Evening star., 1922-06-03
BY STUART p. WEST.

Special Dispatch to The Star.
NEW YORK. June 3.-From the
standpoint OF the general financial
situation. the important incident of
the last week has been the resump-
tion Of the recovery in sterling ex-
change. carrying rates well above the
previous high Of 1922 and to the
highest since the early summer Of
1919. The fact that sterling has
gone up Independently of the other
foreign exchanges simply goes to
show how much more progress Great
Britain has made than the other
former belliEerents of Europe in put
In the first place. Britain's pur-
chases in outside markets were SO
cut down that. reckoning in all the
items in the balance sheet. 1t began
to have a credit. instead OF q debit in
able to bring about an equalization
OF government revenue and expendi-
ture, while reducing taxation and
making provision to meet it's Ameri-
can debts. Third. for the last two
years 1t has been steadily reducing
It's paper note issues and thereby
drawing closer to the normal gold
basis.
OF these achievements, the reduc-
tion In the paper currency is the most
Significant for the example 1t must
give to the rest OF Europe. After
All. the value Of metallic currency
depends upon the degree Of convertt-
bility OF sthe note circulation out
tion Of FEDERAL reserve gold holdings
TO notes of over 7S per cent, the
United States is back to whore It
stood before the war. At the close
OF 1913 Great Britain had a gold cover
OF 81 per cent. By the close Of 1919
present time 1t stands at about 20
per cent.
This does not mean that the gold
ratio must get all the way back to
where 1t was eight years ago before
sterling returns to its pre-war parity.
But 1t does show the essential part
which reduction Of paper notes in
proportion to gold on hand has played
in the recovery of sterling rates.
French note circulation, too. has
been coming down. but only to a
slight extent. The ratio Of gold to
cent as against Is per cent in the
year 1sl9-192o. but still contrasts
with a ratio Of So per cent in 1918.
Six months before the war Italy had
a gold cover Of 81 per cent. This sank
~ Ill hlHuu Oh per cent In 1870.
from which 1t has risen now to only 8.
Germany's Loan Hopes.
Where paper note imitation has not
oeen checked, as in the case Of most
OF the countries Of eastern Europe,
there has not been, nor can there be,
Improvement in the exchanges The
only reason why the German mark
has not deprecated further during
the last month or SO is because ofShe
hope OF an international loan which
VIII enable Germany to balance its
budget and put a stop to it's terrific
emission Of paper
The check to the investment market
mas again been very noticeable this
iast week. Liberty bonds. to be sure.
nave sold again at their high Of two
months ago. but the general run of
high grade corporate securities, such
as railway first mortgages. have gain
ed no ground sincA the middle of
april and. indeed. have fallen some
what behind. Two explanations ap-
pear readily enough. One is the evi-
oence that the money market struck
absolute bottom when the rate on
time loans a fortnight ago fell to
SA per cent. This had the usual ef-
balances by out-of-town banks, the
result Of which has been seen within
the last few days in a pronounced
hardening of both call and time
money quotations.
Big Output Of New Issue..
The second explanation for the halt
IN the upward movement of bond
prices lies in the competition from
the unparalleled output Of new capi-
tai issues. These fiotations last
month Aggregated S417.91S.000, as