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F O R a long time past the failure of the railroads to give adequate service has hindered the free shipment of fuel, raw materials and goods. The situation resulting from this has been exceedingly aggravated by the recent strike of railway employees. Industrial plants generally have been operating close to capacity, but under the most trying circumstances due to these transportation dif ficulties. It is hoped that with the railroads restored to normal conditions these disturbances to trade and industry will dis appear. Prices still show an advancing tendency in iron and steel and allied lines, but the advance has largely stopped in the leather and some textile lines, and decreases appear in a few products. The labor situation shows no distinct change, and operatives in the main still fail to recognize the need for larger production. However, there are fewer reports of demands for increased wages, and in some few cases workmen are beginning to recognize that decreased output rebounds to their ultimate disadvantage through higher prices. The majority of our correspondents state that collections are fairly satisfactory, though it is noted that, due to the amount of money tied up in merchandise, owing to delays in shipment, and further to the tight rein which banks are holding on credits, there has been less discounting of bills and some tendency to allow them to run to maturity. 1 Retail trade is holding up very well and the volume of busi ness is about 36 per cent ahead of a year ago. Stocks are now about 26 per cent larger than a year ago and have been increasing during the past few months in accordance with the normal trend at this season. These percentages, however, are based on values and it is doubtful whether the bulk of the goods on hand shows much increase, as many kinds of merchandise have not been received in as large quantities as usual. Luxury goods still com mand an active market. The following percentages reflect retail trade conditions dur ing the first three months of the year. From the ratio of stocks to sales—381 per cent, it would appear that stocks on hand are sufficient to care for three to four months’ sales. RETAIL TRADE OF DEPARTMENT STORES Net sales: January 1920 February 1920 For month named compared to same month, 1919........................................ + 22% -r For period Jan. 1 to end of month named, compared to same period last year................................................. + 22% r 21% + io% + 16% 3% + 7% 18% March 1920 - f 36% + 26% Stocks at end of month named : Compared to same month, 1 9 1 9 ........... Compared to previous month................. — Ratio of average stocks at end of each month for period from Jan. 1 to date, to average monthly sales for same period............... + 25% ■J" 12 % 381% Ratio of outstanding orders at end of month named, to total purchases during year 1919.................................................................. 22% 28% 25% Automobiles Passenger machines have been in great request and this is still the case, though latterly price increases have discouraged some purchasers. Production has not by any means caught up with back orders. The lack of transportation facilities has made it necessary to drive machines to their destination under their own motive power. The output of closed cars is far behind the schedule. Agencies report the outlook to be bright and prices hold firm. Many of them have sold a large percentage of the cars which have been allotted to them for the balance of the year. 2 The demand for trucks since January 1 has been picking up considerably, and the outlook is very encouraging to man ufacturers. Carpets and rugs Carpet and rug manufacturers report a brisk demand for their products, which they are at present unable to care for, except in the cheaper grades. Prices are firm and the general trend is higher. Factories are operating at 80 to 90 per cent of capacity as compared with 50 to 70 per cent a year ago. Material and labor scarcity is holding up production in some plants, though a few mills have managed to secure ample supplies of raw material. The spot supply of materials is small. The prospects for the rest of the year are regarded as good, but there is uncertainty as to the attitude of retail dealers in view of the higher prices. In any event, large contracts have been made which will assure production for a considerable time. Pub lic institutions figure largely in new orders. Coal With the withdrawal of Government regulations on bitumi nous coal, effective April 1, producers negotiated with consumers for the renewal of contracts which expired March 31. Prices were adjusted to higher levels, due to the necessity of allowing for the wage increases recommended by the