The Western news. [volume] (Libby, Mont.) 1933-current, 1937-01-07


crowd of yammering wolves de-
manding more and more from him.
On top of the fact that appropria-
tons for the army, navy and inter-
es. on debt cannot be cut-the
President being Arm believer in
strong army and navy and the in
terest on debt being fixed-there is
really not much prospect OF any Sc
rious cutting of federal expenditures
except what may be accomplished
on relief. And Harry L. Hopkins
already is having his troubles try
ing to do that.
Cause for Worry
How to restrain the Doom Is not
| SO easy as certain Federal Reserve
officials had thought, and it is caus-
| ing the administration no little
worry.
Here are the things objected to:
l. Too much speculation in the
stock market.
2. Too much speculation In COM
modities.
8. Too much forward buying"
/ The last is the toughest nut to
crack. What is disapproved is really
speculation by business men in their
own business-but it is the sort of
thing that has been recognized by
sound business policy not only by
| business men-@themse1ves, but by
bankers, for 10 these many years.
All the banking laws are written
with view to providing credit for
Just this sort of thing, much as they
may be intended to curb other forms
of speculation.
A good illustration is a depart
ment store owner who may believe
that next fall he will have great
difficulty getting enough stockings,
due to all available factories being
booked up with orders, or due to
possible strikes. Or he may believe
that the price will have advanced
sharply before the normal time for
him to buy for that season.
| AS result, he orders the stock
ings now, and orders many times
more than he needs-in many
known instances six times his own
estimate Of the number he could
sell. He knows he has the right,
under normal business practice, to
cancel any or all the orders at any
time.
| Or take the case Of an automobile
manufacturer who fears the posi-
olllty OF strikes or higher prices
for steel frames. The thing Families
through every conceivable line of
manufacturing and merchandising.
Objection Is Sound
The objection of the government
is perfectly sound. Such mass of
orders represents an absolutely fic-
tional demand. In normal times it
is this sort Of thing that leads to
undue expansion of productive ca
pacity. Factories build additions to
plants, which will not be needed
until after they have become obso-
lete.
Then there is the effect at some
future time when merchants and
manufacturers doing all this for
ward ordering" suddenly realize
that no longer will there be any
difficulty in getting what they want
At once the cancellations pour in
and the bottom drops out OF bust
ness.
| Yet notes at the banks to finance
such purchases, once made, are
prime commercial paper" The
banks love to have them. They can
be rediscounted at the Federal Re-
serve banks, SO there is no question
of tying up their reserves. They
usually pay pretty nearly the top
| interest rate.
As far as stock speculation is
concerned, the difficulty is that the
government has already clamped
down SO hard that it is not practical
to clamp much tighter. The Reserve
board plans to boost the reserve
requirements of the banks. Also it
plans TO sell government bonds, thus
Tightening credit.
But the spectators will not be
cramped by this as once they would,
due to existing margin require
ments. And they know the govern
ment will not dare sell enough bonds
to affect their price seriously, for
to do SO would play hob with the
banks and insurance companies now
loaded up to the guards with gov
eminent securities.
Meanwhile, demands against the
possibilities Of war in Europe have
driven many nations into the mar
ket for more supplies than they
would normally be requiring at
this time-especially Britain which
has decided to guarantee herself by
this method against another sub
marine blockade, which promises
heavy buying for some time to
come.
III Bell Syndicate. Service.