Pueblo chieftain., 1921-08-12

and sell or pledge these securities in
the financial markets to secure funds
which the government will transfer to
the companies in settlement of rail-
road claims. President Harding's ar
gument ls that the railroads would then
be in a position to buy equipment and
inject new life into varisd industries
and that railroad prosperity will ban
ish, to a large degree, the depression
which tho inevitable in the wars af-
tsrmath we are all so anxious to see
ended"
The interesting question is whether
special activities by the government
and bankers can generate a business
revival before it would logically come
in the natural. course of the business
cycle
In the present outlook, if the cycle
were to run its natural course, 1t would
be necessary, before expecting any i'm
portant business revival, to wait until
the bond market had risen substan-
tally above the present level, until
the Federal Reserve banks reported a
reserve ratio" of about 10 per cent and
the official bank rate had fallen to
around per cent. BY this time, wages
and prices of coal, steel and transport
tation would be down to a basis which
would stimulate new construction work
of all kinds Such condition. where
easy money and low prices and wages
would stimulate railroad building and
general new construction, would mark
the natural turning point in the cycle.
We are making rapid progress toward
such a turning point altho wages.
prices and the money market Will not
reach complete readiustment for some
months to come. There are a number
of factors at work. however. which
may tend TO stabilize business condi-
tions before liquidation in construction
work and transportation has run its
natural course. The government has
encouraged the bankers to lend $50 mil
lion to the cattle growers and maks
substantial loans on cotton being car
ried in warehouses. President Harding
is urging Congress to make II possible
for the treasury to pay the railroads
nearly half a billion dollars in the near
| future. Tho cotton crop has been so
reduced that a shortage may he ere
| ated next winter and spring so that
marked improvement will be in evil
| dence in the south before credit liquid
alton has run Its natural course. 'Or.
| more accurately, a recovery In cotton
| prices to Is cents or more may enable
| the planters to liquidate their obliga-
/ tions without wholesale bankruptcy.
/ And. finally, II ia possible that MIR.
Hoover may organize such an eNten-
/ sivs degree OF relief for starving Rus
/ sia that the farmers in the grain belt
will get high prices for wheat and wit
ness some Improvement in corn and
/ oats. The comhina ton OF possible bet
! tsrment in the purchasing power of
| the farmers, together with increased
\ buying OF equipment by the railroads
/ and better employment and increasing
/ pay rolls in the manufacturing dis
/ tr.cts may tend to bring about stab
! ilIzation earlier than would be the case
/ II the cycle ran its natural course.
/ The two alternatives in the outlook
are: First. complete readiustment hS
| the spring OF 1922, with recovery
which will start in 1922 and continue
! thru 1928 and possibly into 1920: Sec
ond "A revival this fail and winter
partl yartihclal. which could not last
as long as boom startling from a
l thoroly liquidated position. In either
] case. however. some Improvement In
merchandise distribution is immediate
/ IS ahead owing to requirements which
| cannot be postponed. Moreover. the
/ United States In q rich country. The
| fact that Henry Ford within n few
| months last winter and spring was
| able to raise $50 million by realizing on
I his trade assets reflects not merely the
| business ability OF Mr.. Ford. hut more
| Importantly that the American people
| are aEgressively at work earning and
| spending money. their total aggregate
! incomes amounting to billions OF dol
| lars even during a period Of deprea-
sion. - From the Alexander Hamilton
| Institute.