Evening star. [volume] (Washington, D.C.) 1854-1972, 1920-07-18
BY 1. A. FLEMING.

HfosreSS mas eViQently been mace In
the work of recovery during the past
week, the beginning of the end of the
railroad muss that has so congested
the tracks of the country that abso-
lutte embargo with attending disap-
peintments and discontinue to bust
hess has resulted.
In order to keep the speed and ac-
tlvity in industrial enterprises, to
Keep the doors of business open, and
the regular movements of money In
ordinary channels, to the manufac-
turer to buy raw material, to be re-
paid on the sale of finished product.
etc, ETC.. it rs necessary that there De
no interference with the ready move
ment of goods to and from the fac
tories, and the only available means
Tor this transportation is rail and
water, with the automobile truck as
an adjunct.
If the railroads are blocked goods
cannot be moved more than that they
cannot be manufactured and credit
tied up in products of various kinds,
becomes of the type referred to by the
reserve board as frozen" Strike
causes freezing; coal shortage is the
worst kind of frost.
1t is therefore encouraging that
strenuous efforts to open the arteries
have been in a measure successful.
LlIOEtS Oh the ISuGTdl ICSSEse UOdEu
to control credit and to prevent ex-
pansioa have been successful beyond
the expectations of the officials.
These efforts were put forth at
time when there was an inclination
to spread out little. when the stock
market was getting breath for a re-
covery. and the brakes, grinding as
they took hold, have had the effect of
continuing in being the slowest stock
market in many years, with prices
rear the bottom.
Some time they will go on to higher
levels, unless all the records of the
past are forever gone. Perhaps it
may not come until the readjustment
is complete, but for years the come
back has followed to market sick to
positive weakness.
Leading Bank Satisfied.
The Chemical National Bank of New
York takes the position that the ac-
ton of the federal reserve board in
It's credit curtail has benefited the
country.
In a bulletin just issued the bank
officials have this to say:
Recently financial articles have
been setting forth the advantages and
disadvantages of imitation and rumi-
mating upon the apparently ever-in-
creasing rates for the use of money
70 the uninitiated or to those who
nave not had opportunity to study
into the subject it may seem almost
unbelievable that interest rates could
go higher than 6 per cent, which is
generally thought to be the maximum
rate in this state These persons fail
10 take into consideration the fact
that money is a commodity, much the
same as wool, meat or anything else,
and its value depends upon the old
law OF supply and demand. 1t is,
therefore, no more possible to set a
maximum figure for which money can
be haaned. and have interest rates re-
maiH at that figure. than it has been
70 get a maximum price for sugar.
me FEDERAL reserve banks through
peilcy OF higher rediscount rates
nave recently 1naugurated a period of
oenatlon which is well under way.
one of the principal reasons for
putting an end to imitation was to
bring about lower prices. There is no
nsed OF explaining that commodities
OF all kinds have recently reached
figures quite out Of proportion to the
average persons pocketbook One
way OF bringing about lower prices
would have been to increase produc-
tlon, when prices would naturally
manding shorter hours and no one
willing to work on our farms, great
er production has not been possible,
at least for the present. The other
method of lowering prices. at least
to some extent. is that of decreasing
consumption. A combination of both
methods would probably be the most
desirable. but since this could not
be had it is evident that the latter
method was the one to be followed
The result of the Federal Reserve
Boards policy of deflation is already
apparent. and, while the process may
be unpleasant for the time being,
there is no doubt but what the out
come will be of benefit to all. AS
long as the merchant uses his own
for SnacnlafiUa
is no great objection, but when he
speculates with his banks money.
resulting in generally increased
prices for commodities. there is no
question but what the wrong policy
is being pursued. Money today is
scarce. butthere is plenty for legiti-
mate business needs.
while the federal reserve banks
probably took the first actual step
in the process of deflation. the situa-
by the outlaw railroad strike, the re-
suits of which have recently become
more apparent, with deliveries of
merchandise held up at all points.
There is a vast amount of frozen
credit which cannot be released un-
til there is a free movement of goods.
Merchants and manufacturers await
ing delivery of goods have, therefore,
been obliged to borrow very heav
lily from the banks. Until there can be
prompt llQulOdllOH VI SuCn circuit, the
increase in the discount rates adopted
by the federal reserve banks can be
of little effect except to check addi-
tional borrowings"
New York stock List.
Every one at all interested in the
New York stock market has been bit
terly disappointed by the course of
price fluctuations and the extreme
dullness of the last few daytdull-
ness for months. After the July pay
ments it was confidently expected that
constructive work would begin, but
the development Of a few more cases
in the commodity business like that
that hit the clothing market in the
spring and later the textile trade this
time in the necessity and luxury
combination of motors and tires,
brought a turn for the worse and de-
preston where improvement had been
expected.
From time to time the supply WIN
pass the demand in various products,
other than food. and there will be
ructions more or less important in
the getting back to normal prices, but
the current range of values of the
exchange are about as low as they
will go. that is for standard shares.
Some of the highly specialized special
ties that have been doomed by pool
may seek still lower levels. but to a
close observer of conditions it looks
very much as il the market was
grinding on the bottom.
Money and Nothing Else.
Money is the one and dominant in
fuence- Billions could be used where
there are only millions available
Sixty per cent of the apparent
scarcity of cash is real and 40 per