Evening star., 1920-03-06
BY STUART p. WEST.

Special Dispatch to The star
NEW YORK, March S.-In the down.
ward movement which began in jan
uary and with only slight Interrupt
tions continued until the end OF Feb
ruary. there were two essential mo-
tives. The first was the scarcity Of
credit and the impossibility Of ex-
panding loans to finance new Wall
street operations: the second was the
belief that the reduction of CONNER
cial loans which 1t was the policy OF
the banking authorities to bring
about would involve general reac-
country, declining commodity prices.
and a consequent lowering Of profits
for many of the industrial compa-
MES the stocks Of which had been
quoted four months ago at high prices
on the stock exchange.
At the close Of the present week
things look decidedly brighter for the
credit situation. To be sure CONNER
cial credits have been very slow to
yield to the various measures adopt
ed looking to their curtailment. So
far borrowers on commercial paper
have preferred to pay the present ex-
traordinary premiums exacted for the
use of money rather than pay or their
loans and reduce their volume of busi-
ness. While this is perfectly clear, It
is also known that the Federal Re-
serve Board Is not directing its ener-
gies SO much against business men to
cut down their borrowing, but that
1t Is aiming at thhat numerous
class Of spectators in foodstuffs and
in other articles of common consump-
ton who during the war were able to
take advantage OF the necessities Of
the government. which was their
principal customer. and turn enor-
nous prohtS for themselves.
Loan Cancellation Slow.
The cancellation of loans of this
sort made in speculative channels
must inevitably be a very slow
process because the goods which are
thrown back upon the hands of the
banks cannot be pressed for sale all
at once without the sellers involving
themselves in severe loss. This is
one reason why the so-called COM
mercial liquidation Is proceeding so
very slowly. Another reason about
which more and more is constantly
being heard. is the car shortage
throughout the land the most acute
probably Of any in our history. There
is no doubt that the transportation
difficulties have been holding up vast
supplies Of merchandise from the dis
tributive centers, and have thereby
necessitated the tying UP of funds in
rendered liquid had 1t been possible
to get the goods to market. Some
concrete idea of the Importance Of
this obstacle is to be gained from
the statement made by the president
of the reserve bank at Kansas City
Of s70.000.o00 would be paid of i'm
mediately as soon as the freight
blockade was relieved.
Up to a few days ago, however.
there had been apprehension that this
liquidation of commercial loans would
gold Withdrawals for South America,
which since the arst of the year have
amounted to moro than $50,0OO.00O
with the prospect OF q total amount.
ing very much higher. II the federal
reserve ratio. already down to the
ther in consequence Of the outward
gold movement. 1t 10 easy to see how
It might cause alarm and at the very
least would exercise rigid restraint
upon the Wall street market
more promising plans Of relief that
are on foot in international banking
circles was 30 well kept that 1t was
not until Thursday's sensational rise
in sterling exchange. followed by the
almost equally spectacular jump on
Friday. that the truth Of what was
happening began to be realized. So
far there has been no ohicial con-
firmation of the reported negotiations
by American bank representatives in
London looking to the shipment OF
gold to this side on a very large
scale. But there has been plenty OF
unofficial confirmation. and indeed no
better proof that a gold influx is about
to start need be sought than the ac-
ton of the sterling exchange itself.
There has now been a full recovery
in the value of the pound sterling OF
it's entire loss since the close OF No
vember. The rate Is up so cents from
the extreme bottom Of month ago.
which means nearly one-third Of the
entire depreciation from the normal
par Of exchange regained.
Credits to Europe Ont 0f Question.
No such degree Of stabilisation
could be att lined ~ the result Of
Europe restricting its purchases Of
American commodities. The rebound
in sterling has been altogether too
violent and too abrupt to be assigned
to any such slow-working cause.
There are only two other ways to
rectify the international balance. one
through an extension OF credits, the
other through the transfer Of gold.
That there has been or viii be any