Full text of Commercial and Financial Chronicle : April 19, 1951, Vol. 173, No. 5004

View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

ESTABLISHED 1839

university
MlCH.GAN

1951

UPR 19

ttWWSTlWlW

USMESS
W

UBUtU

Reg. U. S. Pat. Office

EDITORIAL

Seldom have

the

great rank and file of the

DR.

people of the United States been so stirred as
they have over the act of President Truman in.

relieving General MacArthur of his commands in
the Far East. The General is unquestionably a
military genius, and he has an equal flair for the
dramatic (or is it the melodramatic?); In all the
circumstances he could scarcely miss being a popular hero. We should fail in our duty, however,
if we did not assert with perfect frankness, and
the American people would not be dealing fairly
with themselves if they did not recognize, that

By F. RAYMOND PETERSON*
Chairman, First National Bank & Trust Co.

Paterson, N. J.

Former ABA President, in commenting on current eco¬

Science, University

nomic situation and business

Chicago; Formerly, Director Austrian Institute
of Economic Research; Tooke Professor of Eco¬

Author, "The Road to

Serfdom," etc.

Eminent economist, former resident of Austria and

Eng¬

land, stresses greater effectiveness of free market; and
warns of difficulty of dispensing with controls, subsidies,
and bureaucracy, once they have been adopted. Main¬

tains price
sary

want of confidence in the Truman Administration

control prevents declines which are neces¬
and thus accentuates inflation.

government for

to offset increases,
feel

immediate

and

look

the

immediate

general, and in its foreign policy in particular,
fully as much to do with the acclaim the
General is now getting as the personal popularity
of the returning hero, or as anything in the nature
of complete confidence in or agreement with the
General's idea of what our foreign policy ought

have been observing a great many
not-too-optimistic facts about the general business pic¬
Many published figures show that inventories at
both the wholesale and retail levels are too high. Late
winter and

There has been some mention of the fact that the prob¬
lem of mobilization may be a prob¬
lem not of

the

think

the next year or two but
decade or two, and I

real than

which

rests

can

its

be said of

claim

ing
to

over

non-partisanship upon
the presence in its councils of certain individuals
of the opposing party chosen because they were

one's views on this are

but I, personally,
convinced

„

discounts

Television

sharply,

the

sales

and

used car field.
fallen off

have

manufacturer,

at
A
the New York Central
one

very

least, has reduced prices byi20%.

flex¬

few

that

living

to its spring expectations. Auto¬
mobiles are readily available, some
up

the

days ago,

announced

Railroad

ibility and adaptability of a market

regardless of such matters as this, the pres¬
ent controversy with all its color and froth will
go on the debit side of the ledger of history un¬
less it stimulates a careful review of our foreign

that

thousand

employees, due
We all know that some industries

has been made

ing

several

of a system which
rigid by central direction. There is at
Continued

page

The

Raymond Peterson

laying off
lack of freight.
temporarily work¬

temporarily

system is infinitely greater than that

to
are

short-week basis.

happier turn of events in the Korean War during
Continued

policy from start to finish. The thoughtful man
good of his country at heart certainly

♦From

with the

of the

the

goods, such as house¬
Thus far,

the automobile industry is not

Of course,

strongly

But

SPECIAL

the

preserve

freely working society
long period.
' -.
' ; '

beliefs,
Friedrich A. Hayek

page

inevitably colored by one's general

known in advance to hold certain views.

whether

because
and

hold and electrical goods.

essentials of

Administration

lines of durable

to whether we either change
or less planned economy

as
a

now

Continued

war

our

volume

lower

higher cost of doing business. Most
"soft goods" industries, such as tex¬
tiles, are undergoing a period of
moderate
business
readjustment,
which also extends over into certain

yet done as to what will be
potential not in a year or
two but in five or ten years, accord¬

would be the

gainer if we could cease
to argue the question as to whether the General
or the President is right, and begin to ask our¬
selves whether either is right. Certainly, such an
attitude would be non-partisan in a sense far
us

declined,

margins

have

All of

have

business

ought to pay much more
to the question than we

early spring purchases by
disappointing. Prof¬

consumers were

attention

to be.

the most important.

may

muck of inflation trend.

ture.

the long-run problems

has

some con¬

In recent weeks, we

division between the
almost makes it

strongly that our

very

trends, predicts

readjustment as result of National Defense
Program* but holds the business picture over tike long
run is sound, and no full-fledged business recession is
in the making.
Says, if national affairs are handled
wisely, the economic expansion spurred by defense pro¬
gram can be turned to peacetime output.
Foresees no
difficulties in financing of business expansion, and blames

fusion and

of London;

nomic Science and Statistics, University

„

ference

the

of the Chicago

Hayek before Couunder the ausoiccs
University Law School, White Sulphur Springs, West

transcript

of statements by Professor
of Mobilization, held

Economics

Virginia, April 7-8, 1951.

SECTION TODAY ON

Copy

FRIEDRICH A. HAYEK*

Professor of Social and Moral
.

The Business Outlook

Worldwide Shortcomings
01 Wartime Planning

We See It

Price 35 Cents

N. Y., Thursday, April 19, 1951

New York,

Number 5004

173

Volume

address

♦An

Paterson, N. J., April 12, 1951.

merce,

page

by Mr. Peterson before the Junior Chamber of Com¬
*

at the Annual Dinner

STANY DINNER—Pictures taken

Security Traders Association of New York
appear in the Special Section

April 13 at the
starting on page 25.
on

Waldorf-Astoria,

State and

CONE MILLS

Municipal

Preferred & Common

600 Branches

R. H. Johnson & Co.

across

Established 1927

Bought—Sold—Quoted

Bonds

Canada

Monthly Commercial Letter
INVESTMENT

duPont, Homsey & Co.
Members New

York & Boston Stock Exchs.

31 MILK STREET, BOSTON 9, MASS.
Tele. BS 424

Tel. HAncock 6-8200

64 Wall

Street, New York 5

upon request

THE NATIONAL CITY BANK

The

PHILADELPHIA

BOSTON

Troy

SECURITIES

Albany

Buffalo

Harrisburg

OF NEW YORK

Scranton

Providence

Bond Department

Canadian Bank
4Gommme
Head Office:

THE CHASE

NATIONAL BANK

Toronto
-

120

BROADWAY, NEW YORK 5, N. Y.

Tel. WOrth 2-0115

Tele. NY 1-315

Wilkes-Barre

Williamsport
Allentown

Washington, D. C.

Bond Dept.

Teletype: NY 1-708

Seattle

Internal Bonds
Bulolo Gold Dredging

Distributors of Municipal
OF

BOSTON

and

Placer

OTIS & CO.

Ill Devonshire Street

Established

BOSTON
New York

Chicago
Los

Angeles

1899

Cincinnati

Chicago
Columbus

BONDS & STOCKS

; Central Vermont

Public Service Co.
COMMON
Analysis

CANADIAN DEPARTMENT

Denver
Toledo

Goodbody

Co.

Dokcooh Securities
GrPORATIO?!

MEMBERS NEW YORK STOCK EXCH.

40 Exchange Place,

CLEVELAND
New York

Los Angeles

Company

ESTABLISHED 1891

(Incorporated)

115 BROADWAY

Dallas
Buffalo

NEW YORK

THE CITY OF NEW YORK

Development

Brown

Prospectus from authorizeJ dealers

(all Issues)

Corporate Securities

VANCE, SANDERS & CO.

Portland, Ore. San Francisco

CANADIAN

Dominion of Canada

Underwriters and

20 Exchange PL

markets in

We maintain active

ffie

Bond Fund

New York Agency:

New York 5, N.Y.

CHICAGO

Teletype NY 1-702-3

WHitehall 4-8161

request

IRA HAUPT & CO.
Members New York Stock
and

other Principal

111 Broadway,
Boston

Exchange

Exchanges

N. Y. 6

Teletype NY 1-2708
Telephones Enterprise 1820

WOrth 4-6000

105 W. ADAMS ST.

upon

The Commercial and
2

Financial Chronicle

Thursday, April 19, 1951

(1634)

The

Leading Banks and

Companies

Trust

Comparison
Available

for favoring

particular security.

are

they to be regarded, as an offer to

Alabama &
Louisiana Securities

4
Vacuum Concrete Corporation-—

intended to he, nor
sell the securities discussed.)

(The articles contained 111 this forum are not

request

which, each week,

participate and give their reasons

Quarterly

Consecutive

Thls Week,8

Forum Participants and
Their Selections

different group of experts
and advisory field from all sections of the country

in the investment

of New York
76th

Security I Like Best

A continuous forum in

Bought—Sold—Quoted

Curtis J. Straus, Partner, York
Hei-

merdinger & Straus, New

Teletype NY 1-583

Billner, President of
Concrete
Corp.,
is
a

Mr.

Vacuum

inventor.

famous

the

the corpora-

includes

tion

Specialists in

His patented

owned

process,

manufac-

ture of denser,

stronger

Exchange
Curb Exchange

New

York

Treatises <H. D. Donchian's Jan.
1950 study and H. C. Ray's study
made in Sept. 1949 for example)

Co.

Dan River Mills
Moore

Verney Corp.

horizon is tending to

Simplex Paper

Rudolph Wurlitzer
U. S. Thermo
;

Control

Maine Central R. R.

(Com. & Pfd.)

Sanitary Products

Air Products

Trading Markets

American Furniture

branch offices

Inquiries Invited

lllllllllllllllllllllllllllllllillllHIIIIII1

Mobile, Ala.
Direct wires to our

excess

2-7815

NY 1-1557

New Orleans, La. - Birmingham, Ala.

York 4, N. Y.

Hflnover 2-0700

r u c

BROADWAY, NEW YORK 5
Tel. REctor

z*?

>l\

New

25 Broad Stf New

minimize explaining why performance of
Bf *yjt J^H the ultimate favorable impact of low priced stocks will generally
ment in conthese facts on the future of Vac- be better than high priced issues
t
t i 0 n
uum Concrete Corp.
The com- in rising markets. The principal
work.
Company's common stock (no funded theories can be summarized in the
pany's process
' W
debt or preferred) is currently observation that the man in the
for
removing
selling under $3 per share. In street would rather own a hunmixing
the 1946 bull market—before full dred shares of stock at 10 than
water
at
the
development of either lifter or ten shares of stock at 100.
time of pour,
pre-stressed patent structures—it
It is our-opinion that the record
has
found
Curtis J.Straus
s°ld over $12 per share.
.in Table I by no means represent
wide applica*
a complete bulk market performtion
and
general acceptance
bradbury k. thurlow
-ance; but something perhaps half
where qualities of fast handling,
Partner Talmage & Co'
way between the extreme pessihigh
abrasive resistance,
high Members Nev; York Stock Exchange mism of 1949 and the extreme
freezing and thawing resistance
optimism of a major bull market
and
high bearing strength are Suggested Low Priced Stock Portfolio
in the styie of 1929, 1937, or even
required.
The use of Vacuum
when we were asked to discuss 1946.
Hence we do not believe
processing not only gives these our Favorite Security < in
this it is too late to begin a low-priced
specific improved qualities in the forum a little over a year ago we stock
purchase • program now
resultant concrete, but also per- ch0se the low priced stock, se- (with
a . warning to the buyer
mits
substantial saving in conlecting for in- that if the market is going to,
struction
costs
through
quick
^
vestment a return to a 1949 basis of valuastripping of forms which can be p v
- ..group of ten tion, low priced stocks will in all
reused.
Contractors utilizing this
% issues and ad- probability do the same). Bearprocessing again and again; form
4 v i s i n g the ing the potential risks in mind we
roster of the leading construe- fcJMrT;
buyer
to should try to choose issues which
tion firms.
f.
I
' spread his risk (a) have given evidence of showOf
rapidly increasing imporISrpd over the group. ing earning power well in excess
tance is the use of the Vacuum
> * Mjj1
-4-t ' Since at pres- of that discounted by their present
Lifter
"Octopus Lifter," inf A errt writing we prices or (b) have so far escaped
vented by Mr. Billner.
The origj see no reason speculative exploitation. Such a
inal
objective was to facilitate
for changing portfolio hiight include:
quick removal of large concrete HlWp0qr
original
; T r
Recent
panels and beams .from
formsview we shall
Price
without subjecting them to the
show how a Atlantic Coast Fisheries-- - 3V4
critical
internal
stresses
which
hypothetical Calumet & Hecla
, 9%
their great weight would set up'
Thurlow
$10,000
ac- Decca Records
— 10
if
conventional
lifting
devices
' '
count placing Pepsi-Cola
— lOVs

Members

York Stock

Members

architects and ultimate buyers of
.....
.
,
f
construction work. These advanThis is the statistical record of
tages may be classed as: (1) Ma- a market performance not interial time and labor economies; fluenced by hindsight. There are
(2) increased design freedom, and a number of excellent Theoretical
(3) added long-term qualitative
values."
„
Nothing on today's economic

York Stock Exchange
York Curb Exchang'j

Members New

C°" N6W

faces.

The three patent families of
Vacuum Concrete Corp. offer specific advantages to contractors, ——

mate-

that

rially reduces
the time ele-

frfe pONNELL & Co.
120

mm"

concrete

able

Since 1917

New

■

and more dur-

Rights & Scrip

Steiner, Rouse & Co.

Suggested Low Priced Stock Portfolio - Bradbury K. Thurlow,

institu-

tional buildings and dam

Corporation

Vacuum Concrete

New York 5

120 Broadway,

.fonnLtonI wa?ehouLs

1920

Established

City (Page 2)

construction; a

spillway

£^tyfo°*^

Straas,

Partner, Heimerdinger &
Netv.York City

Corporation
BArclay 7-5660

mation,

CURTIS J. STRAUS

Hanseatic

New York

Handley Hardware Co.
—-

Analyses

Request

®cwm(mcZ&6o.
9, Mass.

148 State St., Boston
TeL OA. 7-0425
^

Teletype BS 259

N. Y. Telephone

WOrth 4-5000

„

Scott, Horner &
Mason, Inc.
Lynchburg, Va.

LD 33

Tele. LY 83

llllllllllllllilllllllllllllllllllllllllllll

Placer Development,

Limited

MEXICAN GULF
SULPHUR CO.

;

Producing

Gold

Marketable

LEAD—ZINC—TUNGSTEN—OIL
Trading market

were

maintained

Analysis available

AVENUE

a
<v

not

pieces,

construction

necessarily of Vacuum
process
construction, that income from the
use
of these lifters is assuming

SEATTLE
Teletype SE 105

lifter

the

proven

heavy

John R. Lewis, Inc.
1006 SECOND

However,

used.

of such general usefulness in handling a variety of

has

request

ELiot 3040

steadily more important posiin the company's operating

tion

Preliminary studies

statement.

incorporation of
in forkand other cargo han-

indicate that the

the Vacuum lifter principle

trucks

lift

equipment may eliminate
necessity for pallets in an im-

dling

Interested in

the

portant
number of cargo and
freight classifications.
Vacuum Concrete patents in the

Hidden Values?

eKciting
We have uncovered an at-

assume

tractively situated unlisted

tance.

company,

arrears

are

ket price.

ager

Trading Department, will

gladly

provide

additional

you

Full

utilization

Concrete's

Billner

processes

with

information.

heavy steel used
ventional construction.

the

pre-

allow

eliminate

architect to

mar¬

Unlisted

our

steel

structural

stressing

Frank H. Koller, Jr., Man-

the

Vacuum

bright

particularly

is
of

shortage.

dividend

of the current

excess

because

alloy casting
which

pre-stressed field may
overshadowing
imporpromise
of
pre-

The

stressing

Cumulative Preferred

stock

the

nielsen, gordon
& hall

for-appreciation.

200

Stock Exchange

blanket

New York 5

% Telephone
BArclay 7:7340

Teletype
NY 1-2733

contract

with

and add royalty
price; several
contracts
for
pre-cast, defense
housing projects; Atomic Energy
Commission contract (more under
to

Recla-

Penna. Power & Light

curity.

1-4-50

$1,000

1,038
' >997

American Marietta

Henry B. Warner & Co., Inc.
Members

Phila.-Balto. Stock Exchange

123 South Broad St.,
KIngsley 5-2700
New York

Phila. 9, Pa.

Bell System Teletype

Phila. Telephone

PH 771

City Tel.:

BOwling Green 9-4818
Emerich, Chicago

to Ames

Direct wire

,999
998

$9,994

200

2,685
1,565

$1,425
2,343
1,550

2,080
*'1,350

-2,830

•

2.275
1,500
2,065

1 625
2,070

' $20,435
255

•

2,200

2,400

$18,024

250

Quotation Services

$100 f
250

1.215

1,530
»

PDi,vifrap3- ^
Recti, in Period

1,718
1,733

$1,800

1,006

1,000

„SIu„e

@ 1951-Highs 4-10-51

.990

200 Twin Coach ________
333 United Cig. Whelan.
140 Western Air Linesi

Dow-JonesIndust'ls_

5%s

Over-the-Counter

969
997

Williams

Central Electric & Gas

Central Public Utility

T , t
T
con'mue t° choose low

Common

South Jersey Gas Common

tartf

366 Shattuck Denn _„r_

contract

Bureau

& Co.

St., New York

priced stocks as our favorite se-

& Heda—

120 Pepsi-Cola

process

negotiation);

110 Tnt'l Tel. & Tel
105 Niles Bern. Pond___

Army, allowing all concrete contractors
discretion to utilize
a
Vacuum

„

Am. Hide & Leather

250 Calumet
19q Eureka

unique
the U. S.

r *

I able i

influence on

Business:

costs

120 Broadway,

;

Pennsylvania Railroad

Since, lor investment as

tremendously in pre-cast and preii
•¥-%.-,7
stressed
fields and the
Billner

Current

York

REQUEST

Philadelphia Electric Common

judgment
Many of these
under heavy
caP*tel leverage which
attractive feature

to 80% gregated just under 7% we may
in con- write off as accidental since the
stocks were purchased primarily

where steel has been
in chronic short supply for years,
the use of concrete has broadened

15 William

the

/I™

design.

New

George B. Wallace

.
$1,000 in each ShattuCk Denn Miningr 6
ten issues at that time Standard Cap & Seal
9%
would have fared. (Copies of the Tonopah
----1%
original article available from the Tricontinental Warrants __ 2%
author on request).
v
United Cigar Whelan — 4!/4
The purpose of the exhibit Universal Pictures
9V2
(Table I) is not to show how well
Tb
nronortion of onp>„ asspts
one or two selected stocks have . V*e ^
+° °"u
performed in a bull market but t0 be c?
1 Z US Jt
how accurately the mechanical gram , bu,
,
Ya
• ?
principle of low price itself can J,™0!*
•
br 0 —
ensure greater profits over a given
buyer is willing to assume m
percentage advance. As indicated.
event his market
the advance in the slow-moving Proves wrong.
industrial averages amounted to companies operate
a
27Vz%, while the low-priced cost .°r
is
group
advanced
102%, almost precisely their
four times
as
fast, with the: m ProsPerous times but which can
worst of the ten low - priced become a severe threat to market
stocks showing twice the per- values during periods of falling
centage advance of the aver- nrir(K
o;npP
for invp«?tmpnt as
ages and a slightly better market P™es.
performance than General Motors, we 1 as . speculative reasons, we
the widely acknowledged "wonder feel
equity prices will be
stock" of 1950. The fact that the very much higher before they are
dividends on this portfolio ag- Vprv m,rrh lower -it seem* eon-

In Europe,

processes are a major

Members

CIRCULAR

Worth $7 Per Share

Stocks

SOLD

QUOTED

BOUGHT

for 38 Years

33 •
,126.50
<
183 '

National Quotation Bureau

Incorporated.

Established 1913

____

$692.25

46 Front Street

CHICAGO

New York 4,
SAN

N. Y.

FRANCISCO

(1635)
Number 5004

Volume 173

The Commercial and

Financial Chronicle

INDEX

Going Like Sixty

Articles and News

'How to Make

Killing in Wall Street

and Keep It*

fan-

1920, * to
tastic

speed

wit,

tor

miles

mo-

that
60
hour!

car

could

—

do
an

would

"jet

pro-

I ex-

pelled;"
humed

this

earlier

Amer-

ican
Ira

day get sentimental
KCL. Perhaps today!
My second nominee in the 60's

This

is Allied Chemical & Dye.

it too has a certain aura,
respectability of having "made
grade." Cats and dogs don't

the
the

that once

concede

has

moved

level

ever, the management has
peared more dynamic as
share aenced by a plant expansion

attained

has

tion, investment

descrip-

merit.
to my four
First is Kern

Well, let's get down
American beauties.

Land Co. Sounds little,
doesn't it? Only a county-but the
name is misleading. Actually KCL
owns in fee 1,898,000 acres of land
of which 405,000 acres are in Kern
County, Calif., and the rest made
County

of open
country in New Mexico, Arizona
and Oregon.
There are 2,000,000

broad

expanses

of KCL common

stock

'roughly $60 an acre.
And what will all this terra firma
do for you besides give you the
stand

you

Yes,

privilege of paying taxes? A good
question and the answer to it for
years was "a lot of bull!" Because

methods

are

same *'

Continued

Reporter on

Utility

May
—

Governments__ ._L

.-v.___

Securities

Railroad Securities

Securities Salesman's Corner
Securities Now in
The Security I

Registration

The State of Trade

and Industry

and Now—Guess

Then

Tomorrow's Markets
Washington

and

(Walter Whyte Says)

;

Published Twice Weekly

;

•.

and

COMMERCIAL

Drapers'

land,

c/o

Gardens, London,
Edwards & Smith.

Street, New York 4

25, 1942,
York, N. Y.,

Hubbard 2-8200

Albany

•

Chicago

Glens Falls

DANA

WILLIAM D.

Worcester

Cement

Harrisburg Steel Co.
Purolator Products

Singer, Bean
&

MACKIE, Inc.

HA-2-0270

Exchange PL, N. Y. 5

Teletype NY 1-1825

& NY 1-1826

Air Products

Baker-Raulang
Collins Radio
Di-Noc

Hoving Corp.

Editor & Publisher

SEIBERT,

President

RIGGS, Business Manager

Thursday, April

—

market quotation

corporation news, bank clearings,
city news, etc.).
Other Offices: 135 South La Salle St.,

(Telephone: STate

Van Camp

Dana

Sea Food

Whitin Machine

2-0613);

Works

United

States,

Territories and Members of
Union, $45.00 per year; In
Dominion
of
Canada, $48.00 per year.,
Other Countries, $52.00 per year.

Possessions,

Bought

Pan-American

Other

and

Chicago 3, HI.

by William B.

Subscription Rates

19, 1951

Thursday (general news and ad¬
vertising issue) and every Monday (com¬
plete statistical issue

E. C., Eng¬

1879.

Every

state

Schenectady

York 7, N. Y.

2-9570 to 9576

records,

Teletype—NY 1-5

Oil Co.

second-class matter Febru¬
at the post' office at New
under the Act of March 8,

Subscriptions

Boston 8

Franco-Wyoming

Giant Portland

Reentered as

Office

COMPANY, Publishers

HERBERT D. SEIBERT,

50 Congress Street,

HAnover 2-4300

DANA

REctor

WILLIAM

;25 Broad

Company

CHRONICLE

; 25 Park Place, New

Exchange

Associated

Stromberg-Carlson

ary

Members New York Curb

Wires

Dev. Res. Corp.

44
54
64

Who?

You

Rgg. U. S. Patent

York Stock Exchange

Direct

Philadelphia and Los Angeles

2
4

Like Best

FINANCIAL

Spencer Trask & Co.

14
55
—. 18
—________—_. ,5
63
v.-_ 19
61
44
~L:
24
23
58

Security Offerings

Prospective
Public

WILUAM B.

Members New

Teletype NY 1-3370

BO 9-5133

—

Bankers

Reporter's Report

Our

; The

preferred stocks

——

Our

interested in offerings of

;

Broadway, New York 6 '•

(Boxed) ___^.

Funds

Observations—A. Wilfred

[We are

Reilly&Co.
Incorporated

:__ 23
Washington.™ 47
47

Conference in

Questions, Too

About Banks and

News

some

page

J.F.

