Evening star., 1934-01-14
Federal Expeditures Pump
New Life Into Trade
Channels.
HUGE NATIONAL DEBT
| CREATES LITTLE ALARM
Activity in South and Southeast
Declared Best Since 1925.
Prices on Upgrade.
BY CHARLES F. SPEARE.

NEW 1Ohh, January 13.-The Opin-
Ion Is steadily gaining ground that
great Government expenditures will
produce a marked effect on the business
llfe OF the country in the next few
months.
A period of expanding retail sales. of
larger activity in the capital indus
tries, Of increasing car loadings, high
er weekly figures of power and light
production, and consequently more en-
pioyment and more purchasing ability,
Is anticipated in the late Winter or
early Spring months, with a momentum
that Will carry over into the Summer.
Predictions of this nature do not,
however, deal with the later seasons
OF the year. 1t Is sufficient for the
time that the better outlook is accepted
as probable. The problems involved in
record breaking national debt, the
manner in which it is to be carried,
and eventually to be hquidated, do not
appear to concern a majority Of the
people.
The trade barometer already is ris-
Ing. Exact proof Of this is to be found
IN many directions acceptable to those
who chart the course Of commerce.
which may be taking up of part Of
the lag in the gold-buying movement.
This operation has become academic.
1t excites little attention. 1t has been
pushed aside by the more effective and
spectacular method Of stimulating
prices by pumping vast amounts of
money into the channels Of trade and
keeping these arteries healthy until
business can stand on its feet.
Travellers Impressed.
It is beginning to do this In sec
tions of the country. Those who have
recently travelled in the South and
Southeast have been impressed by the
prosperity there. Trade is described as
the best since 1926 and banking condi-
any time in the last Is years.
A study of the advance IN commod-
ity prices in the last month will show
that the protected industries, such as
metals, and the staple farm products
have been rejecting the grants Of Gov
ernnent aid, without which they would
have been unable to survive.
The market response to this op-
timiSm was slow in taking effect,
though 1t appeared to be developing at
the end Of the week. A period Of sag
ging prices has been followed by a
more robust aspect in the securities OF
three major groups. The industrials
have been encouraged by the prospects
of a larger turnover, the rails and
public utilities by the benefit in earn
ings to come, as factories expand their
production, as well as by the sugges-
ton from the administration that
their rate structures should be fixed at
q level where satisfactory returns on
property investment may be assured.
40
pressed on the railroads that they must
adop. a more conservative policy with
respect to their finances, revising the
ratios between debt and stock capital
so that, in future depressions the dan
ger of default is leSsened.
Debtor Shown Favor.
It is clear that the conception of
the administration Is one in which the
debtor takes first place and the credi-
tor, or the holder of an equity, must
be prepared to accept more moderate
return than that to which he had been
accustomed. This, in a measure, ex-
plains the reluctance of the public to
buy common stocks, except moderately.
In spite Of the persistent opinion OF
the speculative element that imitation
Is still probable. On the other hand,
medium grade bonds show decided Vi
tality.
It is clear that the Treasury will
make full use of the funds OF the
Federal Reserve Banks in financing its
public works program and will invoke
all OF the provisions of the emergency
act to facilitate the operation.
This includes the capture Of the profit
on the gold holdings Of the Federal
Reserve system and the issuance OF
Federal Reserve Bank notes against
offerings of Treasury obligations that
banks may make. 1t Is more
apparent each day that the admins
tration dominates the field OF Ameri-
can banking and that it has obtained
the favor Of the public by installing
the deposit guarantee feature. In spite
Of the unsympthetic attitude In the
profession toward a condition Of super
vision and espionage, it is Of interest
to note the great strength in bank
stocks this week. A number Of the
most active have advanced from Is to
so per cent over the December levels.
It is also clear that the Government
Is coming into possession OF o vast
amount Of assets now held by private
investors. corporations and institutions,
NJ hsm o M o osatons
In order to facilitate this transfer 1t
teeing not only interest but principal
Of the media Of exchange. The object
IS to bring what once were quasi
Government issues to a parity with
those for which the Treasury had been
fully liable. This intention has been
made concrete in the recommendation
Of President Roosevelt that $4,000, ,000,-
600 Of bonds authorized under the
farm credit act carry the
full responsibility Of the Government
fot interest and for payment Of ma
turity. This Is step in the direction
Of making farm mortgages more ac-
ceptable to investors.
Later 1t Is expected that guarantee of
principal Of the Home Owners Loan
Corporation per cent bonds will be
authorized and that the reluctance Of
to take these securities in
exchange for direct mortgages on urban
property. while they were quoted at a
heavy discount from par, will disappear.
Great Benefit Seen.
The benefit Of all this In releasing
deposit institutions from the grip Of
frozen assets" Is immeasurable. What
Its ultimate effect may be on Govern
ment credit is another question. The
r. r. G. at the end of 1888 had loans
to the banks of the country
Of about $719.000,000. In addition 1t
has authorized commitments to the
banks In preferred stock, capital notes
and debentures OF approximately $817,-
000, 900. The railroads owe 1t $751;
900 900 and mortgage loan companies,
tl76, ,520 900.