Evening star. [volume] (Washington, D.C.) 1854-1972, 1923-11-18
FOREIGN SITUATION
NOW FELT IN j. S.
Wall Street Taking Notice of
Steady Declines in Ex-
change Rates.
BONDS ALSO GO DOWN
Secretary MELONS Tax Suggestions
Most Far-Reaching Home
Development of Week.
BONDS ALSO GO DOWN
BY GEORGE II. HUGHES.

Special Dispatch to The Star
NEW YORK, November 17.-For the
first time in months Wall street this
week took cognizance of the foreign
political situation.
All through the steady decline in
the exchanges, both sterling and
francs, the investment and the specu-
| latlve markets had until Friday ig-
hored IN appearance at least the news
| from abroad. Up to and including
June, only in February did the franc
! TAIL below cents; after the midyear
| only in late September and ear.v
October did it sell above cents. For
the last four weeks the drop has been
| fairly uniform. Taking the year as
| a whole the quotation for sterling
| likewise has slowly but progressive
ly declined. with greatly accelerat-
ed downward movement this week.
Conditions Are Reversed.
During all this time stocks am
bonds moved only in accord with sen
timent as to the trade outlook a
home and, far as purely invest.
ment securities were concerned, ~
accord with the money market.
The only explanation that could b.
given was that investors had beCom"
hardened to alarming reports. How
ever that may be equanimlty at thf-
close OF this week was rudely upset
and foreign bonds went down with
the exchanges.
Whether the action of the security
markets other than foreign bonds
was connected with the fall IN the
exchanges is anybody's guess. \ re
action might have come i'll any event.
1t is easy TO argue that there ls no
real reason for this break in obliga
lions payable in dollars the actuat
value Of which is III no way depend
ent upon the quotations for foreign
currency. II is easy to argue that tine
French external debt is only Vert-
small proportion OF that government
entire Indebtedness and that ther"
can be no possible doubt about tn
French meeting their full obligation g.
American private investors.
Bond Weakness Natural.
1t can be admitted that the differ
ences between France and Great Br.,
ain have only a sentimental bearing
upon the economic situation. The
fact remains that the reparatlonS
problem today is farther from set
Element than at any time and thai
without reparations no one can fore
cast the future of French finance. The
weakness in French bonds is per
fectly natural development, end the
only wonder is that it did not come
decided is what Will be the effect OF
the present complications on the
American domestic security outlook.
1t should be borne in mind that
there has been no important change
in business conditions at home. As
| far as trade with foreign countries
go the probabilities are that the ad
verse effect has been pretty well dis
counted. Radical action by France,
such as the talked-of seizure of the
would IndnJI
cut off Il certain amount of exports
now going forward. The consumptiye
demand at home, however, is still
very large. and only i'll the case of oil
and possibly wheat is there any
serious oyerproduction.
status of Home Inv es tments.
In other words, American business
is pretty we'll braced to meet the most
difficult foreign conditions. Certainty
there is no change in the status
of high-grade investment securities
They have been consistently firm all
the week. In one way uncertainty
abroad is a stimulus 10 the invest
ment market. For a month or more
there has been fairly constant de-
mand for the very highest grade of
American railroad bonds by foreign
purchasers more concerned over Sc
CURLY than the rate of return on their
money. 1t is not unreasonable to ex-
pect a continuance of this demand
when the American dollar seems to be
about the only stable monetary unit
in the world.
Nor should the untoward deyel-
opmentS on the other side be allowed
to overshadow the favorable aspects
OF the situation at home. This week
has been notable for the number of
extra dividends declared by directors
who were taking a leaf out of the
Steel Corporations book in sharing
with their stockholders d part of the
result OF their recent prosperity.
Tax Suggestions Vital.
More notable still. however, was
| the suggestion by the Secretary of
the Treasury of reduction in in
come taxes to the amount of over
100000. What action Congress
will take is in doubt, but the fact
that this is the one government In a
position to make a sweeping reduc-
ton in taxation throws out in sharp
contrast the inherent strength of our
financial position.
That reduced taxa tion, especially
the cutting of the surtaXes on higher
| incomes, would be of enormous bene
fit to industry at large is not open
to argument. 1t would check the flow
of capital into taX-eXempt securitic -
and change the current into produc-a
tive enterprise.
Except for the sitting influence OF
excessive taxation it is hard to see
how our enormous financial resources
could long go unused. Given abun-A
dant credit and fair chance to indi-
vidual initiative. in the long run
American industry is sure to go
ahead no matter what may be hap