Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-09-27
MARKETS
WAIVER AS BRITAIN
DROPS GOLD BASIS
Stock Prices Reflect Unset
Element Caused by Shifting
Credit Conditions.
FOUNDATION BEING LAID
FOR RECOVERY IN TRADE
Wage Cuts Are Offset by Decline
in the Cost Of
Living.
By CHARLES r. sPEARE.

NEW YORK, September 26.--world
conditions, bringing to climax long
pending situations in international
banking and In industry, have produced
this week greater unsettlement and be-
wilderment In markets than in any Pc
Rod of the past two years. They have
produced days of panic in stocks and
in bonds, confusion in the foreign ex-
changes and serious financial disturb
anceS here and abroad.
When the markets closed week ago
it was the spread between demand
sterling and futures that caused most
uneasiness In banking circles. The ex-
PLANTATION Of this was forthcoming in
the astonishing news Monday morning
that Great Britain had suspended gold
payments for a period Of six months.
Collateral to this was an advance in
the Bank of England rate OF discount
to 6 per cent, level nearly as high as
in the Autumn of 1929, when London
was trying to protect her money sup
plies from the American raid. All of
the important stock exchanges in Eu-
rope, except Paris, closed to protect
themselves against the anticipated flood
Of liquidation from investors frightened
by the protective measure that took
from London overnight her title as the
banking center of the world.
Burden on New York.
This general suspension OF trading
facilities abroad threw the burden en-
tirely on New York. It was a grave
question Monday morning whether the
change should, for the time being, per-
NIT transactions in securities. Their
vote to open as usual was at the request
of the Federal Reserve and the New
York banking interests. To 1t was at
tached the unusual prohibition against
short selling, which was not lifted until
Wednesday. In this the New York
Stock Exchange has officially gone on
record as agreeing that there are times
lie interest to allow the freebooters Of
Wall Street to run anuck and when
the sanctity Of free market" may be
ignored.
1t is an undisputed fact that In the
midst of the terrifying liquidation on
Thursday there was promiscuous short
selling which had the same effect on
holders Of securities as cry Of "Fire"
on theater audience already on the
border of panic. These episodes have
brought the ethical and the practical
phases Of short selling more concretely
before the public than ever before. They
have produced among Wall Street peo-
pie a sharper division of opinion than
in the past and one that will be heard
from more in the future.
There Is a considerable body Of
opinion believing that the policy of
Great Britain In finally accepting the
facts of her internal situation and
adopting a drastic plan to meet it, and
the wage cut of the United States Steel
Corporation and others in the same in
dustry will, in the end, bring about
quicker and more permanent improve
ment in domestic and international
trade than could have been built up
on a temporizing policy toward these
situations. They exhibit the initia-
tive and courage that have been absent
for so long and have replaced the pas
sivenesS and stupor that seemed to
prevail throughout the business and
banking world.
It is obvious that they project new
and ursettling factors into the situa-
ton for the time being and that the
difficulty of estimating their effects
and the readjustments growing out of
them temporarily increases the uncer-
tainty where foreign trade is considered
and dollar investments are at stake.
1t is such events as these that have
been reflected and largely discounted
in the price levels to which a majority
of dividend paying American stocks and
interest bearing American bonds have
been reduced.
When the tradition that the pound
sterling and the Bank Of England rep
resent par in the world credit was
shattered on Monday, new era in
international banking affairs was en-
tered. Echoes of 1t have already been
heard around the world. Other coun-
tries in Europe, as Sweden and Den
mark, quickly raised their rediscount
rates and placed embargoes on the ex-
port Of gold The sterling rate has
now declined a maximum of 80 per
cent; no man today knows where Il
will eventually be stabilized. Soand
banking, shorn of sentiment and Of
national pride, will desire revaluation
of the pound at level TO which it
goes of its own accord. This may be
in the neighborhood of the current
rate of 3.50a3.75 or nearer the quo
tation of 3.18 reached 10 years ago.
Continental Europe and in South
America, may be disposed to go of the
gold basis. There is, however, no such
program under consideration by credit
or nations, such as the United States
and France in spite Of the high proper
ton of the worlds gold which they
possess. The effect on commodity
Oh I1CW olCudOlOH Will De
toward imitation, more abroad than
here This is one of the presumed
requisites of an industrial recovery.
The American importer has certain
distinct advantages In the new situation
He should be able to buy at enough
discount from recent prices to permit
the consumer here to share in his in
creased profits. The position of the
exporter is not so good. 1t is Of interest
that the August trade figures showed
larger volume of imports for the
month than Of exports.
Wage Reductions.
Tbs falling profits of American BUSH
ness have been reflected this week in
numerous dividend reductions and in
the readjustment of salaries and wages
to the declining item of net income
The stakeholder had to take the first
cut made when it was evident that the
country's business ills could not be
cured in a few months. Then the
salaried classes were asked to make
their sacrifices. They have done SO to
a degree and on a scale that has left
its impress on the majority of American
families. The farmer has had his profits
taken from lin in the fall of the COM
modities which he produces and has
not been compensated by an equal
decline In the goods he buys. The only
class that has had organized protection
from any change downward in the wage
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