Evening star., 1923-04-07
BY STUART WEST.

Special Dispatch TO The Star.
NEW YORK. April THE rise on
the stock exchange from the closing
half OF January to the middle of
March was undoubtedly extravagant
most optimistic view Of general busi-
ness conditions. On the other hand,
the reaction during the last two
weeks Of last month, which wiped out
in the greater part of the list some
thing like two-thirds of the previous
gain, was, in its turn, excessive.
What happened during the last week
is not SO much fresh advance as a
readjustment between two market
movements which were carried about
equally to extremes. so large a re-
action as occurred in the closing fort
night of March could have been JUS
titled only on the assumption that
the outside trade recovery had been
too rapid to last; that the peak OF the
upward movement in commodity
prices and in production had been
reached, and that the tendency hence
forth would be downward.
Industrial Expansion Not Excessive.
The grounds for this opinion, which
was and still is held in certain quar-
well founded. Authorities from the
Secretary of the Treasury down
agree that the expansion in industrial
output has not been carried too far,
that IL has merely kept pace with
the legitimate demand, that the ele-
ment of speculation has been small,
and that there has been no over
stocking. In these respects the posi-
tion is altogether different from that
of three years ago.
There are, to be sure, two danger
Gus tendencies which have appeared
more clearly during the last month.
One Is the increase in wages which
promises to become quite general, and
which might in the end result In that
alienation of wage and price ad-
vances which was one of the prin-
cipal causes leading up to the trou-
bles of 1920-21. The other is that
prices, as has already happened in
pig iron and in one or two other
lines in the steel trade, will go ahead
so fast that new buying will be
discouraged
Increases Not Threatening.
These are possibilities to be borne
| in mind in any long range view of
the financial situation. But the main
point just now is that neither the
raising of wages nor the raising of
prices has as yet gone far enough to
| threaten serious consequences The
| important consideration is whether
| or not the commercial advance of the
| last eight months has involved any
strain upon credit such as would be
| likely to lead to restrictive measures
| like those of the autumn of 1919 and
| the spring of 1920.
The federal reserve board has
stated that loans of the member
| banks are up s2.000,000 from a year
| ago and are approximately as large
as they were at the maximum, in
1890. But, on the other hand, redis-
counts at the federal reserve banks
| them selves are, in the case Of COM
| mercial loans, only one-fifth Of what
they were at the top three years ago
| and loans secured by government
paper, which covered more particu-
| larly financial operations, are only a
| fourth Of what they were at the same
! time.
! In a word, the member banks have
| been able to take care Of the enlarg.
\ ing credit requirements of the coun.
1 try without making use, to any i'm
portant extent, of the rediscoun1
privilege. The federal reserve insti-
| tutions meanwhile have $1,000, 900, 00(
1 more in gold than they had three
years ago to meet credit demands.
No Imitation as Yet.
| Considering this very wide margin
| OF reserve as contrasted with that a.
| the close OF 1919. and considering thai
| the commodity price average is not
| half way back to the high of 1926
from the low Of 1921, it cannot be