The New York herald., 1921-08-01
FINANCIAL NEWS
AND COMMENT
Worlds Money Markets Show
Good Results of Year of
Liquidation.
CALL RATE FALLS LOWER
Time Loans Drop Through 6,
Per Cent.-U. s. Treasury
Notes 0versubscribed.

A year OF liquidation IS bearing fruit
in the money markets OF the world. The
evidence at home was made clear enough
lowest interest rate for collateral call
loans in nearly two years and in the
reaction OF time loans through the 6
per cent rate. which stubbornly had
-orm OF bank accommodation for many
months. The open market rate for
acceptances gave ground.
Tho Treasury found demand for It's
short dated notes so eager that $780,
100000 were quickly oversubscribed at
5h per cent. for one year paper and
IA per cent. for certificates due In six
months. The latter rate was the lowest
paid this year by the Government on
notes of that maturity.
The indication Of easing money was
equally emphatic abroad. The Bank
of France lowered it's rate of minimum
cent. putting IL on the same basis as
rates of the Bank of England and the
local reserve bank.
The French banks action was highly
significant. During the stress and strain
Of the war the rate was maintained at
: per cent. and after the cessation of
ostilities, when fresh credit demands
sprang up. there was no change until
worldwide imitation forced the manage
ment to set 1t at per cent in the
spring Of 1920. AS the rise in 1920 was
the product of necessity to stop ex-
travagant expansion of loans, so now
the recession is certainly the Sign that
defiation has gone far. Illustrating the
actors applying directly to the bank s
position. it Is worth stating that It's
circulating notes have declined 1,So0.-
100000 francs IN the last three months.
Reserve Notes Decline.
The reserve banks have reduced their
outstanding reserve notes (circulation)
SS6S. 900 since the last week of De-
cember. contraction OF more than rs
per cent. Rediscounts as reported in
the combined bank statement OF last
wee1 were s956.sO0. 900 less than the
$780,, ,34s In the first week of January.
The gold reserve is nearly S451, 900, 900
greater than It was on January 7. thus
showing gain of 81 per cent.
A reason why money is- growing
easier Is the shrunken demand for It
As business has contracted this year.
the use Of currency in payrolls has re-
ceded and notes have been retired by
the banks. As manufacturing has
drawn back from the record production
figures of December, 1919, and the first
months of 1920, the demand for funds
on discounted bills has fallen away.
In many countries the combination Of
the dwindling use OF money and short
credits is being supplemented by the
release OF old loans through the gradual
liquidation Of goods and In the United
States the strengthening OF the bank
position continuously for eight months
has been furthered by gold, mostly from
other countries.
The next stage in monetary deflation
will be the easement OF rates for the
use OF capital. fixed investment funds
as made distinct from money. The
movement here has been slower than 1t
has elsewhere and so far there are few
dents in the bulwarks of the walls
which stringent monetary and credit
conditions built during tho war and
afterward. But the American invest
ment market shows that the walls are
being beleagured
In tho last fortnight many bonds.
domestic corporation bonds and those
of foreign countries and cities, have
advanced from two to more than five
points. The reason Is that money made
idle in industry is flowing into bonds,
and private investors, sensing the true
tendency OF money rates. are coming
into the market to invest their capital
Cor ten or twenty years or more at 61s
to s per cent. In good funded
securities
Shows Capital Cost Falling.
Another indication that capital costs
are to fall lies In the attitude of