„

During Summer

NSTA Notes L

Sharing

High Level

(Editorial)— .1-I

See It

Mutual

was one

since then has been
a gradual switch from bull to drill.
By -1949
oil royalty revenues

4
4

_—

value yielding 5% at the current
market price around 62. A distinguished history, a maded balance sheet, an excellent dividend

tory of KCL

,v;

Cover
Bank and Insurance Stocks
———43
Business Man's Bookshelf--.
_____
,
-.54
Canadian Securities «
r--—-21.
Coming Events in the Investment Field-....—__ ..
8
Dealer-Broker Investment» Recommendation
8
Did You Guess?.
———
47
Einzig—"Inflationary Disinflation".—__.... 23
From Washington Ahead of the News—Carlisle Bargeron_____ 16
Indications of Business Activity..
57

recor(*> a highly intelligent 'management echelon and a vista of
long before Hopalong Cassidy rode ?°-ntmued ^^th. Could be your
from rodeo to video, Kern County ln^5trJ)®"t aly,! „ .
,
*
Land
of the largest cattle
Chronicle in recent weeks
raising enterprises in the United has brought you some magnificent
States." As many as 70,000 head of background material on the telecattle
year have been seen grazlndustry* Blg
ing on these various acreages; 000,000
sets out now, 7,000,000
usually winding up in the lush ^
y,ear;*2 ,channelus
irrigated pastures of Kern County ^ 9'?',
?r i^e future by FCC.
where' they fattened up on alfalfa £
*ota* *?£ ' ^ -stations outfor the rich nearby market on the
f golden future plus
Pacific Coast.
Then along in the
approval recently given for
30's oil in volume was found on Hawaii
Puerto Rico and Alaska,
the 'California land, and the hisad', w^at growth. What pros-

Regular Features

industrial

15 a sweet

Saturdays Except

and Other

As We

book value is now $35 a share
Here

Economists to Hold

Monetary

war-alkalies sulphuric acid, am™on+ia> coal tar derivatives etc.
Textiles, soap, steel and fertilizer
companies customers: ^its J>est
are^ mnong By most
peacetime
accounting

REMINGTON ARMS;

(Editorial)

Construction to Be at

NYSE Open

ap-

evi(out

What ACD .makes is vital to big
industries and indispensable m

conservative

Hytron Radio and TV*

.v.
—
"How Can We Best Meet the Strain of National Defense?"*
(TV Discussion by A. Wilfred May and Others)—
5
NYSE to Close Two Hours on April 20 in Honor of MacArthur
8

just about an acre a share. Current price on the Stock Exchange
of about 60 means the land will
"

i x

—

Estate—Morris M. Blair___—___

of War on Real-

Haile Mines

;

Mobilization
—

1951

Per share earnings, on the split
?t0^,tave grown from $3 in 1946
•

'
___————_

._—_—.

Production Controls for

Hedge Clauses

Another clue to alert leadership
topside was the common stock
split, 4 for 1 in 1950 for a broader
slJare market and the acquisition
5* a ,wi
0 stockholders.
i

National Debt

Problem Is the
Distelhorst—v—:

-:f

of retained earnings) of over
that $100,000,000 in the last three years,

quality called,

precise

for want of more

The Effect

Great Amer. Industries

:—_.

1>__

—Herbert Stem

convincingly past the

mystic, indefinable

Use of

The

seemed more plushy than progressive. In the last five years, how-

and speculators

sell at 60; trustees
alike

—Carl F.

to fit my

YORK

WHitehall 4-6551

Air Products

17
W. Babson__L___1__?______—__ 19
and Inflation—Claude L. Benner__ 20
----'

Basic Inflation

current idea, lordly item has been a blue chip
of playing four romantic stocks for years, one. of the solid bricks
back-to-back.
And- all of them: making up the imposing edifice of
(the stocks, not the backs) sell in the Dow-Jones Industrial Averthe 60's.
age. It's been for decades finanf So here goes. You see 60 is cially elegant, with a balance
quite a respectable number.
If sheet the dream of every credit
your age is that, it is alleged to man; VVhy, today's working capital
denote wisdom, maturity of judg- alone is over $16 a share, and
ment, sagacity — all that sort of there are 8,856,396 common shares
thing. You've been around; you —sole capitalization,
know your way.
If a stock sells
There was a while when ACD

it happens

real value!

Securities Dept.

Telephone:

16
Investment Banking '

Credit Restraints on

Dollar

The Life Insurance

and
wake

Market—Roger

The Bond

over

1___

Regulated?

Futures Trading Be

—Rudolph Smutny

let

WALL STREET, NEW

,—

—T. A, Hieronymus.

Impact of Voluntary

to their

so,

10
II

Policies

Under Wise Fiscal

Front—James E. Shelton

the Home

Should Margins in

you may some

historical purposes as because

for

Mobilization

Controls—Roy B. Harrdd 10

Problems—John M. Hancock___

Wage-Price Control Unnecessary
—Alvin H. Hansen

oil is found—and that's possible — if other minerals are lo¬
cated on this extensive land, earnings and dividends could expand
pleasingly, it your favorite invest-,
ment song is "Don't Fence Me In"

expres-

National

Our Two Major

Obsolete

Business—Martin R. Gainsbrugh

Biggest

The World's

you

and Fiscal

lulled

interest

lack

.J; 6

Hackett

Insufficiency of Monetary

sion, however,
not
so
much

Cobleigh

—W.

stocks that have been

sleep

absence of bids?

the Excess Profits Tax

Economic Ideas

Under Changed

Canada's Progress

1949 and 1950) offer, at 60, a
current yield of 7%%.
•.
Here then is a hunk of owned
land bigger than Trinidad. If you
want to buy a piece of a big ro¬
mantic ranch, this is it. Yet only
a small section of this -particular
earth is oozing oil right now. If

Today sequivalent

Responsibilities of Management Under
—Beardsley Ruml

Own any
to

Stocks—L. B. Sch\vinn___

Look" of Common

The "New

U. Cobleigh

Going Like Sixty—Ira

"Lullaby of Wall Street"

Cover

Hayek

—Friedrich

composed of four com-,
and fascinating futures.
If you
happen to have been amounted to 90% of net before
born after 1910, quite possibly the taxes.
Earnings per share have
impact and meaning of the title slowly climbed from $1.55 in 1940
pi this article will escape you., It to around $6.50 for 1950. Current
lererrea,
par- dividends of $4.50 a share (paid
ticularly from
1910 to around

Wartime Planning

Worldwide Shortcomings of

Outlining an unusual equity package,
mon stocks with diverse backgrounds

-Cover

Outlook—F. Raymond Peterson.

Business

The

Author of

Page

TJ. COBLEIGH

By IRA

Bank

and

Publications

Quotation Record

—

Monthly,

(Foreign postage extra.)
account of the fluctuations in

$30.00 per 3'ear.
Note—On
the

rate of exchange,

eign subscriptions and
be made in New York

remittances for for¬

advertisements must
fundi.

—

Sold

—

Quoted

THEODORE YOUNG
40

Exchange Place,

WHitehall 4-2250

& CO.

New York 5,N.Y.

Teletype NY 1-3230

The Commercial and Financial Chronicle

(1636)

of General Counsel for the SEC

discussed.

Substance

characterized

Be at

hedge clauses

belated

surplusage.

Commission

readers.

mind

control
Securities

The

F. W.

attempting to extend its

eral
,

"My opinion has been requested concerning the legal¬
ity of various types of 'hedge clauses' which are used in
the literature of brokers, dealers, investment advisers and
others-

While the language of these clauses varies con¬

siderably, in substance they state generally that the infor¬
mation furnished is obtained from

reliable but that

assurance

sources

believed to be

be given as to its accu¬

can

Occasionally language is added to the effect that
liability is assumed with respect to such information."

racy.

Here

come

at SEC deviousness.

constant

Who

objection of

ours

Securities

Act

been

has

use

for

force

the Securities Exchange Act for

clauses have been in

over

the
Hedge

years,

during all that time and for dec¬

requiring

now an

opinion of General Counsel?
we

another rampage for

extension of its

already too broad powers, many of these
usurped through rule making.
Getting back to the General Counsel's opinion, we
again quote:
"All

the

provide that

administered

statutes

any

binds any person

by the Commission
condition, stipulation or provision which
to waive compliance with their require¬

ments shall be void."
r

total

award

was

March

$1,300,-

also

behind
a

For

March

and

Thomas

than

has

25%

but

This

1950.

less

that ''the

means

in construction
Thomas S. Holden,

President of F.

Dodge Corpo¬

ration, stated in commenting
the figures.
"It

the

week

current

is likely

upon

point,

prospects

good for improved

are

with additional frame deliveries likely to

Midland Steel Products Co.'s
.

this

mendous

surge

earlier

1951

Corp., effective
tion in

deficiences of critical components.

learned

was

half

Wednesday of this week that Kaiser-Frazer
that day, has proceeded to cut its auto produc¬
on

by eliminating the second turn

This action will result in

on its assembly line.
working force by 3,000
attributed by company officials chiefly

reduction of the

25%.

shortages of parts made of

The cutback

was

copper

and steel.

They at the

time denied that the decision to cut auto assemblies

to continue during

remainder

attributed

were

than

squeeze

started."

fraction of

Nash and Packard are reported by this agency as
the only producers having recorded output losses last week. All

February

expected

week decreased

last

Holden

utilities

March

by Pittsburgh industries in the next four months.
production

Hudson,

$223,627,000

were

Pennsylvania State Employment Ser¬
6,000 to 8,000 more workers may

frames caused by the recent strike at
Detroit plant, it added.

ago.

Public

The

raise output of Chrysler's passenger car divisions, "Ward's Auto¬
motive Reports" state. Increased shipments from a second source
of supply will help this company offset a lingering shortage of

year

The heaviest demand for skilled

between

automotive production

ahead of Feb¬

but

year,"

construction

the

rate

Kaiser-Frazer

sales.

car

however, reported their current sales
early March levels.
area,

was

dealers
are

same

influenced

the

Detroit

10% to 70% below

We continue to quote:

March

Holden said that despite this fact,
"last month's volume of construc¬

The open-end controlled materials plan on steel, copper and
aluminum, just announced to become operative July l, will prove
no cure-all for the steel supply difficulties of the over-all general
metalworking industry, says "Steel,"' the weeky magazine of
metalworkmg. Scramble among nonparticipating or unrated con¬
sumers for the
leftover tonnage after defense needs are met is
bound to be just about as hectic as it is under the present over¬
loaded priority system. "Many steel authorities believe complete
control preferable; that in the absence of such the new method
offers little more toward solving the over-all supply problem
than that present unwieldy distribution system of priorities, di¬

tion showed the restrictive effects

rectives and allocations.

with

The

of this

general clause .is saying nothing more
illegal to agree to violate a law. That's a pet
quotation of the Commission to suggest such a violation
when none in fact may exist. It is used to strike fear, a
form of induced auto suggestion. use

than that it is

out

will

help balance
squeeze. Although

later

any

he has estimated
from J

decline in 1951

950, his estimate still stands

that

1951

year

will

high volume

construction.

Citing the March construction
figure, • as
the
"second
highest

•<*

the courts have

repeatedly held that a hedge
clause or legend disclaiming liability has little, if
any,
legal effect as protection against civil liability, where a
person makes a representation which he knows, or in the
.

exercise of reasonable
or

care

misleading." (Citing

could have discovered, is false

going back to 1926.)

cases, some

always been clear, even under the common law,
and before the passage of the Securities Acts, that a false
representation, knowingly made, which is acted upon to
the damage of another .who relies
upon it, constitutes
fraud and is actionable. This is
elementary, is well known
to the Commission and
certainly required no current ex¬
pression of opinion from its General Counsel. As to this
phase the opinion is mere surplusage.
•

However, notice these words: "or in the

reasonable
or

could have discovered" the

care

legend to be false

exercise of
hedge clause

To understand what the SEC is
up to we must exam¬
ine the issue as posed
?

by General Counsel. He

says:

question arises,, therefore, whether the result,

if not the purpose, of such a

of the investor

legend is to create in the mind

belief that he has

and is foreclosed from

given

legal rights

remedy which he might otherContinued

NOT

NEW

March

July

page

the

was

record,"

rules

defense

and

first

Mr.

regulations.
since

month

thai: "failed

1949

contract volume

increase

month

show

the

over

the

pre¬

ceding year."
were

running

dollar

ahead of last

year

volume in all categories

according
statistics.

Dodge

Corporation

Construction awards

$3,451,225,000

23 %

were

higher

than the 1950 three-month figure.1

Non-residential awards of $1,361,436,000 were 36% more than the

similar total for 1950.
contracts at

19%;

$1,526,633,000

public

corresponding

first

last

1950

Recreational

behind

affords
in the

the

investor

earnings of

GROWTH COMPANY
manufacturing products
MAGNETIC

RECORDING

in great demand

TAPE

AND

AUDIODISCS

Current Price $3
sent

Yieid 6%

you^ on request—a copy of the remarkable history of
favorable balance sheet and earnings statement

this companyf its

PETER MORGAN & CO.

) »%/
'

31 Nassau

St, N. Y. 5

•

Tel.:

Mgby 9-3430

•

Tele.: NY 1-2078

with

available

supplies

viewed

total.

all

close
fense

are

the

seen

forward

taken

another

spurt.

DO set-aside ton¬

the

of the extent of emergency needs is

edging

delivery promises

DO-rated

work.

Despite

recent increases

the

delivery
than

promises

ever.

of agricultural

Home

This, in part, is due to the fact that much

for June goes to meet the require¬

implement manufacturers.
the

States,

United

the

currently reports, increased less during

Labor

time

this

gain

building

in minimum mill product setdefense tonnage are further

most

of the increase in mill quotas

ran

ac¬

larger

A further reflection

month.

through the

order,

have

steel

schedules for June.

mill

various products and more
It is estimated that
to 55% of the steel industry's production will go into de¬
and defense supporting lines of consumption during the
generally

nages

ments

1951; commercial

sulted from NPA's M-4

tonnage is allocated for directive programs.

extended

the

for

requirements

reflected

$563,-

than

building projects fell off signifi¬
cantly in March. These trends re¬

Department

March than usual

The rise was the lowest February-March

of year.

record, except for the years

cording to Mr. Holden.

1942 and 1943. The departContinued on page 51

L. A.

1856

H. Hentz & Co.

Darling

Hotel

Defense Orders!

Yes!

Precision Castings

Members

For

meets the

of the

Aircraft;

New

York

Stock

New

York

Curb

Exchange

Gray Iron Castings;

Cotton

Exchange

Parachute Hardware

Weylin
requirements

discriminating

Exchange

York

New

Commodity
Chicago
New

To be

Predictions are that before the plan becomes
possibly enlargement of the plan's scope,
Closer balancing of defense and defense-

requirements

Defense

This

asides,

project starts

year

quarter of

participation

well-managed

revisions,

supporting

works

amounting to

were

Established

effective,

will be found advisable.

were up

private

and

utilities

156,000

Residential

The Common Stock of

DEVICES, INC.

fprward step.

constructive.

ISSUE

AUDIO

.Generally, states this magazine, even a limited CMP is seen
as

Three-month totals for this year

and

misleading-

"The

total

corresponding

It has

...

•

total

while automotive production advanced for the week.

$469,254,000

ruary

now

of machinists, tool and die makers,
operators, sheet metal workers, electricians

that

noted

Steel

contracts

offices

the category

tool

and

be needed

residen¬

was

aircraft workers.

vice

said, but pointed out that the tre¬

True! But what specific matters in the statute dealing
hedge clauses does he point to? None whatever.

kinas, the bureau added.

workers

lower

were

was

50,COO, the Bureau of Employment Security reveals. As the defense
picked up speed, the biggest demand was for engineers

of all

machine

basis

and

Non

this,

Unfilled jobs on the rolls of State employment

but
than

nation-wide

again showed
week, but aggregate output, not¬
noticeably above the level for the like
period a year ago. Total claims for unemployment in the latest
reporting week continued to decline.

than February

Index

Production

Business Failures

program

$1,267,450,000
or 11% higher

private works

it, the SEC is

see

contract

Industry

production on
decline for the past

slight
withstanding

compilation

Price

Auto

Industrial

construction
for March

and

previ¬

year.

Dodge Corporation the
(East of the Rockies)

37-states

1950's

aimed

over

tial

than 10 years.

ades before. What is this sudden interest

According
the

month

ous

Trade

over

201,000 figure.

requested that opinion?

Investment Advisers Act for

corresponding

The
years,

record,
July 1949

that failed to show increase

"Release" in which it

Retail

Commodity Price Index
Food

and

but is first month since

Exchange Commission has just
gives the opinion of its Gen¬
Counsel cn the subject of "hedge clauses."
We quote from that "Release":

issued

is second highest

year

and

Production

Electric Output

Carloadings

figures this

contract

Steel

State of Trade

Dodge Corporation, points

March

out

sales literature.

over

Thursday, April 19, 1951

The

High Level

Thomas S. Holden, President of

Unique effort to have brokers, dealers and investment advisers
act

1951 Construction to

Hedge Clauses
The opinion

Exchange,

Board

Orleans
And

Cotton

other

•

Information

Trade

Request

Spacious Rooms

•

Inc.

Central Location

Homelike

•

Exchange

Atmosphere

Delicious Food

•

Exchanges

•

Moreland & Co.

Intimate Cocktail
Excellent Service

Lbunge

Members:

N. Y. Cotton

Exchange Bldg.

NEW YORK 4, N. Y.
CHICAGO

DETROIT

GENEVA,

Stock

Penobscot

Building

DETROIT 26, MICH.
Bay City

For reservations

Exchange

Detroit Stock Exchange

1051

PITTSBURGH

SWITZERLAND

Midwest

Theodore B.

Archibald, Manager

Plaza 3-9100

Madison Ave.

54th St., New York 22

Muskegon
l/WWMWWIIWirMIMMMIIIVWMWW I

Volume 173

Number 5004

•(1637)

The Commercial and Financial Chronicle

states, there have been two recent

The "NewLook"ofCommon Stocks
By L B. SCHWINN*
L. B. Schwinn &
Co., Member,

Cleveland securities dealer

Midwest Stock Exchange

traces

improving investment status
stocks, and contends, despite rise in stock market*
current prices of stocks have not advanced in
proportion to
earnings and dividend possibilities. Reviews briefly investment
position of various groups and types of common shares.
of

common

It grieves me

greatly to confess
beginning of this dis¬

at the very

cussion

that

formula

have

forecast

magic

successfully

the

trend

the

common

stock

market.

the

that

best

John

Rocke

Sr.,

feller,

could
to

was

ven-

ture the guess

that

would

fluc¬

tuate, it

seems

presumptuous

dangle

head.

the problem of accept¬
rather than risk
depreciation.
On " the

cost poses

the

ing

loss

further
other

stock showing a
profit excites in its owner an un¬
hand,

easy desire to take a profit.
is an attitude of disturbed

lance in either

There
vigi¬

observation that
people who sell stocks at a loss,

particularly if the purpose is to
buy them back cheaper, not in¬
frequently buy them back dearer.
And, believe me, gentlemen, there
is

bull

sold-out

circles

bull.

Stoain of National Defense?"
In which it is contended that the fundamentals of
tive economic program must

ex¬

they

which

from

the

WGN), April 10, 1951. "Expert witnesses" were Leon H.
Keyserling, Chairman, President Truman's Council of Economic

the
words
spoken by one Justice Putnam
away back in 1830.
In ruling on
quoted

the

Amory,

lege's

Advisers*

fred

mercial

test of the. col¬

Justice

former Assistant Secre¬
tary of State—acting for
Mr.
Keyserling;
and
John F. Forrest, Finan¬

and taxes."

Common stocks are not

ex¬

tant

for less

developments in the invest¬
characteristics

ment

equities

during the past few years, and it
is to the potentialities of these
changes that I wish to bring your
attention.

There

was

cial

i
history
bought,
not

time in

finan¬

our

when
bonds were
for
patriotism
or

flight from high tax brackets, but
for
the
income
they produced.
When interest rates hardened, the
bonds in your portfolio receded in
price.
When interest rates soft¬
ened, your bonds enjoyed a degree
of

Professional

enhancement.

students of the money market en¬

deavored to take
of

advantage

some

these

opportunities, but there
little disposition on the part

was

the

to trade

merits.

largely

the

after

ensue

who

sale.

nervously

often

have

one

Investors

bait

cut

the

all

too

other

these

The

the

alterations

stocks.

your

urban

•
system defaulted
indebtedness, there was

their

interon

its
rush

liquidate the underlying liens
say, the Union Pacific.
Cer¬
tainly there was no vogue for

of,

re¬

plus

one's money,

reasonable

market

stability

price.

Since

tion of

broker

this

policy.

from

come

Endorsement of

York,

Chicago,

authori¬

issue

ties; namely, the persons charged
with the responsibility of safe¬
guarding the nation's savings.

example,

savings banks
invest

either

are

the

within
of

borders

banks

without

state.

meet

this

extension

setts

law,

dividend

the

ever-increasing

role
in the
income.
Unfortu¬

for

re¬

Massachu¬

and
their unbroken
records, are: Bank of

nately, the philosophy which
vailed in the
carried

over

stocks.

Today,

into

market

action

tion

the

pre¬

of bonds has not

era

the

the
is

out

other

era

emphasis
of

trust

Regardless

address

East

similar

nature.

among
the

now

eligible

the

other things, must

following tests:

the

Cleveland

Mr.

Schwinn

Rotary

Club,

before

Cleve¬

under

land, Ohio.

Dealers in

REAL ESTATE
MORTGAGES

—

BONDS

UNLISTED SECURITIES

Investment

Company Act of 1940.
(5) Ten years' Consecutive div¬
idends
paid
from
investment

eloquently

futed by
islation.

re¬

the New Hampshire leg¬
The

criticism

often

C. H. TIPTON
SECURITIES CORP.

much

Broadway, New York 6, N. Y.
Telephone WOrth 2-0510

across

and

Reserve

Department" policies
stroyed the public's
in

confidence

vacationed

New

Question—What kind of taxes?
me say first that it would be

fine if we could
"soaking-the-rich." - Realistically, however,
that orange; has'been squeezed thoroughly dry;
As Secretary
Snyder has testified recently, even if the government garnishe-d
Answer—Let

find

im¬

the

England

knows

that when the
spend a dol¬

Continued

be replaced with

approaching

something

•Mr.

free

Keyserling's participation is presently

Continuing our roll call of the

page

unavailable.

If the gap were

now

to narbetween the yield on Treas¬

ury

issues

market.

World

of World War I and
II, there could be

War

can

depreciation from
levels.
In short,,

bond

only things that

Seligman, Lubetkin &) Co.

down.

The

funds

pension

also

are

likely to weigh carefully the longt e r m
possibilities of
inflation
many
warn

Members
New York Stock

deflation.
So
people in so many places
those

against

about

inflation

are

announce

apt to become immune to advice
the

forts

and

plications

ever

greater

luxuries; the
of
inflation

readily

discernible.

formers

are

cost

dull

figures.

suave

30 PINE STREET
effective

im¬
will
be

Rabid

April 23, 1951

Our

telephone and teletype numbers

remain unchanged

re¬

Telephone:

runs

HAnover 2-2100

than

presentation of facts and
They are more facile in
on

larger quarters at

true

Their forte
propaganda

Continued,

the removal of their offices

com¬

not usually gifted

analysis.

Exchange

subject.

constituents

area

lar, they get value.

money

accustomed to in govern¬

are

ment bonds may

should be financed

Treasury

mutability of Federal obligations.
synthetic fluctuations

natives of that

In other words, even dur¬

rearmament time, government expenses

from current taxes.

The narrow,
we

Question—What about taxes?

ing

have
de¬
complacent
market

the

premise that the definition of present-day
by too many dollars, the

Answer—We must pay-as-we-go.

by government bonds,
uncertainty surrounding

Federal

should

measures

government must cut down the supply of loose dollars; Instead
this, its monetary policies have been causing inflation;
for example, by reducing the interest rate to artificial levels via
making of the Federal Reserve System an "engine of inflation"
and "the doormat of the Treasury."

par

the

and

anti-inflationary

inflation is the chasing of too few goods

Inflation some¬
times appears to be4a sales slogan
These requirements are not a
for sticky merchandise.
If you
bad yardstick for the layman to
will just bear in mind we live in
employ in his own investment
an
age
when
governments
of
trust transactions.
One objection
every hue and color promise their
to trust shares is

expensive charges upon their in¬
vestors.
Any traveler who has so

111

below

specific

government adopt?

of doing

The drop

ican investment scene.

income.

heard that investment trusts levy

Members N. Y. Security Dealers Ass'n

created

being

now

any

Federal

country will overlook the im¬
proved position of equities in the
changing panorama of the Amer¬

present

(4)

the

pension

the

likely

not

government officials—of Mr. Keyserling's

the over-advertising of inflation and their
over
scarcities and
rationing, which promote

Question—What

is usually

the

be
or

seems

funds

the dollar, and taking for granted its perma¬

And

cease

alarms

advance

Stocks

debasement.

