The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1922-01-01
DEPRESSION PEAK
PASfAND GRADUAL
REC6HERYE BEGUN
Financial Expert Bases
Opinion on Theoretical
And Empirical Grounds.
REHEARSES CYCLE
First Signs of Revival Fol-
lows" Rally in Security
Prices. Now Existing.
By F. SCHNEIDER, Jr.
Financial Editor New York Even.

By F. SCHNEIDER, Jr.
Financial Editor New York Even
80 O. ing Post.
whiIe> TIE. presently world situatio
still CARRIES an abundance OF u
eertainties. the probability is that t.,
worst OF the depression is past an.
that "a gradual recovery in bushes
has begun. Such a conclusion is jus
tilted. an both theoretical and en-
piraieal grounds.
-. FollowinE the Cycle.
Rehearsing the sequence Of events
in the typical business cycle. 1t will
be recalled that after a crisis has
been, bred of inflated costs and high
money. rates. the first sign of break
comes in the stock market. The
next striking development is a decline
in coIppodity prices. to be followed
In tuIp by a slackening in the rate
OF business activity and depression
Still later. IN the cycle. money rates
begin to fall. The first sign Of re
vival, then. comes as a rally in secur-
tfy prices. In the present instance
the indications are that the latter
stage has been reached. November
1918. saw the beginning of liquidation
IN the stock market. 1920 was the
year q falling commodity prices 1921
has been the year of falling money
rates The autumn OF the past year.
furthermore, saw a modest but dis
tnct' Improvement in the volume OF
industrial production and the last
months OF the year Witnessed sub
stantial recoyeries in security prices
Leaving the cycle theory out of the
question it is that apparent that
business conditions are now on a
much more workable basis. Commod-
ity prices have gained a very fair
measure OF stability. Distress" SELL
ing OF commodities is generally a.
an end: Further recessions In com
modify prices are likely to reflect
IoWer production costs as a result of
wage reductions and lower trans
portation costs. As such they will be
less rapid and more calcuIabie They
I VIII create nothing like the uncer-
tainty attending the earlier declines
stocksaof commodities are very con
siderable reduced and several basic
industries. show trustworthy signs
or havtne turned the corner,
Banking Is Improved.
mayor Improvement in banking
conoiuons Is another encouraging
FACTOR. whether measured by the
EXTRAORDINARY rise In reserve ratios
or by the substantial decline in in
terest rates. the answer is the Same
A yast volume of frozen credits ba.
been hquidated. War paner hoIdinrs
OF the Federal Reserve system have
been greatly reduced. A smaller vol
ume, Of, eslf-liquidating paper which
represents lower price levels has
been substituted. The big member
Banks have been able to pay Of
most OF. their loans at the reserve
banks
II business. then. has turned the
corner. the question remains as -
the probable speed of the recovery.
Several powerful brakes to tho
movement must be admitted. The
dislocatiOn of worll business has
been huge. representing the lidui-
dation not only of 4 violent post
armistice speculation, bu, the infla-
ticn of four years Of world war.
Europe's economic loss was enor-
nous and the purchasing power de-
stroyed7 cannot he restored in a day.
Domestic Recovery.
Similarly, domestic recovery is re-
tarded by the seriously crippled
purchasing power in lie aSricul-
tural districts. This years crop was
mortgageG before it weEt into the
ground 1t has been, furthermore
a seriotis disappointment. both as
to yield and the prices obtained
As a result. at least another crop
is needed to get the farmer out Of
debt. With the prices of his products
far below those of tn" articles he
must b1y- il is a foreGoTc GOnclu-
sion that his purcnaS's will be
limited to strict necessities. A
strong rally in farm products would.
of course. help the situation great
~. but there is no particular rea-
son for anticipating such a rally.
Agricultural buying, therefore,
probably will be only moderately
improved.