Evening star., 1932-05-22
Method by Which 1t Will Be
Used Is Point at
Issue.
COOPERATIVE EFFORTS
HAVE SHOWN RESULTS
But Steady Shrinkage in Values
Has Undermined Confidence
of the Public.
BY CHARLES F. SPEARE.
Special Dispatch to The Star

SpCIldl LISpdlCH 10 Inc 0tdr.
NEW YORK, May 2l.-The problem
now of the several public and private
agencies that have been set up in the
past seven months to check the processes
of defiation in securities and in COM
modities is to protect the remaining
values or equities in bonds and stocks,
to expand the credit facilities of the
banks and to cultivate a growth of con-
fidence in business communities that
are today in depressed and hopeless
mood.
All of the cooperative measures, from
the National Credit Corporation pro-
NOTED last october during the banking
crisis to that of the New York Commit
tee Of Twelve Organized at the end of
this week, have done much good in
holding together situations that were
rapidly disintegrating. None of them,
| however, has yet succeeded in perma-
nently damming up the streams of
! liquidation or starting industry on an
upward trend.
What Is needed today are results that
are positive instead of conciliatory or,
to employ the expression of Gov. Har-
rison of the New York Federal Reserve
Bank in describing the work of his
committee, to be useful afirmatively in
developing business"
Extent of Def1ation.
The deflation has carried common
stocks to a level representing only 10
to IS per cent of their 1929 prices.
Junior railroad bonds this week were
quoted at an average between 20 and
25 per cent of 1881 high figures. Bill
lions of dollars Of publicly distributed
real estate mortgages are selling from
10 to 20 cents on the dollar. The latest
report of brokers' loans indicates that
only about 5 per cent of the amount in
September, 1929 is now outstanding
The loans on securities by member
banks in the Federal Reserve System
have dropped 81 per cent from their
high of S13,205, 100000 at the peak of
the boom.
The iron and steel industry is operat-
ing at rs per cent of capacity. Current
car loadings of the railroads are a lit
tie over so per cent of normal. In the
building industry, in atsssznohile manu-
featuring and in the distribution Of
merchandise, the record is one that
conforms to the general picture of a
country whose business life is from so
TO 50 per cent of the average of the
years prior to 1890. A few commodities
have shrunk in price more than the
average for securities. Most of them
have made a better showing. Com
modities as whole, while sinking a
little from week to week, display more
f1rmness than securities and are not af-
fected like the latter by a wide distribu-
ton among investors.
Money Markets Clogged.
Some way must be found to preserve
the remaining 10 to 25 per cent of mar
ket values Of securities and to inject
into the industrial bloodstreams of the
country a powerful enough serum to
counteract the effect of commercial
neuresthenia. The money markets are
becoming as much clogged with idle
funds as were the grain elevators last
year with wheat, the Southern ware
houses with cotton and other markets
with copper, coffee and sugar. Excess
bank reserves must be made productive
rather than remain in a static condi-
ton. The leaders on whom the respon-
sibility falls for directing this move
ment must be the bankers who control
the money supplies.
1t is now obvious that the situation
cannot be brought under control with
out certain amount of imitation. The
point at issue is the method of infia-
tion and the degree of it; whether it is
to be supervised by the Federal Reserve
Board or Is to grow out of one or more
of the proposals in Congress for bond
issues directed to relief for the unem-
ployed or to the stimulation of enter
prises of a productive character. The
latter resort has been gaining converts
among those who would have been will
ing earlier TO see the imitation program
limited to Federal Reserve buying of
securities, but who now realize the in
effectiveness of this campaign.
The immediate test OF the use OF
banking funds "afflrmatively" IN devel-
oping business is of immense impor-
tance in determining the subsequent
attitude of Congress toward schemes for
more direct initiation through legalized
channels.
All Eyes on Congress.
The entire world is watching the
move that this country is making to
counteract the effects of deflation and
in working its way toward balanced
budget. Unfortunately, little progress
has been made in either direction this
week The reaction of this on foreign
sentiment is indicated in additional and
substantial shipments of gold. Confl-
dence has been further unsettled by
intimations that Congress will not COM
plete its labors and adjourn early next
month, though there are compensations
in a longer session, in which 1t is rea-
sonable to expect that number OF i'm
portant pieces of unfinished legislation
would be completed to the general ad-
vantage of the country.
The share that Congress has had IN
disturbing confidence among investors
and business men since the early part
Of March is perhaps overestimated.
While the security markets might i'm
! prove If Congress were to retire Tor
time from the center of the national
/ stage, it is doubtful if this would effect
much change in industry, whose slug
gishness is the result of deeply rooted
economic changes that are world wide
in their destruction of values.
German Problem Pressing.
AS the date of the Lausanne Confer
ence approaches there is less hope ex-
pressed here that it will arrive at a
conclusion and vote for program
sufficiently generous to relieve Germany
of her overhanging war debts. There
| Is a growing feeling in international
| banking circles that a moratorium in
| Germany will be in effect by August l..
| This has been reflected in the increased
| pressure during the week on all Ger
| man dollar obligations.
| On the other hand, the imminence Of
such a poStponement OF debts and the
deferring of interest on beth long and
short term credits has long been recog-
nized and gradually discounted both In
| the prices of securities and in the prep
arations made by creditors to adjust