Evening star., 1937-04-11
Official Alarms Shift Be.
tween Initiation and De-
f|ation Trends.
RESERVE BOOST OFFSET
BY MARKET OPERATIONS
Chrysler Settlement and Waning
Labor Troubles Are Favorable
Signs for Business.
BY CHARLES F. SPEARE.
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, April 10.-No more
confusing situation has faced the bus
mess and banking interests of the
country than that which prevails
today. The outcome of it is i'm
possible to predict 1t is full of in
conslstencies in Government policies
toward commodities, money and the
Government bond market.
Once seeking a higher price level
for commodities, the administration
is now attempting to check its rise.
Ihe anxiety over initiation has been
followed by alarm over the prospects
Tor deflation. Reduction in excess
reserves OF the member banks, in
process OF correction by raising the
reserve ratios Of these institutions,
and so modify the progress of in
hation, is partly negatived by the
present open market" operations
OF the Federal Reserve Board Re-
valuation of the dollar seems likely
to be substituted in some form for
devaluation as means of stopping
the heavy flow Of gold into this
country
All OF these emergency measures
deeply disturb the harmony of the
business recovery movement and
adversely affect both the capital
goods and the consumers goods
trades.
Favorable Factors Cited.
The most satisfying development
OF the week is the settlement of the
Chrysler strike and the apparent
waning of illegal labor demonstra-
tlons. Totals of production in iron
and steel and in electric power out
put are not so high as the week pre-
vious, but still much above those Of
recent months. The same is true of
automobile production, in spite of
strikes. Private building construction
figures are well ahead of those of a
year ago. Railroad car loadings re-
main high for the season. Bank
clearlngs for the country were UP
IS per cent for the week, with gains
over corresponding period in 1896
ranging from about 20 to over As per
cent IN is interior cities.
The unsettlement in fundamental
business and financial factors has
shaken the stock market even more
than in March. 1t has completely
stopped institutional and private in
vestor buying of corporation bonds.
Plans for refunding that had been
well along their way toward registra-
tion with the S. E. C. have been tenn
porarily abandoned.
Most Of the new public utility and
railroad mortgage and debenture issues
have established themselves on a Weld
basis which promises little hope for
further loans Of similar character un-
less the coupon rate on the best names
is raised u Of l per cent.
Commodities Held Key.
The crux of this situation Is the
commodity price level of the immedi-
ate future. Almost overnight there
has been change here from a sellers
TO buyers market 1t is inevitable
that abnormal costs of raw materials
should bring about sudden price ad-
justments.
Inc sequel to the skyrocketing in
rubber this week recalls what har-
pened In the early 1920's to sugar
Then sugar sold at level beyond all
reason. The result was that it came
into the market from all quarters of
the globe. The invisible and uncaI-
culated supplies broke the price and
nearly wrecked large institutions.
Realizing that they had discovered
way to quick wealth. the Dutch
East Indian growers of rubber flooded
the London market, where receipts
recently have been 40 per cent higher
than in February. You can't beat the
old law OF supply and demand.
Another factor in the crumblino
commodity price situation is the slow
ing down apparent among some of
the participants in the armament
race.
Time Money Raised.
In the face of the efforts of tho
Federal Reserve Board and the
Treasury authorities to continue low
interest rates, the quotation for time
money this week was advanced u
or per cent for six months loans
Previously rates on acceptances had
been increased. The buying rate on
short term Treasury bills reflected a
higher cost of such funds to the Gov
ernment, though longer bills were
cheaper. The Federal Reserve Board
(see SPEARE, Page G-3)