Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-10-27
'STOCK CRASH LAID
TO FOREIGN SALES
Dumping of Securities by
European Holders Held Chief
Factor in Decline.
BY JOHN r. SINCLAIR.
al DiSnafrh to rha Stnp

BY JOHN r. SINCLAIR.
Special Dispatch to The Star.
NEW YORK. October 26.-The stock
market crash Of last week which sent
thousands of stock buyers down to
financial defeat, was primarily precipi-
tated by foreign liquidation of American
securities. While this fact is clear to q
well informed few. the statement will
come as distinct surprise to a great
majority of traders in securities.
1t is doubtful if the financial world
Will see in the next 10 years another
such craSh-a crash which shook not
only the Wall Street exchange to its
foundation, but also shook a score of
other exchanges in the leading cities of
the country.
Chicago experienced almost as vio-
lent recession as did New York. San
Francisco saw her stocks melt away on
her exchange in q few hours. So did
Los Angeles. Detroit and Cleveland saw
similar conditions.
Waited for Crash.
What was behind the biggest crash in
| the history of American stock ex-
changes?
For some time it has been admitted
generally that stocks were high. In fact,
for the last three years number of
leading f1nanciers have been predicting
drop in the prices of securities
know of one large investor who has
not been in the market except once dur
ing the whole Of that period Last week,
on Thursday this man began buying
| almost at the bottom of the list. His
capital now shows an increase of lust
about 20 per cent in three DAYS. He
waited three years for that chance. He
felt crash was due. but, unlike many,
ne refused to go back until something
happened"
Other thousands, however, who also
believed the market was due for crash.
have been playing it vigorously and sue
cessfully during this whole period. They
| figured they could go in. take a profit
and get out without burning their
| fingers.
| Some did But the difficulty of such
a plan Is knowing when the crash will
come. They were playing with fire.
When the crash came last week, with
many-of these men were caught along
with the rest.
Banking Situation Excellent.
should say that not one in twenty of
these knowing" stock market specu-
lators got out Of last weeks market
with any profits
| But what caused the market to crash
at this particular time? That is the
| question that Is on the lips of every
| man interested in present conditions.
lt Is not because credits are strained
| The banking situation Is excellent. Re-
serves are higher than they were a year
ago. The Federal Reserve Bank is In
the most enviable position of any CEN
trail bank of the world today.
Business throughout the country Is
maintaining itself on high level, much
higher than one year ago. The net
pronts which are being announced this
Fall by the various industrial corpo-
ratiosn are almost universally higher by
| 20 to 30 per cent than they were one
year ago. So there must be some other
reason for the stock debacle.
| Investment services, too, were lame
! on the time" element. Some have
been asking their clients TO keep a GER
! tain percentage of their funds LIQUID.
but most Of these investment services
| did not foresee the crash coming last
week. Some of the most important
ones even recommended the purchase
OF certain stocks in their very last bull
! letins.
Underlying Causes.
Despite all these conditions, now turn
to what really happened
Based on the amount of losses in
foANVA Al hAAC SGOChS tIAQcu III OH
New York Stock Exchange during last
week. when about $4,000, 000, 900 melted
away, the week is the worst the ex-
change has ever experienced.
Add TO these losses the amount lost
In all the other exchanges Of the coun-
try and the total will probably reach
about $4,000. 000, 900.
A careful survey of the whole situa-
ton during the last few months shows
the underlying causes for this reversal
In the prices of securities.
The extraordinary and frenzied spec
ulation on Wall Street during the last
year had driven interest rates up to q
very high level. Other nations being
on gold standard we're forced to do
likewise or lose gold to the United
States.
So dear money in the United States
caused by the frenzied stock specu.a-
ton meant dear money in other ma
lions. 1t spelled high money rates in
Austria, Hungary. Germany, France,
England and other nations
Cheap money. which drives the
wheels OF industry around, being lack
ing, industry itself began to drop and
recede outside the United States.
John Maynard Keynes, British econo-
recent high rates in the United States
had lasted for another six months 1t
would have been real danger through
out the world.
See Lower Money Rates.
Most of the European countries are
iubilant over the situation. For they
believe high money rates will 90 down
in the United States. It will be fol-
lowed by an almost immediate drop
Of money rates in other countries They
see. too, that when that happens, in
dustry and business, which has been
holding back as result of the high
money, will no longer be penalized,
and new state Of affairs will begin,
especially in Europe.
During this period it has been known
that the European central banks. a.
well as their leading industrialists and
capitalists, have been sending their
money to the United States to invest.
Here investments were safe and the
rates of interest were abnormally high
AS late Is last Summer it was known
that the Bank of France had invested
on CALI and in securities an amount
said to have been above $500. O0O. 600
Other countries, like Germany and
England, poured money into Wall
Street.
The total amount of foreign money
invested "on call" and in the securities
OF the New York Stock Exchange.
reached huge sum-probably exceed
ing $4,000 900 900.
This condition was well known on the