Evening star., 1922-01-22

Of q middle e-of-the-roa outlook, as
embodied in an address delivered be-
fore the National Dry Goods Associa-
ton by Herbert P. Howell. vice pfesi-
dent Of the National Bank Of Com
merce, New York. will doubtless be
of interest to those who study the
opinions Of financial experts. Mr..
Howell said, in part:
1.-THE present business situation is
distinctly two-sfded proposition.
There is much in it to be encouraged
about There Is also much to be re-
or a pessimist can cite plenty Of facts
to support his case. We have had
many exponents of both schools max
ing out plausible cases. One may
study the situation and find GROUNDS S
for declaring that no great financial
The other may look at events from
his point Of view and find justification
for his fears that grave difficulties
still confront business.
Favorable Factors Predominate.
Both are partly right. But l have
no hesitation in asserting the con-
viction that the favorable factors
outweigh unfavorable factors we
| are not going to have another grea.
the optimist might feel justified In
hoping for. But we can unhesttat-
ingly count on continued gradual
trend of developments toward more
stable and more active business con-
ditions
"Business was in far better shape
at the end of 1921 than at the begin
ming. 1t will be in better shape at
the end Of 1922 than 1t is now. In net
results 1922 will be a better year than
1921. We might qualify this state
ment by saying 1922 will be better.
continue to act sensibly. We might
say that developments will be favor
able II economy, conservatism and ef-
ficiency rule in business rather than
efforts at stimulation and expansion
Inherent I'm the Situation.
but 1t is not necessary to make
that qualification in words. 1t is in
herent in the facts Of the situation.
Conditions are such that economy
vail in business because the pressure
Of circumstance compels observance
of these measures. Business that tries
to run ahead of the conservative
progress of the times toward normal
will be liable to disaster. Efforts
to spread out will bring disappoint-
ment and failure. Lucky individuals
may run ahead of the game for spe-
cial reasons. But, as a rule. 1922 will
be good year for remembering,
above all. that business is business
and not speculation. During ehe
boom business had to speculate de-
spite itself. due to the rapid change
often made it unsafe not to go long
of materials. Failure to expand un-
der conditions then existing seemed
like turning ones back on opportu-
nifty. But that is not true for 1922.
Undue stimulation and expansion SIM
ply will not work this year. The
market will not take them.
Economy a Requisite.
profits can be made and success
can be established during 1922. But
they must be built up by means of
economy and efficiency within the
bounds of conservative business oper-
atoms. A lower turnover is inevi-
table. There Is a rigid price resist
ance from the ultimate consumer that
must be accepted. Therefore. profit
margins in business must be effected
by economies in production costs.
There are definite reasons for the
statement that the improvement in
business during 1922 will be gradual
Enough favorable aspects are obvious
in business to encourage confidence.
but not to warrant any relaxation in
vigilance and care.
Foremost among favorable factors
in the general situation is the condi-
ton of banking. Fear need not be
felt regarding the ability of worthy
business in command adequate
banking facilities and at reasonable
rates. The banking situation is
strong. because the underlying condi
tions upon which the structure rests
have been strengthened. At the OPEN
ing of the year 1921 bank credit was
characterized by imitation, non-liquid-
ity and widespread insecurity. During
the course of the year there has been
a material reduction of non-liQuid and
unsound credits.
Volume of Credit Reduced.
There has also been considerable
reduction in the total volume of credit.
in keeping with the progress of liQui-
dation. falling prices and reduced
business activity. There is more gold
than the country needs as a basis for
its credit structure. and there must be
no disposition to initiate credit on the
basis Of this gold. The high reserve
ratios caused by the presence of the
huge gold supply must not lead US
into easy credit ana unsound money
policies.
'sThe very bulk Of our gold reserves
emphasizes the warning that the
operations of sound business. not the
ratio Of gold reserves, must remain
the basic consideration in credit ex-
tension. The more healthy conditions
in the investment money market make
it possible for commercial banking to
adhere to strictly commercial busi-
ness. Investment funds are available
for longtime requirements. The
banks are free to take care of current
needs, as is their function. Thus in
all major aspects the nations bank
ing system is in an unusually strong
condition.
Mercantile Business Improves.
1--WE can also feel that mercantile
business is in far better shape at the
end of the year than at the opening
of 1921. There has been a widespread
adjustment of inventory valuations:
During the boom many il-concelved
business sprung up and flourished,
due to easy conditions for success. A
horde Of speculative middlemen came
into being. The more rigid competi-
tive conditions of the period of reac-
tion have eliminated many of these
various classes of business units. II
has not been a pleasant process, ana.
while not complete. it has created
stronger mercantile business situa-
tion. Mt also has resulted In the re-
moyal of many obstacles to the estao-
lishment of fairer prices for the con-
an Industrial business also condi-
tions are sounder at the end Of the
Money to Loan