Answer—Under the

stocks are not the

junior to either indebtedness
other class securities.
The company must be the
open-end variety and registered

market's

proclivity to scare the wits out of government
savers in their persistent concentration on

scare-buying and distort the economy.

Pension Funds and Common

appreciable

(1) Ten years' existence.
(2) $10 million net assets.

the

(3) The capital stock must not

trend, the sword of anxiety
•An

shares.

trusts,
meet

equation.

the

permit
savings banks to buy investment

propor¬

factors

action

been

The laws of that state

Disposition of
contrast, in¬
length
bargaining

appalling.

are

minimum

certain

arms

"fighting inflation" with lip service.

are

family—should

the time consumed

the

There

restrictions, of course, Dividends,
capital, deposits and similar items
must

volves

nent

permitted

now

shares
or

the

property,

time of scarcity, as well as to many organized labor

the depreciation of

fees.

brokerage

subsidies for

to the business man guarding his tariff

bond-holders and other

The

exchanges are an auction
market with exceedingly modest

and

in Massachusetts

traded.

listed ;or

from their current

wherever the

Along with their government,
every

My fellow-economists should act constructively by refraining

stock

real

Improving Investment Status of

For

and

recently

number of

subsidies at

interests—they

telephone call to your
a
telegram to New

has

policy

type

This applies

ourselves.

can
be un¬
of time con¬

holdings

sumed by a

the

Enormous

It decidedly is not up to "the govern¬

deflation-for-the-other-fellow while demanding

for

liquidity of common stocks
nothing short of miraculous.

stabilizing influence in the forma¬

their

by Mr. May.

class in the community,
ranging all the way from the Wall Street speculator to the farmer.
One trouble is many of us have a vested interest in inflation—
in escalators of one kind or another. Too many of us are fighting

The
is

loaded in the length

decline in interest Manhattan, 103 years; Philadel¬
rates and the virtual disappearance phia
National Bank, 108 years,
of bonds,-other than governments, and National City Bank of New
from the typical investor's strong¬ York, 138 years.
In New Hampshire there has
box, common stocks have assumed
,

responsibility must be shared by

gard for the investment merits of
common
stocks could well be a

unloading all of one's holdings quirements.
But what a tribute
simply because "the whole mar¬ to one of the finest American
ket looks high to me."
The basic equities: the bank stock.
Typical
investment philosophy sought a institutions which qualify under
reasonable return

Answer

fondly gaze. When it comes
disposing of them, those pretty
one

ex¬

success.

ment" to be the solo ball carrier.

reveal

May

Mr. May, you have had

experience in government service—with the SEC and the
Treasury. So you seem qualified to answer the basic question
whether it is up to the government to make the Defense effort a

may

list

saner

A. Wilfred

estate

certificates

was

tended

prime advantages.

common

Sulds

investor in real

the

not the

Paul

Carter.

producer.

upon

and

But to make certain it is the brain,
tates

Howard

mortar

brick

the

system, that dic¬

May.

Judge"

Question by "Counsel" Forrest.

fully engraved certificate instead

My intention is quite the contrary.
nervous

Irvin
John G. Forrest

beauti¬

York

Mr.

"presiding

was

Common

only

offer

also

stocks

which

issues

obscure

has been demonstrated.

New

"Times"—for

for

need

unhappy experiences.
My remarks are not intended to
discourage the use of judgment.

Common Stocks

individual

appraised

were'

bonds

pig under the fence
like that raging snort¬

actively.

Moreover,
own

investor in

average

has

Never

Editor

cial

ception to this rule, but compari¬
son with
other securities reveals

apology.
Granted
learned
they lack the fixed income and
squealed
prac¬
titioners
in ing
animal, the sold out bull. maturity of a bond, there are
the art of fi¬ Any
broker will tell
you
his other compensating virtues. Their
Leslie B. Schwinn
irate
client
is
the
one
nance
to
be most
ability to adjust in market and
more
accepted
a
small
profit income to conform with the rising
specific. who
However, there have been impor¬ only to see a substantial rise price level of this difficult period
to

"Counsel"

were

will, the capital is at hazard."
Using more familiar words, we
might say, "There is,nothing sure
you

but death

Financial

and

A. A. Berle, Jr.,
lawyer, ;economist,

what

"Do

said:

economist,

Chronicle"

the

principles,

investment

Wil¬

and

May,

Executive Editor "Com¬

College

Harvard

case

versus

cago

frequently

hears
these v days

one

cause,

stock

common

include

Partial transcript of television broadcast of "Court of Current
Issues," New York Dumont Network (Washington WTTG; Chi¬

ad¬

notable

these

vances

construc¬

non-political pay-as-yougo tax policy resting "on a major broadening of the personal
income base and a sales tax; on radical curtailment of the Fed¬
eral budget; and on a free market without price-wage controls.

previously excluded.

Because

eminent

case.

It has been my

admitted into

now

are

were

its

"How Can We Best Meet the

discussion, it means common

clusive

below

selling

stock

this

stocks

stockholder's

the

over

developments in New York which
augur well
for common stocks.
First,
life insurance companies
have received legislative permis¬
sion to buy equities.
Second, the
"prudent man rule", has become
applicable in the case of many
fiduciaries.
For the purposes of

page

Dell

Teletype:

NY 1-592

m
■

The Commercial and Financial Chronicle

(1*038)

This

Asserting

defense

1951, when President
Truman signed the bill imposing
an

profits tax

excess

business,

1950

was

forced

the

had

and

con¬

ment to use

Emergency Corpor¬

lars

Many of you were

With

government-excess-profitsdollars, the big will
bigger and the small and
will merge with them, or

weak

invite

die.

thousand

discuss, is something
from merely a high

ently
ferent

of business system

have

this

management must learn this new
kind of business system.
it

Let

was

clear

that

what

has

describing

happened
I am not

what is happening.

and

only

Committee

behalf

been

grow

the

cess

profits

that

ail

The

tax?

business

reason

dvoid

wants

putting tax considerations before
considerations;
because
this
happens, competitive

con¬

market

profits

excess

any

did

then

why

true,

big business oppose the ex¬

even

Business

three principal

when

emphasized.

were

this

Fi¬

Emergency Corpor¬

sequences

tax

tax-cheap

many

testimony which I gave

Senate

Committee

Business

the

was pointed
out that
profits tax is conspicu¬

enterprise based on efficiency and
ingenuity in serving the public's

ously inequitable. This tax is an
brew of inequity, exception,

demands will have been distorted

shall

country.

you

ate Taxation,

higher rate of tax.
The excess
profits tax makes a change in the
kind

Committee,
would have

you.

nance

dif¬
or

different

But the excess profits tax,
reasons
which I shall pres¬

ways.

after

Senate

research
Business

judgment and personal judg¬

ment

aggressive business manage¬
wisely its cheap dol¬
to entrench and to expand.

the

heavily

members if there had been time to

for

the tax bill
been completed.. It

hearings

The excess profits

veritable engine

centration, compelling prudent

members of that

ness

require¬

emergency

tax

following remarks, I am

Taxation.

ate

high

strong.

existing before the excess profits
tax was imposed, affected busi¬

O'Mahoney resolution

public

important change in

direction

presented

American

The

that

true

course

going to those who are al¬

ready

management
profits system.

corporate and personal tax rates,

ments.:

On Jan. 3,

double standard of dollars with

favors

excess

Committee

the

explore

Thursday, April 19, 1951

deliberations of the

and

manage¬

until July

law

let

•

tax-oriented
business management, prominent economist and taxation expert
condemns levy as "an evil brew of inequity, exception, exemp¬
tion, and privilege." Says excess profits tax will destroy moral
compulsions needed to make any tax system acceptable and
efficient, and points out motives created to avoid payment of
the tax. Says excess profits tax leads to double standard of
expense dollars or "two kinds of money," and this forces a
new basis
for managerial judgment affecting all phases of
business. Concludes tax is "not a burden but a subsidy."
profits tax is producing

new excess

the

leaning

produce

business

ment.
.1-

■

least,

In my

profits tax of

excess

new

tax-oriented

It
,

unaer

has already begun to

ours

1953

responsibilities

Former Chairman of Federal Reserve Bank of New York
'

continue

Under the Excess Profits Tax
i

carrying

business enterprise.

Responsibilities of Management
By BEARDSLEY RUML*

the

emphasis

First,
the

excess

evil

by artificial and irrelevant factors
which have nothing to do (with

exemption and privilege. Even if
an

profits tax with all its

excess

other defects

skill

in making and distributing
things and services that; peo¬

the

needed, which

were

arguing or criticizing, praising or clearly it was not, it should have ple want.
'
The existence of cheap expense
blaming.
My purpose is to an¬ been rejected in principle on this
alyze as objectively as I can the ground alone—that it, will under¬ dollars does not justify waste, ex¬
changes that have already taken mine the moral conpulsions that travagance or carelessness in the
of
business! ex¬
place and to suggest some of the are necessary to make any tax administration
*

the^Senate Committee
Finance, the proper committee

business-'
manage-?

Whether

this change in
direction
be

will

the left, to

right,
the

di-

tax

the;*

third

recommend

the Senate.

must
in

re¬

mbered,

Beardsley

wever,

that

change

the

for

.ioor

debate

-ime,

with

-seal

measure

of any

kind.,

able

the

Korean- crisis

there

flected

June,

Congress,

profits tax

Representative
early

deserves.
The

business

Helen

excess

Gahagan

tax

Strong
only

the

tax

bill

groups

time.

for

The Korean crisis

ment

tax
or

promoting

some

the

tax

than

benefit.

„

them

for
-

policy

col¬

they

explained
tax

oriented
address

by Mr. RumI at the 16th
Meeting of the Gas Appliance
Chicago,

111.,

April 17, 1951.

which,

that

would

business

the

create

contrary to
^

lawful
of

consequences

this

growth

the

means

the

rates

vidual may,
more

The

and

if he

free

laws-

The

indi¬

who

are

management
such taxes

less,

are

equally
the

vision

under the last

expense

excess

more..

at
the

duty of#the management to
duct its affairs
of taxation

prise will
sistant

with

con¬
that the burden

the business enter¬

the minimum

the

con-

requirements of

the cheap dollar.

is increased

rate

result

govern¬

private spending is

common

less

well

that

understood

the

dollars

knowledge.
is

existence

makes

pr u

dent

business activities that
not.be

cheap.

The

the

business.

question

management

about

its

tax

This

how

should

policy

is,

opinion, ethically correct and
the

burden, but a subsidy.
It provides cheap dollars to the
profitable and established com¬
a

Long Distance 421 and 422

ment

safeguard and to extend

the

position of such
against competition. If
is

not

weak
with

a
a

company

excess

Once

the

again, cheap dollars increase
conscience

stronger

abuse

One obvious

of discretion.

case

abuse

hoarding

the

now

are-

managerial

avoid

necessary

practice

the
shade off into

skilled

But

labor.

agement in most instances of pos¬
sible

conflict

between

national

"company

and

welfare.

Actions

beneficial

the national interest

those which will result

are

better produc's and

which

those

ices, old

inadequate capital—in other

dollars

has

it
its

ig. new

services

or new,

only

expensive

arsenal—it

the

increase

will

serv¬

to the consuming

Management

the

under

excess

profits tax is therefore under the
obligation

pruden ly

use

and

in good

faith a double standard of
expense dollars.
■
In

...

what has happened
is that for some companies, cheap
essence,

dollars
make

excess
profits, if it is
earnings, or young, or

words,

have

been

which

created

prudent the taking of risks

that would be considered doubtful
if all expense dollars had the same

The

value.

pire

fact

that

the

present

profits tax will either

excess

ex¬

ensively and mate¬

double disadvantage as against its rially amended on July 1, 1953,
makes it necessary for manage¬
entrenched rival with 1 ax-created,
ment to put its planning house in

cheap dollars at its disposal.

order

The battle for markets, through

products,

better

coverage,

inventory slocks—yes, and
through
better advertising and
promotion, too—will be a battle
between

lars

ther

profits tax

have

temptation, and clearer vision and

company

and

the

cheap

expense

dol¬

expensive

expense

dol¬

cheap dollars will
win .because they can extend far¬

Ill

Now that the

tax

pany, dollars which can and must
be used by a responsible manage¬

lars,

public interest.

whether

profits

public,.

•

better

exists

excess

prudent except for availability of products and

profits tax is there¬

excess

fore not

better

national'interest but this require¬
ment

those

parties

business,

fact

are

legally imposed,

for

trustees,

than

the fact that the dollars expended

the tax policy of
should be to pay

and

matter

would

business

waste

many

parties to the business.

Accordingly,

It is acting

welfare

53c-—more

marginal

cheap

person.

to. the

geared

my
ATLANTA 1, GEORGIA

taxed

are

ordinary rate is
expensive -earned

worth

much

What

management must be responsibly

think

142

tightened

which

excess

marginal rate is 77%,
cheap earned dollar

ment-induced

and .,busm; the

taxed:

management of

not

business

companies

subject

the

velopment

Teletypes—AT 288 and

further, the cheap dollar will ?. clearly black cases
uncertain grays, and there are no
cheaper still.
The possibility of, carelessness absolute standards to guide ^man¬

desires, pay
than the law requires—the

answer

INC.

cheap dollars the temptation is
greater and control is more diffi¬
cult but there are many examples

become

vendors

in 'tax

individuals-

shall

nesses

law and with the health and de¬

RHODES HAVERTY BLDG.

With

dollars.

still

circumstances

and

whereby

LOCAL STOCKS

the wasteful

expensive

profits tax.*. The same- good
faith on the part of management
in the prudent direction, of a com¬
pany's affairs is to be insisted
upon whether expense dollars are
expensive or cheap.
-

those which

the

twice
?

business—

workers,

that

dollar

trustee for

determine

gress

interest

CORPORATE BONDS

are

tax law, the

parties at interest in the health

'—no

STATE AND MUNICIPAL BONDS

blameworthy

use

extent

ordinary rates.

customers, The taxing power
is in the Congress. It is for Con¬

their

1894

the aggregate; and in any-case,
wasteful use of cheap dollars

the

rates,

Under the present excess profits

business .de¬

on,

management

such

dollars

injury is to himself alone.

tax-

the

rather than loosened their super¬

business; is

duty because busi¬

management is

stockholders,

•

excess

and

the

opinion, 'would
result
inevitably in a drastic, and
probably unwholesome, shift of

ESTABLISHED

ginal

of high mar¬
profits
tax
rates.

consequence

47%,

all

burden

the

Under

for
others
who depend ,cn the
business' profits if such taxeg were
business for products,, for services,
needed for revenue purposes.
" ' for
markets, and for income. The
But business leaders
knew and programs and the decisions of

profits

been developed in vari¬
quarters without reference to

" all

records

occa¬

1 affecting

is worth 23c. The

the

judgment

mana¬

phases of a'business.
<•
Tax-orientation of management

public interest.

and

•

(

gerial

basis for

a new

„

cisions. It is

en¬

Business did not o b j e c t
higher general levels of taxes

ous

Association,

finally

were

of you this may seem

many

ness

extreme

business—whether

would

that had

Manufacturers

was

speaking,
legislation

bad practice and

tax

profits tax,

excess

would force

minimize by all

exec¬

and .ac¬

The
opposition, tp the • excess
profits tax came from every seg¬

V
was

Generally

and

basis

the

ous,

amount of

though conspicu¬
cannot have been important
wasted,

money

for

double standard

question?* Briefly it is this, that
it is not only proper, but, that it
is" the
duty of: management to

•

agriculture

supported

acted into law.

the technical work for the
preparation of such a tax presum¬
gone

asked-for

measures

1950,

having

auditors,

created,

ac¬ is

by
tax

Let me state my position

the witnesses from the labor

and

the Korean crisis occurred, Sen¬
ator O'Mahoney on July 31, 1950,
presented the • first of • his four
to

it.

labor

calling for

Pennsylvania introduced a similar
measure on April 24, 1950.
After

•An

the

against the bill.

elements

opposed

Congressman
Dingell
Michigan introduced an excess
tax bill on Jan. 3, 1949,
and Congressman Uberharter of

amendments

lawyers

tax

overwhelmingly

introduced

profits

•

countants, and of economists

profits

Annual

reason

testimony of business

utives,

sion' for

1950.

tax

sufficient

analysis and discussion which
basic change in the tax policy

which

ousiness.

ably

profits

was

the

Dec. 15, 1947, a bill to

as
an

There

determined

that the

profits taxes, management has two
question, but I can kinds of dollars to work with. It
assure you that it states an issue'
hasicheap earned dollars and ex¬
that is charged with high emotion.
pensive earned dollars.
'•*
V
In the most unexpected quarters
Cheap earned dollars are those <; Good faith on the part of man¬
the
opinion
is
held
that
tax which, if not spent, will.be taxed agement is also required to re¬
avoidance, even within the law, at high marginal rates; expensive frain from actions harmful to the

need for

revenue

profits tax,

consequences,

unreal

which advocated

matter of principle.

impose

was

excess

discussion

for

tax

after the fact?"

been put over

re¬

and

Douglas of California
as

There
an

lectors

tax

World

tax

tices did exist, but the

profits

excess

profits

excess

WaT II. -It is true that such prac¬

expanding

expense
dollars,
and
that
the
efficiently, existence of two kinds of money

the

of fixed

shown

it, was

"Should business

carry

result

countants,

those companies subject to, excess

regard/to

end

why the measure could not have
until 1951 and given

1950,

the

excess
a

out

of 1950 made reason¬

oays

opportunity

tax-

and them let the taxes paid be an

vital, legis¬
the rush to
bill ip the

and debate impossible.

prior to

strong . elements
opinion which were

believed
an

that

were

public

remember

Third,

producing, servicing
distributing its products with¬

and

denying -the
a

but

passage

closing

profits tax was passed
dramatic and disturbing; ; v

Let

proposal,

make

not

mistake

secure

excess

are

did

Finance

task

building

necessary

economy..

that ' within

minimize the

in* another way,

profits tax, confining

excess

similar

The circumstances under which

the

lative

;

so-to

the

assets

management

right of petition on

the

fore

of its operating de¬
put the question

its

tee

needs for a

no revenue

affairs

it will

law

cisions?"

Jo "what'' kind '* of r an
profits tax'' would be most
acceptable.
The Senate Commit¬

the House and only four
the Senate, and, at the

w.ours

management

its

consequences

excess

business

.eadersnip, in a hurried gesture
.o
satisfy political pressures and
popular hysteria, with little dis¬
cussion and with

business

conduct

the

witnesses'

made in spite of clear

was

warnings of responsible

;

can

difference

question of whether there should

Rutnl

' /

management.
there

of >opinion.
That question is this: "Is it proper

by the end of 1950, if it was
possible to do so.
The Ways and Means Commit¬
tee of the House, under Chairman
Doughton'g leadership, refused to
hear
testimony - bearing on the

sharp

at all

What

seen.

tax-orientation

question

one

V ! \
'
penditures. There has been such
Second, it was contended that, discussion of frivolous disburse¬
an ■ excess
profits tax wouldf be ments, based on observation of
harmful to investment, and there¬ bad
managerial practices * under
system work.

be expected

can

the

of business

remains to be

result

by the appropriate commit¬

tee

that

consequences

The

ih Con¬

be introduced

would

gress

into ?.'

and

O'Mahoney f resolution
was
de¬
feated only after assurances had
been given-that an excess profits

;

turn, to;

examine

tax legislation to

con¬

currence

ment.

the

without

presented

was

and

the

can

reason

take

of the

risks.

excess

profits

law, and that it is most likely to- .tax,.-the. government has created

the

sirce

once,

benefit

the company of

dollars must
in 1952.

for

cheap expense
be gained principally

The year 1951 is too soon

most,

and the first half of 1953

is for many a lit le too late.

eralizations

are

exceptions will always
I think

that

the

Gen¬

dangerous,

and

occur,

but

broad rule may be stated

payment

profits tax by

company

Continued

excess

in 1952

page

(1639)

GREAT

LAKES

STEEL

CORP.

WEIRTON

Detroit, Michigan. The only integrated
steel mill in the Detroit

.wide

area.

Produces

of carbon steel products .is
a
major supplier of all types of steel for
the automotive industry.
range

Mills

STEEL

COMPANY

STRAN-STEEL

DIVISION

THE

Unit of Great Lakes Steel

Weirton, West Virginia, and
Steubenville, Ohio. World's- largest- in¬
dependent manufacturer of tin plate.
Producer of a wide range of other impor¬
tant steel products.
at

Plants

FURNACE

CORP.

Buffalo,.New York. Blast furnace divi¬
sion. A leading producer of various grades

Corporation.
at-Ecorse, Michigan, and Terre

Haute, Indiana. Exclusive manufacturer
of world-famed Quonset
buildings and
Stran-Steel nailable framing.

HANNA

of merchant pig iron for foundry

NATIONAL
'•

MINES

use.

CORP.

,• "

Coal mines and

properties in Kentucky,
Virginia and Pennsylvania. Supplies
high grade metallurgical coal for the

West

tremendous needs of National Steel.

HANNA

IRON

ORE

COMPANY:

Cleveland, Ohio. Produces ore from exten¬
sive yjj&fdings in Great Lakes region.
V,.
National Steel is> also participating in the
—development of new Labrador-Quebec
''~ 1'
Jronjpre'fields.'"
-

NATIONAL

National Steel is
It is

progressive steel producer. ■'

progressive in growth and in vision

...

electrolytic plating lines in the world
in the

.-.is the largest

independent producer of tin plate.

development of new methods and the pioneering of new
processes. Its record of accomplishment is the record of an
important part of the modernization of the steel industry.

National Steel put into operation the world's
largest open hearth furnaces. It is now operating a
huge 400'ton'per-day oxygen plant—another forward

A National Steel division installed America's first

step in

fully
hot strip mill. It pioneered the
electrolytic process of coating steel with protective metals.
continuous

Thigh

Today National Steel operates the largest and fastest

NATIONAL STEEL

GRANT BUILDING

one

year,

three

steehproducing efficiency.

This is National Steel

constantly improving, con'
of America's largest and most
progressive makers of steel.
'
'
;
V '

stantly expanding

one

CORPORATION
« PITTSBURGH, PA.

Located

STEEL
Houston,

erected warehouse

PRODUCTS

CO.

Texas. Recently208,425 square

covers

feet. Provides facilities for distribution of
steel

products throughout Southwest.

(1640)

The Commercial and Financial Chronicle

Combustion
36 Wall

Dealer-Broker Investment

tin

L. A. Darling—Information—Moreland &

send interested
parties the

Connecticut

Conn.

•

Light

2903

Made

the

Sale

That

Did

the

Most

for

Me—Book

Co.

—

of Invest¬
Association of Can¬
ada dinner at the King Edward

ment Dealers

Hotel.

—

May 18, 1951 (Baltimore, Md.)

Trailer

analysis of Motorola, Inc.,

pany, and a memorandum on

Baltimore Security
the Country

General Tin Investments, Ltd.—Study—Carl
50 Broad Street, New York 4, N. Y.

Marks & Co. Inc.,

May 24-25, 1951 (Dallas, Tex.)

insurance companies.
Great Northern

Railway—Analysis—"Vilas & Hickey, 49 Wall
Street, New York 5, N. Y. Also available is a comparative

tion

offer

including three-color graphs of primary indexes
date, basic strength graphs for 1948, 1949, 1950

ers

tabulation of Railroad Income Bonds.

the

Major Trend of Stock Prices—Primary
trend indexes
computed weekly—Special $5.00 trial subscrip-

May 25, 1951 (Cincinnati, Ohio)

Hanson-Van

from 1943 to
and

Jack Waite Mining Co.—Circular

of Cincinnati annual spring party

preceded by dinner and
party for out-of-town
guests, May 24).
cocktail

Street, Jersey City, N. J.

gomery

May 30, 1951 (Dallas, Tex.)

options—Thomas, Haab & Botts, 50 Broadway, New York 4,
Kaiser Aluminum & Chemical Corporation—Late

New York.

