Evening star. [volume] (Washington, D.C.) 1854-1972, 1920-08-07
STRAINED CREDIT CONDITION
CAUSED MARKETS SLUMP
Same Situation as in 1907, But Federal
Reserve System Prevented Like Conse-
quences- No Undigested Securities

This supposition turned out to be
wrong. The decline in prices became
so great that it undermined the posi-
ton of certain wealthy operators and
pools.
Their loans were called and they
had to unload.
1t was liquidation from these quar-
ters that chiefly upset this weeks
market There have been con-
tributory causes. the same as there
A lot has been said about the
Polish crisis. just as in 1907 the
critics of the day were harping upon
the antitrust prosecutions and the
Roosevelt speeches as the tnlngs
which were underm ming confidence
Much has been said also about the
falling off in production and sharply
declining profits in various industrial
lines the same as in 1903 attention
was fastened upon the slump in the
steel trade. But when the history or
1903 and 1907 came to be written the
underlying causes were seen in their
true proportion and the final analysis
left no doubt that overexpansion of
credit was the primary source OF
weakness.
Paramount Cause.
So now. while the conditions are
nothing like as serious as they were
in either of these two past crises, 1t
is the credit strain that is paramount.
Nobody is in a position to predict
when the weak points in the credit
situation will all be eliminated. All
that can be said with safety is that
much progress has been made along
this line during the past week. that
buying of a substantial character has
been going on. that stocks have been
passing into stronger hands and that
by this very severe shake-out in July
and August the market has anticl-
pated and therefore. in all prob
ability avoided the troubles. which
were unprecedented for it in the au-
tumn.
Position Improving.
The general credit position has
steadily been getting better and the
recovery has been accelerated by the
housekeeping which has been done
in Wall street during the last few
days.
The current stock exchange demand
FOR funds has been so reduced that
there need be no fear of the call
money market from now on.
Meanwhile, recognizing all that is
unfavorable in the business situation
the deadlock in various industries
because the mills will not produce un-
less they get their prices and the
jobbers and retailers will not buy
because they claim these prices are
too high-the additional compllca-
tions of fuel shortage and inadequate
railway transportation. still has not
all this been properly treasured by
the very great decline in stock prices
WooIens and feathers.
With all the wooden mills closed
down and no resumption in sight, yet
it is a fact that American Wooden
stock is down ninety points from the
high of the year-its selling price far
more than cut in two-and it is quite
possible to work out the present
market value of the stock on the
ground of treasury assets alone, with
out a cent of earning power to help.
In the same way the leather stocks
are probably worth what they are
selling for after their enormous de-
cline. as assets propositions entirely,
regardless of current earnings.
When the market does finally turn.
after having measured the worst that
the credit stringency can do to it, it
will be the remarkable decision of the
Interstate Commerce Commission on
railway rates that will be the big up
building force. The more this de-
cision is studied the more it is felt
that it was far more favorable than
had been expected and that it is the
most constructive action from an in
vestment standpoint that has been
taken in the memory of the present
generation.
Copyright. 1920, by S. P. West)