The Washington herald., 1921-06-11
EUROPE POURING
GOLD DMTOU.S. FOR
AMERICAN STOCKS
Bonds on Bargain C0un-
ter Sought by For
eign Buyers.
CAPITAL ON DISPLAY
Harding's New York Address
Gives Big Business Men
Confidence.
CAPITAL ON DISPLAY
BY WALTER b. BROws,
Eait,r New York Commercial.

NEW YORK, June 10. - Sensa-
tional Developments have not been
lacking during the past week, some
of them having been awarded more
significance than they deserve the
stock market appears to have been
in a peculiarly vulnerable POSITION
and organized bear raids have been
unusually effective.
The passing of dividends by In
dustrial concerns has continued
apace, but does not reflect anything
not already known. On the con-
trary, Industrial concerns that have
been able to declare their usual
dividends have proved surprise
and where the passing of such
dividends had been expected, the
failure of these expectations re-
suited in sharp recoveries. not only
in the price of the individual stock
but affecting the entire list.
Collapse In Exchanges.
By far the most significant de-
velopment of the wek, however, has
been the collapse in the exchanges,
and in sterling in particular. From
a high point Of S4.eol2 for demand
sterling. reached on May 1S, there
has been a collapse of more than 81
cents. This could hardly have been
the outcome of speculative develop
ments. as was declared to be the
case at first. and. in fact. it has
been difficult to trace the under
living causes. For some time the
theory was advanced that the pre-
MUM to which American dollars
had advanced was the outcome of
buyinE Of American dollars by the
mi :
suggested that reparations payments
were to be made in terms of Amerl-
can dollars, and there were strong
hints in consequence of nanipula-
tion Of the foreign exchange mar
ket.
What appears to be the more
plausible explanation is. first. the
withdrawal of bank balances from
London banks by American bankers
TO a degree measured by indiYiduai
necessities. and, second. the pur-
chase Of American securities py
foreign buyers. This phase of the
proposition is likely to develop to
A Considera BILE degree. Foreign in
yestors realize that American stocks
and bonds are on the bargain coun-
ter, and there is undoubtedly a
strong desire on their part to trans
fer as much of their wealth to this
country as they possibly can. So
far. buying of stocks has not re-
Elected any great demand from
abroad. although there are evil
denCes of a demand for bonds.
Trouble Brews In Europe.
The political developments in Eu-
rope are not particularly reassur-
ing The league is in existence
nominally, with the United States
on the outside. but it does not seem
to be funCtioninE. for the disputes
and ieaIousfes now disturbing Eu-
rope should theoretically be dispOs-
ed by the league. Instead. VIC are
wondering whether the Turkish
question is being played against the
Silesian problem, and whether or
not trouble is going to break out
anew in way that will not only
undo all that has been done in the
line Of constructive work, but carry
the devastation farther than Ger
many ever thought Of.
One thing is certain, and that is
that gold has been flowing to our
shores in unprecedented volume,
until we find that we have almost
reached the point where there is a
gold dollar behind every dollar OF
note circulation. In the New York
district the latest statement shows
the ratio of gold reserves to fed
eral reserve notes in circulation aft
er setting aside IS per cent against
deposit liabilities as 93.5 per cent.
This compares with S45 per cent
the preceding week and 45.5 per
cent a year ago. The ratio of total
reserves to deposits and federal re-
serve note liabilities combined has
now reached the total of 5S.3 per
cent as against 57.4 per cent the
previous week and 43 per cent
year ago.
story Of Idle Capital.
This, of course. not only reflects
the tremendous volume of gold that
has come IN us from abroad. but
also tells the story of idle capital.
1t is, in a sense. a most favorable
showing in that it means that our
banking position was never on a
sounder basis. and that there is no
country in the world in such a
strong financial position. 1t does.
however. tell a story of another
Kind which is not so favorable. 1t
means that our capital and credit
resources are being in the show
window instead of being put to
work. The federal reserve law has
worked admirably, and we have the
remarkable spectacle of the strong
est kind of a banking position in
a time of industrial depression. But
ii is time now that the precautions
which were taken to build up this
strong position were relaxed in
some degree at least. 1t is time
for a further reduction in the re-
discount rate for commercial paper.
One important recent develop
ment is the effort made to sell Ger
man marks in this country. 1t
would seem as IL the supply from
the German printing presses were
inexhaustible. The latest state
ment received through the depart
ment of commerce reports the float
ing debt of Germany to be a trihe
less than 165, 1000. 00O.0 900 marks. or
about double what IT was a year
ago.
Mexican Reports Stir Market.
u There has been a great deal CT
in the stock market
within the past few days in regard
Ito Mexican oil stocks. The report
that the Mexican government in
|tends to materially increase the ex-
lport taxes on oil has been made the
basis for sensational raids on these
|securities Somehow all this bear
does not ring true. 1t