Get

Better

York

Banks

parison—New

Acquainted"—Booklet

New
New

York 5.

York

and

Trust Companies—76th

York
N.

Hanseatic

Corporation,

N. T. & S. A,
Lehman

quarterly com¬
120 Broadway,

Corporation—Bulletin

is
National Life Insurance Company.

analysis

Lincoln

of Chicago annual
Day at Knollwood Club*
Lake Forest, 111.

Field

June 8, 1951 (New York, N. Y.)

Sulphur Co.—Brochure—George B. Wallace &
Co., 15 William Street, New York 5, N. Y.

Northwest
^

annual

Minn,

York

City

Oil Company—Data in current Jssue of "Gleanings"—
Francis I. du Pont & Co., 1 Wall Street, New York 5, N. Y.
Also in the same issue are data on Rcxall Drug.

Bank

Stocks—Comparative values—Paine,
Webber, Jackson & Curtis, 25 Broad Street, New York 4,

N. Y.

New

stocks
L„

Placer Development, Ltd.—Analysis—John R. Lewis, Inc., 1006

City Bank Stocks—Comparison and analysis of 18
as
of
March
1,
1951 — Laird,
Bissell
&
Meeds,

120

Second

Over-the-Counter Index—Booklet showing an up-to-date com¬
parison between the 30 listed industrial stocks used in the
Dow-Jones Averages and the 35 over-the-counter industrial
stocks used in the National Quotation Bureau
to

yield and market performance

Riverside Cement Company

Averages, both

Utility

Common

Stocks—Tabulation—G.

—

Lerner &

memorandum

Gear Grinding Machine Co. and on Seneca

Oil

Saxton

Shenandoah-Dives
Evans &

—

Wisconsin

Audio

Corporation—Analysis—Cohu

New York

5, N. Y. Also available is

Dairies, Inc. and

bulletin

1 Wall Street,
analysis of Foremost

City

(3%
Allen

Orangeburg Manufacturing

River, 111.—$132,000 sewerage Revenue bonds
1970-1978) to yield 2.50-2.70—descriptive circular—

Company, 30 Broad Street, New York 4, N. Y.

Harrisburg Steel
Dayton Malleable Iron

Primary Markets

Troster, Singer
,

& Co.

2-2400.

Teletype NY

Private

wires

1-376;

and

Light

—

377;

nounced

Outing

Summer

(Minneapolis,

Minn.)
Twin City Security

Traders As¬
("Opera¬
tion Fishbite") at Gull Lake.

sociation Annual Outing

(Detroit, Mich.)

Traders

of Detroit and

Association

Michigan

summer

a.m.

Atomic Insimm't Stk.

today that trading will

try Club.

Coffin, Betz & Co., Philadelphia, Sept. 30, 1951 (Coronado Beach,
Calif.)
Pa., has soltj an issue of 47,700
of

common

per

Atomic

Instrument

Co.

stock (par $1) at $3.87^

share.

National

Security Traders As¬

sociation Convention opens at Co¬
ronado Hotel.

The net proceeds are to be

used
company's faemfies Oct. 12,1951 (Dallas, Tex.)
working capital. Its plant
Dallas Bond Club annual Col¬
honor of General of the
is located in Cambridge, Mass,
umbus Day outing.
Douglas MacArthur. The
to 1 p.m., on Friday, April

to expand the
and for

Board of Governors made this de¬
cision at
A

Coburn & Middlebrook

special meeting.

statement

issued

Nov. 25-30, 1951

Investment Bankers Association
Annual Convention at the Holly¬
wood Beach HoteL

possible from their duties in order R. H. Johnson & Co.
that

they
to

may

join

General

New

Stock

the

City's welcome 4o

nificent soldier."

(Special to The Financial Chronicle)

Baker, Simonds Adds

(Special to The Financial Chronicle)

Ex¬

change is proud to add its voice
to

Joins Gibbs & Coe

paying

MacArthur.

York

mag¬

(Hollywood

Beach, Fla.)

(Special to The Financial Chronicle)

the

Board said:
"Mayor Vincent R.
BOSTON, Mass.—Monte Nelson
Impellitteri has asked New York has become affiliated with Cobum
City's commerce and industry to & Middlebrook, Inc., 75 State
release
as
many
employees as Street. He was previously with

378

Louis

Philadelphia

June 22-24, 1951

Circular — McDonald,

Company—Analysis—Dayton &

Friday

be suspended for two hours, from

"The

(Philadelphia, Pa.)

Pa.

Coffin, Betz Sells

In Honor of M'Arthur

tribute

Cleveland—Denver—-Detroit—Philadelphia—Pittsburgh—St.

Company

Robert P. Boylan, Chairman of
the
Board
of
Governors,
an¬

Security Dealers Association

Trinity Place, New York 6, N. Y.

Telephone:

outing at the Plum Hollow Coun¬

20, in
Army

Mining

NYSE to Close for

Buckeye Steel Castings

Club —to

13.

15, 1951

Securities

Continental; Can.

Members: N.

Power

Two Hours

Valley Mould & Iron

Yacht

Golf and Country Club, Oreland,

Co., Finance Building, Kansas City 6, Mo.

Service

Wood

Bear

June 26, 1951

Co.—Analysis—Ira Haupt &
Co., Ill Broadway, New York 6, N. Y. Also available is a
review

White

preceded by the usual pre-picnic
get together Wednesday evening,

Co.,

Co., Inc.
Central Vermont Public

City Bond Club annual
picnic and Golf tournament at the

Gernon, 105 South La Salle Street, Chicago 3, 111.

Devices, Inc.—Analysis—Peter Morgan & Co., 31 Nassau
Street, New York 5, N. Y.

Cenco

(St. Paul Minn.)

Twin

and Dinner at the Manufacturer®

Richardsoq & Sons, 367 Main Street, Winnipeg,
Man., Canada and Royal Bank Building, Toronto.

Write-up and prospectus
Coffin,
Co., 123 South Broad Street, Philadelphia 9, Pa.

June 14, 1951

Investment Traders Association

Shawinigan Water and Power Company—Analytical brochure

South LaSalle Street, Chicago 3, 111.

Betz

Convention

Jasper Park Lodge.

June

State

Street, Boston 9, Mass. Also available are analyses of Verney
Corp., Simplex Paper, U. S, Thermo Control, Maine Central
Railroad, Sanitary Products and Air Products.

Corporation—Analysis—Barclay Investment Co., 39

Atomic Instrument Co.

Dealers Associa¬

Canada

June

Rudolph Wurlitzer Co.—Analysis—Raymond & Co., 148

-^-James

Argo

Canada)
Investment

over an

Co., Inc., 70 Pine Street, New York 5, N. Y.
*

Card memorandum

Falls Machine Co.

11-year periodNational Quotation Bureau, Inc., 46 Front
Street, New York
4, New York.
Public

—

Co., 52 Wall

Co., 10 Post Office Square, Boston 9, Mass. Also available is
a

Scarbo¬

Avenue, Seattle 4, Wash.

Pullman, Inc.—Analysis—Bendix, Luitweiler &
Street, New York 5, N. Y.

Broadway, New York 5, N. Y.

Club,

June 11-14,1951 (Jasper Park,

tion

York

27th

of New York

Field. Day at the Sleepy

Hollow
Country
rough, N. Y.

Bancorporation—Analysis—J. M. Dain & Company,

110 South Sixth Street, Minneapolis 2,

-s.

Club

Bond

Gulf

Ohio
New

(Chicago, 111.)

Club

Mexican

available

annual

Club

Bond

1, 1951

Bond

sidered attractive.

Also

June

changes in portfolio—Ira
Haupt & Co., Ill Broadway, New York 6, N. Y. Also avail¬
able is a list of stocks in favorite industries which are con¬

City Bank

Dallas

Memorial Day outing.

20, Calif, Also available is tan analysis of Bank of America,

Stocks—Comparative figures at March
31, 1951—The First Boston Corporation, 100 Broadway, Newi
York

Study—First

California Company, 300 Montgomery Street, San Francisco

describing the firm,
its organization and the diversified services
provided to in¬
vestment dealers
throughout the country—for copies write
to Alfred J.
Stalker, manager Dealer Relations Department,
Kidder, Peabody & Co., 17 Wall Street, New York 5, N. Y.

New

(to

mining district, operated by the Ameri¬
Smelting & Refining Co.—Olds & Company, 35 Mont¬

can

Maketewah Country Club

the

producer of base metals

in the Coeur d'Alene

"Information Please!"—Brochure
explaining about put-and-call

Association Annual Meeting.

Municipal Bond Dealers Group

Winkle-Munning Company—Analysis—Grimm &

Co., 44 Wall Street, New York 5, N. Y.

1951, weekly analysis reports for the next six weeks
(airmail) and newly published booklet, "Planning for Profits
in the Stock
Market"—Dept. C-61, Investors Research Com¬
pany, Santa Barbara, Calif.

."Let's

Investment Bank¬

Texas Group

N.Y.

How to Recognize

Golf

at the Oklahoma City
Country Club.

ing
and

list of common stocks believed eligible for life

Club—South¬

Group
of
Investment
Association Spring out¬

Bankers

discussion of the liberalization of the New York insurance
law with

(Oklahoma City,

Bond

Oklahoma
western

Inc.—Analysis—Eastman, Dillon & Co., 15 Broad
Street, New York 5, N. Y. Also available are analyses of
Great Northern Railway and Northrop Aircraft, Inc. and a

salesmanship edited by J. M. Hickerson, President of Albert
Frank Guenther
Law, Inc., 131 Cedar Street, New York 6,

Club of Maryland.

22, 1951
Okla.)

May

Glass Fibers,

Traders As¬
at

sociation annual Spring outing

Nicholson File Com¬
Northern Pacific Railway.

bulletin

members

Toronto

DePasquale

Report

Co.—Analysis—Walston, Hoffman & Good¬
win, 35 Wall Street, New York 5, N. Y. Also available is an

1950,

Canada)

May 9, 1951 (Toronto,

Manufacturing

Annual Report
Foremost Dairies, Inc.,
College Street, Jacksonville, Fla.

Fruehauf

showing monthly highs, lows, earnings,
capitalizations, volume on virtually every active stock on the
New York Stock and Curb
Exchanges—single copy $10.00;
yearly (6 revised issues) $50.00—special offer of three edi¬
tions of Graphic
Stocks, 1924 through 1935; 1936 through 1947
and up-to-date current
edition, all for $25.00—F. W. Stephens,
15 William
Street, New York 5, N. Y.
How

Hardware

Foremost Dairies

year

Investment Field

Co., 25 Broad Street, New York 4, N. Y.

Graphic Stocks—January issue contains
large, clear reproduc¬
tions of 1,001 charts
complete with dividend records for the
full

EVENTS

Co., Penobscot Build¬

Street, New York 5, N. Y.

Power, United Illuminating, Connecticut
Power, New Haven
Gas Light, Hartford
Electric. Light, and
Hartford Gas—
Chas W. Scranton &
Co., 209 Church Street, New Haven 7,
,

COMING

County, Tennessee Rural Elementary School Build¬
ing Bonds—bulletin—Paul Frederick & Company, 70 Pine

following literature:

Securities—Memoranda

bulle¬

Davidson

Detroit

Connecticut

ing, Detroit 26, Mich.

understood that the firms mentioned will be
pleased

Thursday, April 19, 1951

Engineering-Superheater—Analysis—Bache & Co.,

Street, New York 5, N. Y. Also available is

Sonotone.

Recommendations and Literature
It is

»•

DETROIT, Mich.—Frank J. Keogh,
Jr.
&

now

with

Baker, Simonds

Co., Buhl Building members of
the Detroit Stock Exchange.

WORCESTER,
C.

Willett

with

Street.

has

Gibbs
He

&
was

Mass.—Kenneth

become

Coe,

affiliated

507

previously

Chas. A. Day & Co., Inc.

Main

with

Volume 173

Number 5004

and Financial Chronicle
The Comme

•

By W. T. G. HACKETT*

dependable dollar.

ular

economic ideas that have

gram

Warns rising rate of capital

"an inflation generator." Holds full employment must be
increasing productivity, if dollar-value is to be

in 'with

preserved.
When

viting

took the risk of in¬

you

business economist to
today you probably

speak to

you

felt you

had at least

fifty-fifty

chance

hearing some¬
thing practi¬
cal and timely.
Let

con¬

fess
quickly,
therefore, that
much
1

of what

propose

say this morn¬

ing has to do
with economic

theory.
But

measures

dampen down

expansion, unless accompanied by corresponding increase in
saving, creates inflationary pressures and calls armament pro¬
tied

government is the residual guar¬

as,a

hopeless

government's, job would then be tribution
to take the restrictive and
unpop¬ principle

prevailed since the 1930s and points out their inadequacies.
Sets dangers in dependence on government action for economic
well-being and expresses doubt full employment can be accom¬

panied by

marks, and lest I be; branded

Economic Adviser, Bank of Montreal
new

(Blood Transfusions via ;Governmenti Spendingw).

reactionary," "perhaps I antor^ of welfare seems to have
Now it was of-course implicit in had better say that in may opinion encouraged the*
tendency to run
the theory of the thing" that con¬ the great revolution in economic to 1 government
for
protection
ditions
could -v conceivably * arise thought that dates from the early, against the
ordinary as well as the
in which purchasing power would thirties has produced some results
extraordinary hazards of enter¬
become
excessive, and that the of lasting benefit. Its abiding con¬ prise. You may not have to ponder

Changed Economic Ideas
Canadian economist reexamines

(1641)

necessary

boom.

the

accepted
unemploy¬
is an unnecessary and de¬
moralizing social waste and need

that

now

overly long to recall examples of

mass

these

ment

But in the

your

attitudes

day-to-day

the

course

experience.

thinking of the time that possibil¬ not be supinely endured any more Can We Have Full Employment
.and a Dependable Dollar?
ity was regarded more as a theo¬ than the plagues of earlier gener¬
retical footnote than a matter of ations are today regarded as in¬
And in
addition there are a
practical concern. Indeed it soon evitable by medical science. An¬ few perhaps more sharply defined
seemed to become axiomatic that other thing that I think we may lessons which
may be drawn from
the body economic was a chronic put on the credit side of the ledg¬ wartime
and postwar experience.
er is a quickened sense
of social One is that it is
invalid permanently
dependent; on
very difficult to
blood transfusions in the form of responsibility on the part of busi¬ achieve
stability by fixing the
ness
and the broadened realiza¬
government
spending.
Never
symbols of stability. Another is
again, it was seriously argued, tion that, for any firm, good pub¬ that it is just as difficult for
a
would there be frontiers of expan¬ lic relations must start from
human beings in government as
sion for business enterprise broad basis of fair dealing with its own it is
for
their fellow creatures
enough to provide outlets for the employees.
elsewhere,
to
formulate
lpngsavings
which
the
incorrigibly
range plans for a future in which
Economic Weil-Being and
thrifty would continue to accumu¬
the apparently inevitable has an
Governmental Action
-

of course, that the greatest
material
good for the greatest
number
was
most likely to
be
was,

achieved under conditions where¬
in each individual

was

striving to better his
Government

vigorously

late.

But I think it must also be said

The war changed the
picture.
position.
Problems of unemployment and
neither
"big
business."
It under-capacity soon gave way to
own

that

the

postwar
years
have
with
compelling clarity

awkward habit of not happening
and

which

frequently

the

unexpected

does/

Finally,
the
stability,
that economic well-being cannot
the difficulties of
while offering us a formula for
superabundant
might do something to temper the
demand.
But this was seen as a fully be underwritten by govern-: full
rigours of the competitive strug¬
employment, have yet to
mental action. For one thing the
aberration
from
come
up,
in practice, with a
gle but there was certainly no temporary
theory is basically weak on the
chronic tendencies to
depression.
recipe for full employment plus
widespread view that, with the
side of international
economics, a
The hypodermic needle was not
dependable dollar.
signal exception of tariff policy,
an aspect which we have not time
thrown away.
It was held in re¬
Now all of these points could be
government should be an active
thoroughly to explore. Suffice it
serve for instant
postwar use. And
force
developed with copious reference
influencing the course of
to say, on this point, that for a
at the same time the
to conditions in other countries.
emergencies
economic events.
of war were a
forcing ground for country like Canada, heavily de¬ But we do not need to look be¬
trade, the
other concepts which fitted rather pendent on external
The New
business"

was

"in

nor

shown

theories

planned

Theories of the 1930's

yond our own doorstep for some
of
national
policies
is
neatly into the already established success
thought-provoking, case material.
1930's something pattern. For example, it began to strongly conditioned by develop¬
remem b er
Let us recall, for a moment, the
ments beyond our own borders.
seemed to go radically and trag¬ look as if it
might be possible to
pressing e n prevalent
in
business
ically wrong with the formula. rule out price as the dominant Perhaps more significant is the fact thinking
W. T. G. Hackett
gagements
that anti-deflationary measures are and government circles as we ap¬
The very world went out of joint. force in
balancing supply and de¬
elsewhere, The philosophy of individualism mand.
politically easy, but that anti-in¬ proached the end of the last war.
Thus
we
had
the
price
may I suggest that economic theo¬
It seemed pretty generally agreed
stood indicted at the bar of public ceiling as
applied to the domestic flationary measures are politically
which
ries,
begin
as
abstruse
that the major problems of the
opinion. Whether the indictment interchange of goods, and fixed difficult. Moreover, governmental
formulae in the minds of techni¬
for
low
was wholly deserved is of course
purchasing postwar period would be defla¬
exchange rates as applied to in¬ medicines
cians, can, and often do, end up another
tion, depression and unemploy¬
matter.
A look at the ternational
trade.
The
price of power, being usually popular and
as enormously powerful practical
ment. In government, the accent
"terrible thirties" in the light of capital—the rate of interest—was palatable
tend, like some other
forces
influencing public policy
history will, I think, convince any already well under control before potions one can think of, to be¬ was therefore on postwar meas¬
and popular belief. If anjr illus¬
ures
of a "two-gunned" nature,
fair-minded
observer
that
the the war started, and that control come habit-forming.
The result
tration
is
needed, I need only worldwide dislocations of the time became intensified. With
the one being sighted on some
the de¬ has been, I suggest, that the de¬
mention that we, in Canada, with
specific objective desirable in it¬
were as much due to
interference, sirability of these measures as pression-born emphasis on everother free nations are today fac¬
by governments, with the proc¬ emergency expedients, I am not abundant purchasing power as the self, with the other trained in the
ing up to the challenge of re¬
esses of
international trade as ,to for these purposes concerned. My touchstone of material well-being general direction of the oncoming
armament
to
protect
ourselves
the shortcomings of business en¬ point is simply the factual one has left us some legacies of rather slump. For example, our program
against the threat of a militant
that, by the end of the war, the dubious value. We have perhaps of postwar credits (amounting to
terprise.
communism, which in just over a
area
of action by government in been in danger of
forgetting, at $1.8 billions) for aid to the recon¬
But whatever the causes of the
hundred years has evolved from
the economic realm had in most times, that what is not produced struction of allied nations was re¬
an economic theory
originating in great depression, out of its misery countries become
greatly broad¬ cannot be consumed. The link be¬ garded also as a means of main¬
the mind of an obscure student there emerged a new and welcome
ened.
tween effort and reward has been taining demand for Canadian exThis doc¬
called Marx. And the manner in gospel for the times.
Now at this stage of my re¬ weakened.
Continued on page 52
And
the
idea
that
which we organize our productive trine proclaimed the good news
that depressions were not inevi¬
capacity to meet that threat, the
nature

of the stresses

to which the effort

the

resultant

cial

fabric will

enced

before

begin

you

strains

and

gives rise, and

effects

our

so¬

greatly influ¬
kind of economic

the
thinking which underlies govern¬
mental action and public attitudes.
by

Most of

here today

the

early

table; they could be

and

overcome

prevented by putting into practice
new

economic

theories

which

This announcement is neither

the

derivative

The

purchasing power as
the mainspring of business activ¬
ity and employment. Purchasing
power was no longer regarded as
highlighted

but as the prime mover
which kept the economy running.

nor a

solicitation of

offer to buy any of these Bonds.•

$35,000,000

economic

have, per¬
fully realizing it,
lived through a major revolution

offer to sell

offer is made only by the Prospectus.

And if

haps

without

economic

into

born

thought.

environment

were

which

the virtues of
rugged individualism. If you grew
heavily

accented

this continent you probably
deep, in your youth, of the
philosophy expounded by Horatio
Alger. After having read a dozen
or so of his 120 works (with only
one plot for the
whole 120) the
path of progress became very
clear.
If you worked hard and
long, with no thought of a fortyhour week, if you carefully
up on

drank

washed the back of

neck and

your

avoided the wiles of the

devil,

you

would, without any shadow of
doubt, attain to the presidency of
the firm, after having outsmarted
the villain,
the

paid off the mortgage

old

homestead,

ried the former

and mar¬

president's daugh¬

ter.
we

came

chances

to man's

were

that

nomic theories we had
or

Duke Power

redistribute income into chan¬

nels where it*

most likely

was

estate,

the

Company

First and Refunding Mortgage Bonds,
Dated

3V4% Series Due 1981

April 1,1951

Due April 1,1981

be spent,
low

and measures to promote
and,
preferably, declining

Interest

payable April 1 and October 1 in New York City.

rates of interest.

parcel of the
instead
of a virtue to be encouraged, was
really a social menace since it
kept money out of the spending
stream. The good citizen was the
free spender.
Thus, low interest
new

was

part and

doctrine that saving,

Price 101.93% and Accrued Interest

Copies of the Prospectus

rates, apart from their usefulness
an adjunct to deficit financing,
and as a business stimulant, were

undersigned

also

desirable

deterrent

with

from

followed

all

this

us may

may

be obtained from only such of the

legally offer these Bonds in compliance

the securities laws

of the respective Stales.

MORGAN STANLEY & CO.

that

eco¬

economics was no longer a matter
consciously
up along of analysis and forecasting. It be¬

KVHN, LOEB & CO.

BEAR, STEARNS & CO.

DREXEL & CO.

unconsciously picked

the road
of

purchasing power were in
of becoming deficient it
was the
government's duty to do
something about it. "Doing some¬
thing about it" involved spending
programs of various kinds, action
danger

saving.

When

the

process

were

Adam

those of the school

Smith.

much

without

question,

accepted,

the

no¬

tion that the economic system was

something that, by and large, ran
itself

market

automatic

forces.

An address
ronto

response

belief

by Mr. Hackett before the
Association, Tor oil to,

Personnel

lada, April 12, 1951.

came

instead

namic.

And

the ultimate

functional

and

dy¬

part of the pattern,

responsibility for

ing that purchasing

see¬

EQUITABLE SECURITIES CORPORATION
L.F.ROTHSCHILD & CO.

step

eagerly

the

was

laid

state,

taken

and

WOOD, STRUTHERS & CO.

the door¬

where it

was

given

•homer•

SCHOELLKO

power was

all times sufficient to provide full

employment

GLORE, FORGAN & CO.

a
*

April 18,1951.

The Commercial and Financial Chronicle
10

Thursday, April 19, 1951

(1642)

with which

Insufficiency of Monetary

that monetary
controls can always break infla¬
tion if the inflation is something
of the nature of a bubble, if it is

Oxford University, England

John Maynard Keynes."

Eminent British economist terming as

inefficient and obstruc¬

general

are

inflation

kind

the

But

which

all.

