Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-01-22
MEN AND MONEY
By NJ. S. RukeyseT.
Copyright. 1927

For the first time in IL years, the
oldfashioed international money mar
ket, about which college professors
used to lecture, has again come into
being.
Interests in New York for the first
time since the Federal Reserve sys-
tenn was established are coming to an
increasing extent to be dependent on
conditions in London, Berlin and other
foreign capitals of banking.
This is only another manner of re-
porting that at length the abnormal
tiles of war finance are beginning to
disappear.
The return of an increasing array
of Old World countries to a gold basis
and to orthodox monetary standards
is responsible for the changing char
acter of the money market.
These seemingly obscure relation
ships have q practical bearing on the
activities of the ordinary American in
the role of speculator, investor, or bus
mess borrower at the banks. AL
though interest rates, in accordance
with seasonal factors, are declining,
they are unlikely to drop to or long
remain at the abnormally low rates
which prevailed in 1924.
N1uuc$ 10 OOlus
Since 1924, England, Germany and
most other continental European coun-
tries, excepting France, which will
probably be next in line, have re-
turned to gold, and foreign centers
will draw funds from New York if
rates here tend to fall again to bar
gain levels. In 1924, the barriers of
abnormality checked the flow of the
international streams of capital and
credit and money in this center went
a-begging. At times, call for funds
against stocks and bonds were quoted
on the New York Stock Exchange at
2 per cent and even lower in the un-
official over-the-counter market.
Under the new regime, the twin fac
tors of supply and demand, which de-
termine the price of everything, in
Guiding money and credit, have be-
come international in character, and
interest rates in New York--and for
that matter in Chicago and San Fran
cisco too--will depend not only on the
domestic situation, but also on the
demand for funds at foreign centers.
Americas new adventure in central
banking started in the same year that
the European war began, and we have
not yet had an opportunity to observe
the Federal Reserve system operate
under normal conditions. The coun,
try has an opportunity to witness this
situation for the first time. Even the
reserve banking officials themselves
are still feeling their way and are
still discovering the tools they have
to work with.
Although the world is slowly re-
turning toward normacy, the United
States is not going back to it's 1914
status. The operation of the Federal
Reserve system, which means the
adoption Of scientific banking princi-
pies, constitutes one basic change.
Moreover, the fact that America has
become a leading lending nation, in
stead of borrower as 1t was before
the war, signifies another fundamental
alteration.
New York now shares with London
financial leadership.
The visit of Montagu Norman, gov
ernor of the Bank of England, to New
York is an indication of the new rap
proachment which exists among the
leading central banks. Americas
new dominant position in the matter
of holdings of monetary gold gives
this country a place of leadership in
the banking counsels of nations.
DESIRE 10 Cooperate.
There is plainly a desire between
the central banks at New York and
London to cooperate in the formula
ton of discount rate policies.
For example, the announcement of
reduction in the rate of the Bank of
England would be a harbinger of fur
Their easement in interest rates here.
Wall Street is a place of short
memories. There is a -to-dayness
especially about men who operate in
the security markets.
Overheard at a luncheon of the
Bond Club:
First Bond Man-Yes, business has
been excellent; 1926 was the best year
in the history of our firm.
Second Bond Man-We also did a
record business last year.
First Bond Man-How long has
your firm been In existence?
Second Bond Man-Since 1925. And
yours?
First Bond Man-Our firm was or
ganiZed in 1924.