Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-01-01
CREDIT FOR TRADE
DECLARED AMPLE
Investment Bankers PreSi-
dent Says Money Supply of
U. S. Is Adequate.
BY TRowBRIDGE CALLAwAY,

BY TROWBRIDGE GALLOWAY,
President, investment Bankers Association
of America.
Doubtless the most striking develop
ment in the security markets of 1872!
was the stock market break and STAN
pede of late october and early NoYem
Der. It focused public attention very
definitely and emphatically on the pres
ent period of readjustment in whicl
business now finds itself, but it di,
not produce this situation. The cause
Of and necessity for readjustment wer
long in the making and were significant
ly exemplified in an extended increas
in prices of speculative securities an,
in the use of credit in speculation. Mos
every one realized that a market breal
had to come, but for several years /
had been so frequently predicted ant
the predictions had been wrong 81
many times that even last Summe
when the indices Of a number of Ike,
industries turned downward few needed
the warning.
do not wish to dwell on a painful
subject-the market break Is still S,
recent as to be very sore spot to man,
but there are some very wholesome
aspects in the situation which we can
not AFFORD to overlook First, we arr
further along in this readjustmen
period, and nearer to working into
sounder prosperity than a superficial
view of present conditions might indi
cate. We have expanded inventorie
to throttle production and credit. Sec
ond, our credit structure is in q Soundel
condition than it has been for severa
years. There are ample funds for bust
ness growth. Third, the productive,
Of industry is unimpaired. Fourth. TIT
buying power of the people as a whole
has apparently not been seriously af
fected. Fifth, the element of fear S,
widely spread by the market break wa.
quickly recognized and prompt step
taken by government and business
alike prevented its spread.
Consumption Is Problem.
Ordinarily, in attempting an articl
or this nature, I should enlist the ait
OF research economists, and after the.
had analysed the various induces O
business activity and the key indus
tries and had checked and charted thu
various business barometers, wee
gather around a table and see wha
our plain. common sense judgmen
made out of 1t all. From the econo
miSts we would have a reasonably &C.
curate picture OF just three economic
factors-production credit and distri-
button. We'd have a yardstick on the
production of new wealth by the indus
tries, the railroads. the public utilize.
and agriculture. We would ascertain
the financial position and the avail.
ability Of credit to support that pro-
duction. Then we would endeavor t
make what is usually the most diff1cult
estimate Of all, namely, an appraisal
of distribution. of buying power, of the
country's ability to consume or absort
the products that American industry
capital and labor are equipped tC
produce.
There is no need here and now to
detail the huge and undoubted capac-
ity of American industry to create new
wealth and maintain an increasingly
higher standard of living. That can
not be disputed. Nor can there be any
doubt but that there is ample credit
for every legitimate demand of indus
try. The whole question Of forecast
seems to depend on that one factor of
consumption. To the extent that pro-
duction has been overStimulated by ex-
ceSsive purchases with borrowed money
there is likely to be q Slackening in
production until earnings and savings
have caught up with expenditures; but
in SO far as consumption depends on
psychology the outlook is clearer.
Had this break affected only arti-
f1cial prices its results would have been
much less acute. Regretably, however,
1t developed into q stampede that cut
into intrinsic values as well as fictitious
prices. This extreme phase of what in
the beginning was purely natural eco
nomic reaction has been referred to in
various terms as a '''debacle," panic"
etc. have called 1t q stampede be-
cause, to my mind, 1t reSembled at its
worst nothing so much as the blind,
unreasoning, self-destructive rush OF a
herd OF cattle fleeing from imaginary
fears.
Hysteria Has Departed.
1t would have been no less than wan
ton to have allowed this psychological
stampede to run its destructive course
and interfere with employment and the
wholesome production and distribution
of wealth, the combined process Of
which in substance Is prosperity. Sound
thinking has replaced hysteria-aS it
has replaced optimistic illusions-and
1t is my opinion that our industrial and
commercial system, supported by a
strong banking position, will success
fully meet the test of this readjustment
period-and have no fear for normal
prosperity in 1890.
AS to the business In which I am
most directly interested, that OF In
veStment securities, the outlook Is
promising. Many investors, having lost
In pursuit of appreciation in market
prices, are turning to securities bought
on a basis of safety of principal and
fair income yield. The investment
dealers as q whole throughout the
country are in q sound condition to
render their essential service in provid-
ing capital for government and indus
try, and securities, on an investment
basis, to investors.