President’s Coal Commission, and increased costs due to small car supply. The engineers of the Fuel Administration, which made an investiga tion of the records of a central Pennsylvania colliery, found that a car supply of 60 per cent increases the cost of mining 30 per cent. The regions which supply the coal for this territory are said to be working under a 60 per cent supply. Demand is far ahead of supply, and it is stated that many consumers will try to store as much coal as possible over the next six months, which will keep the market active during that time. The anthracite industry is at present troubled by demands of labor for higher wages, though the men have walked out in only a few cases. The movement of coal is also held up by lack of cars. Retail dealers are unable to care for the orders which are being received and prices are advancing. 3 Cotton The raw cotton market continues to show activity and high prices and the longer staples, on which the demand centers, are in scant supply. Much of this demand is probably from foreign sources, as domestic manufacturers are buying cautiously, pre ferring to use up their surplus stocks before making further pur chases. Prices are at the highest levels since the Civil War, and the present trend is higher, as practically 75 per cent of the avail able supply is said to be of short staple, which is in little request. Yarns have not been in so active demand, but this is mainly due to the fact that manufacturers have largely contracted for their needs, and much of the buying during the past two months has been in small quantities to fill unexpected needs or replace delayed deliveries. It has not been possible to accumulate large stocks. Prices are holding steady, and the general average is about double that prevailing a year ago. Due to continued de mand, and the probable improvement in manufacturing condi tions, the outlook is thought to be good. According to reports, distributors of cotton goods are not stocked up, but the tendency of consumers not to pay the high prices has resulted in the offering of little new business to the manufacturers. Some lines are active, but this by no means holds good for the entire list. Manufacturers are busy on back orders which keep their operations up to capacity, but an influx of buy ing will be needed to guarantee production for the rest of the year. Compared to last year, prices doubled. Demand from foreign sources has served to keep up production and one large manufacturer states that since the shortage of cotton goods is world-wide, what one part of the world will not take, another will. There is no unanimity of opinion among producers as to how business will be for the balance of the year, and caution is generally felt to be necessary. Groceries The first three months of this year were marked by a strong demand for groceries of all kinds, one large wholesaler reporting that his business was 40 per cent in excess of the same period last year. Trade thus far in April has not been so brisk. Sup plies are fairly good except in the higher grades of canned goods and sugar. The price of sugar is rising, and it is stated that the increase in consumption through its greater use in confectionery, 4 soft drinks, ice cream, etc., since the advent of national pro hibition, has caused a shortage which cannot be overcome with out larger crops. Prices of canned goods, with the exception of the higher grades, have been about 10 per cent lower than a year ago. Rice and sugar are much higher; beans maintain about the same level. The majority of grocery items are steady. Transportation is holding up supplies and fancy goods are hard to get. Canners are said to be demanding 10 to 15 per cent more on goods for future delivery than a year ago, and farmers and other producers are insisting on high returns for commodities. Unless some break in the situation occurs, which is not now apparent, grocers ex pect a steady volume of business at firm prices. Hardware Business in general hardware lines has been increasing stead ily since the beginning of the year, and it seems to be unnecessary to use even the ordinary sales methods to book orders beyond the capacity of the manufacturers to handle. Demand for contract ors’ and builders’ supplies is somewhat under normal due to hold ing up of building by high prices. Present prices are anywhere from 25 to 100 per cent above a year ago. Both manufacturers and dealers are exceedingly optimistic about the continuation of demand for the rest of the year, but the thought is expressed that the inability to ship merchandise may cut down the volume somewhat. Hosiery Hosiery manufacturers report that the market for their prod uct is very unsettled. Orders for future delivery are being can celled extensively. Jobbers are following the