Evening star., 1934-08-12
Administration Not Likely
to Ieopardize Treasury
Financing Plans.
DROUGHT MAY BRING
PRESSURE FOR ACTION
Safety of Sound Fixed-Interest
Securities Declared Vital
for Recovery.
BY CHARLES F. SPEARE.
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, August 11.-National-
ization of silver. carrying the infer
ence Of q more rapid issuance of silver
certificates than would have been the
case If the Treasury had continued its
slow accumulation of the white metal
in tn open market, did not take the
financial community entirely by sur
prise. 1t did, however. strongly ac-
celerate the selective movements al
ready under way.
The sensitive, high-strung specu-
lator. at home and abroad. even pre-
vious to Thursdays executive order
had been playing his game with the
notion that imitation Is the trump
card. Here he has sold railroad and
public utility common stocks and pur-
chased commodities and mining
shares. In Europe he has pounded
down the dollar and covered his for
eign currencies.
At the same time the investor, less
of an opportunist. has been taking ac-
count Of what was being done and
said concerning possible further de-
valuation of the dollar in terms Of
gold or the issuance of large mass
of silver certificates" In consequence,
he has withdrawn his support from
high grade corporation bonds and
slightly reduced his holdings of
Treasury paper.
Even before their sharper declines
at the end Of the week, the effect Of
this had been to bring Government
long-term loans down an average of
over a point from the highs of the
Summer, to raise the cost to the
Treasury on its new short-term sbor-
rowing and to create some doubt re-
garding the ability of the administra-
ton to finance It's future require
ments on the same easy basis as dur
ing the last six months.
Foreign Currencies Rise.
The actual inf1ationary effect Of
naturalization of the white metal is
debatable. for the reason that such
effect will depend upon how success
fully the silver certificates SO issued
are put into circulation and kept
there. But that it is strong gesture
In that direction is revealed by the
response Of foreign currencies, all Of
which rose strong against the dollar,
and by the accentuated weakness in
long-term Governments.
OF out-and-out imitation of the
"shin- plaster" type, we still have
none. And it may be said that there
Is no popular demand for it; rather
a deep conviction in the mind of the
mass of people that it would be an
economic tragedy. But within recent
weeks the business world has grown
impatient over the slow progress of
natural recovery, then increasingly
alarmed by the scope and money
losses involved in the drought 1t is
on this mood that the infiationists
have played to advantage. melting
fear and being none too exact in what
they have intimated as to Washing
tons policy for overcoming the lag in
industry and for lifting commodity
prices.
Commodity prices, it may be said,
now are at the highest of the year,
but until the latest move along the
flip it might have been said that
they were rising from natural forces
such as the greater intensity of the
drought this week, resulting in higher
grain prices, and the effect of the
heat on cotton. sending it up to
around IA cents-and not by virtue
of any monetary processes.
For some time it has been apparent
that the upswing in business which
had been anticipated this Autumn
would develop slowly, if at all. The
drag has been in the capital indus
tries, where a high percentage of the
unemployment now exists. There was
good reason, however, to expect that,
as the crops were harvested and the
proceeds from them realized and put
into circulation, Some portion of the
normal lift in trade that comes in
September. october and November
would act as a Stimulant. Now the
country faces a new and unappraised
condition. that of a dought that Will
check business instead of stimulating
it, for the estimated loss of $5,000,-
900, 900 incurred, though a consider
able part in capital, is taken from
sections that have had a low spend
ing capacity for several years. Thus
the picture has changed radically and
so suddenly that it will require time
to make adjustments to it.
Feeding Initiation Sentiment.
Initiation sentiment is strongest
where drought distress is most severe
1t viii naturally be fed by the new
circumstances. 1t has been indicated
from time to time that, if business
did not improve or commodity prices
advance under the Warren method of
raising the gold value land it has
not), more radical form of infa-
ton would be adopted. Consequently
there is some excuse for the belief we
may be on the eve of a series of i'm
portant developments with respect to
the national currency.
Now let us consider the question of
immediate imitation from the more
logical standpoint. The Government
has certain large financial undertak-
ings under way from which it cannot
withdraw. To negotiate them sue
ceSSflIlly 1t must have a satisfied
banking attitude 1t could not, for
instance. decide. as has been rumored,
to reduce the gold content of the dol
lar to the minimum of so cents and
then expect much Of a subscription
for its refunding notes. There are
quite plain indications at the moment
that the saturation point is being
reached for some of the newer Treas
ury issues, which have dropped under
par.
Then there Is the housing pro-
gram Ii is generally believed that
this is the Governments "one best
bet" for encouraging business and ac-
commodating the labor situation.
Continued on Third Page.)