•

national product now stems, from government, contrasted with
8% in 1929, with inevitable result—irrespective of Korean

faced isn't "bubble"

due

emergency^of moving to a controlled economy. Cites govern¬
ment's increasing financing difficulties, and vital dislocations
resulting from ever more drastic tax burdens.

real demand for defense and
for capital outlay consequent to
defense programs. In the face of
those very real demands coming
on top of a fully active economy,

that the monetary con¬

believe

combat

inflatiQn, in which mone¬
trols are not strong enough to be
A Time Limit
can play a part.
really effective.
I think it would be very impor¬
May I begin
Following my argument — you
tant in instituting physical con¬
by saying that
may ask—since I am against phys¬
trols to give them a time limit. I
my
back¬
ical controls, and I say that mone¬
just throw out as an example of
ground of
tary controls would be ineffective,
that a time limit of two years, be¬
thought is
do I recommend inflation? / I an¬
cause it seems to me that that is
very
much
swer, no, because that is the worst
the time of maximum danger of
hostile to
evil
of
all.
Open
inflation is
the
inflation
gathering momen¬
physical con¬
worse than physical controls, bad
tum.
I am assuming, of course,
trols, on the
as those physical controls may be.
we are not to be involved in total
ground,, pri¬
Now,
having
presented
that
war.
If that happens, then
the
marily, that
dilemma, I will just say a few
whole picture changes.
they
are
so
words about my own line of ap¬
inefficient. By
Assuming no total war, but. a proach.
r
maintenance pi high defense ex¬
physical con¬
I should say that if you werp

Our

which

think

penditure, I submit that the crucial

period is when you are stepping
up the defense expenditure.
Pre¬

in the

between

race

sumably, at the end of about two

got to do what we have been do¬

Harrod

allo¬

the

and

Roy F.

controls

price

get
ever
more and
more detailed.
I
believe those methods to be essen¬

cation of materials which may

plateau, and it
toward the top of

reach

years, you

for

preventing inflation, you have

four
is mounting up
years.. You have got to overbal¬
that plattou that imposes the great ance
your budget, and overbalance
tially inefficient and obstructive strain. Once you get to the top it by quite a lot, and Tor two
to
the flexible working
of the of the plateau, then you may reasons. I suggest that - it is - not
maintain your high defense ex¬
economy.
enough to say "pay as you go,"
I think that perhaps we are here penditure, but, with the increased meaning financing all the defense
flow of production, you will get
in this country, and everywhere,
expenditures out of taxation, be¬
successive easements made
pos¬
cause you
too much influenced by the fact
have got other infla¬
that Britain had to adopt that sible, and you may then relax in tionary forces at work.
method

1939 to

quickly in

very

had

Britain

because

1940

act

great hurry, in a rapid

very

time

to think out more elaborate

plans

for

having

would

there

and

step-up,

which

economy

rather

run

time of

was

them

British case, it

Also, in the

important to remember that there
very

factor

limiting

beginning the

from the import program

controls

rials,

all other
of

flow

the

over

and

components,

mate¬
so

on,

may

♦From

that

these

physical

will be necessary,

controls

sor

ascent,

and

not

system

high defense expenditure

transcript of

Harrod

Economics

before

talk

none-

by Profes¬

Conference

.of

the

.Mobilization, held under
the auspices of the Chicago University
Law
School,
White
Sulphur
Springs,
West Virginia, April 6, 1951.

All

it in this

If you

way:

look away from the budget to the
of

balance

to think

of.

taxes—and

gov¬

ernment

and

omy,

the

As you step up your

them

personal saving will undoubt¬

In any event, I am against these
physical controls if they can pos¬

less
on

private and

the

one

On the other

sibly be avoided.

saving

personal

side..

side, the whole of

this expansionary situation

Monetary
The next

that I

tary

Controls Inefective

thing I have to

not believe

controls,

the

that

say

sense

that

have already begun to discuss

them, can be very effective in pre¬
venting inflation. I don't believe
as

they could be managed by the

Federal Reserve, and with cooper¬
ation from other -great banks, are

is go¬

good deal of addi¬
tional investment outlay,;all the
different firms tooling
up
and
ing to lead to

mone¬

getting ready to meet government
orders which are going to flow out
the whole economy.

over

;

■

quite apart from the
actual outlay of the government,
which,

would

seek

tion,

this heroic scheme one
to

have

you

got

taxa¬

cover

addition

strong enough; and I don't believe twin factors making for inflation:
that

history

you

can

find

example of pure monetary control

preventing

high taxes

to hit personal
and

the

fact

going

are

savings somewhat,
that you have got

inflation of the sort private
investment
expenditure
being stimulated, to meet the di¬
rect government expenditure.

of these shares having been sold this advertisement
appears as a matter

the fact that

So that I conclude that however

47,700 Shares

The

Atomic Instrument Company

fiscal

side

the

things,

high taxation, is designed to re¬
lease

resources

for defense expen¬

ditures by making the consumers

COMMON STOCK

consume

less than they otherwise

would, and that you have got-to
do, of course. You can go a long
way along that line.
But, I don't

($1.00.par value)

think with this step-up of expen¬
diture at the pace we contemplate
in these two years while we

cline

Exchange

April 18,

SO.

BROAD

1951.

You

STREET, PHILADELPHIA

non-defense

investment

expenditure.

Philadelphia-Baltimore Stock Exchange
123

it all

have also got to bring about a de¬

Members
New York Stock

climb

the plateau, that you pan get
out of consumer expenditure.

COFFIN, BETZ & CO.

by gov¬

r.e-

national

the

ever,

labeled:

let's

the

to
V

grow

OUT r

ment. It is true, so runs

size

govern¬

the argu¬

ment, that government Is costing
us more than it
has in the past.
But

give

and

bit more time,
expanded our

a wee

will have

national output that we
have

the

cost

will then
in

government

high rates

are

designed to reduce
on

page

base, how¬

government. The national income
cdncept takes cognizance of gov¬
ernment

only

employer.

Government's contribution to na¬

income

tional

to wages and

confined

Far

revealing is the trend
in government as a source of mar¬
ket influence.. The
government's
rising take of goods and services
is clearly evident in the ratio of
more

its

purchases

total

gross

from .8% in

product,
',

studies

Our

for

total national

reveal the

century

period be

one

pattern
whether the

Federal

the

war or peace

whether it be boom
When

half

same

after decade,

decade

past

depression.

Government

steps down its.rate of spending, as
in the Twenties,

local

then the state and

in,

22.5%

na¬

moved up

1929 to 17% in

estimate

the

solely

salary paid by gov¬

ernment. /

tional

further

national

gross

including civilian

product,

well

1949.

rise

mili¬

outlays, for 1951. Here, as
throughout, I use government in

tary

its broadest

eral,

to embrace Fed¬

sense

State,

expendi¬

local

and

tures.
I

come

nounced

the

now

and

most

pro¬

disturbing trend of

and
accelerate their rate of spending.

of income to individuals. This may

There is

governments

move

evidence

over

the past

the

three, government
paid for work

half century that we

government,

caught

ernment

have as yet
the demands of
expanding
na¬

with
government
by
up

tional output.

That

when
lic

pattern

same

debt

- emerges

look at the ratio of pub¬
and

national income

keeping in mind the commitments
have already underwritten for

only of. social security and

re¬

lated provisions, but even more in
terms of pensions and other com¬

pensation for past services of vet¬
and their families.

erans
>

turn

question
about

past trends to the

what

such

this sequence

from

of comments

foreboding
relationship? That

frequently answered
question: Isn't that

another

what the people want?

Isn't gov¬
thereby being responsive
to the people's demand?

ernment

aside, for the moment, the
influence upon the electorate and
upon
government itself of the
political power that accrues as a
result

state.
cern,

that

of '

the

expansion

immediate

the
con¬

if I may be permitted to use
phrase, is with some of the

broader social and economic prob¬
lems entailed in this growing re¬

liance

upon

a source
a

source

Let

securities,

on gov¬

pensions

or as

transfer

and

payments, such as
security. Only 8.4% of all
personal income stemmed from
government in 1929; 20% of all

government, first

personal

income

from

stemmed

government in 1950.

the next quarter century, in terms
not

performed for
interest

or as

for

will also hold for the years ahead,

as a source

social

Permanent Debt-Income Pattern

employment, second
of markets, and third

How Far to Totalitarianism

The final question I would raise

is, how far
in this

can

voluntary
qualify

An economy 5%

influenced

would,

economy

should

process?

government

free

95%

and

suppose,
economy;

of 95% government and

voluntary would conversely
qualify as a totalitarian or govern¬
ment-controlled economy.
Even
if
the
employers
various
units

and

each

had

other,
of

source
was

different

from

collusion

with

long as the basic
income—95% of itso

government,

would have

accounts

suggest

government-con¬

trolled economy.
Within the last
social

were

governmental

years,

reveal

our

that

have certainly moved in the direc¬
tion of a mixed economy, with the

government

influencing 20 to 25%
income, and total

of total personal

national

gross

product. I' would
further
that
when
we

suggest
move

to 40%

ernment influence

upon

of gov¬

the dotal

structure of the
economy, we are

already close to, if not at,

trolled economy.

con¬
:

of income.

form—but

give

you

hope quite readily
grasped nevertheless — the rela¬
emerge

The British Pattern

in statistical

tionships that

Continued

income

tional product. This has

income.

Na¬

understates the influence of

reasonable balance with gross na¬

quite clearly

Now you may say, "But

that is
precisely the object of monetary
control and a tight credit policy;

(See Table on

Influence

immediately ahead. The use of

argument
might

na¬

from

figure at about 12.5% for the

year

encounter

MartinR.Gainsbrugh

risen

tional Accounts, p. 56.) I would put

quently,

which

the

has

in 1929 to 12% in 1939,

about 5%

the

Put

The Hub of the Matter

income

Government's

question

;

contribution

ment's

tional

been

ernment.

with

matter.

From 1929 to 1949, the govern¬

and to 19% in 1944.

w o n

heroic you are on the fiscal side,
you

New Issue

in¬

Income
_

steadily

will still not succeed in avoid¬
ing inflation by that method alone.
That brings me to the hub of the

of record only.

social

our

Government's Contribution to.

has

the past five decades. I suspect

that

growth of

national

have got to

you

time.

over

come,

economy,

step
up
mightily to cover this
defense
program—private

vast
and

whole

the

have got two further things

you

edly be affected, and you will get

that additional monetary controls

sprang.
It

two-year affair during

necessary.

import

absolutely essential, and

program

very

shipping

the

which made

shortage,

Look

that is to be kept in being so long
as

from the

So that if, at the worst, physical
controls
are
found necessary, I
think it would be a good thing
to visualize them and to publicize

freely in the

war.,

Britain's Wartime Needs Different

was

directions.

many

in Britain for three

ing

appraisal

accounts

government and the
private econ¬

to * rely on fiscal methods,
ordinary sense of taxation,

going

from

the

past half century, reveal that the

terms

least

.at

span

Conference

The

studies

Board,

tary control

trols,

expanding national output has caught up with government's
demands. States 20-25% of all personal income and gross

with

inflation

Industrial Conference Board

Economist, urging long-range consideration of government
spending Trend, -denies contention that -over past half-century

very

non-defense investment expenditures.
to state very briefly theless, and on that I should
view on means to to maKe this point:

due to

ways.

materials allocation, pleads for their
two-year limitation if they cannot be avoided here. To supple¬
ment monetary policy and interest rate anti-inflation instru¬
ment, suggests tax incentive to induce people to abstain from

tive, price controls and

I shall try

By MARTIN R. GAINSBRUGH* V
Chief Economist, National

undue
speculative activity, and the like.
You can then tighten your credit
and put up your interest rates,
and you can burst the bubble al¬
is

something that

By ROY B. HARROD*

Author, "The Life of

;

would suggest

And fiscal Controls
Professor of Economics,

threatened, be¬

we are

the forces are too strong.

cause

I would

cite, in that connection,
Britain's experience currently or
our own World War II
experience.
That,

^Transcript of statement by *Mr. Gainsbrugh before Conference on -the Eco¬
nomics
of
Mobilization, held under the
auspices of the Chicago University Law
School, White Sulphur Springs, West Vir¬
ginia, April 7-9, 1951.

however, is an aside. But
somewhere between the 5% gov¬
ernment and the 95%
voluntary
as one

extreme and the 95% gov-

Continued

page

Volume 173

Number

5004

The Commercial and Financial Chronicle

(1643)

willing

workers.

been ;taken

This

step

some "

spots

there .is not yet any

By JOHN M. HANCOCK*

pace

the

threat of war,

combined with need for national preparedness;
(2) inflation and its continuation. Says first can be solved

and

by greater production, which must

longer work hours and increased man-hour output.
labor union
ernment.

progress,

policies

weekly
when
40

moment

would

one

safe in saying that the first major

problem facing
is

for

the

undertake

too

need

preparedness;
the

pressed

and

duction.

second

problem being

its

Winston

C h urchill
must have had

prob¬

some

lems like these
in mind when
he

said:

truth
to
.

"The

hard

by."

come

John

f For the

pur¬

pose

•

rowing down this topic I
to

Hancock

nar-

that all of

assume

•

going

agreed

are

absolute need for adequate

on our
•

preparedness.

that

tion that carries

assump¬

quickly

to the problem of inflation

over

which

stems, in part, from the absolute
for

need

preparedness.

Too Much Taken for Granted
In

our

country

inclined to take
tem

for

been

his

have

granted. Each

concerned

been

economic sys¬

our

with

has

developing

business and professional
within
the
framework

own

success

provided by
out

our system, but with¬
specific regard for the
itself.. Sometimes, it has

much

system
seemed

tem

didn't have

sys¬

such, though we did glorify
individual rights and responsibili¬
as

ties.

That

which
sult

the

was

framework

worked. It

was

the

in
re¬

the

evolutionary process
which our people had

through

passed—retaining the best of
inheritance
Fathers.

from

our.

our

Founding.

;

both too weak to wield unlimited

and, thank God, too strong

power

to submit to it." No

"ringing

words"

has found

one

for

expressing

the ideas .wrapped up in the con¬

cept -of The American Way of
Life, but to me it certainly means
all these ideas—equal opportunity
for all, personal liberty consistent
with ffull personal responsibility,
no

leaning

bankrupt

beneficient

(the

government

only

difference being one

of time),
coercion by anyone, no favors

pose of

simplest

gaining votes,

interfer¬

ex¬

labor

this

The

situation.

in¬

too

seems

tip-off
the

officials

on'

and

Maybe

of' ment and

employers,

over

govern¬

the public.

Wartime

the

greater grab for po¬
power

inflation

and

great

given

in Washing¬ shortsighted welcome by too many
officials. There is a people—including too many busi¬

its

hue

and

Weinberg,

cry

Clay,

about Wilson,
Johnston
and

nessmen—just

peacetime infla¬

-as

tion-has had such

welcome. Too

which

level

political

power

brings

along with it far
greater economic power than can
be attained at the local level.
Even

em¬

which disarma¬

economic

employees,

our

attitude

toward

to be

litical

national

the

traditionally^

conservative
union

couple of years joined up with
the others, not only in the effort
to attain the collectivist
political
power

at the national level,

willingness to

use

stomach

the

recenbyears departures from

these

Sermon

the

Mount.

principles have been

of weakening the free market and
bringing on greater and-greater

substitution of centralized
govfemment direction—as compared with
the decentralized

decisions of the

posts in large

politicians

many

have

liked

in¬

free, /individual citizen.

completely

being conquered by
in a military war.
The basic cause of rising prices in
the

goods.

war

sult,

Russians

and

peace

leaving

creating—and

people's
than there

money

match.

The

tion

caused

the

military

war

extra

hands—more
goods

are

wartime

circulation

the

I think

tunity for

inflation

can

For

some

Union

time

obvious that the

progress has been
the inflation problem it
has been far too little and it has

Power
has

seemed

far

come

own

too

late.

observation

Continued

top union group

far

'•This announcement is not an

prevented

ojjer ojsecuritiesfor sate

or a

1*'

page

solicitation oj an ojjer to buy securities.
-r

money

New Issue
_

April 19, 1951

spending. No amount of
juggling of wages and prices can
sumer

the fact that

cure

•

our

pro¬

Columbus and Southern Ohio Electric

duction is

going to war and that,:
therefore, for a time we are going
have

what

less

produce.

out

money

200,000 Common Shares

available for spending, the actual

demand for goods will exceed the
available supply of goods, and ris¬

ing

prices

are

Company

consume

certainty.

Par Value $5 per

must, therefore, increase produc¬
tion

of war goods and limit the
operations of a free market until
a
balance is restored.

The
the

over-all

objective

mobilization

effort

then

is .to

getting licked
field of battle by a foreign
pare against

Price $20.75 per share

pre¬

our

are

the

enemy

Cdpies oj ihe prospechi/mag he obtained from such of die
undersigned (who are among
the underwriters named in the
prospectus) as mag legally ojjer
these securities under
applicable securities laws.
,<

vulnerable because

economic

appear as

that

will

made

national interests. I fear
at'empts to
the

wishes

every

in our people, government
only in destroying

succeed

itself; for sad to say, many people
>.*An

address

American

tors,

Hancock before
of Industrial Edi¬

Mr.

Association

Philadelphia, Fa., March 30,

Longer

Russia's

1951.

Hours

and

Dillon, Read & Co. Inc.

BIyth & Co., Inc.

The First Boston Corporation

Lazard Frerli & Co.

Man-Hour Output

government

underwrite
group

are

inflation,, we
simplify
problems immensely.

One

rather obvious way

to in¬

production is to provide for
longer hours of work and attain

Merrill Lynch, Pierce, Fenner & Beane

Stone & Webster Securities Corporation

crease

output per man-hour, which

ought to be
comparative

attained with
ease

because

The Ohio

Company

Hemphill, Noyes, Graham, Parse ns & Co.

Hornblower & Weeks

some

of the

improved facilities supplied by
management and from the greater

skill, care and effort supplied by

W. E. Hutton & Co.

Paine, Webber, Jackson & Curtis

concerned

away

by consumer goods
available for con¬

being

a
great oppor¬
national union of¬

some

money

only by keeping the extra

—from

our

While

made

leaving

extra

leader has the veto pow¬
all others.

Aiming

there is

ficials to meet this need for great¬

paid to produce those goods. Fur¬
ther

one

over

Union Leaders' Opportunity

infla¬

shooting

goods, and

many,

for class consciousness has grown
and selfish interests

the

borrowing and spend¬
ing and other debilitating means

ignorance and
another, or, in even simpler bad policies. If we let ourselves
terms, it means the Golden Rule get licked on the home front by
and

but

the

Over

elements in national

leadership have in the last

the

which

for giving

strike

weapon

field

production.

calling
a

occur—

ideas should be extended.
The immediate problem seems to
be broader than even
this, for it

terms,

production

meet

•—the interests of all.the people—
group

cut

conditions

♦.

lies

ting licked here at home by our¬
selves through
the inflation to

one

with

this is

Harrison having come to their
top
posts in mobilization from top

pro¬

nation,
except when clearly in
keeping with the national interest

robbing

ployed

the

doesn't

argument

immediate

and, meanwhile, to keep from get¬

was

however, when

..The

powerful

that

result

defense organization

with the economic life of the

ence

threat

ur¬

strikes

inevitable

terference

present
no

and

the

benefits

by government to one
class of its people because of po¬
litical pressures or with the pur¬

be simply
is—greater

with

but

should be maintained ment

reversed.

ton

had the one
objective
of
increasing
the
union
movement's

flation.
But,
inflation
through
A Counsel of Desperation
business organiza¬ higher wages is popular with un¬
defense needs tions. In fact, they were chosen ion officials most of all.
This is
Accordingly, the counsel of des¬
and the only alternative is to ac¬ for their
personal honor of course, because the rising cost of living peration seems to have prevailed
cept a lower standard" of living but especially for their proven over the past five
years
gives and the rather shortsighted deci¬
until the increased production is abilitv to, attain and retain re¬ them the
presumed justification sion to have been made for an allattained. As yet we do pot know sponsible
;pqsAs in industry where for demanding pay increases to out, last-stand try at seizing pow¬
what this increased demand is go¬ the free market
workers' pay even er over government,
process insured bring- union
business, em¬
ing to amount to but there should their not being able to attain, and with the new
inflation, which un¬ ployees and ' the public. They
soon be a reasonably authoritative' especially
to retain, those posts fortunately has
been caused in would do this through the twin
ce ermination on this point. If we
unless they proved
conclusively the main by previous wage in¬ mediums of actual and threatened
are to give top priority to defense;
every day that they coordinated creases, though heloed by other wartime strikes across the nation
production, we must know what.1 the activities of all concerned in a related bad economic
policies of and political retaliation at the
the
defense, needs are, and we way that served the balanced
best government.' Unioii officials ea¬ next elections. They could
prom¬
must proceed to cut out civilian interests of
consumers, workers, gerly promote pay rises while de¬ ise they would be far stronger as
production for the less essential investors. * government, and
a
result of the power
the crying
the
resulting
increased
they could
needs, and we must at the same nublic. Let these men know jjou prices to their members.
They gain meanwhile in bargaining po¬
time reduce the buying power of have faith in them.
seek to get the benefits of
They need
litically with government instead
pay
our people
so as to reduce their your support in the face of all the increases and be free of the in¬ of
having to bargain on an eco¬
effective demand for goods. Un¬ a'tacks which can
only disorgan¬ evitable results of their pay in¬ nomic basis with employers and
til we can bring the total
supply ize and sabotage government at creases. They
seek
guarantees employees.
or entire production into balance
this critical time. Let us be fair from all of us that their
That is a sketchy
pay will
summary of
with the needs for preparedness and realize that
they are the vic¬ rise as the -cost of living rises. the situation, as I view it, in the
and the needs of our entire popu¬ tims of all the
funny, or phony, They ask this guarantee from all immediate inflationary problem
lation, both civilian and military, fiscal and economic ideas of the the rest of us who have no such affecting the wartime
economy in
we
have a very explosive factor past two decades. One
which we are
large prob¬ guarantees.
endeavoring to in*
in the economy.
On4 leader cannot do much to crease production to meet war
lem, rot in the immediate fore¬
Inflation here at home can de¬ ground, is the need to
inflation.
The
stop the stop
competitive needs and also to avoid reducing
stroy our freedom and the rest of drift, to statism and a planned situation forces each group to our standard of
living.
our
material and spiritual well- economy
so
far as is possible, struggle to get as much increase
The Inflation Problem
while attaining the production of as any other
being just as quickly and just as
group gets. As a re¬
not

—not matched

The American Way of Life has
prospered in the idea that "man is

•

made

The

situation

can

increase

will

continua¬

tion.

objective

must

and

threat

much.

Laying aside for the moment
this general concep", our immedi¬

]

strikes,

upon

urgency,

workweek

hours.

union

ate

the

government

Must Increase Production

combined

war

national

inflation

have

country today

our

threat

the

with

willing

are

the

was

pay

the

work,

help than increased taxation.
the

excuse for the

argument.

are
..

differ

may

At. the end of the prior war. the

endeavoring to seize power of the gov¬
Contends solving inflation problem has made little
and cut in government wastefulness would be more

general view that there is

Washington has

major

gency in our situation.

Criticizes

degree

there is

in large part from

come

.warranted

ur¬

peacetime.

major problems: (1)

two

sense

assuming that this greatly
our economy. need is
getting almost no atten¬ power-—and
not
just
economic
going along, wi h tion. Every
day we see efforts power at the level in bargaining
few exceptions, at about the made to limit
for, wages, ..hours, and working
production, even
we
follow
customarily in going so far as to threaten to call conditions for its members,
but
to

seem

.very

Investment Bankers, New York City
as

er production.
From what one can
but read in the press, one would seem

gency in any part of

Partner, Lehman Brothers,

Prominent investment banker lists

has

The Commercial and Financial Chronicle
12

David R. Mitchell Is

Missouri Brevities
reached the

in revenues and
decline of 2.1% in operating ex-

Clark Hungerford, Presi-

penses,

dent, stated in the annual report,
during the 12 months

The Frisco

acquired

new

bringing: to

tives,

diesel locomo276 the total
the close of

number in service at

the

Total

year,

were

revenues

$121,383,409 and net profit, after
taxes, totaled $11,244,619, equal to
$6.57

This

share.

common'

per

compared with revenues of $113,117,337 and net profit of $5,598,-

$2.02
1949.

313,
year

joint¬

ly by Monsanto Chemical Co, and
American Viscose Corp., has made

through

arrangements

Morgan

Stanley & Co. and Dillon, Read &
Co.
Inc.
to borrow
$110,000,000
institutional investors to fi-

from
nance

construction of plants which

synthetic

will manufacture a new

completion of arrangements between Chemstrand
subject

Nemours &

I. du Pont de

and E.

