Evening star., 1933-04-02
DefIation Process Is Re.
sumed After Recent Ma
tionaI Bank Holiday.
WALL STREET AWAITING
GOVERNMENT PROGRAM
Decline in Money Rates Is Expect.
ed to Aid in Treasury Finan-
cling Plans.
BY CHARLES F. SPEARE.

Special Dispatch to The Star
NEW YORK, April 1.-The fast-mov-
ing picture of events in Washington
makes the average business man dizzy.
While eager to subscribe to every new
law or regulation that will benefit him
individually or the country as a whole,
there is so much he cannot comprehend
/ that he is unwilling to make new COM
mitments until clearer interpretations
are available
Consequently, trading in securities
has fallen back to the low volume of
January and there is prevailing dipo-
sition to let things drift.
Partly responsible for this is the fact
that we are still going through the proc
esses of deflation. This has been en-
phasized since the bank holiday. New
words have come into the vocabulary of
business; old ones are being given fresh
prominence. "Conservator," "rehabili-
tator" and "co-ordinator" or dictator"
now all have a connotation with en-
forced economies, or, in other words,
with further def1ation.
Incomes Further Reduced.
The process Of deflation is going on
in other directions and at great cost to
those whom it involves. One of the
features of proposed farm relief bill
Is the shaving down not only Of the
principal, but the interest on farm
mortgages. There is practically mora
torium on the payment of interest on
guaranteed real estate mortgages in
Greater New York and either cessa-
nr iv, int rocf
on mortgages elsewhere.
Altogether this involves incomes run
ming into hundreds of millions of dol
lars a year that had been quite i'm
mune from the effects of the depression
until year ago, but which, in the last
six months, and especially since the
first OF this year, have been suffering q
rapid reduction. Obviously this curtails
the buying power of considerable body
Of large and small investors. At the
same time there is continuation and
recently an increase, of the corporation
policy of omitting dividends in order to
conserve resources. In this movement
the banks Of the country have this
month been rapidly falling into line
There Is quite general satisfaction
with the progress that has been made
in re-establishing the banks of the
country on a firm foundation. While
there are several States in which the
proportion of closed banks or banks
operating under restrictions is high in
comparison with institutions that are
solvent, the percentage of bank assets
still unavailable to depositors is reIa-
lively small. The recent banking episode,
however, has made for a spirit of gen.
eral caution. This is reflected both in
retail and wholesale credit and in low
volume of collections.
Unsettlement in Europe.
A broad survey of the situation must
include the present political conditions
abroad, for these are closely related
to any change that may come in foreign
trade. Germany occupies the center
OF the European stage. The per-
formance which the Nazis are putting
on has been responsible this week for
heavy liquidation in German dollar
bonds, which have lost all Of the gain
made few months ago. Holders of
these bonds are adjusting their minds
to scaling down of interest pay
mentS and to some defaults.
1t is gradually becoming more evi-
dent that such recovery as takes place
in this country must grow out of the
attention that the American people give
for the present to their own affairs, for
with continental Europe in such a
chaotic condition politically many
months must elapse before there can
be anything like normal flow of inter-
national trade.
Under the circumstances, markets for
securities have exhibited a great deal of
stamina. With all of its depressing ef-
fects, the month of March produced a
moderate net gain in stocks and small
average advance in bonds. Money rates
are gradually declining, giving
stronger basis on which to build case
for long-term issue of Government
obligations. This should be promoted
at the earliest possible moment. The
public is now in a mood to follow the
lead of the administration in any
mover.nt to strengthen its hand, while
at rne same time gaining possession
Of the best security that the world
offers at an attractive rate of interest.
Copyright, 1889