Evening star., 1929-12-16
MERCHANTS HOLD
DOWN INVENTORIES
Stocks of Goods Much Lower
Than in Previous Mar
ket Breaks.
BY JOHN F. SINCLAIR.

BY JOHN +. SINCLAIR.
Special Dispatch to The Star.
NEW YORK, December 16.-"Inven-
tories are in first-class shape. I doubt
if they have ever been in better shape
than they are now, considering the time
of the year." says correspondent to
this column.
The Illinois Manufacturers AsSocia-
ton, after the big market break, made
a study of this situation among its own
members. It found that on November
l the raw materials in the hands of
Illinois manufacturers were valued at
but 5.46 per cent of the annual sales.
Compare this figure with that of 11.40
per cent on october l, 1920, the time of
the last big break.
In 1920, when the big break came,
it was accompanied by falling COM
modify prices, resulting in Shrinkage
of inventory values.
But the present drop has been con-
centrated in the stock market largely,
while the commodity price situation
continues in a healthy condition.
A well known economist, in letter
to the writer, makes this statement:
whether inventories are large or not
is a relative matter, and you may recol-
lect that in earlier crises it was a very
simple matter for inventories to become
large very shortly after a slump in
sales took place. We now have the
added feature, not existing in our
earlier crises, of having two kinds OF
inventories, both the old-faShioned va
riety in the hands of the manufac-
turer, wholesaler and retailer, and also
the new variety of conSumable COM
modities in the hands of consumers
holding them under the installment
purchase contract. Were you to make
an estimate of the goods held by con-
sumers and not yet paid for, and add
it to the old-fashioned type of inven-
tory, you might obtain an interesting
total"
When Owen D. Young, a director of
the Federal Reserve Bank Of New York,
stated that the basic cause Of the stock
market panic was that credit had got
ten out of bank control into the hands
of irresponsible outsiders" the fighting
H. Parker Willis rose to protest.
He holds that the Federal Reserve
system itself did not handle the credit
problem in a way to merit anything but
criticism. 1t did nothing to meet the
situation, but only to aggravate it-that
is, by cutting acceptance rates and
raising the rediScount rate.
But consider this: "AS every one now
admits, including the officers of the
Federal Reserve system, discount rates
were cut unduly low in 1927 and 1928.
This was the ill-fated attempt to pre-
vent gold from leaving England and
coming to the United States by making
bank funds unduly cheap in New York.
The scheme did not prevent the gold,
when it got ready, but it did enable
tremendous expansion and over-issue of
bank credit to take place. This was the
root of the difficulty"
Prof. Cassel agreec with Or. willis
that the attempt of the Federal Reserve
TO regulate the Stock Exchange failed"
The contention of DR.. Willis, however,
is that had the Federal Reserve handled
the problem properly, the Stock Ex-
change jam would never have occurred.
When the IL governors of the Federal
Reserve Bank and the IL Federal Re-
serve agents met with the Federal Re-
serve Board in Washington last week,
five of the reserve banks New York, Bos-
ton, Chicago, Atlanta and San Fran
cisco) we're on az per cent redjscount
basis, while he rest Werr still on A 3
pc" cent basis.
u ls quite acnaraIy accepted that tle
seven otnor baL-S, now Cn q per cent
basis, will be DOWN to Az per cent within
6 short time. It Is possible that rediscount
rates will go lower, although credit con-
ditionS throughout the country do not at
this moment point in this direction.
But two years ago, when the Federal
Reserve eased of, rediScount rates moved
down to 312 per cent.
The Federal Reserve is continuing its
open market operations this month by
the purchase of Government securities
and acceptances, in order to take care
of the large demand for currency dur
ing the Christmas season. Some expect
the total maximum currency require
ments will go over $4,000, 100000 before
Christmas.
Reports from the entire country indi-
cate that there will be no substantial
drop in the holiday trade-good news to
thousands of business men throughout
the land.
Arthur Fertig of New York, speaking
before the Southern Furniture Manu-
tacturers' Association on "The Manu-
facturer'S Place in Retailing" made
some candid statements:
Volume Is not the yardStick of prof
its for the retailer or for the whole
saler. In the long run, the course of
common sense leads to balancing pro-
duction with demand, selling only what
can be sold with commensurate profits
to all concerned and the complete neg
lect of your competitors non-profit-
able business"
Business is beginning to recognize
that a healthy body of retailers makes
for healthy business order.
"A few years ago it was common
practice to load up dealers far in eX-
cess of possible sales and let them dig
their way out" says Mr.. Fertig. But
not any more in the more progressive
organizations.
The most progressive manufacturers
today virtually supervise the retail out
let's, to the extent that they have to
make orderly merchandising possible"
saws Mr.. Fertig.
In other words. they have learned
that it was bad business to load up
the dealer and then go fishing"
Consumers credit will be greatly
needed in 1880 and aggregate sales will
be as large in total volume as they
have ever been. with probably a smaller
unit of sales of volume per store and
smaller net profits"
This is Mr.. Fertig's prophecy Tor
1880.
Business men today ale not satisfied
with knowing their own business only.
They must know, too, about the other
factors which contribute to healthy
industrial expansion.
Copyright, 1929. by North American News
paper AllianceO