Site for the first Chemstrand plant,

account will amount to

Louis, reports that despite a 30all-time peak, and were 38% in day strike at its Canadian plant,
excess
of the comparable figure consolidated sales for the three
for 1950. Consoldiated net income, months
ended March 31, 1951
after
income
taxes
at
current were the largest in its history and
rates,
amounted
to
$6,213,737, amounted to $6,116,427 as cornequivalent,
after provision
for pared with $4,043,522 in the corpreference dividends, to $1.25 per ' responding period last year. The
1951

reached

baugh
thereto

Willed $492,226: <*

quarte/of

Co.

1950

year

was

brie

eventful

Ijnois (St. Louis) states that the

all-time

the preference stock, and com-

for! April,

May

booked during the first quarter of

holm

Chronicle)

Savannah Bank

York

ifi 1950 totaled $129,598,161, com¬
pared with $106,103,875 in the

preceding year.
*

;

directors

; /
*

six

stock.

mon

the

Missouri-

This

compared

earnings of $246,836,
per

for

the

corn-

with
cents

corresponding

period ended March 31,1950. Sales

$2,650,748,

...»

•

;

(Special to The Financial Chronicle)

"SAN FRANCISCO, Calif. —
Robert H. Dwyer is with Walston,
&

Goodwin, 265 Mont¬

Exchanges.

at j

Frost has become associated

Stoetzer,

Faulkner & Co.,

bers

the

Detroit

with

mem¬

Stock

Lynch, Pierce, Fenner &
116 West Forsyth Street.
was
formerly an officer of

Cantor, Fitzgerald & Co., Inc.

was

of the Peninsular State

Ex¬

Co.

head

Ernest

—

Schwartzkopf

are

with Waddell & Reed,

BOSTON,

Stathopoulos
the

staff

$500,000

connected

Inc., Bark-

ley Building.

Co.,

John Jordan Patrick

the

debenture

former

H. T. Carey,

York City,

payable

loans,

$500,000

Patrick, partner in

Joost & Patrick, New

passed away suddenly

April 17th.

PRIMARY MARKETS IN

to 1955, and $4,660,000 of
3%% serial debentures, due $500,year

000

year

annual

The

report

sales

$41,754,339 and

.Connecticut Securities

Electric

reveals

Company
of

Hartford and

from 1955 to 1964.

for

net in¬

$1.52 a share
of common. At the year end, un¬
filled
orders
amounted to
$91,-

come

$1,395,941

TIFFT IlltOTHERS

•:

Members

York

New

;

April

'''

preferred
S.

voted to

present 7%

Finishing

Boston Stock Exchanges

Exchange

Co.

(Associate)

Hartford 4

9 Lewis St.

change provisions of the

New York Curb

stock¬

holders

1907

Established

260,000.

New York: BArclay 7-3542

Tel. 7-3191

Bell Teletype

HF 365

non-callable cumula¬

Tennessee Gas Transmission

•

■We maintain

Texas Eastern Transmission

primary markets in:

MEMBERS

Rockwell Mfg.

CONNECTICUT

MIDWEST STOCK EXCHANGE

SECURITIES

Southern Union Gas
CONNECTICUT

Southwest Gas Producing

LIGHT

CONNECTICUT

HARTFORD

Bought

—

Sold

—

Quoted

Stix & Co.

Landreth Building
Bell

Teletype

SL 456

St. Louis 2, Mo.

509 OLIVE

STREET

L. D. 123

POWER

•

UNITED

NEW

•

ELECTRIC

LIGHT

HAVEN
•

ILLUMINATING
GAS

HARTFORD

LIGHT
GAS

request

these and other Connecticut companies.

CHAS. W. SCRANTON 6- CO.
MEMBERS

Garfield 0225

Descriptive memoranda available
'

SCHERCK, RICH TER COMPANY

members of the New

John Jordan

has

and.

Boat

Mass.—Charles
added to

been

York and Boston Stock Exchanges.

The new debt struc¬
consists of $2,334,000 of 2^%

bank

has

Estabrook

State Street,

payments on principal from

1950

Neb.

Estabrook Adds
(Special to The Financial Chronicle)

Bridge¬
port Brass Co. has reduced its an¬
nual

Ernest

refunding,

change. In the past he

Fla.

associated with

Beane,

cost, of -: about

Through

ture

Joseph D.

—

total

$3,300,000.; The present capacity
of 5,000,000 pounds will be ex¬
panded to 8,000,000 annually.

Lynch

Merrill

of earnings.

(Special to The Financial Chronicle)

SAGINAW, Mich.

ward

Delhi Oil

companies, Hart¬

become

has

Butt

sinking fund requirement of 10%

Bair, Velma H. Jackson and Ed¬

Mississippi River Fuel

JACKSONVILLE,

promissory

expand and convert the
production of»carpet

eliminated

Faulkner

the

(Special to The Financial Chronicle)

facilities to

$600,000

With Stoetzer,

added to

Butt With Merrill

cash

$57,650

$430,000 of Hart¬

part of the agreement

between the two

rayon

Walston Hoffman Adds

LINCOLN,

Petroleum Heat & Power

for

unpaid

Rayon's

notes.

ernize,

Three With Waddell-Reed

Spinning

return

changes. Mr. Cooke was previous¬

shares of com¬
shares of pre¬

131,944
15,065

ly with Ames, Emerich & Co.
((it-

CITY, Mo.—Fernando

Ledoux has been

Proceeds,
together with
will be used to mod¬

Ex¬

(Special to The Financial Chronicle)

Berkshire Fine

and

loans.

Stock

KANSAS
J.

1,000,000
staff of Prugh, Combest & Land,
and to approve a plan whereby
Inc., 1016 Baltimore Avenue.
Bigelow-Sanford Carpet Co. will
600,000

South La
of the New about

against $1,-

777,179.

from

Prugh, Combest

(Special to The Financial Chronicle)

will borrow privately
$2,000,000
through
term

Co., 209

Midwest

Joins

ford Rayon

months

1ter taxes-of $428'302'

totaled

and

>'t

stockholders of
Rayon voted to increase

other funds,

outstanding 400,000 shares of

total at Dec. 31, 1949. Loans made

with

affiliated

gomery Street, members of the
New
York
and
San
Francisco

the

ford

Chronicle)

Financial

Salle Street, members

proximately 5,475 stockholders,

the

The

become

has

Cruttenden

e(lual 1° $1.07 per share on the i

over

28,

and surrender of

CHICAGO, 111.—Leslie L. Cooke,

Jr.

of last year, the company had ap—
an

Cruttenden Co. Adds

.(Special

March

ferred

The

April 24.

purchase

Building.

Stock

££ spilt
375

the

for

the authorized number of common

for

about

Hartford

Gleaner Harvester Corp., Inde-

120,000

mon

ended March 31, 1951 reported net

The

Financial

The

& Co., Inc.,

& Trust

Hoffman

$2.28 per share on the common

about

former

was
increased been started in
Plymouth, Mich.,
300,000. / Stock¬ and a new division established in
holders of record April 10 will re¬ Milwaukee to
produce springs for
ceive a 50%
stock dividend on that area.

from

SAVANNAH, Ga. — Jack H.
Saunders is with Varnedoe, Chis-

the

pendence,

(Special

and

«about -eaual"

shmild

net of $3,930,577 for
the year 1949, which was equal to
a

is reacti¬

vating its Lake City, Mo., plant to
produce small arms ammunition

will

authorized

'.v.';.\>

y.'l]

: , ,

last few weeks of the 1951 quarter,

share after dividend requirements

increase

Varnedoe, CHsholm

Joins

bookings

although

this year exceeded shipments,
:
*
*
*

with

com¬

■'

;

,une fould ^oul equal the
first three months. Net orders

of $1,452,720 in taxes over
tjbe previous year. This was
equivalent to $1.96 per common

pares

and

Remington Arms Co.

and

the

Pacific

Lawrence, Mass.
*

East

Locks

Haven

North

the

Works at

earlier

its

sold

duce

April 23. Telephone and
numbers
remain
un¬

changed.

SU9

crease

high of $4,091,647, despite an in-

Windsor

also

Division

from

transferred

months

Several
pany

Hamilton Standard plants to pro¬

outside

teletype

stated that although bookings
showed a tapering trend in the

fjom the company's standpoint, operations

Net earnings reached

plan¬

the Pratt & Whitney Division

his

chief

1950. W. B. McMillan, President,

Investment

Mills, Inc.,

«•

Standard

Hamilton

Hartford

busi¬

One

rates

|
*
*
| Donald L. Barnes, President of
American

*
-

Corp.

total cost of about $20,000,000.

will

ness.

applicable to .P?r common share, as against
that period, amounted to $5,521,- $359,348, or 88 cents per share for
857, or $1.12 a common share.
the three months ended March 31,
lower

the

The

h i s

counter

over-the-

own

Aircraft

ning to build new plants in Wind¬
Locks and North Haven, Conn.,

con¬

ducting

Mass., to Hampton
wholly-owned sub¬
sidiary of D. B. Fuller & Co., Inc.

Easthampton,

sor

the

and

■

United

for 25

years

& Co.
prior

and

which

■Mr

Blair F. Clay-

4,868,189 common, Canadian strike has since beep
outstanding on March 3L^settie<fiN'et income for the 1951

present plant.

dition,

eight
with

years

new

that it would be

$160

partments.

to its

New

Trading

effective

quarter

convertible into three shares of $4

Department,

their

Street,

$3,087,927.

Refrigerator Co., St.

Hussmann

first

$67,937,172 for the

sales

callable

after

York

net

Co.'s

Chemical

The new ad¬ convertible preferred.
❖
#
%
will
cost
about
$180,000, will be used to house
Aspinook
Corp.
has sold its
the
cleaning and finishing de¬ Hampton Print Works, located at

Inc., 70 Wall
City, in

Co.,

preferred stock, the additional Exchange* announce the removal
paid-in capital account will be of their offices to larger quarters
eliminated and the earned surplus at 30 Pine Street, New York City,

(Inc.) covering the manufacture of nylon. Decatur, Ala., is the
Co.

Monsanto

Thompson &

Seligman, Lubetkin
In New Quarters

acrylic fibre and will process and
manufacture nylon. The financing
is

stock from 400,000

common

Chemstrand Corp., owned

tive preferred so

Steel Corp. is

build

on^-story
brick and steel building adjacent

planning

become

has

Electric

Hartford

Army Ordnance Corps.
plant has been in partial
parts for two new jet en¬ operation since December. Pres¬
to 800,000 shares in order to per¬
gines, the J-57, an advanced jet ent
interests
plans call for expenditure of
mit
the
directors to
declare a
type whose performance is still a over
David R. Mitchell
is
ST ANY,
$4,250,000 to rehabilitate the
100% stock dividend. The stock
military
secret,
and the T-34,
where
he
is
plant, which is expected to em¬
split will be made on April 25 to at present Secretary of the which is the most powerful pro¬
ploy between 8,000 and
10,000
holders of record April 11, 1951. Gratuity Fund and also is official peller-turbine engine in produc¬ workers.
if.
it
it
This will increase the outstanding photographer of STANY Bowl- tion. All tools for the new plants
will be supplied by the Govern¬
shares to 610,884. The stockholders ers.
During 1950, sales and earnings
also approved an increase in the
ment, but the plants will be built of Associated Spring Corp. were
with private capital. About 10,000
stated value of the preferred stock
the largest in the company's his¬
workers
will
be
added
to
the
from $10 to $100 per share,
tory. Sales for the year amounted
present 25,000 force.
through the transfer of $6,750,000
to $37.7 million and earnings to
'
it
it
#
'
from surplus account to capital
$4.58 a share. During the year the
account. Giving effect to the comStockholders of Acme Wire Co. new cold-rolling mill to produce
uion stock distribution and the mSeligman,
Lubetkin
&
Co., approved a stock dividend at their spring steel was completed, a new
crease in the stated value of the
members of the New York Stock annual meeting.
The number of plant of 165,000 square feet has

share, for the

per

Mitchell

Thursday, April 19, 1951

Connecticut Brevities

Thompson

associated with Hill,

pon

gain

7.3%

David

(No. 51, dated April 1, 1948)
of the adjustment bonds. It will
become due and payable on May
1, 1951. D. V. Fraser, President,
two -days later announced the
purchase by the Katy of a strip of
land near Garland, Texas, consisting of approximately 108 acres,
The area will be large enough to
accommodate extended yard tracks
and modern freight house facilities, designed to serve the Metropolitan Dallas area.
*
*
*
The stockholders of Interstate
Bakeries Corp., Kansas City, have
voted to increase the^authorized

highest level since the company
was
reorganized in 1947 because
a

With Hill,

Kansas-Texas RR„ on April 5 authorized the payment of one cou-

the St, Louis-San

Net income of

Francisco Ry. in 1950

(1644)

St. Louis I,Ho.

NEW
New York:

NEW

HAVEN

REctor 2-9377

YORK

STOCK

EXCHANGE

Telephone 6-0171
Teletype: NH 194

Hartford 7-2669

Volume 173

Number 5004

The Commercial and Financial Chronicle

inflation, in World Way 1,' as

well have wage control, you have got
to have price control.
v*;
There was a monetary basis for
It is also true that you can go
such expansion as occurred, but too, far in the program of—going
the point that I am calling atten- back to my original point Of conWorld War II.

Administration,

creases

and price controls

very

Prtc/

-alJIri

to,

m o 0 r

course,

reason

increase

cessfully diverted
quickly to war effort,

Hilt
automobiles in the country.

Building.

being might very well cut them out
situation altogether as we did in 1941-1942.

the supply
enormously different.

estate

Real

These

credit

and

WACO, Texas—Stuart C. Pil-*
the food short- sumers' credit, I also include, and
MADISON,, Wis. —William —. cher — engaging — a securities
M.
is -~ in were capital issues' control, and a tax
factors
in
causing system which would curtail in- Saxer is now with A. C. Allyn & business from offices in the Ral-

increase

the

occurred

resources

prices

Co., 3847 Nakoma Road.

vestment.

had

that

Now, if we rigorously controlled

...

1 submit that in both World War

that transfer of-resources
jfer

had,

Now, however, I don't want to

because

that

overstress

that in the circumstances

are

™ ,e™S °£

the money supply"

think

•

shortares the Crux

•

■

■-

Monetary Supply

it.war

Does Not 7

'Determine Demand

f Directing
my attention to the
first, ;I should like to sayJ that I
^

would mat

.4.1

that-

termine the aggregate
demand, from

von

rir-"

ran

Condensed From Financial Report,

"> m addition to a drastic curtailment of investment, non-

.'overbalanced^

dTe t

fhafbasi^get'by"wHhout

Cash

wage
t

prices

tfl

that

-bat so
.^^'^ave^ considerably ;
JSituatlon^in
pccurrecl'-c.whichr^. investment
wnicn V. mvesimenx

Investments

my -

j udgment,

had
k,h - they rise

you can

;

price"wage spiral going'

strong

the middle of the, had

!' but prices were;
j?
'■
l»i.

little

very

because
ucl«uoc

the
me,-

•

price

siiwitagcs
shortages

would
w v ui u

;

......

Notes, Purchase-Money

• • •

............

...........331,056
....$15^12,655

• • •..

• •

.$ 3,420,704

Obligations, etc. t-;

due after one year.;..,».
Total Liabilities

;

...

4,431,750

.................

7..

>.......

.T.$ 7,852,454

capital

say

^ic^Mvere'^ lower" at°toe-"largely hav«

;

-uAwurKs;-^;
Current Liabilities

The Price-Wage Spiral
"price-wage" because I

inflation;

been removed;; and think regularly in these situations
and of f948^ian to January 1948
fhere is n0 reason,T from the mone- it is prices that go up first and
Now
whaL were the Causes of tary situatio1?' why prices should then wages go up.-To be sure, if
thiq nrir#* Sahiiitv?
Tf nr!i ^n
rlse as much as they dld» any we now introduced wage control
Sider^ -Smnto fhl manlv !Il'more than they should have risen in that situation - and rigorously
what hil
th
naJt
'threefold. The monetary .situation held wages* down, the' inflation
£&£tto formal
ocRv^of Was th<?re t0 what they increase
'iustify an actually
very quickly run out
pertectly .norma.l velocity
of three times

sumer

•

.....>. ......... .

vtotal assets,...

■'

summer

be sure there

nni-p

fairlv

2,763,625

and Equipment—net....

Deferred Charges, etc.

205,375

.....»

arp"oftPrinrWH ^been Me-~l don^ think we were WH1 be very strong demand, and
over^ok ft-was a v^ar of able' becausc 5 the Psychological r think irresistible demands for
stabUitv
There was to.be t,nilA
Siaouuy.
mere was, to he^^ation hv^ the ^ountry-te con-. wage increases.; Then you 3.have
pnntrnl fnr annthof 19.

1-35,635.u J ■,
.$ 9,314,576
and; Non-Current Receivables.......... . , 264^160:

t<:/^':.;Total'Current Assets

Property, Plant;

plw^tiSiy rf monev^^^ahortagesy were fallowed toHnvestmentahchgdvernmental ou^
I.'am n^Sbng to taik
tot'vt*1*°W PtaW?Wte^ar^felay:Jexceeds,.aayingsvan^
itheor^ hutl^t^alliatuiivliom to''^the/pnce ~ntrois.were re- then you-, have a situation in
and I think

Obligations........
..........

.$4,576,130

;iPrerpaid Insurance, licenses, etc.. .i#..

consiaeraD

a"d. f similarly, after this -war,,; exceeds saying, or put' it on
-sub—wh*n
war -was "over,./ these ,little broader basis;-that in ptiva

-^experience The we had from
that year 1948
1946- to
1948.;

U. S. Gavcrnment

.
....

;'"'';,/.^-t.Inventories"'-;i.V/^v.'.1,633,761

monetary

the" monetary

ASSCTS;-^

............

y-t-Receivables—net

,wage'and

Ended, December 31, 1950

For the Year

n.ot be produced 5 while we were and price; controls." I say it is
. t he
war, - tremendous possible we might get by without

■

■"

■

AND SUBSIDIARIES

fighting

increase

I,;.V

a„ kindso£ things could

and

' ■ '

FOREMOST DAIRIES, EMC.

Current Assets

but I-merely call attention to

eigh Hotel Building,

r
'

■

outlets,

investment

of suppressed inflation,, which im-'beyond a two-year period, I think
pi[es t0 put it in more concrete if we don't- get into aj general
terms, that the whole thing can war, the situation will ease.

until

staDinzation

price

.$3,025,660
4,853,348

Capital Stock,.........
Surplus

81,193

Reserves

Total

Capital

.$ 7,960,201

TOTAL LIABILITIES &

and

CAPITAL.. .$15,812,655

•

at least we^ had it for
decades, if one were going to estimoney,,

Why?

jiad

demand

^t";
shortprices should have ceased risine
P v[. P tne tremenaous snoit
£ ill™™ mil e ceasea rising-ages that existed, that we had a
in the world why

no reason

mT?ani?a^y'.
We had
virtually
the-money supply.
-posits and

no increase in
stood

currencv

substantial increase in prices for
n;n#i mnnfhc

de--^2e^is

Demand

at S1C-3

^u'-

another

thing

that

^J.948,

There

was

velocity,

♦From

small

sufficient
that

payments

sor

as an average

were

transcript of

Hansen

before

increase

talk by Profeson

Now,

necessary

Conference

By January
jt stopped

for

care

the

"inv^tmAnt""and**voii> in-

excess investment, ana your in-

penary development would run
But, if course, that is ex-

happen in
mP8, the kmd of socrety we hve m.
^ whstr would

1946' and they
$108 billion

g00n develop a sufficient volume
deveiop a sufficient volume
of saving
balance the former
soon

t a"Oi«er ining^inat 1 out.

biHion before jrnice controls were
stood at

Because the excess of
would raise prices, but

^er'e removed1" under Ihl held ^agef down' ?"d y°u %™uld
consumptio" would
rise " >'ou
"."lu ' )«me"ndous"

«!!?:«>» ** bas,is. ,fhere is absolutely

If Pnces were allowed to rise,

rising.

the

monetary

situation,

aneged suppressed inflation,
an increase

then you would have the P^werdemand for wage increases,

So, in view of the fact that I

would have justified
in

prices three times what

got.

do not think we are at all

ade-

* submit that there is no ex- qUately attacking the investment
planatlOH

this

suppressed

inis

and I doubt we are going
LawaUsX", wit CSuC1XrUtr^, the shortages that the war caused, to, it seems to me necessary to
Economics

Mobilization,

Westi Virginia, April 6, 1951.

held

under

(Special to The Financial Chronicle) • i.. ■

judgment

fundamentai

sue-

did

AUyn

(Special to The Financial Chronicle)

non-defense
as in fact I and World War
II, the essential outlays/ and backed it up in the
we did, had we had rigorous price
causes
of the increase in ^prices next two years while we have this
stabilization from 1940 to 1942.
that occurred is not this business hump that has been mentioned
*

S. C. Pilcher Opens

All

•

Joins A. C.

con-

bottlenecks and
age

million un-

vji'i

(Special to the financial chronicle). , ;

shortages

overcome>
was

employed, but, even so, I do not
have

were

strategic

The

J kI

would

p^jce

Kidder Staff

Joins

had worked

through very many of our

effort because

eignt or nine

-fillorl tirifVi
intiDnfnrinc? oil
filled with inventories all omimd
around,

unusually
y

war

Corporation,

Boston

such
things
as
autoNEW ORLEANS, La.—The firm
ST.
PETERSBURG, Fla. -mobiles in the investment name of Couturier & Derbes ;has Arthur U. Mattson has joined' the
short- category, as one may very well been changed to Derbes & Co. staff of A. M. Kidder & Co., 400
being do.
We have plenty of civilian 2ff.V%e.s are *ocated *n tbe Whitney Beach Drive North.
eluding

meantime,

ageg^

OUtpil

then

First

department,

In the

4f1wAULS°wtPrCVnrCiHeaw7raTTl
go back to World War H,

rigorous

James C. Morrison

The

that aFe already ;in con?e c0"nected with Republic In- President in the Government bond

some

bring

factor

ately overbalanced budget, with
taxation that would be tolerated;
then we perhaps would get by
without wage and price control.
I do not believe we are having

price fluctuations.
I don't know of any period in
history in which there has been a

believe

there,

at all

from a11 over the world began to ing

lit

and undesirable

to the

balance

in reports in January of force, but not being used very vestment Company, 231 South La
1948 that agricultural and food vigorously, such as the real estate Salle Street.
^
^
tween
desir- suPP^es were on the increase, we credit and the consumers'
dur: ,
,lhlfl
n'rin" had a sharp break in those prices, ables.
Now Derbes &l Co
+ innc
and th£it was a very important
I am here at the moment in_
*v
fluctuations

Alvin H. Hansen

were

nice

"i'n ph^l

F°

substantial

There is

situation; wage and that is why I suggested it is
control, for example?
I think it one which one can't be dogmatic
would be quite possible for us in about; but it does seem to me that
this situation—I don't want ;to be if
we
vigorously attacked the
dogmatic about it — to get by investment area and had a modermonetary

tnink,

nad

creases.

New York state, New Jersey, Con¬
from the standpoint of the pres- Two With Republic Inv.
necticut
and
the
southeastern
Why did prices stop rising? ent purpose in hand for this
(Special to The Financial Chronicle)
states.
Mr. Morrison joined The
Well, I submit that it was funda- country. We could sharply reCHICAGO, 111.—Willis J. Mee- First Boston Corporation in 1931
mentally the result of non- duce the non-defense investment
J
...
monetary factors.
When wires by a number of measures, includ- han and David S. Miller have be- and gjnce ^945 j^g been a Vice-

alfpn

;!„

tion

irresistible demand for wage in-

history-

was,

sources

vlf"

the

'twen-

"Banking

ties

Appoints Merrison

over-

middle

t-.

and

investment.
that situation, and for that reason 10o Broadway'~~New~York City'
from, a monetary standpoint why
We have been having for some I think that in these circumstances announces that James C Morrison'
tlle income velocity should not years a perfectly enormous vol- we do need wage and price con- vice-President has been, placed
in charge of sales in the New
bave gone up to 3,3 where ^ bas ume of capital outlays.
Very trol.
York territory, which embraces
been over long decades in our much of it is quite unnecessary

Robertson

wrote

without price controls and wage
controls provided we did certain
other things vigorously; particumuch in the little basis, the income velocity in- larly provided we attacked vigbook that D.
creased from 1.7 to 2. Now, there orously the area of non-defense

about price
there

say that it is quite with the increase of money inbecome
too
rigorous come that occurred.
stabilization. I think
Estimating it on the income

easy 1

the

in output.
should

What is the relation of controls

curtail capital investment and adopt wise
budget and tax programs. Asserts, on basis of historical rec¬
ord, some price increase is necessary for substantial increase
avoided, if

investment

balanced
budget —taxation, r: so
that the very heaVy taxes on the
mass of people will
lead to an

enormously
price in-

than in fact occurred.