policy of buying from hand to mouth in the expectation of a reduction in prices. Manufacturers, however, hold to the opinion that such a reduc tion is not in sight. Raw materials, with the exception of silk, continue high, and labor conditions, although more settled than at this time last year, nevertheless cause much concern. Under the circumstances, the producers feel that the longer jobbers and retailers refrain from purchasing hosiery to replenish their ra pidly decreasing supplies, the higher prices will be. Below are given the first results (as applied to manufactur ing) of the new plan of the Federal Reserve Board for publishing accurate business statistics. The percentages apply to the hosiery 5 industry in the Third Federal Reserve District, and show the value of goods manufactured during March, the finished products, raw materials, and unfilled orders on hand at the end of March, as compared to February, 1920, and March, 1919. OPERATIONS IN THE HOSIERY INDUSTRY—MARCH, 1920 Per cent increase or decrease as compared to March, 1919 Feb. 1920, 1. 2. 3. 4. Product manufactured during month (selling price) Finished product on hand at end of month (selling price) Raw materials on hand at end of month (cost p rice).. . Unfilled orders on hand at end of month (selling price) + n% - f 50% + 23% — 14% + + 196% 57% + 149% 270% Iron and steel The demand for pig iron, steel, and finished products such as plates, shapes, castings, etc., shows no signs of cessation but is rather on the increase. Producers are working to capacity wherever their supplies will permit, but they are very seriously hampered by the transportation delays which make it difficult to bring in the raw materials and ship out the finished com modities. As a result of the holding-up of deliveries, consumers who have been clamoring for needed supplies are offering high prices to secure immediate delivery. The danger of unrestricted price increases has been recognized by more conservative manufactur ers, but their efforts to stabilize prices have had little effect thus far. Quotations on Pennsylvania no. 2X pig iron in April were $47.05 per ton, as compared to $45.35 the previous month, and $31.80 last year. Pipe fittings have been in smaller demand lately, but large back orders have kept up production. The building situation is affecting this line. Jew elry Demand for jewelry of all kinds is continuing strong, and there appear to be no signs of any cessation. Manufacturers are slow in making deliveries. Certain classes of the American people are apparently still dominated by a desire to own luxuries of the most expensive kind. As compared to a year ago, prices of diamond goods have gone up 50 per cent, jewelry 32>l/ 2 per cent, and silver 60 per cent. The outlook to the end of 1920 is thought to be very good, despite the tremendous advance in prices. 6 Leather The majority o£ the plants manufacturing kid leather are not operating up to their full capacity, which is due to material and labor scarcity and in some cases to lack of orders. Plants appear to be operating to about 80 per cent of capacity. Demand has fallen off noticeably during the last month, more particularly in the lower grades, and consequently the supply has been fairly adequate. Prices are comparatively steady, but the general ten dency is toward lower ones, though they are still much above a year ago. Raw skins are reported to be scarce at primary markets and very expensive. Producers feel that there will be good business as soon as the price situation is settled. Shoe manufacturers are rather wary about committing themselves to large purchases of leather until they are satisfied that they will not be able to buy cheaper in the near future. The volume of sales is adversely affected by the exchange rate for sterling. Normally there is a large export trade, but this has been seriously interrupted and American tanners are con cerned over the possibility that foreign tanners may have gained a foothold in markets which once belonged almost exclusively to this country. Lumber The demand for lumber has been quite strong, though some wholesalers report a decrease lately. The advent of more season able weather may very probably result in a larger volume of busi ness. Dealers report that they are able to care for their orders with fairly prompt deliveries, but the small stocks of seasoned wood on hand make this rather difficult. Prices hold firm and average about 50 per cent higher on spruce and hemlock than a year ago, and double in the hard woods. In any event, supplies are small due to car shortage. The outlook for business during the rest of the year is thought to be good by most dealers, but the feverish buying which has been witnessed in the past is not expected to be a feature of the market, and