Evening star., 1925-05-30
BY ROGER W. BABSON.

>cia Dispatch to The Star.
-WELLESLEY HILLS. Mass, May
5a--The Federal Reserve System is
tn2ctioning better than at any time
nee its inception. Practically all of
' larger banks. and many of the
filer ones, are now members of
system. a splendid group of men
dke UP the Federal Reserve Board,
"nd so long as Calvin Coolidge is
resident, we may be sure that high
'.'}de men will continue In control.
result. the banks Of the country,
zen as a whole. are in a very strong
>ition with larger reserves than at
~ previous time when the country
lad the present amount of business.
Western Banks Improve.
There are still a few banks in the
est which are struggling. but even
Ihese are i'll better position than
they have been since the war The
Hited States has about two-thrds
the total gold supply of the world
I'd is strengthening its position as
international banking power.
therefore, sufficient cash and credit
j. today available for all legitimate
cnterpriSes-that is to say. there is
Il plentiful supply of money.
While this supply is large. there has
ot been corresponding increase in
emand for funds by the large bor-
overs. Both railroads and industrial
concerns have been plowing large
sums back into their properties. re-
'ucing floating Indebtedness and grad
ually STRENGTHENING their financial
structure. Many of the large corpora
lions are today loaners of money.
rather than borrowers; and some have
nnconsciously become huge banking
rompanies as wen as engaged in the
manufacture of steel, electrical ma
Chlnery or automobiles.
Complete Change Noted.
Hence, the larger concerns are not
In need of funds as was the case some
years ago. Furthermore, the decline
in commodities reduces the amount of
money necessary, for corporation or
an individual to borrow in order to
carry a given stock of raw material
or merchandise. The recent great drop
IN the price of wool naturally hurts
people with large supply of wool on
hand, but in the long run il ca ses the
borrowing requirements all along the
line. With the price of wool only half
of what it was a while back, wooden
mills, clothing manufacturers and 9TH
ers are obliged 10 borrow only half
of what they formerly were obliged to
borrow in order to carry their stock of
raw materials or mercha ndiSe.
There are certain commodities such
AS rubber. which have gone up in
price and there are others, like the
building materials. which have held
their own. but the average of all com
modities has gradually been declined
ever since the war.
Small Stocks Carried.
Even if commodity prices were al
their former high figure. it would not
be necessary today to carry the large
commodity stocks a formerly. The
very much improved transportation
conditions have made it unnecessary
for manufacturers to keep on hand SO
large supply of raw materials or for
merchants to carry such full lines of
goods. Both raw materials and man.
ufactured goods can be secured now
by jobbers and retailers on a few days
notice. This tends to relieve further
the financial situation and reduce fur
ther the current demand for money.
The great demand today for money is
either for new promotions or for large
capital investments in new building
water power and other public utility
developments, municipal and quasi
public improvements.
Banks naturally shy a new pro
motions and thus their greatest op-
Dortunity to loan money today with
safety is to the public utilities. This
largely done in the form of bond
Duying. and it is possible that the
'anks will continue to be in the mar
let for some time to come for good
Donds. | therefore expect continued
lctive bond market during the bal
Ince of this year at least.
Better Conditions Abroad.
Although what has happened in
Europe during the past month is not
pleasing to many people. Vet this
should tend to strengthen rather than
hurt the financial situation. They are
having bad time in France but fun
damental conditions are better in
France today than they have been
for some years. France has no new
troubles. but has simply reached a
point where she is recognizing that
she has troubles-that is. she is pull
ing her head out of the sand and see
ing conditions as they exist
The Won Hindenburg victory is
naturally repulsive to us. but an
analysis of the situation shows that
Won Hindenburg represents the con
servative interests of Germany. His
election shows that Germany is really
at heart conservative nation. There
is no doubt but that the credit of Ger
many is far better with a conservative
autocrat like Won Hindenburg as
President than with young radical
whose name might be much more
popular.
British Credit Strong.
Employment conditions in England
may not he helped much at the pres
ent time by England going onto a
gold basis: but it means that Great
Britain has successfully passed one