...

troi

mone-

Curtail Non-Defense Investment!

can

for

was

greater; expansion

Professor Hansen maintains wage

basis

tary

By DR. ALVIN H. HANSEN*

First Boston Corp.

tion to is that there

Professor, Graduate School of Public
Harvard University

(1645)

flation

The

real

explanation

and that accounts for the postwar

have wage control, and if you

condensed income statement
'

Total Sales

For Year Ended,

December 31, 7950

$52,621,127

(including inter-plant)

48,160,059
527,708
$48,687,767

Net Sales
Other Income
,

Total Income

Costs and Expenses

(including depreciation of
Net Income

(no

46,916,381

$750,338)

before Federal Income Taxes
excess

Provision for estimated

$ 1,771,386
522,500

profits tax)
Federal Income Taxes

.$ 1,248,886

NET INCOME

Dividends declared in 1950 on

Preferred and Common

Copies of the Annual Report
Offices; 2903 College Street,

•

Stocks.............. .$

658,123

will be supplied on request. General
Jacksonville, Florida.

Serving the South, Southwest

and East

-f; - 5 i

(1646)

The Commercial and Financial Chronicle

"This

distinct

contrast

with

Mutual Funds

the

two

major bull markets of
20 years. In the first

past

yield

Prospectus
your

tinue
upon

request

investment dealer,

from
from

high

remainder
this

the

and

year

rate

con¬

during

first

the

half

Current Financial Comment

NATIONAL
120

SECURITIES

The

during the second half due
military defense expenditures
reaching the production stage in
large volume," was the. conclu¬

CORPORATION

sion

the

Investment

Department of
Securities & Research
tion at
to

recent staff

establish

viewpoint
the

DIVIDEND

remaining

the

cut

Re¬

formly
with

this will

of ,,<1951.

prices
those

generally

that

have

the

your

careful

and

\ -

vital

"The

Established 1894

One Wall Street

New York

im-

for

year

though

careful

prudent,

decline

power

cates

seems

concern

Knickerbocker

investment

time

have

participate

has

"WHAT
—

Diversification, Supervision and
Safe-keeping of Investments
Prospectus

may be obtained from
investment dealer describing
and its shares, includ¬
ing price and terms of offering.

your

About
ural

KNICKERBOCKER SHARES INC.
20 Exchange Place

YOU

Fund"

whose

Investments

the

velopment
of

sources

Keystone
Custodian

for

FuncLs
Certificates of Participation in

INVESTMENT FUNDS

investing their capital

The

2.95%
3.36%

2.93%

BONDS

PREFERRED STOCKS

war

.-2

COMMON STOCKS
(Series S1-S2-S3-S4)

Bull

Keystone Company
of Boston

and

de¬
and

sales ; story

for

producers

•

conversion

peacetime

protection

against

pation in the growth of Canada's
raw

material's

industries, in which

approximately
folio
At

its

port¬

thq present time, the; Fund,
securities

operating
natural

15%

is invested.

owns

this

dozen

available

companies
-

different

fields.

resources

latest

Copies

sales

presentation
without obligation

from

Natural Resources
Fund, 52
Wall Street, New York
5, N. Y.
ONE

OF
of

THE

unique character¬

the

present bull market,
according to a report from Ed¬
ward Rubin of Selected
American

Shares, is that
stayed

liberal

stock

yields have

throughout
the
began in June,

current rise which

1949.

en¬

appreciation of all investments of
Dividend

date

Shares, Inc. at the

amounted

Working from his own statis¬
tical
imputations, Ed Rubin, in
studying three bull markets, notes
that

same

approximately

$20,000,000.
The

holdings

largest

common

stock

International

were

Continued

page

and its

shares,

RESOURCES FUND, INC.

including

Prospectus

terms of offer¬

available upon

EBERSTADT
19

CO.

INC.

St, New York 5, N. Y.

Telephone

Teletype

WHitehall 4-6120

New York City

Broadway

on request

FRANK L. VALENTA & CO, Inc.

request.

NY 1-3125

Yield

Industrials
7.68%

1949

PUTNAM

4.63%

——

4.39%

4.12%

June 1946

eon

Dow-Jones

July 1943"

Date

Bull

3.30%

FUND

Market
Yield

Dow-Jones

.Date

Industrials'

1949_-__

6.84

June

1950

Dec.

1950

&06 ton

5.94

March

"prospectus from
r

Putnam Fund Distributors. Inc.

6.42

50 State

extracts

are

9.94

x.__

1951—1

Statistics

from

complete

your

Mr.

Rubin

notes

•

investment
or

the characteristic decline in
Dow-Jones
stock
yields
which

deafer
;

■„

Svrcet, Boston

PHILADELPHIA

study which viay be obtained roithout ob¬
ligation from Ed Rubin, Selected American
Shares, 135 So. LaSalle St., Chicago. 3, III.

2* PA.

his

report';

that, "in approximately 1% years
of

the

DJI

1949-51

yield

has

bull

market,

dropped

less

the

American Business

than

Vz of 1%, and is still around 61/2%
—a

good

very

figure,

past

other

yields

investments

Shares, Inc.

whether

standards

comparison with

Ben Franklin's

absence- of

Congress Street

Boston 9, Massachusetts

has

965,

Market

July 1944
July 1945

resources, the

istics

be obtained from

$10,729,210
basis, resulting in an un¬
appreciation of $9,193,86%. The total unrealized

tax

Prospectus

upon request

available

today.

tangible assets, the rela¬

problem,.. the

com¬

cost

Dec.

value

3.71%

_T.

It must be

Notebook

to inform the
moneyless how
can reinforce their
purses.
I
of

the true

catching,

money

Lord, Abbett & Co.

act of kindness

inflation,, and the Fund's partici¬ acquaint. all with

are

K.1-K.2)

now

fields

new

allowance

3.10%

v-—-i'

1942-46

materials.

presentation's

vital

fund

market

tively low labor costs, the special

(Series B1-B2-B3-B4)

exploration
of

with

52 Wall

10.38•%':

judged

natural

(

June

made

are

raw

describing the Com¬

price and

ing, is

March 1937

pros¬

stresses, as. the. Fund's invest¬
ment
advantages, the ownership

tax

„

established

the

$19,923,175 at the year-end
pared

Industrials
_

July 1935 '
July 1936

title;

production, processing and manu¬
facturing of raw materials, also
include

had

1950

firm.
stock

NATURAL
A Prospectus
pany

July 1934

new

the
companies
whose activities, in addition to the
in

31,

mar¬

Market

July 1933

Know

qualify for sale in 28 states, in¬
creased its net assets from
$109,500 to $1,185,000 in the fit-fit 14

Fund

Tke

bull

Date

of
its
operation
from
February, 1950, to April, 1951-.

may

Bull

July 1932 '

Fund's

presentation
investors.

Fund,

managed by the
largest
common

holdings

joyed yields of 6% or thereabouts
good grade industrial stocks."

preseht in this

in¬

nine-page
The

major

market

Dow-Jones

indi-.,

American

Natural Resources

pective

took

market

with

approximately $83,500,-

Yield

Resources, Nat¬
Stocks, and. Nat¬

Resources

bull

and

Div¬

the

having

months

Prospectus

been

not

1932-37

in- order

SHOULD

Natural

Resources

ural
of

the company

(SerieJ

July 1942

for the

present

000,
The

fund

current market rise.

opportunity
the long-term

dustries."

the

Inc.,

growth

bull

stocks
a

Shares,

realized

1932-37

industrial

idend

analysis

would

expected

usually accompanies
ket

to
benefit
from
the
relatively
high income available and at the
same

from

judge,

may

the

point, the
the experience

Chairman, Delaware Fund

representa-'

stocks

one

publication.

circum¬

purchasing

advisability

common

setular

IFund

the

the- dollar. 'This

the

adequate
tion

part

states,

Bullock

the investor is the continuance of

the

rise

substantial. On Jan.

the Dow-Jones Indus¬
137; in 1946 it reached

far

case

Al¬

backlog

genuine

DJI yield
7.68%

Calvin

current issue of

accom¬
as

normal'

the

D. More ait Barringer

investors.

reasonable

may

price

monthly

assets

took place with yields fraction¬
ally above and below 4%; so far,

reduction

result

same

stances

will," in the
Fund's opinion, "be another good

bonds and preferred stocks

side

the

pro¬

1934, the
it reached

firm

"Bulletin," the

brought on by lower prices and
deflating inventories.
:>•.

1951

year

other

very

place with yields at 3%;
part of the 1942-46 bull

are
get¬
difficult to

output,

under

the

was

market

loans

forced

plish the

selection
*.

civilian

reactions

period ahead, therefore,

portance.

its

3%—from

The

was

vestment
in

temporary peak at 212.50.

major

shield, defense production
rapidly gaining momentum,

be expected.

over

bank

"So

likely

seem

about

1944,

trial
a

the

.higher

prevailed

intermediate

last

continue

obtain.

result

price rise,

4.61%.

28,

indefinitely,
for a top-heavy inventory sit¬
uation is appearing in many

"Variations as to industries and
issues will continue to be wide

doesn't

bursements

may

calvin bullock

ances.

were:

likely

there

comparisons,

quarter

and

although

first

was

April

was

1942-46

essential

dropped

despite higher tax allow¬

year,

for

this year up to the present time—

Prospectus from

favorable

the

increasingly

will

failed

expected

non

lines

than

investment dealer

ting

stock

has

the

"Continued
high
corporate
earnings and liberal dividend dis¬

backs

any

first quarter make almost uni¬

National

outlook

production

show

products, and earnings for, the

Corpora¬

months

Other conclusions

meeting held
Corporation's

the

outstanding fact is that

civilian

BROADWAY, NEW YORK 5, N. Y.

there

investment
emphasized by the in¬

program is

price

rise

Thursday, April 19, 1951

THE VITAL ROLE which
care¬
ful selection of securities
plays in
the success of a sound

7%—from

The

104; in 1937
temporary peak of 194.
"In the first 1% years

rate

RESEARCH

DJI

about

3.02%.

nounced.

accelerated

dropped

10.38%
from

"BUSINESS ACTIVITY will

the

1%
of the 1932-37 rise, the DJI

years

By ROBERT R. RICH

experience in the other

the

they

New York

—

Chicago

Atlanta

Los Angeles

will-

secret

certain

way to fill empty purses and how
to keep them always full.-

"Two simple rules
will

will-

never

the

well

observed

business:

First, let
honesty and labor be thy constant
companion's; Second, Spend one
penny every day
less than thy
clear gains—then shall
thy purses
soon begin to
thrive, thy creditors
oppress

insult

thee

nor

want

hunger
bite,
nor
naked
freeze
them, the whole
hemisphere will shine brighter,
and

nor

pleasure

corner

spring
thy heart.

"Remember

that

in every

up
.

money

prolific, generating nature. Money
can

beget more,

there

produces
the

and

the

on.

The

Diversified Investment Company

Prospectus

may

be obtained from

investment dealer

your

local

The Parker

Corporation,
200 Berkeley St., Boston 16, Mass.
or

turning,, so that
rise
quicker, and

every

profits
quicker."

Contributed

Vance

Hale,'
Sanders.

•

FOUNDED

192 5

•

Volume 173

Number 5004

»n

The Commercial and Financial Chronicle'

.■

nils

-^and I called in a

doctor, the first government paid the farmer not
thing; I" wouldwant him. to find fo plant crops and to kill'his little
out Would be what was the matter pigs, i and then, both directly an<|
With me; what was causing the ill- indirectly,
pressed for
shorter
ness,rand« remove ■ the cause.« A hours and mote pay for labor to
little aspirin to lower the temper- thereby increase the cost of pro-

*•■-/«•

President, Americah Bankers Association

;

Asserting inflation; was brought about deliberately in this country two decades ago by government policies, ABA President
maintains credit expansion has had little to do with it, aside
from effects of an enforced easy-money policy/ Advocates cut
in non-essential Federal spending of from $7 to $9 billion,
along with balanced budget. Stresses purpose and use of bank
loans and not amount determines their inflationary effects.

wouldh't know or

going to talk to you'todays of

"am
as

citizens.
have

who

men

are

about my

care

fn controLof the

realistic

this

matter:

Certainly

The
precious
heritage
that
we'hold as

Hitlers have drenched the battle¬

evidence

fields of the world with the blood

had lost,

about

American citi¬

dom and

in their effort

it.

Well,

upon their fellow men/ Now once
again in the same basic roie man¬

been and

kind

loans

now

is being threat¬
en

within

and

lames

political

Shelton

and** economic

and

based upon the propo¬
sition that the individual citizen
riotf only has the. fight but the
J'
6,

;

•

brpught about.
We should do this candidly, factu¬
ally, andrealistically because 1it
is- logical; to assume that, if We

control his own conduct and man-

affairs. These systems
the

nation

our

we,

her

The

face

satellites, we have been

* course,

II and the deficit government fi-

the things

inflation has

locusts

restrictions, and controls
imposed by government upon the
individual. This is basically and
fundamentally opposed to the so¬
cialistic philosophy that the indi¬
vidual is incompetent to manage
his own affairs, and that he must,

excess'

are

Whether

Korea.

into

World

War,

The ■decision lies

know.

with

are. now:

of money supply over

this kind, which we had then and
the
now'getting again, do notour*
an

.short supply of goods or servgoods
and services; and, to the extent)
that the price is raised, the; purices • raises the price' of' the

military, industrial, and spiritual
therefore, have.his thinking and mobilization. The future of this
planning done for him and his country and its very salvation may chasing power of the dollar is delife regulated and controlled Tor
creased: That is an oversirhple exwejj depend upon our strengthhinf.by government.
not alone our, miliary/ strength,
planation. Now, of course, in a
The American
system stands necessary as that is—but also our free1. economy the law; of supply
economic,
financial,
industrial,
and spiritual strength on the home

tion, incentive, thrift,, industry,
intelligence, opportunity, and pro-

and demand acts as:

front.

independence,.ambi-

gold standard and repudiated

its contract to redeem its obliga¬
tions in gold, it definitely struck
a

blow

value

the

our

verted it into

aged

commodity

cafpfv

vaivf*

currency

hazards incident thereto.

Credit Not Responsible for

the

inflation

great deal these days

contribution

men't

easy-money

made

nolicies

credit

i°"a

wnv-

SL IS
nnr?

couia

xnen

turn

MvStBK
policy to aid in

low-cost debt servicing has been
a

factor in permitting the growth

of inflation. A flexible rate which,
attract

government

the

debt

purchase

outside

of
the

banking system would have
helped; and would now help to
minimize the /forces of inflation.
I

hope that this policy will

now

be
.

effect

of government credit fpolicies <hi
the integrity of the dollar withlending,

the

activities of the government and

0f governmental agencies in makv
ing,
buying,
and
guaranteeing
done, the continuing
loans. Possibly the greatest siiiround of price increases mightContinued oh page 44
have been avoided or minimized.

loose

ductive achievement by the indi- strength
will
prevent
another1 mand,» then the price gaes up. The
It means solvency global war, and1 only such strength higher prices create an induceat all, levels.
It means spending will assure our victory if such e ment and incentive' to produce
less* than you take in and thereby war is forced upon us. But in more of that commodity. Under

had

the de-

less than

about

commenting

S®^ppf^
aemana,

Tne

ar»v

safety valve. If the supply of. any

Only, recognition of such

Inflation

We hear

pu**«ued by the Treasury.
We cannot speak of the

until «iT ^v!riPr

automatic

snnniv

thp

stability of the
and con¬
government-man¬
with the many

currency
a

would

was » a Position to -hold both

vidual citizen.

accumulating capital and savings,

When this government went off
the

^.Cly'lian

the

engaged, in a great

deliberately

the

hide^ it
up the
demand and postponing its fulfillment. At the end of the war, with
Price- and wage controls and rationing damming up the demand

bidding by the excess money for

few mad Russians in the Kremlin/

been defined

the supply of goods and services inflation.; They merely
not available to be purchased. The by artificially damming

in the opening rounds of

Third

developed. .Economic controls of

which brought it about,

munist China have swarmed like

laws,

for freedom,

inflation .was,

greatly increased by World War

Inflation was

the ruthless hordes of Com-

and

minimum

in the his¬

was

intelligence -and' the character to

under

inflation

was

name:of defense.'

peacetime budget deficits,
a large measure on bank
credit,
planned,
created,
and
fostered inflation; and then, point¬
ing to the false, unsound, and syn¬
thetic prosperity created thereby,
boasted that "we planned it that
way."

brought about in nancing indulged in during the
plunged into "a bloody war many this country as a; rpatfer of delib- war* 'With production of civilian
thousands
of
miles
frorii' ouf v erate
government policy over a goods diverted to the war effort
shores.
One
of
Stalin's pawns;, period of almost zo years with' "and with price and wage controls
20
aiiuica.
uuc
W
ouuui». pdyvno perI0cl; 0t
witn
\&
having been defeated, he has sent World War II thrown in for good and rationing, tremendous and abanother of his pawns into thewar;. measure: Let us: examine some of
»Wi^;.»lyrtages ar qyjlttn- gooda-

are

own

how

why and

then

tinued

.its early stages, inflation is
stimulating as alcoholic bever-

breached

based in

war.

and
would
remove
its
and of the could
this critical causes, them we could arrest its
year of decision. Because of the progress if not entirely eliminate
continued
aggression .of. Russia !its effects.
i

tory

world that

J The Ameri¬

age'his

.tot .the

chained

;

„

flower

is at such a time

destruction

systems

and

since the "Korean

Right

ages;"but* after overindulgence, it
is just as destructive and brings
about as great a headache. The
government itself, with its con-

In
as

power

We should determine

chariot of Stalin and* his ruthless

from without.

ca n

faced /by the: hordes of
and her satellite nations,,

gong.

With the threat
Of

harnessed

faced

now

extinguish the flame of free-,
impose their selfish wills

Russia

from

chasing

our economy

and destroy individual incentive
an<* unusual reward for unusual
effort upon which our whole suecess as a/nation Was built. '
"occ
Q
V""1*

dollar

our

two
decades has

for

fulfillment.

holding back the flood of

government/
Since the war, everything has'
been done to feed the fires of
inflation. Price support programs,
extravagant government spending,
+ w
*
social welfare projects, all contributed to the inflation but shone
briefly with a misleading glow of
artificial and unreal prosperity,
This program of domestic* spending is Still continuing under the

than 40% of its pur¬

was bound to under-

tninef he strength of

have some

before the Korean
war, so all of our inflation didn't
Come just since the Korean war;
and, therefore, it Wasn't brought
about • by an increase
in bank

postwar inflation

most

men

sible

the dam

Of course; it

change of program.

bankers and as American stater Through the centuries, the inflation—a lot of it. Our econIn both capacities we
Charlemagnes, the Napoleons, the omists tell us that high prices are
stake in this country of BIsmarcks, the Mussolinis, and the not inflation—that they are the

of millions of

some years

mand

q u t s.

zens,

to order and found for

illness,fhenT would certainly de- to be politically quite profitable,
Let

hpth

But the leaders of organized labor,
did not want to wait for wage in-

President,1 Security-First National Bank, Los Angeles
-

Creases,and
the
government
yielded ta their political pressures.
Although labor is the greatest element in the cost of most products,
ature and even a little sedative duction. Thus there was created the
government, with almost childto induce sleep I might be glad to* the doctrine J that the way for ish innocence—if it was innocence
have on the side. But if I thought people to get along in this world —announced that it would raise the
the doctor either didn't know or was 'to* get more and more for wages of labor but still hold down
wasn't treating the cause of the doing less and less. This was man- the
price of goods produced by
illness and was merely putting me made, synthetic, artificially in- labor; That
statement, of course,
to
semirtated inflation, manufactured was both ridiculous and
sleep
with sedatives
so
I
impos-

By JAMES E* SHELTON*

(1647)

been

free economy again. If this

free enterprise system, this
is done until a* supply equal to or
our"

intelligent provi-

spite of the dark clouds on the
foreign horizon, I firmly believe
that this country can never be

sion by your own efforts—not by

destroyed from without unless.we,

duced—then the price goes down

government dole—for old age and

first

for those dependent upon you/ It

from within.

means

day*

means

nest egg for a rainy

means

free

and

individual

man¬

hood, the kind with head high and
chin and

chest out.

If
is*

arid,

disintegrate and deteriorate

Solvency

and

socialistic

anathema to the

welfare

state.

state makes tne citizen

the

ana.

ment.

That

the ward

of the

servant

measures

govern¬
the benefits to

the individual not by

our

"to

paixosophy

inevitably

debauches

basic human

upon

ago

years

during a

period, of severe depression, thosfe
in charge of our government ap¬
parently deeided that the fundawas

real-

consideration of the facts

their economists wrote a^ prescrip¬

are

tion for

government-made, syn¬
of prosperity, < really
inflation;* based upon a govern-

Freedom of disdebate are- an; in-

necessary.

cussion

but

^tSeSct^amenfai lavv bf in functioning; and
supply and-demaiid
too slow

policies, candor and

vitally

Almost

our econ¬

,:-;

tional

psychology.

look

In discussing the problems con-

■

his political support. That sort of a

take

of the features of

some

what the in-

Pr°duces but upon the
political favors he may receive
from the governmentan return for

ia the. readjustments,

perience and

military productive effort is

founded —let

omy.

profitable,

less

it is based upon actual human ex¬

is the very foundation upon which

independence of

are

pro

produced. There are some hard

ships

important—and it is—for it

the individual

being

lesser quantity of , the commodity

internal economic strength

our

the demand

in excess

and

thetic

j-erent and necessary part of our

form

!.ni.c0.rf?J,isi?th the citizen and AWca/'waro?li&'They'p'rothegovernment.
On

mote understanding.

international Scene to¬

the

day the same basic principles are1
involved. They involve the pres¬
ervation

the

loss

the most

precious heritage* which merr have
striven for through the centuries.
Civilization and
stake.

humanity

The basic issues

are

Ohe of
Aa.

said:

where

our

what to*

could

we are

tending,

great Presidents

<tT4S

"If

first

and whither

created short
.

supply of commodiobviously re-

once .ties.* Such a program

know
we are

could better judge
do arid how to do it." / In
we

that spirit and with that approach,
let us discuss some of the. vital

i_A_._ii.fi.

•

nni

quired money, and lots of it. The
government
does
not 1 produce
wealth-r-it consumes wealth. The

& f»

only money which the government
has/is that -which- it takes- from its
citizens

the

form

fS:*

x— •/

s—

'AWiv' 4*

taxes,

9.'

sim¬

problems affecting our economy / either direct or indirect, and what
and the major lines are today.
.
it borrows, usually from its own.
clearly drawn. The whole Ameri¬
;
•
.
citizens. So the government efnThe Inflation Problem
can system and way of life are
.barked upon a policy of taking
predicated upon the recognition of¬
We hear a great deal about in- tax money from those who had
the dignity and the freedom, of flation these
days and how to something, and piling, up goveriithe individual.
The other phil¬ remedy it. One might almost think ment indebtedness and
spreading
osophy is the antithesis of all that from somej statements on the sub- the^ money around in, the form of
we'hold dear in life. It would turn ject that inflation was something
doles, subsidies, parity payments,
ple,

!V>

...

•

the

hands

the

through

back

the

make

the

pawn

citizen

the state,

clock

centuries
the

slave

time

and

existed in this country
until the Korean war, and that the

and

tightening

few

economic

« >

'.'tftt t
v»
«
v !>-:
t

V-.