some uncertainty is apparent as prices have ruled too high. Pottery Pottery and porcelain products have been in demand since the beginning of the year, and there is little prospect of cessa tion in the immediate future. The general situation is strongly 7 marked by inadequacy of supply, and many plants are six months back on their orders. Shortage of railroad cars has been holding up materials and fuel, but the majority of concerns have managed to keep production very nearly up to a 100 per cent basis as com pared to 50 to 60 per cent last year. Prices are holding steady at levels from 10 to 20 per cent higher than a year ago. A large part of the present demand comes from contractors engaged in making factory extensions and alterations, and there are said to be few speculative building operations under way. Manufactur ers are exceedingly sanguine about business for the next twelve months. Shoes Some manufacturers of footwear are running to capacity, but most of them report operations at 70 to 80 per cent. The demand has been fairly strong, but has decreased lately, and they are now able to care for orders. This is the season of the year at which purchases are usually made for delivery in July, August, and September. Up to the present time there has been some hesitancy on the part of purchasers in buying for delivery during that period, primarily because consumers are holding off in the expec tation of lower prices. Leathers of desirable quality are scarce, but the chief diffi culty in securing materials is due to the transportation situation. The year 1920 will probably be marked by a decrease in the vol ume of business, but this may not be the case as to the value of the goods produced and sold. Silk Producers of silk goods are running at from 80 to 100 per cent of capacity, which is somewhat higher than a year ago. Demand has been strong, but the recent slump in the raw silk markets caused a marked decrease in the demand for finished goods. Under present conditions manufacturers are able to supply the demand. The attitude of consumers had prompted the feeling that price levels were unreasonably high, and conse quently prices of finished goods are unsteady and trending lower but are still from 50 to 100 per cent above a year ago. The raw material supply is easier, but the higher qualities are scarce. In view of recent market developments and the wavering price sit uation, producers are uncertain about business conditions in the coming six months. 8 Ribbon manufacturers are busy and, while new business has slackened off somewhat lately, they believe this condition to be temporary as present styles are said to favor the use of ribbon. The large amount of back orders which are yet to be filled are keeping operations up to 90 to 100 per cent of capacity. W ool Wools of the fine merino grades continue in demand and prices hold firm. In the medium and lower grades, prices still favor the buyer, though there is more interest in the medium wools. Demand has been somewhat smaller during the past month due to the tie-up in transportation in New England during Feb ruary and early March, and the curtailment of credits. Yarns have been in strong demand, though one firm reports a decrease, which it ascribes to smaller bank accommodations to customers. Prices are tending higher and are now about 50 per cent above a year ago. Cloth manufacturers are sold ahead and are producing ac tively, though demand shows a small decrease in some lines inci dent to the season. Prices weakened slightly, but are much higher than last year. Manufacturers think that clothing needs will assure full-time production for 1920, but they do not care to prophesy conditions after the close of the year. A large dealer in raw wool gives it as his opinion that the insistent demand for wool textiles is gradually being supplied. Financial There is no buying of commercial paper by the banks of Philadelphia, but the buying of the country banks is approaching normal. The rate holds firm at seven per cent. The loan and discount operations of the Federal Reserve Bank decreased from $571,916,000 in February to $544,618,000 in March. The average daily earning assets of the Bank increased from $243,612,000 to $246,229,000, however. The reserve ratio shows little change, continuing from 40 to 41 per cent. Federal reserve note circulation increased from $242,258,000 at the end of February to $247,631,000 on March 31. The average daily number of checks handled by the transit department in March was 161,474, amounting to $56,146,000. In February, the daily average was 124,478, to an amounnt of $44,409,000. 