The Daily Alaska empire., 1946-09-27
The Break in Stocks
(New York Times

On recent Tuesday the stock market, after a sharp sinking spell the week before suffered the worst break of any day in fifteen years The drop brought stocks back to the lowest point since August 1945
 The violence of the drop seems to have left Wall Street bewildered. It came at a moment when no single piece of seemed sufficient to account for it. The fundamental inflationary situation has not chang ed The amount of money and bank credit in exist is still than three times the amount before the Production employment and national in come are at record peacetime levels While the labor situation has not been good there is no immediate crisis that seems great as did several of those i'll recent months during which the stock market remain ed firm. The foreign situation is without doubt serious but it looks the surface less serious than it seemed few weeks ago.
 The prediction by an irresponsible radio commen- tator that war with Russia" might come this year seems to have touched off great deal of iterate selling. The violence of the drop itself had the psychological effect of convincing many traders ill Wall Street that the market must know something 9 which caused their selling in turn and aggravated the decline. This especially the effect those chart followers who believe that stock market movements predict only the future of business but their own future and who intensity every turn as result of this belief
 One factor undoubtedly played role of major importance. This is the Federal Government regua- tion, put into effect at the beginning of the year making it illegal buy securities on margin This determination against one particular form of prop erty ostenSiby made part of the drive against inflaon Its result combined with other restrictions against short selling and against trading by profes- Slonals and insiders has been to produce thin market A comparatively small volume of selling can bring about comparatively great break. People who wish to buy cannot get the to do cannot get them without delay Under such conditions the normal checks to decline do not exist
 The stock market, in short, is made much bump fer" by Government intervention than it before And the basic economic situation which the market reflects also made much bumpier by excessive Gov ernment intervention On the hand the nflationary forces let loose by governmental fiscal and interest rate policies. On the other hand the hourly threats hanging the market in the form of price controls strike encouragements, wage "poli cies" and the like which to put every crucial decision in the unpredictable hands of Govern ment official and to make it impossible for business know what is going to happen to it from day to day With these two sets of forces working against each other the inevitable result be more violent oscillations in the business outlook than might other wise occur.
 The stock market break does not necessarily fore cast any change for the in the business situation But it should serve a warning to Government regulators against continuing treat like interest ing toy the economic system upon which the welfare Of all of us depends.