Evening star., 1938-04-04
FEDERAL SPENDING
REVIVAL TALKED
Week End Rally of Stocks
Spurred by Rumors
From Capital.
BY TIE Associated Press.

BY ire Associated Press.
NEW YORK, April "A bit groggy
from the March selling blows, Wall
Street yet has been quick to take
notice Of new rumors Washington Is
about to pump more billions of dol
lars into spending channels to turn
the deflation spiral.
The week end rally in stocks and
bonds, broadest since the markets
started to fall after February ad-
vance, seemed to draw much of its
force from published reports the Fed
eral pump, running in lower gear in
recent months, was in the verge of
sluicing out another big flow Of bor-
roWed money.
In way this merely was a re-
vival of ideas widely accepted in f1nan-
cial quarters few weeks ago. before
security markets fell off their winter
resting place. Previously, however,
the ideas had pivoted on war prepara-
tions and a moderate boost In relief
outlay.
Visions of more pump printing"
intervened on the gloomy spring scene
in Wall Street just about a year after
President Roosevelt made his cele-
brated pronouncement on rising
prices, citing steel and copper as too
high.
April Warning Recalled.
In retrospect, his remarks early
last April have taken on historic
importance for the business world.
Whether the New Deal chief merely
was a prophet calling the turn or
actually Influenced the turn, the rise
in commodity prices from the 1888
depths eliminated as his headlined
comment faced feverishly bullish mar
ketS.
Thus the Associated Press index
Of wholesale prices Of 35 leading sta
Piles touched the recovery peak on
April S. 1887, at 98.l4 per cent of the
1926 average price level Last week,
still on the skids. it fell to 6S.55,
lowest since October, 1894.
What was accepted widely in spec
ulative circles then as notice the
White House was set against continu-
alton Of fast-rising prices served to
dramatlze shift in Federal policies
AS early as the spring of 1896.
with stocks in a strong bull trend,
the Federal Reserve Board gently be-
gan to tighten its strings on specu-
lative use of credit by upping margin
requirements in stock purchases
With basic commodity prices nearing
1929 levels Washington hauled in
faster on the credit strings, raising
bank reserve requirements and re-
sorting to gold sterilization"
Policy Changed Again.
President Roosevelt recently boiled
Federal economic control moves down
to nautical phrases. He said the helm
had been put over on new tack when
there was concern the rapid rise in
prices of some commodities was en-
couraglng speculative boom.
But, he indicated the helm again
had been swung in direction of rising
prices because some commodity prices
were considered too low for the bal
ance' necessary to business recovery.
Evidence of this shift. Wall Streeters
observed, was the lowering Of margin
requirements last November, partial
desterilization Of gold, moderate ex-
pansion in relief and war spending and
resumption of R. F. c. lending.
However, key commodities-after
holding fairly steady for several months
have been shaken the last two weeks
with the hard fall in security markets.
Hence "pump-priming" advocates con-
tend the Government should step in
with dramatic gestures to prevent the
crack from widening and aggravating
the lack of balance discussed by Presi-
dent Roosevelt last February.