9 B U S l i ESS S I T U A T I O N Third Federal Reserve District G EN ER AL April, 1920 A B IL IT Y T O S U P P L Y DEMAND DEMAND B U SIN ESS R A W M A T E R IA L O R M E R C H A N D IS E S IT U A T IO N PRICE T R E N D S Automobiles Strong Unable, except on higher priced cars Higher Carpets and rugs Brisk Unable, except in lower grades Higher Coal Very strong Unable Higher Cotton goods Yam s— strong Goods— fair Busy on back orders Firm Groceries Good Able— except sugar and some canned goods Higher Hardware Very strong Unable Higher Hosiery Decrease Able Firm Iron and steel Very strong Unable Higher Jewelry Very strong Partially able Higher Leather (kid) Decrease Able Trend lower Lumber Good Partially able Firm Scarce— must drive / i n by hand A T T I T U D E OF LABOR C O L L E C T IO N S O U T L O O K FO R B A L A N C E O F 1920 Better Excellent Excellent Fair supply Somewhat better Excellent Good Scarce Troublesome Excellent Firm Excellent Fair to good Fair—-T ransportation interferes Excellent Good M ostly excellent; some slowness Excellent Scarce Indifferent Fair Scarce Uncertain Mostly excellent; some slowness Excellent Excellent Excellent Excellent Uncertain Excellent Good Indifferent Excellent Excellent Better Excellent Uncertain Mostly excellent; some slowness Uncertain Slower Good Indifferent Fair Scarce Somewhat better Scarce [ Scarce Pottery Very strong Unable Steady Shoes Decrease Able Steady Silks Decrease Able Lower Woolens-worsteds Steady Unable Firm Scarce I Fairly easy Fair Mostly indifferent; some better . 10 11 The table below shows the average discount rates reported by Philadelphia banks for the thirty-day periods ending on the specified dates. A p r. 15 1920 Mar. 15 1920 A pr. ! 5 1919 Customers’ prime commercial paper: 30 to 90 days........................................................................ 4 to 6 months...................................................................... 6 % 6 % 6 % 6 % 5 Yz% 5 'A ft Prime commercial paper purchased in open market: 3 0 to 90 days........................................................................ 4 to 6 months...................................................................... 7 7 % 6%% 5 'A7c % 7 % S 'A % Loans to other banks— secured by bills payable............. 6 % 6 % S'A7c Bankers’ acceptances of 60 to 90 days: Endorsed.............................................................................. Unendorsed.......................................................................... 6 % 6 % 4A * *>%7c Loans secured by prime stock exchange collateral or other current collateral: Demand................................................................................. 6 % 6 7c 5 Ya Tc 3 m onths.............................................................................. 6 % 6 7c 6 7e 3 to 6 months...................................................................... 6 % 6 7c 6 % Cattle loans................................................................................... 6 % Commodity paper secured by warehouse receipts, etc. 6 % 6 7c 6 7c 6 % 6 % Loans secured by Liberty bonds, Victory notes or certificates of indebtedness................................................. 12 STATEMENT Federal Reserve Bank o f Philadelphia RESOURCES April 16, 1920 Legal tender, silver, etc.. $137,692,415 668,709 $137,393,744 492,524 $130,393,362 268,628 $138,361,124 $137,886,268 $130,661,990 $167,355,852 33,958,465 3,415,982 34,075,300 $162,735,396 49,237,182 5,590,873 31,988,400 $184,200,448 13,979,026 963,693 18,665,400 $238,805,599 $249,551,851 $217,808,567 $9,975,920 101,393 $13,441,675 638,192 $8,406,560 223,180 Uncollected items............ All other resources.......... 76,438,960 2,456,722 76,030,875 2,742,168 62,516,700 72,140,431 2,337,124 Total resources........ $466,139,718 $480,291,029 $494,094,552 LIABILITIES April 16, 1920 Month ago Year ago Month ago Year ago B i l l s d i s c o u n t e d , members: S ecu red b y G o v e rn m e n t w a r Bills bought in open market United States securities.. Total earning assets Mutilated and fit notes on hand: F ed era l re s e rv e n o t e s ............ F ed era l re s e rv e b an k n o te s . Due from d ep ositary banks—war loan deposit Capital paid i n .................. Surplus............ Government deposits . . . . Due to members—reserve account. . . . Collection items . . . Gross deposits......... Government deposits— special account........ Federal reserve notes out standing . . Federal reserve bank notes outstanding. All other liabilities.. . . Total liabilities........ $8,198,300 8,805,132 21,018 993,723 $8,198,300 8,805,132 14,047 16,016,055 $7,584,650 2,608,344 101,024,753 67,301,933 94,837,197 70,239,144 112,884,217 65,547,500 $169,320,409 $181,092,396 $183,180,537 4,748,820 $67,078,390 $256,692,475 $256,484,850 215,165,790 19,164,000 3,938,384 22,344,000 3,352,304 15,840,000 2,636,841 $466,139,718 $480,291,029 $494,094,552 13 RESOURCE AND LIAB ILITY ITEM S o f member banks in P h ila d e lp h ia , S c r a n t o n , C a m d e n a n d W ilm in g t o n A t the close o f business Apr. 16, 1920 Mar. 12, 1920 Apr. 11,1919 r i n thousands of dollars— i.e., ooo’s omitted. L J United States bonds to secure circulation. ._____ $ 1 1 ,3 4 7 $ 1 1 ,0 9 7 Other United States bonds and notes.................... 