The New York herald., 1922-01-09
FINANCIAL NEWS
AND COMMENT
Although Money Eases Rapid
ly, Events Indicate Return
to Normal Not Easy.
MORE LOAN LIQUIDATION
Stocks Less Stable Than War
ranted by End of Decem-
Der Conditions.
MORE LOAN LIQUIDATION

The outstanding events of last week q
financial markets were the rapid ease
ment of money rates and evidence sup
Piled in two or three happenings that
the return to normal conditions would
not be along path of roses. The de-
cline OF the interest cost on fixed period
collateral loans to the lowest point in
more than three years set its stamp on
the money situation. 4 rate Of Az per
cent. for ninety day funds had not been
1917. In the first week of that month
the aggregate OF Reserve rediscounts
was S45l $4,000 and the total of the gold
reserve was 81, ,43S. Az 900. Last weeks
Reserve statement showed that redis-
counts amounted to s1,112, 800, 600. about
two and half times their amount in
early October 1917, but the gold re-
serve was almost exactly double the
holdings in that week. The sinews OF
credit in the three years expanded 9
great, deal more rapidly than did the
actual borrowings. Inasmuch as redis-
counts declined nearly $6S 100000 during
the week which enoompassed part Of
the old and part OF the new year jus,
entered into-a period that brought an
expansion OF $36 1900 in 1g1s-1 1a30--the
suggestion was plain that the holiday
and year end enlargement OF credit and
money use had been ended earlier than
1t had in year of active business.
The decline of loans in the initial
week Of 1921 was even moro rapid than
it was in the week just past. amounting
to s1os, ,5oo, 900. and there was a parallel
between the two years. In January.
1921. forced deflation was wringing g
loans out of merchandise and sgr,cul-
tural products. This year lacl, Of de-
mand for funds and some liquidation OF
old loans is causing rapid repayment of
borrowings from reserve banks and a
persistent retirement OF currency.
Loan Liquidation to Proceed.
II the parable, be carried further. the
history of 1891 indicates that loan !ioui
dation is likely to proceed until an in
crease In the denzn nds OF business cause
the movement to slow down. Even tina,
factor. which normally would not be
delayed longer than April and May.
when spring planting begins, is not GER
tain to stiffen money rates immediate
~, as the gold movement continues ana
has made no sign OF stopping. although
in December the inflow was consider
ably less than it was in prece6n.
months.
SO low a quotation for time funds as
that OF Friday and l-2 per cent. call
money probably would have had an inn
mediate reflection in a rise of stocks
in normal year. There was much more
money offered than borrowers wanted.
but the incentive to buy shares was
plainly less insistent than it was in the
preceding week. Reasons for the indlf-
ference Of buyers lay outside the mar
kets themselves. The absorption Of two
large Chicago banks by another institu-
ton under emergency methods showed
that there were still sore spots which
had not been healed in those memora BILE
days OF July and August when the
financial doctors operated on several in
stitutions in the East. No signs were
apparent that the trouble in Chicago
would spread. but the situation natu-
rally caused believers in the longer
stock market outlook to stand by for a
while. At the same time decline Of
90 cents a barrel IN the price OF Penn
sylvania crude petroleum disturbed a lot
OF speculative calculations which had
made no allowance for the fact that
flush production in a new American oil
field, added to an increased output in
Mexico in December. had promised a
greater supply than the refineries could
store easily and work up into market
able products
stock Market Not True 10 Form.
The opening week of a new year of
course is not a period sufficiently long
TO denote what business prospects actu-
ally are. Nevertheless the firm tone OF
stock market quotations as December
closed promised a more ctable market
than was seen last week. The uner-
pencted incidents mentioned here were
unsettiing TO sentiment, without fore
casting anything in respect to develop
ments of the second half of the month
and later. 1t is difficult TO see at the
moment where a forecast OF spring
business will come from Possibly il
will appear only in the actual occur
rences in industry and trade. The ease
OF money and the plenitude OF credit
are not OF themselves any proof of inn
proving business. Quite the contrary.
Money is growing easier because there
is small demand for Il. The fact Of low
rates and abundant supplies will make
in time for advantageous borrowing by
corporations when their requirements
shall be enlarged. In the meantime IL
serves TO make more difficult the PROB
lem or what TO do with vast gold hold
ings in banks. which TO large extent
are unproductive OF new wealth
Leaders Of DIeineea aorordir0 to