New-York tribune., 1919-11-17
In Wall Street

The amazing thing about last
weeks stock market was not that
the smash was bad, but rather that
| it wasn't good deal worse. With
hardly an important interruption,
the bull market which eliminated
on Wednesday had been under way
since the beginning of February. 1t
had been advertised by it's own pyro-
technics as none preceding it had
ever been advertised. No section
of this country was so remote as to
escape its allurements. And the re-
suit of months of sustained advance
was inevitable. The country had
gone speculation mad. Stocks were
brought ecstatically, not because
buyers knew or cared anything
about values, but simply because
prices were going up in what seemed
marvellous fashion. The thing
had reached that absurd stage where
the widest tip was enough to cause
rush to buy without pause for in
vestigation. We know of one brok-
erage Office where half the customers
were speculating heavily-and max
ing money-on the inside" tips of a
ten-share trader! 1t was no won-
der, under such conditions, that the
market in the stocks which had ad-
vanced most sensationally became
topheavy and toppled when the first
serious obstacle was encountered.
Of course, those who paid the price
of their own folly had to blame some
one else, and, as almost invariably
happens, the banks, and particularly
the Federal Reserve Board, were
held responsible. 1t was even COW
ertly insinuated by some persons too
stupid to understand the plain facts
of the case that the banking authori-
ties had deliberately wrecked the
market for their own selfish ends.
The fact is, the Federal Reserve
officials deserve commentator rather
than criticism for acting as they did,
Legitimate demands for credit are
larger and perhaps more pressing
than they have been at any time
since the system was inaugurated.
In spite of the prevalence Of labor un-
rest. an enormous volume of business
is being transacted throughout the
country. An inquiry last week dis
closed the fact that New York de-
partment stores were doing 100 per
cent more business in terms of dol
lars and 10 per cent more in actual
volume than last year; and this is
typical of conditions at many other
centers. In the rural districts,
which are rolling in wealth, trade is
of almost fantastic proportions.
Moreover, it happens that hundreds
Of millions of dollars of credit are
'frozen" as a result of strikes, the
longshoremen's dispute alone hav-
ing held upward Of $2OO,OO0,0OO of
credit in suspense. Hundreds of
millions more are still tied up in
crop moving, although the crest Of
that movement has been passed.
Added to this is the enormous bur.
den of financing foreign trade, a
large part of which has fallen on the
banks. All these demands had COM
bined to cause an increase in bank
loans to the highest point Of record.
And this increase came at the very
time when the flow Of gold had
turned outward. 1t is believed that
the country's store Of money gold
has been depleted by at least $780,
100000 in the last twelve months,
and there are indications that the
movement will continue on an ex-
panding scale for some time. Inas-
much as dollar of gold serves in
practice as the basis for about $40
Of credit. it will be seen that 50
heavy loss as has been noted could
hardly take place without causing
some contraction of credit. All
things considered, the Reserve Board
acted wisely in bringing about the
liquidation of an overextended mar
ket position.
Considered in one light, it is most
fortunate for Wall Street that the
liquidation has taken place, since it
is obvious that the speculative struc-
ture was getting more dangerously