39,261 3 7,938 3 4 ,8 2 6 Certificates of indebtedness.............................. 56,8 8 4 4 5 ,8 9 5 141,931 Total United States securities owned . . . . $ 10 7 ,49 2 $ 9 4 ,9 3 0 $ 1 3 8 ,3 5 4 Loans secured by United States securities. ____ 7 5,3 0 9 7 8,4 0 5 141,573 7 59 ,6 05 6 13 ,3 98 All other loans and investments................... Total loans and investments............... ____ $957,401 $ 1 1 ,5 9 7 $ 9 3 2 ,9 4 0 $ 94 3 ,3 2 5 Reserve with Federal Reserve Bank........... 6 4 ,0 8 6 6 9,6 4 2 6 7,3 0 7 Cash in v a u lt....................................................... ____ 16,958 17,244 18,836 672 ,5 88 6 74 ,7 34 645 ,3 02 Net demand deposits on which reserve is computed................................................... ____ Time deposits ..................................................... Government deposits........................................... ____ Number of banks reporting............................ CHARGES TO 2 5,7 6 9 2 2,6 0 5 8,681 1,568 4 1 ,4 6 0 56 56 56 D EPO SITO R S’ A C C O U N T S other than banks’ or bankers’ , as reported by Clearing Houses W eeks ending Apr. 14, 1920 Mar. 17, 1920 Apr. 16, 1919 Altoona................................ .................... $3,413,000 $3,457,000 $2,657,000 Chester................................ ................... 5,213,000 5,271,000 3,938,000 Harrisburg ........................ .................... 4,927,000 4,240,000 3,718,000 Johnstown.......................... ................... 4,590,000 3,423,000 2,762,000 Lancaster .......................... ................... 7,553,000 5,926,000 5,118,000 Philadelphia...................... ................... 363,227,000 385,555,000 281,702,000 R eading.............................. ................... 6,400,000 6,059,000 3,000,000 Scranton ............................ ................... 15,907,000 12,442,000 9,357,000 7,999,000 T ren to n .............................. ................... 11,385,000 11,713,000 W ilk es-B arre.................... ................... 8,002,000 8,358,000 5,840,000 Williamsport...................... ................... 4,837,000 4,501,000 8,607,000 W ilm ington....................... ................... 8,240,000 10,326,000 3,017,000 Y o r k .................................... ................... 5,181,000 4,333,000 3,421,000 T o ta ls....................... ................... $448,875,000 $465,604,000 $341,136,000 14 BUSINESS IN D ICATO RS Percentage Increase or decrease compared with Apr. 19, 1920 Previous month Philadelphia banks: Loans................................................. Deposits.............................................. Ratio of loans to deposits................ $820,724,000 701,816,000 117 Federal Reserve Bank: Discounts and collateral loans......... Cash reserve...................................... 90-day discount rate.......................... $189,765,000 44 6 7 Commercial paper (6 mos. open market) % 3 Jo 119 — f,* % 7 %* Building permits, Philadelphia............. Post office receipts, Philadelphia......... Commercial failures in district (per Bradstreet’s ) ............................. $ 1 1 ,3 9 9 ,0 6 2 $ 1 ,4 1 3 ,4 4 3 % + + + + $ 2 0 .7 1 2 4 15 % %* 5y2%* — Year ago _L 23 cfo 7c + 48 % 7c + 27 7c +328 7c 20 % 26 21 65 7c 35 7c 7. 8 % 1. 9 To $ 2 5 7 ,9 0 1 ^Actual figures. 3 42 Previous month j 33 3 2 1 .0 0 0 + %* Percentage increase or decrease compared with 1 3 5 ,0 6 9 ,6 2 4 $ 2 , 2 6 7 , 3 6 0 ,9 3 7 6 fc 7 % 118 %* %* % $ 2 , 1 3 2 , 2 9 1 ,3 1 3 Latest commodity index figures: Annalist (food prices only)............... Dun’s .. Bradstreet’s + + 8 41 6 % Total clearings............................... 2 % Mar. 1920 Bank clearings: In Philadelphia................................... Elsewhere in district.......................... + + Year ago 0. 67c _i_ 1 * 20 % 19 + + 2. 9 7 , 17. 2 % 19. 