Evening star., 1936-02-16
Commodities Fail to Climb.
Federal and Corporate
Bonds Are Strong.
NEW DEAL FOES CENTER
ATTACKS ON FINANCES
Warnings Increase as Effective
Method of Arousing Opposition
to Fiscal Policies.
BY CHARLES F. SPEARE.
Special DISPATCH TO The star.

NEW YORK, February 15-After
the statement of Gov. Mariner S.
Eccles of the Federal Reserve Board
late in November that he did not be-
lieve initiation possible when men are
idle and plants are idle" and that I'VE
are a long way from such period of
imitation" as is evidenced by "increas-
ing the means of payment in the
hands of people who are willing to
spend faster than We can increase pro-
duction," the average price of indus
trial stocks dropped 10 points. A
months decline has been followed by
six weeks of recovery, with the entire
stock market at the highest since 1880.
It's most recent aavance has been
predicated on the threat of currency
imitation by Congress, which has now
blown over, and by this weeks views
of ex-PreSident Hoover concerning the
proper policy for trustee to adopt in
anticipation of further devaluation of
the dollar.
Not only have equities" been
strong, but there has been a rise in
fixed interest obligations. United
States Treasury issues have rallied
from the mild effect of the first sug-
gestion of soft money to meet the
soldiers bonus payments and of the
withdrawal of a modest amount of
gold for export: municipalities have
borrowed on the best terms in over a
quarter Of a century; corporation
bonds OF all classes have risen. and
there has been no sign of imitation in
the markets for commodities.
Political Value Cited.
Imitation has been brought into the
political campaign as one of the most
effective means of arousing opposition
to the fiscal program of the admins
tration. 1t Is a much better vehicle
for this purpose than the Constitution,
the broken pledges on monetary pol
icy, the multiplication of Office hold
ers and of persons on relief for alleged
vote-getting purposes. II appeals TO
millions Of investors. holders of life
insurance policies and wage earners.
And it is not wasted on that specu-
lative body which has been running
out Of material on which to bull a
market advancing over the last IL
months.
The psychology of imitation is that
it breeds from fear. 1t takes a long
time, however, for this fear to infect
the minds of the multitude. 1t has
been present in the thoughts and re-
fiected in the policies of numberous in
dividuals since 1898. There is yet no
proof that what they have done to
anticipate it has been probable.
The dreaded inf1atlon-the currency
form of it that Mr.. Hoover considers
when he suggests that trustees give
thought to the substitution of common
stocks for bonds-is that which gripped
Germany dozen years ago and
France in the eighteenth century.
Such a development is not probable
here. Nor does any one who has care
fully studied the situation expect seri-
Gus disorders from credit imitation in
the next 10 months.
To intimate that legal bonds, such
as trustees are expected to buy for
individual clients or institutions,
should be exchanged for equities is
to elevate the risks of speculation
when they should be placed under
more strict control. AS for favoring
common stocks instead of bonds. on
the basis of the small and dwindling
yield of the latter, few minutes with
pencil and paper will prove that divi-
dend-paying stocks of 'well-managed
corporations" today give less return
than most of the new refunding bond
issues.
Control Held Possible.
Historically, currency imitation is
uncomfortable. On the other hand,
serious credit imitation may be averted
if the means of checking it are adopt
ed in time and earnestly carried into
effect. This week the Federal Ad-
visory Council, composed of represen-
tatives of the Federal Reserve Banks,
has renewed its suggestion of last No
vember that the existing excess bank
reserves be reduced as credit safety
measure. This can be accomplished
in two ways: % BY selling, or allow
ing to run off" the Government
paper in the Federal Reserve Banks,
or 90 by raising the reserve require
ments of the member banks. The new
Federal Reserve Board apparently is
not favorable to either operation. 1t
takes the position that to effect higher
money rates, as would be done through
the councils method, would disturb
the Government bond market when 1t
needs a continuation of current nomi-
nal rates on which to borrow.
Spending Could be Cut.
Credit imitation could be checked
and a diminution of excess reserves
effected by an immediate reduction
in Government spending. On whether
this is done, the degree of it and
such evidence as Is given ,of de-
termination to reduce Treasury def1-
cts. depends the course OF business
and of investment and speculative
markets in the next few months. A
revised budget is required. That OF
January is obsolete.
The emergency which justified the
exnenditures for relief during 1884
and 1895 is over. There are agen-
cies of the Government that should be
Inundated and their assets applied
TO the absorption of urgent Federal
costs. 1t is asserted that to eut of
the supplies Of money from those
who have been depending on them
would not be politically expedient
in an election year. 1t may appear
somewhat naive, but the conviction
OF this writer is that to do the coura-
geous and businesslike. act, even now.
would win votes for the author of
such a policy rather than cause him
to lose by 1t.
tcopyright. 1885, by the North American
Newspaper Alliance 9neo