Evening star., 1934-01-21
Greenback Fears Banished.
Business More Able to
Gauge Future.
MARKETS AND TRADE
RESPOND VIGOROUSLY
Effect Clearer on Domestic Outlook
Than on Foreign Currencies.
British Pact Likely.
BY CHARLES F. SPEARE.


NEW YORK, January 20-with the
by President Roosevelt this
week Of his new monetary policy, the
country has entered enother phase in
the effort to promote recovery. It
knows now that there is to be no infla-
ton Of the sort that had been feared
no greenbacks are to be issued It
has at last measure of the dollar and
can make contracts and commitments
that it refused to enter into before the
so and so cent limits were established.
This already has created more conf
dence.
To this healthier mood trade and
markets have vigorously responded.
has touched the highest point since last
September. 1t is more than 20 points
above the low of October.
There has been a remarkable rise in
corporation bonds. In the last fort
night they have advanced an average
Of points. In special groups the gain
has been more pronounced. A list OF
10 medium grade railroad mortgages
shows an average improvement OF over
Z points, while II unlisted public util-
ity refunding and debenture bonds are
up from to IA points and average
IL points above the prices Of the first
week Of January Government bonds
have been steadier; municipals are ris-
ing.
Public Sentiment Improves.
Confidence is essential to any Gov
ernment undertaking. AS it grows the
resistance to recovery decreases. Eco
nomists now claim that confidence
alone cannot pull us out Of our trou-
bles, that the expansion in business
now apparent may be only ephemeraI
and will disappear when the Treasury
abandcns its spending program and be-
gins to consider measures for actually
balancing the national budget.
To recapture the imagination OF the
public and to turn it in the direction
of employing its resources and its wit
for constructive purposes is an achieve
ment for which the administra-
ton should have credit and from
which it should henceforth realize
abundantly. Lacking this confidence.
all measures for relief in 1881 and in
1882 fell fiat.
The domestic outlook seems clearer,
as a result of the stabilization and re-
valuation program. than that identt-
fed with international money affairs.
A stop to the decline in the dollar has
been placed at half its old value. Prices
are rising slowly The cost of living
has not yet burdened the public that
prospers on wages, salaries or fixed
incomes. Food is slightly lower than IN
November.
Effect on Foreign Currencies.
It is not improbable that the drain
Of gold from France may require that
country again to revalue the franc.
Great Britain took the devaluation here
at first because it has not
vet been a disturber of her trade, but
later her currency became agitated
by it.
1t is reasonable to expect that some
time in the near future an agreement
will be reached between the Bank OF
England officials and the financial
heads of our Government to avoid the
in England and in the
United States Of a clash between two
exchange equalization funds with joint
resources of nearly 81 1000, 600 600.
other aspects of the new monetary situ-
alton are the proposals Of Japan to
meet the effect of cheaper dollar by
depreciating the yen and the reported
intention of Canada to reduce the gold
content of her dollar 1t will be seen,
therefore. that the echo Of Mondays
money policy has been heard around
the world.
The use of about half of the profit on
gold taken from the Federal Reserve
Banks by the Government to protect
exchange and Treasury issues implies a
market in the latter that will encollr-
age both the banks and the public to
buy them as they are offered in the
next five months. The first intimation
Of the effect on them Of the revolution
Of the dollar will come next week in the
issue of SIPS 900 900 Of 91-day Treasury
bills
The cash balance of the Treasury is
today lower than it has been for
1t requires upbuilding to meet
the increasing drafts on it from the
many Government spending agencies.
This can only be accomplished by the
early sale of a round amount OF Treas
ury paper, say $1,000, 10000.
Rates Likely TO Harden.
Money rates are likely to harden as
the season advances, due not only to
the absorption of bank funds by the
Treasury, but to an increase in corpora
ton requirements From an interest
therefore, the Government
Is in better position to borrow now
than later. 1t has the further advan-
tage of an unfit in public confidence.
Recovery has been quickened by the
rising equities of holders Of securities.
prominent among which are the banks.
Their investment portfolios have sub
enhanced since the first OF the
year In some cases this has been suf-
ncient to lower the requirements for
new capital from the r. F. c., whereas
surplus was small and old capital NAV
securities, the subsequent appreciation
n the portfolio changed the complexion
,f the account.
Nearly all classes Of stocks have taken
part in the advance. the rails and public
Utilities as well as the industrials. With
he exception of very high-grade corpo-
-ation bonds, which are on competi-
i've basis as to yield with Governments
aand other tax-exempt issues, nearly
Ill mortgage and debentures have been
ouoyant.
It will be found on investigation that
he motive for purchasing members
from each group is that of prospectively
higher earnings. though there are still
those among the orthodox who are
regulating their investment affairs on
the expectation that initiation cannot
be avoided and that the new monetary
policy of the administration sooner or
later will be defeated by inability to
1t with the economy of other
nations with which this country must
continue to trade II 1t Is to realize pros
perity.
copyright. 1934)