6% * Is our present remarkable business boom likely to continue, or is the end in sight? This is a question which is foremost in the minds of commercial and financial interests in the United States today. At the recent annual meeting of the United States Steel Corporation, Judge E. H. Gary, chairman of the board of di rectors, told the stockholders that the United States at the present time has the best opportunity it has ever had for enhancing its commercial supremacy. He remarked that to his mind, condi tions are improving, and have been improving for the past year or more. He said that, “ W e can take and maintain the leading position industrially and financially of all the countries of the world.” This is the almost universal feeling among business leaders. The banking interests, however, do not view the situation in so optimistic a vein. Paul M. Warburg, formerly vice governor of the Federal Reserve Board, views “ the position in Europe with distinct alarm.” He looks for a recession in business throughout this country. This recession will be caused, in part, by a decline in our exports to Europe, owing to the, as yet, unsolved problem of furnishing adequate credits to war stricken countries. Com menting on the financial aspect of our domestic outlook, Mr. War burg remarked: “ If our fight against inflation is successful, it will involve a recession in prices and reduction of loans and cir culation. The Federal reserve system in these circumstances, will, to my mind, have to put its discount rate upon a basis that does not invite rediscounting for profit on the part of the banks. If we can arrest the mad buying on the part of the public, which in turn causes the feverish buying and cumulation of stocks on the part of the retailer, wholesaler and manufacturer, or farmer, we shall soon contract our bank loans, increase savings, and reduce the cost of living for ourselves and the world. The finan cial situation would thereby gain in strength, free itself from the 16 past hothouse influences, and get us back to a solid basis from which healthy progress may then be made in the large tasks confronting us.” Henry P. Davison, of the house of J. P. Morgan & Com pany, looks upon coming events from a very dismal point of view. He recently remarked, “ If I told you what I really think, it would be too blue to print.” Frank A. Vanderlip, too, looks for a sharp recession of our present business boom. This will result, he says, from the dis aster to which Europe, he feels certain, is moving. The Stock Exchange in the past has always acted as a barom eter forecasting future business conditions. If it is continuing to do so, the recent sharp declines in practically all securities would seem to indicate that the banking interests hold the correct view, that the peak in business prosperity has been reached, and that the next six months will evidence a sharp decline. IS The London office of the Standard Statistics Company re ports the following: “ The export trade in woolen hosiery and underwear is badly handicapped by the increased cost of pro duction; since 1914, labor cost has doubled, fuel gone up by 300%, freights 250%, and raw material enormously; Australian (Botany) wool has increased from 2 shillings, 9 pence per lb. to 16 shillings; cotton yarn from 7 pence to 4 shillings per lb. It 1S in the latter two items that Leicester manufacturers bitterly complain of gross profiteering restricting export trade.” In spite of these conditions the British manufacturers con template exporting to American markets. One of the leading manufacturers in England recently remarked, “ America at the moment is our most promising market for good quality hosiery. The demand there is for the best article, and British goods are admittedly the best.” There is small prospect, however, that British hosiery will make its appearance in American markets to any great extent for some time to come, as British home consumption of stockings ls so heavy that there is but little to export. IS Frank A. Vanderlip, formerly president of the National City Bank of New York, delivered a number of addresses while on his 17 way across the continent to Seattle, from where he sailed on April 10 for Japan. In all of these Mr. Vanderlip expressed the belief that the present-day prosperity is based on a false premise, namely, currency inflation, and that unless the extension of ab normal credits is curtailed by the effective use of the Federal Reserve Board’s rediscount power, a crash is certain to follow. Below are given several extracts from his speeches: “ The Federal Reserve System which permitted banks to es tablish credit of thirty times their reserve, caused the inflation. It simply added $15,000,000,000 to our purchasing medium. This was the chief contributing cause for putting prices up two and one-half times as high as in 1914. * * *” “ They tell you lack of production caused all of the unrest and misery, but inflation is the basic reason. Because of high wages labor lost the connection between efficiency and the pay envelope. Today labor works at 60 per cent efficiency. * * *” “ Inflation reached into savings accounts and clipped every dollar down to forty cents. It rewrote insurance policies to half their value. It caused untold suffering among the classes with fixed incomes.” Following his address at Fort Wayne, Indiana, on April 3, the Indianapolis News published the following: “ The