Evening star., 1938-01-02
GIVE
NO INDICATION Of
NEW DEPRESSION
1887 Was mot Another
1929" Wide Differences
in Situation Cited.
MOST CONTRAST SEEN
IN BORROWING RATES
Brokers' Loans Low, Banks
Stronger, Market Losses Smaller,
U. s. Income Scars.
BY HARRISON r. BOULIA,
Cambridge Associates STAFF.


from the new recovery peak in August.
the insistent question has been, rs
this another 1922"
To this question alone. perhaps,
among the many posed by current
definite categorical
answer is possible. And the answer
Is mol"
There Is a superficial resemblance,
1t is true. Both in 1929 and 1887
business reached peak in midsummer
and terrific deflation of stock prices
occurred in the fall. But here the
similarity ends
Contrast in Money Rates.
The most obvious difference between
1929 and 1887 is in money rates. Call
money in March of 1929 reached
high Of 20 per cent and the average
rate for July was 923 per cent In
1887 the call money rate never quiv-
cred from the long established / per
cent. Time money loans were above
8 per cent for most of 1929; in 1887
the rate was x per cent.
Brokers loans climbed steadily
throughout 1928 and 1929 averaging
So, $50, 900 monthly for the latter year.
Throughout 1887 they hovered close
to the billion mark.
In 1887 the national income reached
a record high of $8l ZOO, 900 900
against an estimate for 1887 of $6l,-
600, 100000. How much of this income
was tapped for speculative purposes
will never be accurately known. but
the cry of "profitless prosperity" which
was raised had much to justify it. The
now OF money into the stocks which
made the fat, boiling markets were
recalled by the financial
district during the thin markets" of
1887. Consumer income suffered in
spite of the high national income
total, and furthermore, the 1929 crash,
although no greater percentagewise
than that Of 1897, caused many more
billions OF dollars damage and caused
lar more serious and widespread loss.
Banking Structure Stronger.
Nor is the credit structure as other
wise vulnerable as it was in 1929. The
drastic purge Of weak banks in 1888
lett the remaining institutions in
condition OF unprecedented soundness.
ana the ultra-conservative character
OF present bank investment portfolios
is virtual guarantee against a recur-
renee OF that period, when it was
reported that incoming celebrities were
saluted by the boom of banks in
Manhattan.
Neither does 1887 resemble 1929 in
the matter of white elephant" pro-
ductive facilities. During 1929 more
than $500, ,000. 900 of new capital was
raised. And the years previous had
also seen tremendous amounts of new
money poured into plant construction
and equipment. In 1897 new financ-
ing totaled scarcely less than a billion
ana a quarter and not since 1880, the
last year when utility expansion WAS
important, has industry asked for more
than negligible amounts of new capital.
Perhaps this failure to tap the in
Vestment reservoir to finance indus.
trial expansion is the chief reason whv
recovery stumbled, but the fact re-
mains that no unwieldy amount of
excess plant construction remains to
be settled for after apparent need has
faded. So far this has been almost
completely consumption goods" re-
covery and those looking for hope can
md it in the fact that, in the past.
1t has been much easier to adjust in
ventory and price errors than those
stemming from the too-exuberant use
OF credit for speculative activity in
capital goods.
Wage Rates Higher in 81.
Whether the fact that hourly rates
OF wages have forged ahead of 1929,
rising much faster than production
and employment, will be an obstacle
10 further recovery remains to be seen.
One school of thought maintains that
high and rigid wage levels preclude
resumption Of recovery pending a
dimcult adjustment. Another, basing
its theory on the conclusion that the
great depression was caused by failure
OF mass purchasing power, halls the
present higher wage rates as basis
for optimism.
Only in production levels did 1897
compare closely with 1929, and two
things should be noted here: First,
few indices are compiled on a per
capita basis and so do not take into
consideration the more than 100000
increase in population since 1929. Sec
ond, the most popular indices tend to
reflect production of consumption and
semi-durable goods more strongly than
construction and capital goods activity
The tndices Of building for 1929 and
before are in violent contrast with
those Of the last seven lean years
Ample ammunition is available in
these statistics both to refute the
premise that the debris of another
1929" must be cleared away, and to
defend the hope that steady In
crease in both residential and COM
mercial building is possible.
Comparison Confuses.
The year 1887 may have been a
prelude to many things as yet unfore-
seen, but there is scant background
of evidence to call it another 49,
For one more thing, according to ng-
ures covering general business activ-
ity, business took two and q half years
before to drop = far % 1t has during
The past four RonthA.