Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-07-12
REACTION IN STOCK
MARKETS BELIEVED
TO Be TEMPORARY
Prospects Declared Brighter,
Despite Setbacks During the
Week-Tone Improved.
LIQUIDATION MOVEMENT
PROBABLY COMPLETED
Nations Business Has Been Laying
Sound Basis for an Early
Recovery.
BY CHARLES F. SPEARE.

NEW YORK, July 11.-Even though
the stock market this week hesitated
and then reacted on the continued
heavy Withdrawals from the Reichsbank,
its setback was of minor proportions
and there is every reason to believe
that 1t has been rescued from the pros
pect of another slump in July or August.
which would violate the low levels Of
last month.
The improvement in the Reichsbank' S
reserve ratio this week. the diminish
ing demand for foreign exchange at
Berlin and the strengthening of both
stock and bond markets here near the
week end are evidences Of the worlds
faith in GermanyS ability to secure
sufficient rediscount credits to support
the mark and. in the long view, pull
herself out of the present troublous
condition. The market, therefore, must
now deal for a time with domestic
factors, such as unfavorable corpora
ton statements covering the second
quarter of the year and with the in
evitable reduction and omission of divi-
dends. These will have their influence
on speculative sentiment and on the
attitude of investors, though not so
positively as If they were still associated
with crisis abroad such as was brew
ing when the reports OF the first three
months of 1881 were published. Be-
fore the debt holiday" was proposed
the business mind of the country had
already swung from fear to conf
dence" In the signs of steadiness il.
securities and in commodities, a better
psychology had been created. All this
would have changed. however, had the
momentum of run on German credit
not been checked
Time to Move Forward.
1t is now time to begin to go ahead;
to think in terms of what is to be
rather than in those of what has been.
Sufficient adjustment has been made
to the overexpansion in industry, in
agriculture, in the output and the in
f1ation of securities and to personal
extravagances to bring the business and
investment situation back to a sound
basis. Certainly there has been enough
liquidation to restore the confidence Of
those who are considering the purchase
of stocks and bonds, commodities or
merchandise, or who are of a mind to
re-establish enterprises that have lain
dormant for year and a half.
If one does not believe that liquida-
ton has run its course and thinks that
further shrinkages should occur before
the economic structure Is in sound
health, let him consider the following
facts:
The general business index has fallen
over so per cent since October. 1929
representing one of the sharpest de-
clines on record, and has only recently
touched its low point.
Prices Of listed securities have con-
tracted between so and IS per cent
from the 1929 level. eliminating at
least $45,000,000, 900 of what may have
been regarded as fictitious values.
Commodities have declined in the
past two years an average of 81 per
cent and are close to the pre-war level.
Brokers loans have decreased nearly
80 per cent.
There has been a contraction of over
one-third In the volume of bank
clearings.
More than 1000 banking institutions
have failed and nearly 10000 CONNER
clal 1nsolvencies have occurred during
this depression
Over 1000 corporation dividends have
been reduced or passed.
Railroad earnings have decreased
about IS per cent in that item from
which interest and dividends are paid
Actual Wages Reduced.
1t might be argued that while this
is all true and seems to be a sufficient
cure for the excuses of the past, there
has been too little liquidation of wages
and not sufficient writing down Of
losses which are quite visible in COM
modities, merchandise, securities and
real estate.
Union wages, per Sc, have not been
reduced. Actually the pay envelope of
organized, as we'll as unorganized labor.
has been thin relative to its fairness
from 1925 to 1880. The 100000 to
5000 900 unemployed do not complete
the record of these who are victims of
the indu 5trial and financial setback
There are as many more who are work.
ing few hours day or a few hours
a week, not infrequently at a lower
wage scale than formerly to exc out
enough for bare necessities. Surely
they have experienced wage liquidation
In its bitterest sense. From September.
pay roll fell nearly 40 per cent
The individual who, through industry
and thrift. has created a competence
to relieve himself of public care when
he can no longer labor on, has also
had his rightful wages liquidated in the
loss Of dividends, interest, rents and
the lowering of rates on money on de-
pojlt. His position Is entitled to Just
as much consideration as that CT the
man who is still working to obtain eco
nomic independence.
Adjustment in Commodities.
Commodities have been quite gen.
orally reduced to the market level and
do not constitute the problem with
banks and merchants that they did in
the 1921 panic. The present depres-
sion has been conspicuous for an alb
sence OF large mercantile failures.
though significant for : the increasing
number of middlemen who have been
forced out of business This is one
CT the beneficial aspects of the adjust
ment.
The pricing of merchandise at re-
tail to the recognized parity with COM
modities and wholesale values had been
resisted through 1880. Latterly it has
been recognized that in order to move
goods there must be substantial con-
ceSsionS to buyers.
Copyright. 1917