The New York herald., 1922-03-20
FINANCIAL NEWS
AND COMMENT
All Indications i'm Business
World Point to Stable Con-
ditions Near.
EASY MONEY AIDS STOCKS
Improvement in Credit Situa-
ton Foreshadows Better
ments on Way.
EASY MONEY AIDS STOCKS

ment OF rates not only established quo
tatlons not seen before for fixed neriod
loans on collateral since 1917. but re-
fleSes Of the same force working for
relaxation in the tTnited States were
noted in the highest Bank or England
ratio OF reserve to liabilities III two
years and in the most rapid retirement
OF Bank or France currency In any
week or this year or last Significa nee
! OF these tendencies In what may be
called the basic market, for without the
use of credit the other markets could
hardly exist quite overshadowed re-
markable recovery OF foreign exchange
and vigorous rise OF grain prices.
1t goes without saying that a DEMON
stration like last weeks flood OF call
loan offerings at and even 2,s per
cent, and heavy supplies OF thirty to
ninety day money at to A.. per cent.
was a powerful stimulant 10 securities.
Cheap money enables speculative pools
if all other factors are not favorable to
actually bludgeon prices upward by
sheer force. Low interest rates and
plentiful accommodation smooth the
way for capital TO flow from less pro-
ductive lines or business and trade into
bonds and notes which carry a rela-
| lively high yield. Ii was not surprising
! that several big issues OF new securities
passed quickly from underwriters into
dealers hands. and in turn were well
distributed by the latter among the
public; nor was it anything but natural
that bankers should hasten plans for
further large issues this week and next.
Presumably the banking community
IN its program for many new bond
issues made due allowance for the fact
that money relaxation was. TO a de-
gree. of temporary character. due TO
operations centered In Federal tax col
lections and operations or the Treas
ury. While income and profits taxes
throughout the country fell 40 per cent
or SO under the amount paid In year
before. the banks made their usual
quarterly preparations. accommodating
balances against drafts to be made
upon them by taxpayers. a part Of
these funds will be distributed as the
Treasury checks the money out, and
It is likely that offerings OF call money
will be less extensive this week than
last
But against this potential Influence
! for contraction stands the persistent
j.,
by reserve banks for member banks. a
process that is steadily being furthered
by the liquidation OF so-called frozen
obligations from the last two years.
! The aggregate OF reserve bank redis-
counts is now just about half what 1t
was in January and the reduction con
tinues 10 go on rapidly.
The present easy money situation can
he labeled a quite natural product OF
what has occurred in the field or bust
the closing quarter or 1920 the throes
OF deflation from an overextended
credit position were just becoming pain
full and the antecedent OF current low
money rates lies in the extraordinarily
high rates OF that period Just so the
travail which the foreign exchanges
suffered when the American balance
OF exports and attendant influences
carried sterling exchange down 10 3.ls
mas become altered into a really COM
cause the preponderant balance has
practically dlsa ppesred
Sterling last Monday was quoted
around 4.2Tia for sight drafts, ana IL
looked as though the reaction from
sl.44ss. the best level OF the year, reached
on March /, would proceed somewhat
further. But once speculative operations
ran afoul of a genuine force working
against short sales and profit taking the
Movement upward was resumed afresh
with speed appros ching upon violence.
The undoubted factor of most weight In
this sbou. face swing was the February
statement OF our foreign trade which
not only showed the smallest export sur
plus since 1914. but suggested that the
visible merchandise balance OF s34 .0oo 900,
~ which all bu. 81 10000 was offset by
imports Or gold and silver. had been ex-
ceeded by foreign credits established
outside OF the trade field.
In the light OF the February report on
commerce and the rapidly enlarging
loans In the United states by foreign
governments and corporations. it is plain
that the great trade balances OF the war
Years VII hereafter not be so potent in
supporting the dollar IL foreign markets
- they we're in the three years follow
Ing the conflict
+ III has been established now that rec
4 ords OF unfavoreble Industrial results in
! lsH are not 10 make much OF an impress
\ sion upon the prices OF stocks Passed
dividends like those or The Crucible steel
I Company and the Tide Water oil Com
pany las. week act merely TO cause a
furry here and there. Past business
was bad. current business is none too
good, but stocks. as Is their wont, seek 10
leap ahead 10 those coming DAYS when
\ profits shall be satisfactory again and
credit Oh permanently stable basis.
\ Events of the last week in securities
commodities money and foreign ex-
change indicate that stable conditions
arc drawing nearer every day.
nj ~ = A. A q