The Washington times., 1935-03-25


it is difficult to see why it should,
since there has been on fundar
mental change in conditions.
It seems best to regard this lit
tie rise as a sort of technical
rally" based upon an oversold con.
dition and aid by renewed fears
Cor hopes) on initiation. The out.
standing gains, considering vol
ume of trading. were in North
American. Consolidated Gas. and
Columbia Gas and Electric. And
fresh evidence of underlying in
flationary developments kept gold
and silver stocks firm.
A further average gain Of ~
points on this move would be
a normal expectation.
1t is certainly going to take
more than Kennedy'S "cheer
up" talk to start recovery. He
told New York business men
that "things might be worse"
and chided them for not
"taking it" like a man. But
what about business? What
about profits?
What is money (Which is the
life-blood Of busineSs) going to
be worth?
It is also going to take more
than Initiation threats" The
House passed a bonus bill pro-
viding two billion dollars in
greenbacks. But the stock mar
ket hardly batted an eye. Infla-
ton talk and initiation policies
which do not "cary through"
merely increase uncertainty and
produce deflation effects.
So it is with the policy Of
depreciating the dollar in foreign
trade, while doing things to raise
costs and destroy credit in the
country, we cut our export
prices. That puts pressure on
world markets. In connection
with our internal restrictions and
uncertainties, this reacts to check
our potential initiation and to
keep our prices down, except as
forced up by costs.
1t seems clearer than ever,
that we must either deflate or
initiate. We can't go on much
longer, half inflated and half
deflated.
But, while some sudden blow
might knock us into deflatiOn,
this does not seem probable.
The probability is that the gov
ernment will be compelled be-
fore the 1896 election to force
an internal depreciation of the
dollar.
1t has promised higher prices.
Above all, it has been using a
'nest egg" based on the "devaluar
ton" of the gold dollar. In order
to make that egg good, and hang
on to its gold profit" it must
depreciate dollars much further,
1t must depreciate the paper dol
lar as much as it has devalued the
mythical gold dollar.
But it can never do this by
establishing a confident use Of
bank credit. It has already put
itself in a position where a re.
storation of real confidence in
money and credit would be "de-
flationary!"
Therefore, it must force a de-
probation in paper dollars by
making us fear the dollar.
That, / think. is the only alter.
native to deflatiOn.
Meanwhile, the Administration
must support Government
bonds!" Here we find the same
alternative. If it doesn't, we get
serious deflation. If it does, it
has to go on initiating bank
credit, by the aid Of which its
bonds are carried.
Probably the Administration
will maintain this half-and.haf
condition during the present bond
conversation. It wants uncer.
tainty prolonged, and the resort
to fear initiation delayed, until
the first effects of real currency
initiation may be felt as a factor
in the 1896 election! After that,
the flood!
So I would guess that narrow,
erratic swings will prevail in the
stock market for q good while
yet. The Government will spend
enough to keep things going, and
will control the banks to hold its
credit (bonds) up while it bor-
rows.
Accordingly, hedges against the
dollar should be held, and added
to during market receSsionS.