New Britain herald., 1919-06-23
Henry Clews
 Weekly Letter
Especial to the Herald)

New York, June 23.-The situation at Paris and Weinar and the question 1 whether the German representatives l will or will not sign the peace treaty ] in the slightly amended form which ] has been offered to them still cOnSti- | tute the central and overshad lowing l question of international business and l finance Eventually the Germans ] must accept the terms which are of l fered to them, even though there may l be an interval of hesitation or refusal 1 before the inevitable is reached. Mean ] time. this protracting of the discus | sion is naturally a source of some 1 anxiety to business and finance. That ; such anxiety is regarded only tenn l pOrary is, however, indicated by the l active efforts now on foot for arrang- 1 ing the peaceful finan cing of our ex- 1 port trade upon a grand scalo.
 ] Foreign financial conditions have 1 thus become the dominant factor in ] our securities market. How to finance ! our export trade on some sound basis l IS much more than an export problem. ! 1t involves the question how much money shall be allotted to domestic l financing and to the support of specu- lat1Ve operations at home. This situ- 1 alton came to point last week with the establishment of a rate for call money which at one time heached 1 per cent, and with the recognition on 1 the part of both federal officials and local bankers that the time had come { for some action which would be con- elusive. This feeling has given rise l 10 the eStabllShment of committees, ] and the calling of conferences designed to produce some definite result within 8 comparatively short time. The re- suit, whatever it may be, will exert the utmost influence upon general 1 market conditions. It is to be expect 1 ed that we shall not succeed in financ- ing the export trade upon the very high and abnormal level now existing, but it is also to be expected that we shall show both the good sense and consideration for the needs of Euro pean industry which will provide for reasonable accommodations to for eigners.
 Money and Stocks.
 The stock market has not fully un- derstood the peculiar new conditions to which it is subject under the fed eral reserve system. There was a deficit of reserves at the close of last week and this deficit could most easily be made Up by larger discounting at federal reserve banks for the purpose of establishing greater reserve credits ,, on the books of the banks. In spite Of this call money promptly bounded upward as in the old days when a deficit of reserves meant a necessary curtallment of loans. The fact is that the federal reserve system could sup ply very much larger reserves through the Tediscount process. if it chose to do so, and the funds thus provided If once obtained by the member banks could be used in any way that the banks might see fit, whether for spec
 ulation CT for some other purpose
 The member banks have rediscountecl
 heavily on the strength of liberty bonds and certificates of indebtedness
 as collateral, and it is in this way that
 a good deal of the recent upward
 movement in the stock market has
 been financed. But the warnings sent
 out by the federal reserve board and
 it's calls for information as to the use
 of rediscount proceeds necessarily
 have caused some anxiety to bankers
 who were already carrying larAe lines
 and who would naturally hesitate to
 put themselves into any position that
 might invoke legitimate criticism. The
 reserve system has n H functioned as
 it was expected to in this particular.
 It has reasOns to show for it's peculiar
 position regal dng speculation in that
 if had been called upon to finance the
 treasury so largely and at low and
 stable rates. Still the fact remains
 that it is the great source of supply of
 funds, and that the policies that it
 may determine upon will in no small
 measure regulate those of the actual
 lending banks. 1n short the money
 situation has as never before become
 the key to the stock market.
 Arc Stocks Too High?
 Tn view of the evident anxiety that
 is being exhibited with respect to the
 use of reserve funds, resulting as al-
 ready seen in high money rates, the
 question is fairly asked whether stocks
 are too hSh? The course of events
 during the past week does not indi-
 cate that the country thinks so, great
 power of recovery being shown on
 Tuesday and Wednesday. No one
 can safely pe q prophet in the present
 circumstances, yet the indication
 would seem to be clear that stocks are
 not yet due for any prolonged decline.
 while the money situation will prob
 ably prevent them from showing any
 sensational or dangerous advance
 This would seem to mean that the
 stock market is in a more or less (for
 it) stable situation~--likeiy, Of course.
 to suffer ups and downs, while given
 stocks may still afford gcod specula-
 tive posSi i5ilit1es. For the present it
 is not as likely as heretofore to un-
 dergo marked changes ir either Girec-
 ton or will undergo thGm when they
 occur only temporarily.
 Whether stocks are too high