Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-07-19

per cent bonds were at about the
same discount as German rs today.
French 1nunicipalS were only slightly
better than German city bonds at the
moment.
Perhaps the two periods are not right
~ comparable. Germany has bsen a
debtor for seven years and France, in
the five years since her currency was
debated, has been gaining in power at
G:rmany's expense. Inherently Ger
many has the greater vitality, with
larger human resources, more energy
and greater mechanical and scientific
skill. It is fair presumption that her
government issues will in time respond
to these facts. There is nothing in her
situation that warrants 10 to II per
cent basis for the bonds of her best
corporations and cities.
Effects on World Trade.
Until the difficulties facing Germany
are overcome and the threat Of another
break in the line of financial defense is
, removed, there will be a hating move
ment in trade here and elsewhere. In
spite of the withdrawal of credits from
Germany, there is a substantial total
now being carried in the portfolios OF
| American banks. These, like those re-
| manning in Austria and Holland, must
be extended for considerable periods
This will exercise certain amount OF
| caution in the granting Of domestic ac-
commodations. What is feared most OF
all Is the radical political consequences
of dislocation of German finances, not
only in Germany. but in all Central
Europe. and the effect here OF a pro-
| longation of the term of excessive I'M
| employment.
Germany was nominally of the gold
basis, with thu ReichSmark selling much
| under parity while the franc scared and
sterling dropped to the lowest since
1925 Toward the end of the week. 1t
is true conditions we're much better
in the foreign exchange market. But 1t
was testimony to the well liquidated po-
sition here in securities and in COM
modities that such revolutionary condi-
tons in the international banking sit
u3tion should have caused relatively
small decline in prices. This may b.
created in part to the action of the
New York Stock Exchange relative to
short selling and to President Hoovar'S
appeal to the patriotism of those who
have ben depressing wheat. That the
international situation has deferred the
recovery that was promised two weeks
ago is unfortunately true.
Hearings before the Interstate Com
m rec Commission this week on the Is
per cent freight rate petition have so
far produced stronger evidence in be-
half of an advance than in favor of the
status quo. The difficulty in this case
as in that of Germany, is that what
may be done to help ease the strain may
come too late to have full value. The
net operating income of class l carriers
Tor the five months to May 81 was "a
per cent below that Of the none-too-
good year 1890 This ratio will not b.
improved by the June earnings, which
are to appear next week. The railroads
are not earning, nor will they earn this
year, much over 40 per cent Of the 534
per cent on property investment per-
mitted by Law. The commission is less
likely. as a body, to accept the arsu-
ments Of professional and persistent agi-
tators for lower rates and Of those who
secretly favor Government ownership
than to carry out the provisions Of the
transportation act. which Congress put
into its hands 10 years ago TO make
effective.
tCopyrisht, 1917