Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-08-30
Action of Market in Face of
British Crisis Is Held
Encouraging.
LIQUIDATING MOVEMENT
is BELIEVED COMPLETE
Commodity Prices Escape Further
Relapse-Retail Prospects De-
clared Much Brighter.
BY CHARLES F. sPEARE.


| Special Dispatch to The Star.
NEW YORK, August 2e-In the past
three months nearly every week has de-
veloped some crisis In the domestic or
| international credit and political situa-
| ton. Yet the average price of stocks
| stands today well above the low level
OF June
It cannot be said that such events as
the great losses of the Creditanstaldt of
Vienna, the suspension Of payments by
leading institutions in Germany and
/ threat OF a total collapse Of banking
, facilities throughout that country. NOR
| atoria In South America and finally,
| the national emergency In Great Brit
ain, had been discounted In the quo
tation for speculative and investment
securities prevailing in the Spring. None
Of them had enteied into the calcu-
lations OF Wall Street. Together they
were infinitely more serious than many
of the troubles over which owners OF
stocks had been mourning for a year
! This is further evidence that the mar
ket has been liquidated. 1t has stood
above the June range longer than most
critics had expected and under circum-
| stances that the most pessin1istic would
not have considered possible q few
months ago.
Sterling Given Support.
Next to the dissolution Of United
States credit, nothing could so alarm
the banking world as an intimation
that the pound sterling might suffer
serious depreciation. Such q suggestion
| was conveyed in the statement of Pre-
rnier Macdonald on Monday, when he
said that the commerce and well-being.
Nf f4n hf1f af
a large part OF the civilized world, has
| been built up and rests upon the we'll
| founded confidence In sterling" There
| has been a sentimental OF traditional
premium on sterling which has not
been altogether warranted the past year
/; IntrinSically the dollar and the franc
ale pre-eminent. The sacredneSs of
sterling, however, in the eyes Of those
who have an international viewpoint
and knowledge of the ramiflcations OF
British trade compelled the political
move which has made OF Ramsay Mac
Donald the sort Of patriot that the
world now needs and has exposed the
selfishness Of party politics in q ma
tional crisis
Great Britain has again turned to the
United States and to France for credit
assistance II the lenders have infer
red that they would be more liberal in
their terms If q borrower that had been
reckless with his income were to turn
over a new leaf and practice economy,
their attitude would be the same as in
accommodations granted TO individuals.
After all, there Is no sound reaSon why
q government that dissipates its re-
sources, either criminally or carelessly,
should expect preferred treatment when
its national balance sheet clearly DEM
onstrates that 1t is "a poor loan" Had
more attention been given to the set-up
Of government finances, along with in
vestigation Of the habits Of political
leaders, a portion of the losses incurred
BY American investors in Latin Amer
lean dollar bonds might have been
avoided For the first time In many
years those who have capital to furnish
distressed nations are getting down to
the brass tacks" Of the matter and
throwing sentiment and tradition over
board.
Clash on Dole Coming.
This attitude makes it possible for
those who find political advantage in
doing so to emphasize the evils of the
capitalistic system and to stir up class
hatredS. The manifesto of the British
Labor party contained the statement
that Great Britain, under pressure
from international and national finan-
cial interests is to take the lead In a
process of worldwide degradation.
There is no doubt that there will be an
echo of this in Congress next Winter,
where the attempt to force some sort of
, dole" onto the statute books viii be
stimulated or checked by what hap
pens in the British Parliament in the
next few weeks.
check on government and municipal
expenditures here and abroad is now
taking place. When borrowing is made
difncult, ways are found to meet ex-
penses without increasing capital LA
bilities. Loans to all sorts of political
, divisions have been extravagant. Taxes
have. in consequence. reached the point
where payments were only possible
through sacrifice Of property or by the
liquidation Of securities, and societies
for the reduction Of taxes were being
formed. This involves doses of bitter
medicine to thousands who have lived
on easy life at the public expense. 1t
Ii part of the liquidation and defiation
required to return general credit TO q
sound basis.
Rail Bonds Depressed.
The unreasonable panic in second
rate railroad bonds has brought them
this week to the lowest average since
1924, coincident with prices for well
considered railroad stocks unequaled In
a decade. Liquidation in junior mort
cages seems to have run its course, as
the maximum possibilities identified
with their legal status have been con-
sidered and discounted. It is unfor-
tunate that so many unseasoned rail
bonds as, for instance, st. Louis San
Francisco consolidated 412s. st. Louis
Southwestern first terminal SIS, Nickel
Plate refunding 5l2s, Southern Rail-
way 6l2s, Texas Pacific refunding rs
and Wabash refunding 5ias should have
been admitted to the legal list two years
ago on the wave Of their first real pros
| perity. 1t would be of advantage to in
/ stitutions TO limit the legal bonds to
those that can experience one serious
| depression without danger of default
and give TO others that pass the test
longer period than IL months in which
| to meet legal requirements.
/ We hazard the opinion that very few
| issues now officially legal win be re-
moved from the preferred group, also
that most of the bonds now so much
deprecated viii show appreciation In
/ the next few years similar to that tax
| ing place between 1922 and 1929 We
have heard the presidents Of two large
systems make similar statements In re-
cent months, namely, when business
| returns to normal the trafflc of the rail-
reads win also return to normal"
Not only In Wall Street operations,