The Washington herald., 1921-07-22
|DULLNESS SHOWN
In LIGHT MARKET
WITH HEAVY TONE
|Steels OFF, But Rails Rise
FNctionally in Slow
Session.
EXCHANGE is QUIET
STERLING Touches New Low,
Then Reacts-Francs
Steady.
EXCHANGE is QUIET

NEW YORK. July 21.-Dullness
remained the rule on the stock eS-
change today. the volume Of busi-
ness approximating recent low rec
ords. During the morning the tone
was heavy. with a few issues sub
jected to bear pressure and suffer-
ing, in consequence, losses of a
point or two. Included among the
latter were Mexican Petroleum
and the Steel stocks In
the afternoon a fair amount OF
strength came into the rails, re-
suIting in fractional advances,
while the Industrial list presented
an irregular appearance. The mar
ket. in other words. was Still of
the traders variety. Call money
was at So per cent all day.
Quietness continued in the for
eign exchange market also. quota
tion being lower in morning and
moving up again in the afternoon.
Sterling touched a new low for the
present movement of sS-57S, and
then recovered half a cent, as re-
suit of which 1t showed a net gain
Spf one-fourth of a cent on the day
French francs were unchanged at
|T.73E cents, and German marks
were up 1 point at 1907 cents The
canadian dollar continued to gain
moving up one-fourth Of cent to
Ss% cents. possibly in connection
with reports of arrangements for
financing the Canadian crops. in
which. il is said, London will have
la larger part than during last year
Il wheat Up and Down.
In the early trading Wheat re-
Nacted rather sharply, as result
| OF heavy liquidation of stale bull
Iaccounts. During this phase the
|September future broke nearly =
|cents subsequently,, however, pri-
lvate reports of a bcarish nature
Regarding the condition crop re-
|versed the situation. and thu Sep
|tcmber price recovered to Sl.26i:
for a net gain of one-half cent.
cotton. on the other hand, reacted
moderately. despite the continue
,ion of good spot buying at Liver
ApooI. October went as low as 12-62
Ft+tnLSs anu AZ a AoNNh A'A'N
Eras off points on the day.
That the reduction in rediscOunt
rates by the reserve banks at New
York, Boston, Philadelphia and San
|Francisco. should have a negligible
|snect on the markets is in line
with experience after the earlier re-
1ductions and with the nature OF
1.-The case. Even though cheaper
money is desirable. its present price
hs not a chief delaying factor in the
readustment. Besides. the reserve
HANK rates do not determine the
Icpen-market quotations. which are
lin the last analysis, fixed by the
Ilavs Of supply and demand. In
Ifact- despite Glamour to the con-
israry. the action Of the markets
Ebows that they have come to rec
kgnize the true situation They re-
|jaIize that interest rates will be
Hover when credit becomes really
plentiful. and that while the liquid
k,tion Of frozen credits is going on
|steadily. the improvement Is TAX
Rng place gradually.
Lack Understandings.
Nevertheless, a surprising lack of
understanding of the real function
/ Of the Federal reserve system con-
|stinues to exist. A great many per-
sons seem to assume that the re-
<rve banks rediscount rates should
Feontinue below the corresponding
kopen-market quotations, although
ffhe reverse is, of course, the proper
IreIation between a central redis-
krounting bank and its atf1ltated IN
stitutions. War conditions and the
Notation of the governments war
IIoans made the existing relation
expedient, but its continuation our
ling the period of peace would De
vicious, since II would made redis-
profitable and so encour-
Ee current borrowing from an IN :
|etitution which exists to provide
reserves in emergencies
IN Reduction of the Bank of Eng
Hands rediscount rate to 52 per
cent has much greater justification,
fnasmuch as rates in the open mar
tket have been considerably below
1.-The official figure. 1t may be OBJ
Elected that the British reserve posi-
tion is materially weaker than our
Town. and the fact that the banks
OF reserve is only liz
| per cent. as compared with 12 1-5
hast week. may be cited as sub
|stantiation. The striking gain in
| our Federal reserve ratio, on the
other hand. is principally due to our
Extraordinary gold imports. the part
Iplayed by actual liquidation of loans
Ibeing relatively small. Lending Is.
|iin fact. still heavy. and the gold
|istream may switch back in the
bother direction. Competent British
|observers meanwhile point out that
with British trade reviving. the de-
mands for credit may result in the
restoration of a higher rate in the
| fall. Thus II may be seen that too
great emphasis should not be given
| to the reduction of rates on either
/ side of the water.