Evening star., 1921-07-23
BY STUART p. WEST.

NEW YORK. July 23.-The most
important incidents Of the week have
been the further reduction in Amer
this country II 10 4 case Of marking
down the federal reserve discount to
keep pace with the rise in reserves,
in precisely the same way as charges
were increased in the fall of 1919 and
the spring OF 1890. in proportion as
the ratio Of reserve to liabilities
dwindled. 4 year ago this reserve
percentage was 44.4: it stands now
at cas-. At this time in 1890 the
New York banks ratio was only 40.2
per cent; now II 10 20 per cent. This
comparison indicates very clearly
why the banks in the eastern dis
tricts and in San Francisco have seen
fit to reduce their discounts to uni
cent in June and per cent in May.
The other reserve institutions have
held back, apparently to get better
line upon requirements for financing
the new crops. but they are expected
to join in before long.
land is quite different. Its three
successive reductions this year are
not the result Of any improvement in
its own status. for its reserve ratio
is still we'll down toward the lowest.
The motive. with 1t. is to stimulate
languishinE trade situation and help
the government in its difhcult task
Of borrowing to make both ends meet
Nevertheless the action Of the Eng
lish bank, in close correspondence
testihes to the certainty in the high
est financial circles that the world
wide credit crisis has passed and
that financial conditions are on the
mend.
Speculative Securities Not Aided.
This assurance is of great i'm
portance. and yet opportunity has
been afforded this week again to see
how wrong the view was eight
months ago that the chief problem
was one OF credit. and that when
money conditions became easier gen.
eral recovery would be prompt. Low
er money rates, actual and prospec-
tive, have stimulated the demand for
investment securities of unquestioned
safety, because lower interst means
a lower investment return, and. con-
squently. higher investment prices.
But speculative securities have not
been helped. simply because the trou-
Bile with them has not been in in
suficiency In the money supply, but
the depression in trade. For business
to start up there must be feeling
of certainty that prices have struck
bottom, and there 10 slight connection
beween tho spread OF this feeling and
While not the major factor, the
easier money situation cannot. how
general gene business. We have seen
something Of this already In the plans
for financing cotton exports and the
have the support Of the eastern banks
ouite as much a. those in the south.
The establishment Of German credits.
for the purchase of grain. cotton and
other commodities, 10 another step
toward stimulating the export trade,
months ago.
Textiles Near Normal.
The most cheering news from any
been Coming from the textile centers.
The demand for print cloths. ginE-
hams and other cotton goods is back
TO normal, whereas a year ago this
industry was nat on its back. The
same 10 true. although perhaps IN less
soods. Next to textiles the best re-
ports are those from boot and shoe
and related trades.
Here are instances whore the corner
was rounded In the early part OF the
year and where conditions have stead:
ily been improving since then until
they are now back to those OF sood
average season.
Tho point has been repeatedly made
in these articles that no sudden and
general recovery 10 to be looked Tor
in business. but that what we may
expect is q gradual turning move
ment, by one trade after another, in
dividuaIly. Cotton and woolen manu-
featuring and the boot and shoe busi-
ness were Just as badly on twelve
months ago as steel producers are
now. They completed their readjust-
ment and have had a fair recovery.
and so will other industries. given
time. Improvement will come easiest