old national banking law, Mr. Vanderlip said, provided that for every $7 loaned, $1 must be kept in the bank’s vaults, but the Federal reserve law allows $30 of money to be loaned for each $1 in the bank’s vaults. This has caused a tremendous inflation, he be lieves, and the balloon will break with disaster to the country’s business if a stop is not called. An increase in production will help the situation greatly, he said. Labor has come out of the war dissatisfied and is giving scarcely more than 60 per cent efficiency for a vastly higher wage, said Mr. Vanderlip. If labor were wisely led, he added, it would find 100 per cent efficiency bringing down the cost of living. Mr. Vanderlip did not lay all the blame, or the major part of it, on labor. He said it is due to the unwillingness of the Government to use the discount brake on expansion of loans which the Federal reserve law provides. The Federal Reserve Board wanted to boost the loan rate as a measure of protection against speculative interests, but the Gov ernment wanted low rates, and forced the Reserve Board to keep its hands off, he said. At present, therefore, there are $26 in loans for every one dollar in the bank’s vaults, and there are only $4 more in the pyramid possible. 18 “ The speaker urged that before the bubble bursts and business collapses, the rate be put so high that it will stop further infla tion.” *8 “ What’s the matter with the port of Philadelphia?” The “ Public Ledger” sent this question to many prominent local man ufacturers, and of the answers received, that of Mr. Kerro Knox, Export Manager of the H. K. Mulford Company, was especially interesting. Mr. Knox agrees with Samuel Rea, president of the Pennsyl vania Railroad that Philadelphia’s undeveloped port is not the fault of the Pennsylvania Railroad, but of the exporters and man ufacturers of Philadelphia, who have failed to bring more steam ship lines here. Were Philadelphia the terminus for a greater number of lines, the railroad would be forced to give better ser vice to the piers. In support of this argument, Mr. Knox gives an account of a great effort which he made to ship from Philadelphia, and relates the stupendous difficulties with which he met and the resultant loss of contracts. Lack of steady and accurate information regarding sailings, freight rates, etc., is the chief handicap to the Philadelphia ex porter. Specific occasions are cited when ships scheduled to sail on certain dates did not leave until four or six weeks later. Furthermore, no definite information as to exactly when the vessels would sail could be obtained, thereby causing a loss of valuable contracts. A woeful lack of principle, he says, is evi denced by some owners who seem to be ready to charter their vessels to the highest bidder irrespective of prior contracts. The better facilities offered by New York in the matter of foreign exchange is another disadvantage under which Philadel phia labors. New York banks have their own branches in foreign countries, whereas Philadelphia banks and bankers must work through correspondents. This adds Yi to 4 per cent to the cost of a ^raIt drawn in Philadelphia, as no demand has been created for Philadelphia exchange. This is a secondary consideration, however, as the foreign exchange and foreign credit situation could and would be easily solved if manufacturers and exporters would ship from Philadelphia. In Mr. Knox’s opinion, good shipping service could be built UP by: 1. A steamship company that would establish regular sailing dates and guarantee those sailings; 2. The employment in 19 Philadelphia of Federal employees who would interpret the Federal export shipping regulations in as broad and liberal a manner as is done in New York, and not enforce the mere tech nicalities of the law. The crux of the situation, therefore, with regard to the port of Philadelphia is that shipping people must give reliable accu rate information, and must make their service regular so that patrons will not lose valuable contracts through the cancellation of sailings after they have been announced. It was reported recently in the Philadelphia newspapers that Japanese interests had purchased two large textile mills in the Kensington district, and were dismantling them preparatory to sending the machinery to China and Japan. The owners gave as their reasons for selling their plants the fact that labor conditions were such that it made it unprofitable for them to continue operations. Five thousand employees have been thrown out of work as a result of this. The question arises, what did labor in this instance gain from its persistent refusal to cooperate with capital? This business report 'will be sent regularly to any address upon request. 20
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