Evening star., 1924-01-20
GOLD TABULATED
BY NEW METHOD
Reserve Board'sAction Cause
of Wide Comment During
Week in Wall Street.
BY GEORGE T. HUGHES.


Special Dispatch to The Star.
NEW YORK, January 19.-No topic
has been the subject of more discus
sion in financial circles this week
! than the new method adopted by the
, Federal Reserve Board in it's tabula-
tion of gold holdings. The change was
hrst made in the statement for the
week of January g.
Under the new classified ton gold
with federal reserve agents" and
gold redemption funds with United
States Treasury are combined into q
total designated gold held exclusive
~ against federal reserve notes"
Ihls Is, in effect. a reversion to the
poilcy in effect before June. 1917.
The result is that in the statement
| made public this week gold held ex-
ciuslvely against federal reserve
notes" is $2.177, $40, 900, against fed
erai reserve notes in actual circula-
ton of $2,084.320,00O.
Ratio Near 1923 High Point.
In other words. outstanding fed
eral reserve notes. according to this
way or stating the financial condition.
of the system, are more than covered
doliar Tor dollar by gold. Meanwhile
the method of stating the ratio of
totai reserve remains as before. IL is
calculated on basis of deposit and
| iederai reserve note liabilities com
olled, and stands this week for the
system as whole at SOL per cent.
Almost equal to the high point Of 1923,
Which. In turn, was the highest since
iSi'; We're It to be calculated on
the basis of the reserves against de-
post liabilities alone the ratio would
be only about per cent.
Inc important question about this
more or less technical detail is why
.nis change was made. 1t has been
temptation to credit imitation which
our enormous gold surplus continu-
ousiy presents. If that is really the
intention, IL is doubtful whether it
VIII succeed. For one thing. gold con-
tinues TO pour into the country and
the trend of the foreign exchanges is
all in favor of more gold coming,
| rather than less.
No Cause for Alarm.
As to the probable effect upon prices
! Lor securities and commodities it is
ndzdruous to venture prediction
| One school of economists insist that
the normal result would be TO ad-
vance p1ices all along the line One
| thlhs is certain, that no matter how
nese s9atlstcs are presented credit
| is abundant for every legitimate com
| mercial purpose. On this foundation.
and with no disturbing DEVELOPMENT
anywhere in sight, it can at least be
sald that nothing could be more i'm
probable than any major business de-
preston.
! The decline in the exchanges has
mad another effect, namely, to in
crease foreign buying of dollar secur-
/ itles, both bonds and stocks This,
| In turn, accelerates the fall in the
| exchanges. What could be more nat
/ ural than with the franc making new
low records in response to doubts as
TO the ability of France to carry on
without German reparations, and with
sterling sagging to new low levels
that foreign investors should be anx-
J ious to transfer their capital into
securities expressed in the one stable
currency in all the world? If this
theory is reasonable the effect in our
markets would be to advance quota
tions rega ardless of the business out
look. Nothing in the markets OF the
week has developed to contradict this
view. Bonds have been consistently
have had some setbacks there has
been no important weakness in those
Of real investment merit.
Trend May BE Reversed.
1t may be, of course, that the trend
in the foreign exchanges will be re-,
versed. The decision of the French
government to increase taxation 20
per cent, to institute important eco
Monies in administration and to defer
such reconstruction as cannot be met
out of the ordinary revenues, mo-
mentarily, at least, stayed the fall in
the franc, which had been approach
ing collapse in panicky selling. 1t is
too early, however. to assume that
these measures will be successful.
The outlook is favorable. but the
exchange market awaits demonStrat-
ed results.
Likewise, in Great Britain. until
the labor government has met the
test of responsibility and it is re-
go in putting their theories into
practice. the disturbance in sterling
is likely to continue.
All this has had one curious effect
on our own foreign bond market.
French dollar bonds steadied on the
announcement of the measures adopt
ed by the French government. In
fact, French bonds never shared in
any degree the weakness in the
franc, meaning. of course, dollar
bonds On the other hand, British
dollar bonds have been heavy, which
is certainly illogical, for no one seri-
cusly imagines that even the labor
government will damage the credit
! of Great Britain abroad.
Investment BuyingS slower.
Investment buying of securities has
gone on all the week. but the pace
has been materially slackened. New
offerings have been we'll absorbed.
Banks and institutions have been in
| the market seeking employment for
surplus funds. The demand has been
especially good for high-g short
term securities with yields of TO
51h per cent. Investors of large means
are still buying taX-exempt securities,
even though, if the Mellon plan goes
through, they will not need them IN
| such large blocks.
Copyright, 1924.(