not however dissociate itself from European conditions. In Europe eco homie disorganization has not been ] overcome and requires our aid for its ! immediate relief. The outlook for ! 1920. given due business caution, is hopeful: but the difficulties to be ]