Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-03-15
MONEY IS CHEAPER
IN WORLD CENTERS
Decline in Commodity Prices
and Business Recession
Have Eased Credit.
BY PRESTON S. KRECKER.
,atch to The Star.

Special Dispatch to The Star.
NEW YORK, March 15.-Reduction
of the New York Federal Reserve Bank
rate from per cent to 3l2 per cent was
rather belated recognition of the fact
that the bank rate and the open market
money rates had been out of line and
that a readjuStment was necessary.
The reduction had been a foregone
conclusion ever since the Bank Of Eng
land made its cut last week. and could
easily have been made a week ago. as
fundamentally conditions are just what
they were then. Money is easy all the
world over.
The reduction follows a long series of
reV1SiOnS downward in open market dis
count rates which have been the real
indices of the situation in the money
market. Three successive reductions
were made in the bankers acceptance
market in as many days last week and
another was made Thursday with the
result that the open market rate for
shorter maturities got down to ga per
cent. as compared with a 4 per cent
bank rate.
Reserve Bank Operations,
That decline in the open market rate
had been the result partly of operations
OF the Federal Reserve Bank itself The
banks whole policy this year has been
the exact opposite of what it was a year
ago AT that time it exerted all of its
power in the money market to tighten
up bank credit in order to keep it out
OF the stock market. This wear it has
worked to make credit easy with a view
TO encouraging the much desired bust
ness recovery.
For at least three weeks the Federal
reserve Bank has been buying bankers
DillS despite a seasonal slackenin0 in
the available volume, with the result
mat 1t actually competed with CONNER
clal banks and dealers for those invest
menus Obviously the aim was to make
creult easy. and that policy was eff
iectlVe In forcing down the open mar
Ket rate in advance of the cut in the
reserve bank rate
Inc new bank rate is the lowest ar
which the Federal Reserve Rank of Me-,
YORK mas discounted since August. 1927
IL is not mere coincidence. but a nat
ural corollary that open market money
1927. 4e'e4 0iii0c
In addition to Federal Reserve noIicv
several fundamental causes of the easn
IN the money market are operative
One Is the TACT that business has slowed
ooWn. While there has been some inn
provement in industrial ACTIVITY within
Cne last month or more, there Is no uIles-
ZION put that the volume of business is
less IMAM 1t was year ago. and mate
rally less, with the result that less
money Is required to finance trade. The
liquidation in the stock market. of
course, has been factor all along but
would not account for the increasing
ease In the money market, since Stock
exchange loans again are on the rise.
Commodity Price Drop.
The fact that commodity prices have
been In prolonged decline tends to
make money easy, because it is possible
to buy given quantity of almost anv
commodity that one can name at a
cheaper price and, therefore, with less
money than was the case year ago.
The accumulations of new capital
represented by interest and dividend
/ payments are factor. Those disburse-
ments in December, over the year end
and during January, February and
March this year were the largest ever
made for corresponding period. The
TACT that business requirements for
funds are less than formerly causes
these new accumulationS of capital to
back up, as it were. Since it is difficult
Tor them to find employment, rates of
interest necessarily go down.
The only bad feature of the credit
situation at present is the unliquid con-
dition OF member bank securities loans.
Loans by banks on securities are almost
as large as they have been at any time
Their volume was not reduced in the
slightest degree by the stock market
break last Fall. 1t still is near the
peak.
(Copyright, 1901