Evening public ledger. [volume] (Philadelphia [Pa.]) 1914-1942, 1920-01-01

Laying aside the motive. impulse, in
tlucnce, condition and any other fac
tor. the bull market of 1919 was the
most stupenduous of it's character in the
history of Wall street. 1t eclipsed all .
other previous upward swings for many .
reasons. Foremost of these. first was
the pre- emincnce given the high priced .
Industrial stocks; second the number /
of consecutive million share markets
third. the immense public following and
lastly in the large number of stocks
dealt in.
There is no telling how long the
speculative orgy might have kept up had !
1t not been for the money market; at
least for the radical steps taken by the
Federal Reserve Board to correct the
serious credit imitation which was rap
IDLY becoming hazardous.
This action, it is only fair to state.
did not come without warning. On the
contrary on more than one occasion
many weeks before the speculative bub-
BILE collapsed. it forced the member
banks to curtail loans to Wall street
orrowers and to fortify the bank po
sition.
1t only required few hours by the
board after visiting Wall street early
in November to conclude that the un-
bridled speculation was endangcring the
whole financial situation, and a serious
money panic was inevitable if the load
was not lightened
The board however. five months be-
| fore had queried the Federal Reserve
banks about the use that was being made
| of credits based upon rediscounts grant
ed by them and the banks We're openly
warned not to provide funds to support
an unreasoning speculation in securi-
| ties.
When the Bubble Burst
When the speculative debauch was
running in full force. however. compar
atively few were in the humor of pay
ing attention to caution signals or other
forms of warning. 1t was simply a
question of getting aboard at the psy
Geological moment and be swept on
ward by the onrushing mad current
So when the pyrotechnics in quotations
suddenly and violently collapsed on
November u the bull boom melted in
thin air.
From November Il until the latter
part of December the heaviest liquidat-
ing movement of the war period pre-
vailed, with two days in which the
transactions approached the 5000, 600
share mark.
Under this increasing weight of
pressure prices were forced down as
rapidly, if not faster, than they had
iniudiciously been boosted prior to ap-
plying the brakes. Not only were al the
advances wiped out, but in many in
stances quotations were swept down to
the lowest level of the year, with many
of the high grade investment issues ap-
preaching panic levels.
For a time there was grave danger
of the reversal movement reaching as
senseless extremes as that of the in =
flation campaign. With the food of
enforced liquidation there accompanied
extensive short selling. In consequence,
by the middle OF December. the market
reached what is technically designated
as an oversold condition. Efforts tC
reduce these overextended bear com
mitments brought q violent rebound
By reason of its artificial structure
the recovery movement was not Ions
; sustained and was followed by the
: customary backing and filling. process;
> usually witnessed during adjustment
process in bringing the market to &
stable level.
Serious Trouble Averted
= In light of what has happened since
! the compulsory checking of the wilC
, speculative orgy of the stock exchange
il is aDDarent to every unbiased anC
: fair minded person that the enforced
; heavy liquidation following the bursting
l of the speculative bubble saved th'
: country from a much more serious
) reckoning later on.
| Thanks to the Federal Reserve sys'
J tenn the unsettlement and panicky con
, Jition was confined to the overzealou!
/ stock exchange spectators and did not
; as was too often the case. prior TO IT
, orpanization, spread to general bust
t ness. which proceeded in the even teno
of it's way unaffected by the disturbance
2 in Wall Street.
The sooner the average investor get
that fact impressed firmly upon his mint
- that much clearer will become his visiol
! and the better his understanding OF tn
. real conditions underlying the genera
= situation.
. . Wall streets present uncomfortabi
a position is of its own doing. Collapsini
of the stock market was not influence
because of any adverse change in tn
General situation or impending catas
4 fronhe that would be likely to serlousl'
: affect the country's unchecked pros
! nerity. but because wild speculatlV
= movement was inflated beyond ali sens
V of reason.
a The Credit Imitation
The all absorbing closing chapter o
the wears financial history was toun
in the monetary conditions. Inc J.
$ X IS, 20 and % per cent call none
: rates and the and 8 per cent rates 10
I thirty and sixty days money are monu
ments of the inflated credit SITUATION
II must he borne in mind, however. tina
e rrrch of the credit imitation was due t
= Government financing caused by the wal
Il Member banks of the Federal ReserV
e Svstem during most of the year hac
S under rediscounts with the Federal Re
e serve banks. bills secured by govern
= nent war obligations to the extent {
= SI zoe. 900 900 or 50 900 900, 900, Will
all other bills did not exceed $2oO,Ooo'
+, 600.
y As an official of one of the, larg
h western banking institutions in dlagnos
: ing the credit situation says: The ultl
= mate hope for a speedy return TO NOR
IS normal conditions depends on the ca
'e liability of our people to produce NOR
i and save more, and thus gradually ab
j. sorh the outstanding war obligations
lie The Federal Reserve Board can onl
assist such a movement; it cannot b
its own power produce sudden and com
plete change. Our country is possesse
1t OF enormous resources in all directions
K and our people showed during the wa
ID TO make all sacrifices asked of them.
IS is not TO be doubted we shall pass safel
sr through the present crisis. There
Sc ro need of despairing and becoming i'm
st patient. The experience of the Napc
ot ieonic wars and our own Civil Wa
- shows that il takes a long time for ma
9 tions TO overcome the effects Of gret
=. wars. The war through which we hay
le lust passed has been so much create
lr cataclysm than any other that has pre-