Evening star., 1932-08-08
STOCK PRICE RISE
DECLARED NORMAL
Slow and Certain Recovery
in Conditions Seen
From Now On.
BY MARK SULLIVAN.

The most authoritative sources of
financial opinion in the Government,
and the most authoritative in Wall
Street, are in agreement to striking
degree about the rise in prices of goods
and securities that has taken place
during the past week. Both belleVe
that what has happened so far is nor
NAL and justified. Both agree in smll-
ing at or soberly deploring the eXtraVa-
CANT optimism that has risen as re-
spects the immediate future. A char
acteristic opinion says that what has
happened so far is the natural rebound
from a condition of extreme panic to
condition of normal depression. In
putting it that way there is touch
of deliberate humor The intention is
to emphasize that the country is not
out of the depression, nor markedly on
the way out yet. There is complete
confidence that the setting for recov-
cry is here, and that the beginning of
There is also, however. general con-
victi0n that the recovery cannot pos
sibly take place at any such rapid pace
as has prevailed the past week.
Slow Recovery Seen.
The one point about which there Is
absolute certainty of Judgment is that
there can be no more of those acute
panics, of which we have had four
major ones since October, 1929. There
will be no more shocks. What should
normally take place now is slow re-
coVery.
The financial events Of the past eight
weeks can be regarded as beginning in
May and early June with a panic state
Of IND in, al IJnItR6
States. Europe thought fer a few weeks,
grotesque as it may seem, that the
American fiscal system was about to
smash She withdrew all the gold she
had any title to take from US; She col
1ected, in effect, all the oeots Que her
from Americans, Europe having done
that, then concluded that in nervous
world the United States is, on the whole,
the safest place to keep money. Since
the middle of July, gold and money
have been coming back to America.
That is the first of several causes OF
the change in conditions here. A sec
ond is the complete buttressing of our
credit structure by the Reconstruction
Finance Corporation and other emerg-
ency relief institutions set up by Con-
greSs upon the Presidents request. A
third cause is realization by business
and financial leaders that the panic is
over. and steps taken by them to 60 for
ward with business Some of these have
yet I'D organized machinery to speed re-
covery.
\ Credit Reiterated.
The sum of many causes is that credit
Is being re-created in considerable guam
titles. Destruction of billions of dol
lars in credit was caused by the three
years of depression and falling prices.
Destruction of credit has been, indeed,
the thing that the depression consisted
of. That credit is now being created
anew. In part it is deliberately fostered
by the Federal Reserve system. In part
it is a natural result of the only thing
that can really create credit, which Is
confidence.
This new confidence. and the credit
that arises from it, brings about higher
prices for goods of all kinds and for
securities. The prices of farm crops and
ether goods was in June at panic level.
They are now creeping back to level
which is higher, but which should still
be fairly low because it should be con-
sistent with the present state OF active
business 1t Is possible for prices OF
goods to go still higher.
What happens in such periods as the
past month is a complete reversal OF
business psychology. The panic state OF
mind is one Of fear that prices will go
lower Consequently no one buys. That
is succeeded some time, perhaps already.
by a fear that prices will go much
higher. That causes buying, Something
like that may be here or Immediately
ahead of U.S. If it should go too far it
would be unwholesome Both Washing
ton and New York would deplore
runaway market in commodities. Both
Washington and New York feel and
know that business has not improved in
the sense of increase of volume Of
manufacturing Both know that in
creased earnings have not actually be-
gun. Both are confident these increases
of volume and profits and employment
are ahead of us. Both think the period
of recovery must be gradual.
After all is said that prudence and
caution dictate. the fact remains that
a red-letter thing has happened De-
Spair and fear have gone. In the judg-
ment of competent authorities their 60
ing is 1inal. Hardly any people has ever
had to endure. even m war time, SO pro-
longed a period of sfrOcks that breed
fear. The ending Of that is news
event of major importance. IN our new
cheerfulness there should be mixture
of patience, because there is ahead of
us much cleaning up Of wreckage, much
laborious reconstruction.