Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-01-13

Immediately following the first of any
new year there Is relaxation in the
credit strain. The New Year is a
period of large dividend distributions
and also of liquidation of indebtedness.
Moreover. the enormous volume of re-
tail trade at the holiday season re-
leases very large sums. January is a
period of waiting in which business
readjustS itself before embarking upon
the real business of the new year. In
consequence. banks have more money
than usual to lend and interest rates
have a tendency to decline. While this
situation, in itself, constitutes an incen-
tive to go into the market and speculate
with cheap money, the indicators for
the entire year suggest caution and a
subsequent tightening of money. which
would be more than likely to find per-
sons attracted by the cheap January
funds overextended.
The average volume Of this Janu-
airy return of money to the banks for
the last four years has been S271 ,000.-
600. In January, 1928. this figure
climbed to $326,000 900 and it is quite
possible that figure may be exceeded
this month. Those are bank funds
alone Corporation funds also are likely
to show increases and as corporations
have increasingly tended to go into
competition with the banks in furnish
| ing money for stock market speculation
there was an increase of 81 300, 000,-
600 last year-the total supply avail
able is tempting.
Big men in the banking and business
world are decidedly optimistic concern
ing continued prosperity for the next
| year. No fundamental weakness is dis
cerned in our economic position This
| large supply of January money coupled
with glowing business prospects con-
! stitutes an attractive lure to the I'M
wary investor.
If there is one keystone supporting
| the arch of prosperity which can be
| identified with certainty it is the in
terest rate for money. There is a
| necessity for the American banks tC
| maintain interest rates at high level
so any relaxed rates in the early part OF
the year must not be expected to con.
| tinue. This necessity for high rate:
arises from the world gold situation. A
spectacular struggle for gold now is go.
| ing on throughout the world. 1t ha:
been reported in this column recently
how all the principal governments Of
the world are conducting survey oil
their potential gold resources. This in.
| formation is desired to the end thai
! national treasures may know what
| supplies to expect and whence they
will come The information will be III
| hand next August.
Credit Backed by Gold.
Meantime every country is striving tc
| get all the gold it can. The business
of the world is spinning like top ano
| the number of revolutions per minute
| is steadily increasing. To keep the toe
| spinning, to keep business going at this
fast pace, there must be ample credit
the lubricant of industry and trade
and to provide ample credit there mus
| be gold back of currency issues and in
ternational exchanges.
! Gold is hayward and fluid COM
modify. It will go where it can carr
the highest rate of interest as auto.
matically as water will flow down hill;
| that is, provided no national embargoe;
exist, and as such embargoes usually arr
war measures, none is likely to be laic
In 1929.
For this reason, money rates in the
| United States must remain on fairly
high level to give funds a return in in
| terest which will prevent them from
going abroad to find more lucrative
employment. There is substantial