Evening star., 1932-12-11
UnfavorabIe Business News
Makes Little Impression
on Price List.
.DEFLATION CONTINUES
ON COURSE EL LSEWHERE
Seasonal Dizziness in Industry
Marked by Additional Reduc-
ton in Dividends.
BY CHARLES F. SPEARE.

NEW YORK, December 10.-The out
fact in the market situation
this week is that stocks have been thor
oughly liquidated. One event after
another of a nature that ordinarily
would disturb investors has left little
on the price list. This ap-
pears to have reached state of i'm
munity to bad news.
1t does not follow that securities are
approaching a period when they will
move forward to any extent, as there
be dealt with and solved before the
courage Of investors is sufficiently re-
established to give expression to this
in the market-place.
On the other hand, while liquidation
may have been completed in stocks,
there are many evidences of deflation
elsewhere. 1t is this situation that
provokes the most serious discussions
of how to meet the condition in which
governments and private debtors find
themselves at the end of three-year
period of depression. The foreign debt
issue Is only part of the general dis
tress created by an inability to carry
the charges of obligations incurred dur
ing the war, in the era of land infia-
tion and commodity price advances soon
after the war and in the speculative
craze that reached its climax in 1924.
Two Remedies Open.
The issue now is between continued
artificial support of damaged credit or
return to the old-fashioned method
Of curing depression through the proc
ess of receivership and reorganiza-
ticns. Each plan has its advocates.
The one school of opinion adheres to
tine policy that the status quo of in
stitutionS and corporations should be
maintained until an automatic recovery
in industry permits both to rely on
their own earning power and resources.
It would have the Reconstruction FL
nance Corporation or other Govern
ment agencies continue to lend their
funds to insecure banks and to rail-
roads that, without 1t, could not meet
their fixed charges, as well as to pro-
vide means for employment through
Ioens to States and municipalities and
for -liquidating public works.
The contrary view Is that the tina
has come when we should face realities
and deal with individual situations
from the standpoint of their inherent
worth, and, if they are found to be in
capable over period Of years of justi-
flying their present status, to use the
surgeons knife rather than to provide
them with a stimulent.
Artificial conditions that have exist
ed tor the last two years in different
quarters are gradually breaking down.
This is more visible in the field of
urban real estate and in that of farm
mortgages than elsewhere. Rents that
were for long time held up to rela-
ton with 1928 and 1929 property VAL
ues are being, from necessity, adjusted
fA fha Nff - -
There has been some progress in de-
flating the tax rate, though not so
much as will be made in the next year
after property owners in every part OF
the land have had something to say
about their local budgets
Wages and salaries of those still en-
ployed, with the exception of the great
army of civil servants, have been re-
duced as far as they can be, and Fed
eral and State and municipal employees
are about to experience a part of the
wage deflation that long ago struck all
others. What was said to be impossible
in Washington and in New York be-
fore the election is now proclaimed as
feasible and necessary.
Debts Revision Next.
The next step that must be taken is
toward a revision of debts and a re-
duction in the carrying charges Of
these debts
The time has come to meet these
unpleasant facts squarely. 1t makes
no difference whether debts were in
CURED by war: by the injudicious pur-
chase of farm lands at extravagant
prices; by the promotion of real estate
in an era of inflated values; by the ac-
quisition of railroad, industrial or pub
lie utility properties or extensions to
them at high prices or high cost; or in
an accumulation of securities near the
high average of the new era" period.
1t Is beyond the capacity of a world,
facing an extremely slow recovery in
earning power, to make it's normal
business commitments while staggering
under such load of debt and having
less than half its ordinary income to
meet the service of it.
The attempt to effect some compen-
Sation tor this condition through in
flation has not been successful, inso-
far as it was practiced by the Federal
Reserve Board, nor is it likely to be in
any other form. All that the purchase
of over $l,000,000,000 of Government
securities by the Federal Reserve ac-
comphshed was to further deflate in
terest rates for what might be termed
Street money" The average borrower
has had practically no benefit from it.
1t has resulted in driving the banks
into the market for short-term Gov
eminent securities, on which there Is
only nominal return, and in permit
ting the Reconstruction Finance Cor
poration to secure funds at about one
half the cost which it charges its
borrowers. 1t has not protected COM
modities against the influences of abb
normal supplies or from a return to
approximately their former low average
price, after the period had arrived
when the inflationary policy of the
Federal Reserve had reached the ex-
pected phase of greatest effectiveness.
1t remains to be seen what reaction on
commodities and on our foreign trade
will come out of the enforced paw
ments by Great Britain and France of
their December Is quotas.
Industrial conditions this week re-
nect the usual dullneSS of the season.
There has been another decline In the
rate OF iron and steel operations. The
first definite downward trend In the
output OF electric power since the end
OF August has also taken place. With
some systems railroad car loadings have
improved; with others there has been
decrease. The excellent record Of the
carriers with respect to their October
net operating income Is not likely to be
duplicated in the November figures or
in those for December. Automobile
production as whole has shown some
gain. owing to the activity of a few
manufacturers, though some part Of
this Is at q decided concession In prices.
(CopyriRhk. lna2l