Evening star., 1933-04-23
Public Has Poured Funds
Into Security Holdings Dur
ing Past Week.
CURRENCY LEGISLATION
WILL CONTROL TRENDS
Wall Street Anxiously Awaits BE.
suits Of international Conference
on Economic Policies.
BY CHARLES F. SPEARE.

Special Dispatch to The Star.
NEW YORK, April 22.-It is not pos
sible even now to comprehend the mag
nitude or the significance of the sensa-
tional events that have taken place this
week and from which the entire none
tary position of the United States may
be long Influenced.
The violent fluctuations in securities,
commodities and in the foreign ex-
changes give q clue. After all, they
represent the confused and almost
panicky state of mind Of public sud-
denly faced with set of conditions
that are intricate in their character
and not easily understood.
The ultimate trends in all kinds OF
values will be controlled nearly as
much by what develops in Congress
in the way of enactment or rejection
Of proposed currency measures. Wall
Street is also anxiously awaiting such
determination as is reached at the
Forthcoming economic conferences on
tariffs and international stabilization
Of gold
Public Psychology Changes.
We had had for some weeks the ex-
pectancy Of imitation. This had been
evidenced in commodities and IN Ger
tain typeS of securities. It Immediately
reached the proportions Of a panic
among those who were short OF COM
modities and securities when announce
ment was made on Wednesday that
this country was to abandon the gold
standard and an effort made to raise
the level of prices as a measure TO
counteract the processes OF denatlon.
The entire psychology Of the pub
lie at once changed. Instead OF hold
ing cash. which was the universal pas
sion a month ago, 1t became popular
to turn cash into securities of the
equity" types. At the same time. as
a phase of the flight of capital from
the dollar, there was a tremendous de-
mand for foreign securities issued In
dollars, which recently were considered
quite worthless, and. along with this,
eagerness to open bank accounts IN
Canada and abroad The discount on
the dollar became greater than IN the
past so years, while the exchanges OF
European countries for the. hrSt time
since revaluation after the war, rose
above their parity.
In effecting a rise in the price
level there has been immediate sue
cess in those commodities that have
the largest speculative following and
whose influence on the most vocal
groups Of inflationists Is greatest. The
producer of wheat and cotton, as we'll
as Of corn, silver and sugar, has over
night recovered a larger degree OF p,lr-
chasing power than he could have con-
templated a month ago In gradual
rise covering the remainder OF :hls
year. This helps to alleviate the dis
tai
which he was asking relief through
various measures that would not only
lift prices, but moderate his interest
charges and the principal OF his debt.
On the opposite side Of the situation
we have the consumer with a fixed
income and also obligations OF rigid
type who must pay the higher prices
for commodities out Of an inelastic
fund from wages. services or from a
return on investments.
Common Stocks in Favor.
The markets for securities have al
ready demonstrated that the sequel OF
all inflationary programs by govern
ments is to lift the prices of conmodi-
ties and common stocks and to depre-
ciate the quoted values of certain
classes of preferred stocks and bonds
Under such a condition the public in
mass rushes to buy the one and to sell
the other. It discriminates between
groups, but not between individual
members Of groups.
Naturally it chooses the common
stocks of corporations identified with
commodities that are rising. 1t also
prefers the shares of corporations re-
lated to the major industries, on the
expectation that, given an advance In
the price level of commodities, there
will be a steady expansion in the pur-
chasing power of communities. This,
in turn, is expected to be translated
into more employment and again into
more purchasing power. This class Of
common stocks is in no way regulated
as to the amount of earnings that may
be produced on it. Therefore 1t has an
advantage, under present conditions,
over the shares Of railroads and public
utilities that are limited as to return
by public regulating bodies.
The dramatic announcement that the
gold standard was to be abandoned by
the United States stunned Europe as
much as did the news from London In
the Autumn of 1891 that Great Britain
had suspended gold payments. This
action has been construed as a major
move in a campaign to take from Great
Britain the advantage she has held over
the United States in international trade
since sterling went to discount Of
nearly 80 per cent. To many. this looks
like the first move in q trade war that
will extend the period Of world depres-
sion and to modify which President
Roosevelt invited delegates from abroad
to come here and discuss measures Of
relief. 1t will probably be found, after
these conferences have been held, that
a satisfactory understanding has been
reached on the entire question and that
no devaluation race is proposed.
Favorable Developments.
Apart from the movements in securi-
ties based on imitation there have been
a number of developments this week
that might have prompted purchases on
their merit alone. The advance in the
production Of iron and steel to % per
cent of capacity was the fourth in the
past month. The unfavorable condi-
tions to growing wheat and In the
planting Of Spring wheat had . legiti-
mate effect ON wheat prices. There
were many little straws In the trade
news to indicate gradual recovery In
different lines of industry. The week
was distinctive for having had no i'm
portant dividend reductions.
(Copyright 1881