PRICES TUMBLING IN U.S.

Taihape Daily Times, Volume XI, Issue 3517, 1 July 1920, Page 3

PRICES TUMBLING IN U.S.

CAPITALISTS WORRYING. ON CREDIT RATIONS. SAX FRANCISCO, May 24. The period of readjustment in America is being marked by an almost unbelievable drop in prices of certain necessities, such as have caused the people of the U.S. to rub their eyes in extreme surprise. Liberty bonds have been sold in a situation which at one time closely approached a national panic, until the Was-hington Government sent out an appeal in almost agonising tones, insisting that the populace should regain its poise and cease from rushing to brokers to exchange their bonds for currency.

The market has been overloaded ' with these war bonds, with the un- ' avoidable consequence that prices have I lowered to a surprising stage. United I States Steel shares have dropped from . a phenomenal figure in the century I rung to 9J. , Other leading stocks have also fallen 'many points, causing the I financiers, and particularly those i gambling on 'Change, to squirm and | bellow their sorrows from Wall Street and other financial centres of the U.S. American business is now on creditrations. While there is no hard-and-fast rule \>£ applying the system, generally speaking the great financial institutions of the country, with the cooperation of the Federal Reserve Board, are now distributing credit taday much as sugar and other raw materials were distributed to the housewife and manufacturers iduring the war, namely, in proportionate quantities, so as to do the most good. While the sagging on the New York Stock Exchange • and the spectacular reduction in commodity prices by concerns in many cities of the U.S. have brought the situation into striking relief, it is said that the process of liquidation of the nation's tremendous credit inflation has been under way since the first of the year. NO PANIC PROBABLE. And it has been so successfully done ] to date that, for the most part, the great institutions are in a strong condition, and the prospect of further liquidation without panic conditions is bright, according to a report sent out i from New York. „• It is an interesting thing, and one that was commented upon by several of the foremost New York bankers, that the prqsent-day financial adjustment is being directed from Washington instead of from Wall Street, as in the past. In other words, the Federal Reserves Board now is the force that J. P. Morgan and Co. was ten years ago.

Ou Januarj'- 1 credit inflation had reached a point where the daily borrowings from the Federal Reserve by Xew York banks, for instance, ranged from oh J hundred and forty to two hundred millions each. The Government hoisted' the danger flag and demanded ■ retrenchment. A glance at the statements of borrowings by a number of the great banks in New York showed that the average was now down to from forty to sixty-five millions. In its process of deflating the banks began, very slowly at first, a careful rationing of loans. For example, if a loan to some vital industry matured and an extension were sought, or more money asked for expansion, sufficient funds were advanced to meet the industry's needs. On the other hand, if a firm had a tremendous surplus o£ silks, fancy commodities of any kind or articles of luxury which it was holding, or contemplated producing as a speculation on the increasing desire of the public to pay 'fancy prices, when the firm came around to extend a matured loan for carrying on the speculation, the banker demanded payment and sale of the stock began. As Governor Harding, of the Federal Reserve Board, said in Washington, the gooner the business world understood the situation the easier would be the process of readjustment. Manufacturers of non-essentials would be compelled to wait on essential producers in credit, extensions, even as the candy and soft drink manufacturers during the war had to wait for sugar until the home needs of the housewife and the army and navy wants were accommodated. The Governor added that there would be money for all'if all were willing to co-operate in adjusting their demands proportionately to the essential needs of the country, CALL FOREIGN LOANS. And the process of credit rationing applies not only to domestic consumers, but also to foreign governments. For instance, a number of prominent foreign loans floated in the United States. including one of fifty million dollars to the Argentine Government, are being called in upon maturity, despite urgent requests for extension of the credit by the "foreigners" concerned. With market and credit conditions such as they are to-day, bankers say it will be some time before foreign governments will be able to receive favourable conditions for floating their securities in America. The bankers say that Americans are charged with exacting exorbitant rates of interest. But they apparently do not realise that in accepting the fiota-

lion of a foreign loan, conditions musfc be adapted to the facts existing in, America to-day, plead: the New York financiers. American business demands money as never before, and under the old law of supply and demand, money is high. When a great: railway corporation like the Pennsylvania is compelled to pay H per cent, on a. short term, on gilt-edge bend issues, it may be appreciated what many manufacturers must encounter when seeking credit. To-day the capitalist, merchant, and speculator, in everything from Wall Street s tocks to commodities of life, is feeling the pinch of the readjustment. As an instance in the price decline if may be stated that one day in Chicago, after'a-series of steady declines, prices came down'helter : skelter on the Board of Trade. All grain and provision joined in the big tumble. Corn and pork underwent extreme breaks, respectively- 7 3-8 cents a bushel and 2.05d01. a barrel,' July delivery of com touching as low as 1.64 1-8 d 01.,. and July pork 34.75. dol.