Evening star., 1924-07-02
BY STUART p. WEST.
Special Disps tch to The Star.

NEW YORK. July 2.-The thing
which stands out most strikingly in
the markets OF the mid-year is the
failure OF most OF the prophecies
which were made at the beginning o.!
1924. These ranged from moderate
to quite extreme optimism. 1t is
hard to recall a single instance where
business leader or a banker, speak
ing OF the future. foresaw the really
severe downward turn in industry
which set in toward the end of March.
In the same way few looked for such
drop In Wall street prices as oc-
Cured between the close OF January
and the early part Of May.
These recollections are OF interest
in that they show why it is that, hav-
ing been wrong in the past, business
and financial representatives are eau
t1ous about what they say OF the fu-
lure. opinion went wrong at the
start of the year, first because it made
the political outlook altogether. too
ciear, and, second, because it greatly
underestimated the forward demands
for manufactured goods. The steel
mills, the automobile makers and
other OF the leading industrial pro-
ducers extended their operations too
Tar. They found that they were &C.
cumulating surplus supplies at an un-
pleasant rate. and had to cut down
operations abruptly. The decrease in
little more than two months from 80
per cent to 45 per cent at the steel
mills has been one Of the sharpest in
similar period ever known.
~ was not only case Of overpro-
duction in certain lines. In others
particularly in the textile industries.
causes for depression were found in
the inability OF the manufacturers to
raise their own prices enough to effec.
the raise in costs OF labor and raw
nmateriais; The cotton goods trade in
New England has perhaps never been
through worse experience. Even
now, only 20 per cent of it's productive
capacity is employed and there IS no
prospects of any pickup, certainly
until the autumn.
Commodity Decline Checked.
The general average of commodity
prices went down continuously from
the middle of May to the middle of
tions were brought back to a pre-war
OASIS lnasmuch as production costs
are FAR above what they were in 1918,
TINS means that in certain industries
operations are being conducted at a
loss. A situation like this can never
continue for long. because it is eco
nomically impossible. 1t was not sur
prising, therefore, to note in the lat
ter half of June, indications that the
price decline had run it's course
The low commercial price level has
to be emphasized because il consti-
tutes one of the essential points of
dinerence between the present situa-
ton and that of four years ago The
stcono point or d1nerence is that pro-
duction in most lines has been Sc
Verely cut down SO as to meet a con-
Sumptive demand based upon only the
most necessary and immediate re-
quirements. Along with this, money
rates are lower than they have been
IN seven years. and the credit supply
is the most abundant in our financial
| history. All these are features which
represent the antithesis of conditions
making for prolonged depression.
OF defation at rather extreme
stage.
Investment Values Lean Forward.
Very low money rates are never a
prime case of business Improvement
They can be of material assistance
only where the relation of production
to consumption is right The expert
forcibly also that cheap money does
not of itself stimulate speculation
| The principal effect of the cutting OF
the federal rediscount rates TO what
may Dt TtS dTueu DIS Ihe lowest since
the formation of the federal reserve
system. and the extraordinary piIins
up of surplus funds, has been felt in
| the increase in investment values
| The rise in the better class Of invest
ment bonds and investment stocks
has been the feature of the last two
months.
1t has seldom happened in the year
of a presidential election that much
fresh initiative either in business OF
finance has occurred during the sum.
mer. Everybody is waiting to see
how the campaign develops. especially
what are the chances for or against a
| radical change in policies at Washing
ton. The trade movement and the
markets are apt to wait until the
autumn before attempting to discoun,
the election results.
European Outlook Brighter.
The European outlook at the end
of the first elk months Of 1924 ap-
pears distinctly brighter than it die
at the beginning. Foreign capital is
pleased with the new French min
istry. 1t sees in it an abandonment
of the extreme nationalism which
more than anything else stood in the
way Of the settlement of the repara-
tions problem and the economic re-
suscitation of Europe. The Dawes
plan has been accepted on all sides
and with the change in the French