Evening star., 1933-09-24
Decline of Dollar and Bonds
Confuses and Alarms
Business.
LONGER TEST OF N. R. A.
DECLARED NECESSARY
Trade Index Shows Nearly Half
Gains Of Summer Lost, but
Greater Patience Is Urged.
BY CHARLES F. SPEARE.

| Special Dispatch to The Star.
NEW YORK, September 23.-The
outstanding developments in the fnan-
cial situation this week were the decline
| in the dollar to a discount of over one
third from parity. the arousal of
militant attitude on the part of the in
| f1ationists, a sharp decline in high
grade bonds on the presumption that
the dollar is to be officially devalued
and more rapid growth of the policy
Of interference by Government agencies
in general banking practice.
All of these factors have further con-
fused and alarmed the business world,
! with the result that trade statistics are
less favorable than a month ago, and
speculative securities including low
grade bonds as we'll as stocks, have at
times been under pressure instead OF
responding to the pronounced signs OF
an early imitation movement.
The question Of the hour refers to
the degree and method of imitation. for
| it has come to be accepted that inf1a-
| ton is inevitable. This in spite Of
| daily word from Washington that the
administration is opposed to it and
| still holds to the view that there is
| enough momentum developing to raise
| the purchasing power of the public.
The Chicago speech of Secretary Wal
| lace must have surprised some of his
associates.
Twenty Cent Cotton Demanded.
Actually the commodity average this
| week was the highest of the year. This,
however, does not impress the cotton
growers. They now are insisting that
| they should have a minimum Of 20
cents a pound on the farm, or double
the existing price, and that the Presi-
rent should take immediate steps for
'the imitation or expansion OF the cur
rency." The wheat and corn producers
have been more moderate in their ex-
pressions. On the imitation talk May
wheat had advanced above dollar .
bushel.
In some quarters it is believed that
devaluation of the dollar will be &C
complished within another month. Will
it be a 60-cent or a 50-cent dollar?
And will either be the final point of
| stabiliZation? The fear is that it will
not
Perhaps the orthodox bankers and
| economists are following too closely
the distant past and fairly recent his
tory of imitation in preparing their
arguments against it, for each era
1 AAoso ITO SoA1RC4AootAAS ClCAllClito. NoLA2Ap
| it Is important to remember that infla-
ton has way of raising prices much
faster than wages dn the Civil War
| period living costs rose three times
| faSter). that the price advance outlasts
the wage gain. that it wipes out the
| savings of muititudes of thrifty people
whose purchasing power Is reduced
close to zero and that its effects run
through every phase of domestic and
foreign trade.
What is it that the French and
German people today most fear? In
| f1ation. of course. They had their fill
of it some years ago and it is to them
still a nightmare. 1t has frequently
been compelled by a selfish minority
who were powerful enough politically to
override an unorganized majority.
| Bankers Show Resentment.
avoid use of the contingent currency
| expansion program. voted by Congress,
/ Is that of supplying the banks with
abundant credit. which many of them
! now have. SO that they resent the effort
| to force them to issue preferred stock
| and Of loaning at low rates of interest
and on collateral which national bank
examiners are declaring to be of doubt
| full value. 1t is not too much to say
| eAiot llNIC ID SlONJy uckSlOpulR
| hitherto passive bankers a spirit of
resistance and resentment against the
activities Of the Reconstruction Finance
| Corporation and that they are now
In mood to oppose. rather than &C
cept, the terms of this body The in
| depreciation of good banking practice"
which the Federal Reserve Board NAV
have set up is being overthrown by
the judgment Of the Reconstruction
Finance Corporation. The viewpoint
of the one on loans that are SLOW"
Is diametrically opposed to the other.
1t appears. however. that the bank
ing philosophy of the Reconstruction
Finance Corporation is more in ac-
cord today with the administration
ideas than is that of the Federal Re-
serve. For this reason and because of
the short time In which examinations
can be made, there will be much leni-
ency toward weak banks when they
apply for admission to the Deposit
Guarantee Corporation
The extent to which the r. F. c.
is prepared to grant loans to banks,
as we'll as to other lenders, and to
take the part of thei legitimate and
also the irresponsible borrower, raises
the question as to how and with what
success 1t will provide the money to
cover all Of its requirements This
Is important in connection with long
term Government credits, which have
shown a disposition to ease this week
On the other hand. short Treasury
paper has been sold at the lowest
rates of the year.
Trade Index Declines.
The business index, which shot up
sharply from the end of March to
about the first Of August has declined
until nearly half of the Summer re-
covery has been lost. It is significant
that the reaction began soon after
the first codes were adopted and the
processing tax made effective. This
does not mean that these initial steps
In the N. r. A. program were hurtful
to business, rather that they COIN
cided with completion of the first buy
ing waves by both the wholesaler and
the individual consumer, who put their
capital reserves to work as soon as 1t
became apparent that prices were to
advance. The subsequent increase III
pay rolls and in employment has not
produced q purchasing power eQuiva-
lent to the early one
Meanwhile, the timidity Of the un-
employed and the numerically large
element who live on dividends, interest
or rents has increased as the empha-
sis on imitation in one form or an
figures Of unemployment compiled by
the Department of Labor indicate that
1900 600 persons have been restored to
their. Jobs since March This Govern
ment agency, however, places the roll
(coqtinued on Second Pase.)