Evening star., 1926-11-23
MEN AND MONEY
By M. S. Rukeyser.
(Copyright 1920
(Copyright. 1927

The efficiency of dollar depends on
where it hangs out.
Dollars that loaf in your pocket or
in the bureau drawer are least pro
ductive of all. From the standpoint
of their effect on the general supply
of credit. dollars are more effective
when placed in the bank. They are
still more efficient as a base for credit
when deposited by the ordinary bank
into the Federal Reserve Bank.
| This is the season of the year when
dollars to an increasing extent drift
from the vaults of the bank to the
pockets of individuals and the tills of
merchants. The net effect Of this sea.
sonal factor is to make money tighter
than it otherwise would be, and the
first place where this is reflected Is in
he rates for coll money in Wall Street,
which are most sensitive to the day
to-day changes in the volume of
credit in the reservoir.
The motive for the withdrawal of
funds from the banks is pre-Christmas
retail shopping, and most successful
merchants are looking forward to a
trade Of unprecedented volume.
Increase in Circulation.
The money spent returns in a day
or two to the banks and the effect of
the withdrawal is temporary. How
ever, at any given time, the circula-
ton Of currency is heavier than at any
other season. The increased national
tendency to pay bills by checks re.
lieves the strain on the banking sys-
tenn Of the huge seasonable increase
in the tendency to shop.
The growing demand for currency
during the next five weeks will no
doubt be reflected in a substantial in
crease in Federal Reserve notes in
circulation. This movement may
check the recent tendencies toward
easement in the money market until
after the first of the year, but, broadly
'peaktng, apart from seasonal factors,
the supply of credit is still abundant
and neither business nor the security
markets need give any consideration
20 the danger Of a credit pinch. for
there will be none.
This year has been one Of mixed
business sentiments. It started with
expressions Of extraordinary optimism,
which soon turned to pessimism. BY
summer, sentiment was again cheer.
full. At present, there is considerable
subsurface talk of a current shrink
age of activities in certain lines.
Unquestionably, there are some
quiet recesSions under way in certain
trades. such as the building and auto
mobile industries. And yet there are
no signs of abrupt declines in bust
ness in the near future.
Commodities Are Lower.
The conflict between recorded pros.
perity and business sentiment this
year has been largely aScribable to
the extraordinary fact that, despite
the record-breaking volume of buSi-
ness, wholesale commodity prices have
declined 10 points. Ordinarily they
advance under similar conditions. In
times of declining prices, the profits
go primarily to the ablest and most
efficient producers and distributors.
From the standpoint Of volume, 1926
is likely to prove the best peace year
IN the history of the country.
Automobile sales, according to pres
ent estimates, will be larger than in
any previous year. Railroad freight
traffic has been unprecedentedly large.
Construction activities, though sag.
ging, are still far above the long term
normal.
The total volume Of the crops, as re.
ported by the Department of Agricul.
ture, will be 2.9 per cent larger than
in 1925. The chief gain in quantity
has been in the cotton crop. The
purchasing power Of farmers, outside
of the cotton belt, will be approximate
ly the same as last year.
According to Henry G. Taylor, pro.
fessor of agricultural economics at
Northwestern University, the real in.
come of farmers per capita was 20
per cent lower in 1925 than in 1919,
whereas that Of the factory worker
was 3 per cent higher. If the lot of
the cotton farmer is included in the
figures for the new crop year, the
showing Of agricultural classes will
be even less favorable.
Reducing Tariff Rates.
This situation" according to Prof.
Taylors diagnosis, has resulted in q
apital loss OF $4,000, 900 900 to farm
ers and untold suffering. The only
possible remedy Is the readjustment
of price ratios. This can be brought
about in large measure either by re-
ducing the tariff on city products or
making them effective on farm prod
ucts. The tariff rates on city products
are much higher than is required to
sustain our city industries. Tariff
rates have become a method Of arbi-
trary price fixing, which for the time
being enriches the non-agricultural
population at the expense of agricul-
ture. This price fixing for the city in
dustries Is basic reason for the pres
ent inequitable distribution Of wealth
in the United States. The present
tariff rate should be reduced 10 per
cent each year for five years. or until
the ratio between farm and city prices
are re-established on the pre-war
basis. The amount Of the tariff re.
duction should be distributed over the
various industries in such a manner
as to secure maximum benefit to
agriculture from an average 10 per
cent reduction"
Though the tariff may have been q
factor in causing the disparity be-
tween urban and rural prices. the sit
uation does not seem so simple to me.
The differences in part reflect the re-
suit of abnormalities in postwar world
buying habits.
Incidentally. the slump in cotton