The New York herald., 1921-05-02
FINANCIAL NEWS
AND COMMENT
Industry Appears to Need Low
er Production Costs, Not
Easement in Credit.
TRADE is STILL SPOTTY
Gain i'm One Section Is Offset
by Dulness or Setback
in Another.
TRADE is STILL SPOTTY


some of them. There appeared the GER.
tain indication Of easing credit through
q reduction of the Bank of England'i
discount rate from per cent to g..
per cent and In a reaction of the rate
of commercial bill discounts In New
York to the lowest point in two years
for selected paper; yet no immediate
stimulant to sentiment was recorded
outside of the stock market.
Gold continued to pour into the coun-
try from an points OF the compass
until the months total Of imports
reached nearly s5o.oOo,OO0. and additions
to the Federal Reserve holdings made
the gold reserve almost s26o,o0o, ,oo(
larger than at the close OF 1920. The
greatest corporation bond issue ever
offered to the public for subscription
the $3.50 900 Great Observation-Disclosures
Pacific joint 6i8s-was applied for with
a margin over that indicated the pres
ence of a large amount Of savings
available for investment in prime
security.
In dealing with such superlatives Al
these events warrant it would be de-
cidedly satisfactory If facts permitted
description OF constructive forces
growing out of them. But 1t happened
that contrary elements entered the sit
uation here and there throughout the
week.
Lower Dediscounts Likely.
No question exists that the new
Bank of England rate suggests freer
movement of credit and freer use OF
It in trade by and by. Nor is there
reason to believe anything but that
the relaxation OF mercantile bill dis
counts from 714 to 7A per cent. to o%
per cent. in New York for moderate
amount OF business shows that the time
is near when the Reserve Board VIII
sanction a marking down Oh reois-
count rates.
The reserve system is in the strongest
position in respect to the relation OF
cash to note and deposit liabilities that
If has occupied since the last week OF
August. 1918. The accumulation of gold,
due TO the grim necessities OF foreign
buyers OF our goods. promises to con-
t,nue for some time. adding to the bank
reserves. The redscount rate will come
down.
But the trend of industry thus far
into the year has not shown that an
easement in credit costs will bring I'M
mediate response in a resumption OF
business activity. The impression is
firm in some quarters that industry Is
ON the mend. yet the record OF actual
achievement is decidedly uneven. and
whenever one finds proof that gain
has occurred in one channel there al
most always arises offsetting facts OF
inertia or loss elsewhere.
q. s. steeI's Showing.
The Steel Corporations report for tho
March quarter supplied an excellent ex-
ample OF present repressive factors In
business. Every one expected a sharp
drop of earnings as compared with the
final three months of 1920; contraction
was inherent In the known slackening of
operations from around 80 per cent. Of
capacity in January to 46 per cent. in
March.
IT was not thought generally though
that lessened mill activity. with It's in
evitable increase of overheads. would
bear SO heavily upon business In March
that that month would show AZ per cenr.
smaller profits than January. And the
processes at work in the final months
OF the quarter threaten to continue for
a time, as trade surveys indicate only
a moderate stimulant to buying from
the recent reductions OF steel prices,
From the present viewpoint, 1t seems
as though the most effective spur for
industry is not TO come from lower
cost OF credit, although a cut in redis-
count rates unquestionably would help
sentiment; nor is II to be derived from
gold imports. which are rather doubt
full benefit. since we had at the end OF
last year all that we were likely to
need as true credit base: nor will II
be transmitted from tho flow of idle
millions into new securities. The belief
that little real Improvement OF manu-
featuring and sales can appear before
costs are cut heavily IS spreading fur
ther into the Industrial fabric.
The Pennsylvania Railroads dividend
reduction showed how the wind Is blow
Ing for the railways When n corpora
ton cuts the payment which II has
steadiiy maintained on It's stock for
nearly a generation Il Is plain that such
action is taken reluctantly and not
until all avenues of relief have been
examined.
The process Of paying out 100 cents
for every dollar taken in has a limit
of measurement equally In terms Of
accumulated surplus and ordinary busi-
ness sense. IL ia significant that work
men In several fields are beginning TO
concede that the pay increases OF the
last six years installed to parallel the
rising cost OF living arc retarding the
return TO normal conditions. And events
seem TO be shaping In transportation,
In the steel trade and elsewhere for
general reductions, or an equivalent
benefit ia respect to production and
costs through more efficient effort and
full days work for a days pay.
The advance OF stocks last week. es-
pecially those Industrial issues in which
speculative cllques succeeded In arous-
ing following. evidently had some OF
It's roots in what Is expected TO develop
In trade and industry IN the next few
months. The stock market does not
.4,Is f.x.4 L.. -