Evening star., 1938-04-20
Wall Street
Topics
BY FREDERICK GARDNER.
Associated Press Financial Writer.

NEW YORK, April 2O.-Banking
statements this week are expected to
show the largest pile of credit 'in-
f1ation" fuel since the Federal Re-
serve Board in the summer of 1886
began to cut down excess reserves of
member banks.
The cut of S75000O,000 in reserve
requirements under the spending
lending-credit expansion program out
lined to Congress last week by Presi-
dent Roosevelt, it was figured in bank
ing circles, should send surplus re-
serves Of member banks this week
above s2,50o 100000. Eventually,
with the addition of 81 400 900 900 from
the sterilized gold hoard into the
credit structure as the Treasury pays
out the money, the surplus is calcu-
lated likely to approach $4,000 00O,-
900.
For short time. before the Re-
serve Board ordered an increase in
reserve requirements in 1885, the sur
plus lendable funds in the member
banks under previous Federal pump
printing drive was above $4,000, ,O00,-
000 But this had been cut to around
S700, 100000 last summer when Fed
eral authorities reversed the credit
restriction policy.
In anticipation Of the record break
ing accumulation of surplus bank re-
serves under the new recovery pro-
r,ncolS al
imitation meaning vast expansion
of credit and resultant rise in prices
of commodities and living costs-as if
it were inevitable.
But the big question posed in spec
ulative circles is: When will it take?
which would touch off the pile of
surplus reserves and make it blaze
into a gigantic confagration of credit
expansion is confidence" an urge
to borrow and spend in private in
dustry.
Those who contend confidence" is
lacking now to make use of the po-
tential credit growing out of the gold
liberalization and cut in reserves cau-
tiously are refralning from making
any forecasts on the time element in
appraisine inf1ationary implications
of the program.
Apparently the stock market can't
foresee an immediate credit fare-up
as result of the billions of potential
loans and investments put at the feet
of industry by Washington's new
credit expansion steps The sell-of
Monday and yesterday cancelled a
large part of the gains scored after
the presidential message on relief was
made public Thursday.
In fact the surface indifference of
the market the furore of imitation talk
started by the latest notwithstanding
and gold moves surprised many who
recalled the sensitivitv of the market
to such influences from 1888 into the
spring of 1887.
Traders who take their market gospel
from charts, rather than the news
headlines, have been reluctant to fol-
low the rally the last few days because
stocks so far, according to the chart
lists, haven't signaled a definite re-
versal of the major bear trend, now
more than year old.
On long-term perspective, they
hold, the early April rally thus far
looms on the chart merely as a tech
nical rebound from the March decline,
rather than a clear-cut shift to a
major swing upward. Many traders
accepted profits early this week in the
belief the technical" rally had gone
just about far enough:
Many brokers, following the chart
lists theories. have been urging Gus
toners to hold off on accumulation OF
stocks for the long pull until the
market undergoes a test of the March
lows, which chartists hold should come
before autumn, anyway. Even among
skeptics among the chart-reading fra
ternity, however, there have been many
recent converts to the idea funda-
mental conditions, in conjunction with
the loosening Of the credit savings in
Washington and prospect of more
pump -priming expenditures, have
turned in favor of rising prices as soon
as reviving Initiation psychology
spreads wider through the business
and financial world.