Evening star. [volume] (Washington, D.C.) 1854-1972, 1928-09-02
STOCK PRICE GAINS
|. NOTABLE IN MONTH
BulIish Days of Spring Re-
called as Various Issues
Join in Advance.
BY CHARLES r. SPEARE.

Special Dispatch to The Star.
NEW YORK, September l.--on the
assumption that present high interest
rates are fictitious and that money is
abundant, speculation In stocks APP
preaching the dimensions and equaling
the force of that during the Spring
has been promoted during the past
month. Between the middle and the
end of August the average Of selected
group of shares rose Is points. In
dustrials alone were up an average of
rs points. The market as q whole Is
now higher than 1t was In June.
It Is dif1icult to convince a public that
has had access to unlimited supplies Of
capital for all purposes for so long that
these supplies have been steadily dimin-
ishing since the first Of the year. This.
however, Ia q fact. No country can
lose 500,000,000 gold, issue new Sc
curities at the rate Of $1,000. 100000 a
month, send the borrowings Of It's bank
up $500, 1000, 900 and lift the total of It's
loans on speculative commitments
81 ,000000,000 without feeling the ef-
fects.
A phase of the present mental at
titude of the American people engaged
in the business Of buying and selling
securities Is their unwillingness to recog-
nize unfavorable developments and to
exaggerate the Importance of those that
are encouraging.
Foreign Balances Withdrawn.
Since May the member banks in
The Federal Reserve system have lost In
demand and time deposits $1.l33 .000,-
600. The two factors in bringing about
this shrinkage are the Withdrawals of
foreign balances. mainly those OF
France. and the shifting Of deposits of
individuals and corporations to the
loaning market. It is known that
France has taken cut between $780,
100000 and S700, 000, 900 In gold and in
other mediums of credit. Her maximum
dollar and sterling balances were
81, 600. Between May and Au-
gust 81 the total brokers' loans of "all
others" increased $54l 100000 or from
81. 366,0o0,000 to sl,907 100000, while
those of New York banks decreased
from $l.200.000,0 900 to $780,, 1000. 900, or
$408, 900, 900
The ordinary lenders of funds have,
therefore. been a minus quantity COM
pared with other periods, with the con-
troll or the situation passing into the
hands of those upon whom no restric-
lions OF regulative policies could be i'm
posed. Even mutual savings banks have
been found lending their deposits out on
call which may explain how some of
them can afford to pay as high as Az
per cent interest: also why they are not
buying bonds when they are cheaper
than in several years
Call Loans Higher.
A condition that is fictitious cannot
go on indefinitely. II the rates for
money we're artificial. some evidence of
this would have appeared during the
past month when the requirements for
new financing and for business nor
mally shrink to the low ebb of the year.
On the contrary the stringency has in
creased, with an average Of call loans
"a of l per cent higher than In July,
time money more difficult to borrow at
6l2 per cent than at Ga the month
previous, and five and six months ae-
ceptances II to u above the discount
rate in New York, II may be possible
to rig the call loan market but not
that for four TO six months funds.
The head OF one of the largest Stock
Exchange houses was around begging
for loan Of 81 .000, 900 at 6i5 per cent
for any maturity this week and had
great difficulty in getting 1t. Munich
palities that sold notes on a Al. per
cent basis year ago are asking for re-
newals at 8 per cent, as they cannot re-
hnance conveniently.
Money Scarcity Ahead.
The serious aspect OF the situation
Is that there is no relief In sight
Rather, there is ahead a period of even
greater scarcity of funds and higher
interest rates than have so far been
paid by commercial and speculative
borrowers. The effort just now Is to
keep the money market static" until
after September Is so that there may
be the least possible interference with
the plan or Government financing. In
the Judgment of bankers the burden
on this market will be heaviest between
September 20 and October Is.
Obviously there can be no temporary
concession on the part of the Federal
Reserve to these conditions. This dis
count rate will not be reduced below
per cent tor some time,
The only point from which relief
might come is France 1t has been nee
esSary for her bankers the past week
To adopt a policy toward franc ex-
change that would prevent gold fiow-
ing to this country. This France would
not relish. The pressure of exchange
and high money rates here may
eventually force 1t. There is also a
possibility of gold coming from South
Africa that usually goes to London.
In neither event would the amounts be
large enough To have more than a sem
timental effect 1t Is not difficult to
imagine, however. how a stock market
that becomes buoyant when call money
drops from ia to per cent would
perform II announcement were unex-
pectedly made of gold engagement of