Evening star., 1921-08-13
BY STUART p. WEST.

NEW YORK, August 13.-IhlS week
has been characterized by further evi-
dence Of improvement in banking and
credit conditions on the one hand and
by varying testimony regarding trade
conditions on the other. Not since
the beginning of March. 1918, have
the federal reserve banks been as
strongly situated as they are now. The
ratio of reserve to liabilities stands at
IS per cent, or nearly 25 per cent
above the low of last year.
Nor is there any indication that the
recovery in resources is at an end. On
top of the huge total of $41O,OOo,ooo
gold imported between January l ana
August 1, a further large supply Is
headed this way and will go to SVEN
the gold stock in the vaults OF the re-
serve banks. Meanwhile. OUTSTANDING
discounts have dwindled from their
peak, around $4,000. 100000. to only d
little more than $500, 00O, ,0OO-that IS
have been just about cut in tWo-Wn me
note circulation is about $6OO,ooo,ooo
less than tt was at this time year
ago. .,,
Under these circumstances furthef
lowering of discount rates is Tore
shadowed in the not distant future
The member banks have not been ap
vide funds in place of those sent INTO
the harvest sections. On the con-
trary, they have continued paying OH
at the federal reserve banks, as Is
shown by the decrease this last week
of $76,OOO,O00 bills on hand.
The result has been to keep money
rates up. where. if the redlscount
privilege were exercised. as II mleh'
be, the present per cent money mar
ket would not be warranted.
Confidence In Bond Market.
The active buying movement in in
yestmen't securities has subslded
somewhat in Difference to the hlshef
money rates. but the feeling IS as
confident as ever that before long the
the rising tendency in bonds and other
securities of fixed yield will be re
sumed. Corporations with good credlt
find ready market for new capltai
issues. They do not have to De
financed, as they We're year ago, py
the banks. The investment market
in other words. has assumed much OF
the burden which in the closing
months of 1920 was being carried on
the shoulders of the banks. and TINS
of course. has been factor OF the Ut
most Importance in promoting the
liquidation of loans.
On the other hand. conditions are
as difficult as ever for corporations
whose credit has suffered because OF
the losses sustained in the Industrial
collapse. or because of inflated lnVen-
tories which cannot easily be worked
off during this period of slackness.
Sound stocks Gain.
The same distinction is present in
the stock market. Shares of com:
panies in good standing at the banks
have stopped going down. In fact
and as the net result of the fluctua-
tions of the last two months have
gained ground rather, than lost
Where. too. there has been any i'm
provement in the earnings situation
the market has been recognizing it
This was seen in the recent action OF
railway shares and in certain indus
trials, like the wooden stocks and the
stocks of cigarette manufacturers
with which business is fairly good.
On the other hand. where there Is
an inventory problem still to be
solved. where bank accommodation
Is hard to negotiate. or else where
earnings are poor and dividends in
danger, the stocks concerned con-
tinue more or less vulnerable.
The full effect of the trade de-
preston and drop in prices upon oul
foreign commerce was eXempiihed IN
the July figures, which showed the
smallest total. taking exports and
imports together, of any month in
nearly six years. The fall in i'm
ports has been relatively greater
than that in exports, and cons
uuently the trade balance for the
month, which was $144, 100000, was
high by comparison with the MONTH!
balances for the last year.
Rail Repayments Needed.
1t will surely be a great pity II
Congress takes a recess August 2t
without action on the railway re-
funding bill. 1t will mean putting
over for another month the mos
promising opportunity yet afforded
Of breaking the deadlock in trade
and relieving unemployment. The
railroads, with s500.00O.000 in their
treasuries. to which they are justly
entitled under the war guarantee
would start up their construction
and repair work which has been held
up for the last six months, and this
would give employment to tens OF
thousands of idle men.
The carriers, at the same time,
would be able to pay off their debts
for old supplies and order new. and
it is easily conceivable that this new
buying coming into the steel and
equipment market would be the
initiative for general revival in
other lines. These facts seem so
uatent that it is difficult to under
stand the ground for any honest and
sincere opposition to the proposed
Icgislation, either in Congress or
outside.
Copyright. 1921
non,ooo di+>r Ponorfc