AX '■<
/:•>

<>4

<
t

means

•*

Convention,

Beach, Fla:, April 3, 1951:

thumbscrews

would

eliminate

it.

Well, I don't think that'Cither of
these

assumptions

know that if I

seriously ill—
feel the same way

were

and I think you

fii .correct.

;v»

!i-

■A

<5:

theory that this was the way to
create "increased purchasing

power." * On- the other hand, to
make goods* and services scarce
and therefore more expensive, the

4'*; Ji'i
««>
*.v.

t
*
ww x.
*

which

address by Mr. Shelton before the
Florida Bankers Association
Palm

{? :><•.

14.

would immediately spend it on the

never

w "

;;

price support programs,, and other
such devices among people who

the-slave and the pawn of the man
■* *

that

•x

.■■s

:v;U
t;<>«

} X

v! if* *
v.

•

*4!

t
.

^ ? "
*

yi fci MVh;.

The Commercial and Financial Chronicle-.

(1648)

faces. And
of

From

drafting of

Washington

Ahead

certainly such

industry and of

men,

policy does not entail

(2)

and the spending of billions that is now going

men

them,

my
are

opinion the American people, the rank and file of
not at present concerned in the relative merits of the

The

confused. They seem, in fact, more united on this

cal dopesters

thing than they have been in years. It is not exaggerating
the situation, indeed, to say that many of them
look forward to the forthcoming great show¬

one

relish. I can't explain it;

with

down

doing is reporting
be.

this

had

have

Democrat's tell

some

the

may

fact, surprising

all I

thing

very

it may

volume

that

the

Administration

hasn't
to

cooled

town
are

but

issue.

not

This doesn't

mean

evidence

10,

probably in for a lot of excitement
the Republicans are counselling

some

Carlisle

MacArthur,

Bargeron

condition

admits.

the

White

are

interesting angles in¬
intensive propaganda cam¬

many

volved. All the indications point to an

of futures markets.

by the Administration to make the Republicans the war
party and MacArthur a man who wanted to "extend" the war to
In another way, they are out to make the Republicans
and MacArthur pro-Asia while they are pro-Europe. A whispering

paign

tecting them. This is, of
token
in

the

vicious slander but it is a mere
of what we may expect. With the propaganda machinery
hands of the Administration and the seeming confusion

For

this

that

belief

explains the

Democrats' optimism.

Asia

wage

futures

Defense

which
provided,
among
other
1950,

make

the issue.
What

involved

simple proposition that MacArthur
did not ask for the Korean war, it was dropped overnight in his
lap. There is really no question about keeping the military under
civil

domination.

There

those who have been
to

be removed

means

seems

Korea,

agreement

The

They note that upsurges of spec¬

Korea he served only to shorten the
enemy's supply line and make
stronger; in order to have room in which to bomb the enemy's

ulative

accompanied
by rising prices, and cite the Jan¬
uary
1948
price increases and
rapid increase of soybean prices
following the outbreak of the Ko¬
rean
war.1
They suggest
that
higher margin requirements
would
curb
such
speculative

him

supplies he had to let the enemy remain in Korea from which it
his

that

MacArthur

mission

drive

never

them.

made

the

this

"retreats"

intimate's
which

contention

were

ascribed

him; he had to effect withdrawals

in order to bring the
enemy
supplies. The General, according
to this source, considered this
advancing and backing up and
down the peninsula
indefinitely with its heavy loss of American
to him where he could

lives
not

bomb his

situation which he

General could not tolerate.

booms,

For

example/ they "have

Europe they

are

ment

only making

case

the

merit

in details.

margin

require¬

contract

fulfillment.

Trading members in turn must

re¬

quire their clients to post certain
minimum
margins.
Commission
houses

may require larger than
minimum margins. The historical
purpose

of the

margin has
t

been

the. prevention of contract default.

futures

Grain

and

Buyers

two

the

meal

were

bushel

per

time soy¬

same

products needs im¬
the most important
speculation in oil and

large

volume

trading

essential to uncontrolled and
sitive

price

adjustment.

small

re¬

adjusted

quently

must

large amounts while
ket

supplies

for

with

many

relatively
broad

mar¬

traders results in

prices that change

them, and
expectations of the average
prices that will prevail at future

by smaller amounts. A broad

times.

the

average prices expected, the
quantities offered for sale are in¬

creased, if they
are

below,

are

decreased.

discounting the
supply-demand
conditions
current

prices.

market

make

but
all

supplies
the

last

consumed.

the

time

same

and erratic

year

occur

them

not

Current prices are

speculative

interest

are

singularly good discounting mar¬
kets and especially useful in ra¬
tioning supplies over time pe¬
riods.

large

Much

purpose.

same

time.

that

mean

vol¬

spec¬

prices.

price,

reason

erratic price changes cause

is that

large
trading. There is no
logic in speculating in prices that
do not change.
Speculators
when
buy
they
think that prices are too low and
sell when they think prices are
too
high.
They differ in their
opinions' about what is too high
volume

large
activity. A

of speculative

logical line of

seem

This does

erratic

caused

are

amount
more

are

tensive

than

traders

How

price changes

at the

changes

prices. If the supply-demand con¬
ditions change so that expecta¬

changed, these changes
should be immediately registered
in current prices.
The extent to
which they are so registered de¬

few

Volume of trading and pricesIncreases in the volume of trading

functions of expectations of future

tions

ulation helps assure free

will

full

have

market.

large for this

into

that

rate

mar¬

of trading is necessary to as¬
sure
uncontrolled prices
is not
known.
Volume
cannot
be
too

regulating the flow of grains onto
the

often and

ume

total

essential

one

narrow

quan¬

This

process

ket is less susceptible to influence

If current prices are above

tities

sen¬

volume of trading by a few people
results in prices that are -infre¬

anticipated

total

demand

forward po¬

and

soybean

being

basic

sellers

and
of

oil

provements;

markets—

have

prices should

estimates

Discounts
in

bean futures showed a carrying
charge. Risk shifting for soybeans

consum¬

and- what is too low.

the

The actions

individual

speculators in buy¬
ing and selling tend to force prices

tends

expected by the
participants. Speculation

average

market
to

eliminate the

speculation.

and
rate.

are

consumed at

Part

owned

of
as

for

Speculators
assume

the

long

much of

fairly

stocks
as

futures

even

must

the

reason

judgment

for

the

Reports

transactions
of

make

the Administrator

CEA, 1948, 1949, and 1950.

perfect, prices
would change only when the un¬
derlying economic conditions
changed.
Speculation cannot affect prices
much in a liquid market.

Cash

the risk in

mar¬

and futures prices are tied
together by the delivery feature.

keting

grain.
Risk
premiums
must be paid to get risks assumed;

anyone

purchasing

for

A good

risk-shifting

were

very

markets

deferred

margin requirements delivery must be able
to buy
commodity and stock exchanges cheaper than he expects to be able
frequently compared, differ¬ to sell later.
in

speculators

months.

Although

the

oil and meal. In

high as 30 cents
soybeans. At the

are

1 See

soy¬

—

guarantee

ences

1948-49.

meal.

■

sales of

livery.

made

Price risks in grain marketing
Commodity exchange
clearing houses require that clear¬ are extensive. Crops are harvested
ing
members
post
margins
to during a few weeks of each year

un¬

than patrol of the water between
Formosa and the main¬
land by a handful of warships.
Assisting Chiang Kai-Shek to get
back to the mainland would
require, according to these so-called
China Firsters, no more than some small
naval protection to get
the Generalissimo's
troops landed, and equipping them; These socalled China Firsters have the additional
argument that the Com¬
munists are on the move in
Asia; in
no

CEA

Nature

This is Truman's tactic,
This is far from an accurate
description of these Republicans'
attitude but their tactics do
play into the hands of the clever

propagandists.

the

come

say the least, to the pouring of
billions of dollars into Europe and to the
sending of additional
division of troops. Yet, they are in the
light of, long before Korea,
wanting action in Asia. They wanted action to this extent: Assist¬
ing Chiang Kai-Shek to make trouble for the Chinese Communists
and the protection of Formosa by our
Navy. This latter involves

The

controversy; there is

to be propagandized
being "isolationists" in Europe and "interventionists" irt Asia.

mistakably been lukewarm, to

the

following comments apply
only to the broader aspects of the

For several years
now, some of the leading Republicans have
permitted themselves to be dubbed "China Firsters"
by the Ad¬

Administration

delivery
be

importance of pends upon the effectiveness of
commodity markets and the signif¬ the
discounting system, which in
icance
attached
to
the
margin turn
depends upon the level of
question by both the CEA and the speculative
activity.
The
dis¬
Exchanges, review of margin re¬
counting process requires specula¬
quirements seems desirable,
tion. Futures markets with an ex¬

seriously

are

Because

that they will have
any such clear picture as this. And I am
afraid that the General will lend himself to. the
muddying of the
waters which is exactly what the Administration wants
to do. '
'

They have

activity

was

question at all of his wanting to "extend" the
war; he simply
wanted the freedom to end
it, which he was confident he could do.
Now, put up to the people in this light, there is no doubt in
my mind as to what the verdict would be. But I do doubt
a

ministration propagandists.

Commodity Exchange Au¬

sitions

form

the Exchanges encourage ex¬
cessive speculation and specula¬
tion
with
insufficient
capital.

Charged with running the Communists out of
time he advanced from a fixed position in South

was

■

follows:

every

The

of his inti¬

one

Hieronymus

thority takes the position that the
low speculative margins required

impossible situation to
me

campaign.

close to the General that he fully expected
command and that he welcomed it as a

bringing what he considered

futures^

ing oil and meal for deferred de¬

possession.

markets

risks;

make

Report of the Adminis¬
the CEA continues the

1950

trator

among

from his

the attention of the American
people.
This situation has been explained
mates

general

values.

margins. The margin control pro¬
visions of the Act were defeated.

the

When

flect both current and

things, for the
regulation
of

trading

was

shifted part of their risks by sell¬

are

accrue

(1) the registering of
grain prices and (2) the shifting
of

effective

their inventories

forward

Commodity margins guaran¬

Futures

Pro¬

for

volume

They
shiffed the bulk of their risks by

functions:

duction Act of

However, this is not the issue as I understand it and it is not
literally thousands of people who are
deluging Congress with indignant letters and telegrams. The
able

13%
bean

margin

payment must

Functions

the

with

was

small

clearly too small
effective hedging. In 1948-49
was 1.5 billion bushels.
Illinois
processors
hedged only

A futures contract

date.

chaser

recent attempt

the issue in the minds of the

mar¬

trad¬

for

mated or offset; the posting of
margins does not entitle the pur¬

kets. The most

the volume

meaningless.
on

tee that contracts will be

odity

too

The

1947-48

agreement to purchase at

full.

eculative

c o m m

this country while millions of our voters do have

Administration will

the purchaser.

made

transactions in

ties with Europe.

purchased

future

Administration would win.

question is whether the

promoting legislation to

of where to

do not vote in

been

ity to regulate
margin re¬
quirements on

it in Europe I am quite sure the
By this, I mean the broad proposition
place the emphasis, which involves, for the time being,
where the money is to be spent, where the troops are to be landed
to spend more money; in short, whose economy is to be helped.
As I have pointed out before/regardless of the
merits, regardless
of whether Asia or Europe is more important to us, the Asiatics
or

comparisons

Stocks

Department of Agriculture

hedgers2

volume

December 1950 soybean processors

such

give it author¬

are

Communism

Commodity

delivered and dividends

has

successful in getting over this picture to the American
people, I think their optimism is justified. On the broad propo¬
sition of whether it is more important to wage the war against

they

the

States

the

time

the

million bushels in soybeans

at 40

Points out large volume of trading in rela¬

Exchange Authority of the United

Republicans, or their ineptitude in expresing them¬
selves, I am not too hopeful about the outcome of the debate. I

among

some

hedging.

is essential for sound futures trading and
lessening of trading volume may affect relative price
stability. Holds speculation cannot affect substantially prices
in a liquid commodities futures market.

course, a

of" potential

Reports

any

campaign already getting underway is that MacArthur has large
investments in the Philippines and is selfishly interested in pro¬

20 times the

Volume in relation to the

indicate that

tion to size of crop

China.

10, 15,

ing in mill feed and soybean meal

legislation permitting Fed¬
eral regulation of margin requirements in
commodity futures
trading, explains nature of margin requirements and functions

There

15 times the size of the
is not known. Neither is it

futures

Prof. Hieronymus, commenting

given amount of

essary.

University of Illinois

House

size of the crop may or may not be
the appropriate measure.

Assistant Professor of Agricultural Economics,

overwhelming mail of the Congressmen, both
Republicans and Democrats, is decidedly pro-

size of the crop is more tnan nec¬

By T. A. HIERONYMUS

caution. This is in the face of the fact that the

that

known that

Margins in Futures
Trading Be Regulated?

that

markets

some

enough and in other
large enough. From a

trading is the minimum necessary.
Whether
the
minimum
is
just
equal to the size of the crop, 5,
crop,

their enthusiasm to go

some

the

hedging point of view, too large
a volume of trading is impossible.
There seems to be no objective

the party

Should

large

markets not

that will unite

and pull it out of a hole.
The Republicans are not unaware of this
situation and
it has them perplexed, if it

require

volume

least

discussing and
overwhelmingly upheld.
succeeds in blanketing
this by
drawing these Republicans and the General into the broader
proposition of Asia or Europe first, as it seems likely, they are
quite cocky about the outcome, and I fear their cockiness is
justified. I have written of a group of Republicans rather than the
party, because on the broader proposition they are badly split,
which lends additional weight to the argument that they should
tie the debate to Korea and
keep it there.
if

nanus

who

the attitude of the Republicans whom we've been
But

ltno

of trading necessary
good hedging market is not
known.
We only know that the

for

General MacArthur would be

solidity with which the Democrats have gotten behind
Truman in his dismissal of MacArthur has the Washington politi¬

risks

persons

Necessary volume of trading—

propositions: saving Asia from, communism or saving Europe
from Communists. They want to know how and when the war in
Korea is to be brought to an end. On this one question I believe

The

instantane¬

removed

smallest risk premiums.

two

By CARLISLE BARGERON

get

those

on.

of the News

and

ously without price penalty; and

with the'

war

Thursday, April 19, 1951

placed

remobilization

all-out

a preparedness for

(hedging)

market must: (1) provide a liquid
market so
that
hedges can be

Continued
2

page

H. S., and McDonald, E. M.,
"Inventory and Hedgihg Policies ot Com¬
Irwin,

mercial

Mixed-Feed

United

States," United States
Depart¬
Agriculture, Agricultural Infor¬

ment

mation

Bulletin

No.

Manufacturers in

the

24.

3 Hieronymus, T.
A., unpublished in¬
vestigations of risk in marketing soy¬
beans, University of Illinois.

Volume 173

Number 5004

The Commercial and Financial Chronicle
..

floor

Impact oi Voluntary Credit

under

commodity prices,

the

does not restrict
wages and con¬
tinues non-defense
spending at an
unprecedented rate.; However, if

Skipper of the Ship of State
help reef a sail while
sailing in a stormy sea, you re¬

Member of recently organized National
Voluntary Credit Re¬
straint Committee explains
purposes and progress of credit

banking in its execu¬
bankers, whether concerned with mu¬
nicipal or corporate securities, cooperate to combat inflation
through curtailing all credits not in line with defense efforts.
Section 708 of the Defense Pro¬
Act

.1950

financing institutions

enter

the

into

voluntary

gional

inflation.
produce

companies

Executive
Order

the

Board

Governors

the

Reserve

sumer

Rudolf

thority with

Charles

by the Act. This plan is entirely
voluntary and as indicated, has
the full approval of the Board of
Governors of the Federal Reserve

Federal

The

Trade

Commission.

voluntary
action
insurance companies,

secure

banks,

vestment

bankers

lenders

refrain

and

from

loan

Eastern

Credit Restraint

in¬

other

Frazer

loans for non-productive purposes
with
the
objective
of
thereby

Life

Ins.

Julian

helping to control existing infla¬
tionary pressures, and assisting

National

Restraint

pointed

Voluntary

Committee

March

was

1951

Columbian

National

Life

Insurance

Credit

Re¬

Governors

Reserve

the

System.

Fed¬

This

same

pair

suburban

Credit

Restraint

appears

example,

lead

area.

only

believe

re¬

that

fi¬

loans

from

last

two

materials

should

our

that

one

this

wish to

study

ous

will

Washington
of

and

made

programs that are

ment.

alternative

Credit

Restraint

Voluntary
if

program,

Co.,

Inc., N. Y.; Francis Kernan,
Partner, White Weld & Co., N. Y.;
William

Barkley Jr., Partner,
Stein Bros & Boyce, Philadelphia,
Pa., and Rudolph Smutny, Partner,

Salomon
It

Bros & Hutzler.

most

realize

that

National
straint

important
the

that

purpose

lenders

re¬

purposes

with the ob¬

jective thereby to control infla¬
tionary pressures. It is recognized
that
voluntary efforts have not
been

very

dividual

successful

basis

in¬

holding

down
non-productive loans, but with
this new approach institutions in

community will be able to band
together under legal sanction to

halt

"shopping around for loans."

The

primary purpose of the Na¬
tional Voluntary Credit Restraint

for

into

productive

purposes

defense.

Regional

subcommittees

have

National

and

retail

by Mr. Smutny at MeetIn? of the Municipal Forum, New York
City, April 13, 1951.

their

there

establishments,

are

services

the: Vol¬

untary program have done

cerely and
for its
in

are

York

standing

job

think

success.

New

sin¬

working earnestly
have

the

done

banks
out¬

adhering to the
Credit Restraint pro¬

Support defense production
making scarce materials and

wish

reiterate

that

this committee is either

Credit

Restraint

alternative for
a

Federal

Committee

Capital Issues Committee.
Mr. Charles E. Wilson, Defense

Chairman

Committee

ventory

follows: "I hope that you will im¬

has

borrowed

been

financed

Excess

money.

inven¬

tory

accumulation
has
already
contributed directly to the rise of
wholesale and retail prices

beyond

any

level justified by the supply

situation. It obviously has created
undue

competition in

scarce

ma¬

terials.
I

clearly under¬

stood that my serving on the Na¬
tional Committee does not

imply

tacit

you

flation

upon

our

industry

leaders

the

success

this

effort

(Vol¬

untary Credit Restraint Commit¬
tee), othewise it will be necessary
for

committee
to
consider
what additional steps may be re¬
I

sure, gentlemen, that this
statement requires no explanation,
it is direct and to the point.

policies

the

personally cannot

govern¬
see

how

successfully combat in¬
by
monetary
controls,

the

government

maintains

cept in

Reserve

statement

for

the

period ending April 11th shows a decline
in commercial loans of $31 million
plus
the

ing

were

preceding decline of $6 million, mak¬
a total of $37 million in loan reduc¬
.

agreement

roads should be built
cases

modified to extend

was

only to roads to be financed out
of bond issues.

self

the

found it¬

awkward

position

disapproving bond issues for

with

Highway

,_j

120

the

War

Industries

Board

and the Fuel Administration. The
Council
requested
states
and

municipalities not to construct
roads

without

gardless of the

its

approval,

source

any
re¬

were sup¬

ported by the action of the Capi¬
Issues
Comhiittee, the Fuel
Administration and other govern¬
tal

Enforcement of the above
as

Kidder

CONDITION

New

business

the

Superintendent

the

provisions of
of

New

Banks

Y.,

1951, pub¬

call

made

pursuant

Banking Law of

the

ASSETS

balances

banking
cluding
and

the

April 9,

with

York,

Cash,

York

accordance

with

other

institutions,
in¬
reserve
balances,

cash

items

process

collection

United

$1,128,338.46

States

Government

obligations,

direct

and

guaranteed

Obligations
political

States

and

subdivisions

Corporate

„,

420,838.30
50,249.84

stocks

60,000.00

Furniture and fixtures
Other assets

192,128.93

458,488.47

TOTAL ASSETS

$2,310,044.00

LIABILITIES

Demand

deposits

partnerships,
corporations
TOTAL

individ¬

uals,

and

„

$206,749.04

DEPOSITS-. $206,749.04
Other liabilities
TOTAL

LIABILITIES

1,049,273.39

including

(not

subordinated

obligations shown below)

CAPITAL

$1,256,022.4:

Capital t

ACCOUNTS

$500,000.00

—

Surplus fund

325,000.00

Undivided profits
TOTAL

229,021.57

CAPITAL

AC-

COUNTS

$1,054,021.57

TOTAL LIABILITIES AND
CAPITAL
ACCOUNTS—

tThis

institution's
stock

common

with

$2,310,044.00

capital
total

consists,

value

par

$500,000.00.
MEMORANDA

'of the funds.

Decisions of the Council

obtained

Broadway,
in

State

Council,

composed of representatives of the
Departments of Agriculture and

War,

(UMPANY
of

in-aid. This problem was met by
the establishment on June 8, 1918
U.

roads

obviously less important
roads were being constructed out
of taxes, and with Federal grants-

the

Chronicle)

COm'tmTIOXTRUST

while

Financial

F 1 a.—Schuyler

soon

ex¬

nomic necessity. At the
request of
the Secretary of Agriculture this
statement

South

the;.

of military or eco¬

Assets pledged or assigned to
secure
liabilities
and
for
other

Securities
are

after

shown

deduction

that

was

best

the

above

re¬

1,495.40

SKINNER,

Treasurer

institution, hereby certify
statement

true

the

knowledge and belief.

follows:

(1) The Investment Bankers
Association agreed that none of
its members would underwrite or
distribute any unapproved issues.

above
of

—

CHARLES

$100,738.14

serves

purposes

the above-named

ment agencies."

dealing with corporate issues

1 Federal

tions.

deep interest of the government in
the

endorsement of the infla¬

can

while

press

letter to the

quired in the private credit field."

would

Agriculture

The

the close of

Committee stated that the
Committee and the Department of

"The Committee

opinion, the only

REPORT

lished

Issues

that

Co., 208

It might help us to refer to the
Capital Issues Committee of 1918.
The legal jurisdiction of the
Capi¬

gram.

Mobilizer, stated in

tionary

address

fered

peak levels. An important part of
this
abnormal
increase
in
in¬

ment. I

♦An

policy

many inflationary influences
work., Inventories in the United
States, particularly in wholesale

appointed to which lenders
the

Voluntary Credit

are

submit

been

Bank

prominent members of the
various committees who have of¬

Voluntary

may

questions

Reserve

Restraint Committee being a
committee recognizes that

Committee is to channel available
credit

Federal

The

secure

frain from making loans for non¬

productive

Reynolds & Company; A. Phelan,
N. Y.

voluntary action by banks, insur¬
companies, investment
and other

Stewart, Chairman,
Kuhn
Loeb
&
Co.; T. Jerrold
Bryce, Clark Dodge & Co.; Clar¬
ence E.
Unterberg, ,C. E. Unterberg & Co.; Frank A. Willard,

the

that

assure you

the

Percy

V.-P.

ance

bankers

mittee:

Re¬

Voluntary' Credit

Committee

voluntary action. I

Com¬

Wag¬

Co., 506 Florida Avenue.

credit available.

successful, is Federal regulation,
or
a
Capital Issues Committee. I

purely

un¬

pany

Voluntary Credit Restraint

tion.

Chronicle)

affiliated with Francis

now

Burdett

corporate financing.
Combat inflation through produc¬

credited for this action.

The

duPont

for suburban improve¬
rule of thumb
applies

equally to municipal financing,

can

Financial

TAMPA,

The

With A. M. Kidder

building

that

(Special

political

does

way

With Francis I. duPont Co.

this

com¬

Limbert, V.-P., Blyth

the

groups in
the
problem

Salle Street.

municipal financing4 is fecog-

The

us.

opinion, that is the
wind is blowing.

other

where

called

■ -i
good job voluntarily
have a tough first
Capital Issues Com¬

that seri¬

and

Com¬

mate

responsibility. '

won't

mittee put over
In my

while loans for defense, iron,
steel,

hopes

National

Committee,

sail has been assigned

ner

you

(Special

the

assure

Committee

loans, commodity, meat
packers, etc., declined $45 million,

CHICAGO, 111.—Alfred

defense

Committee

Let

ex¬

things that
definitely should be discouraged.

non-

the

State sailing in troubled waters.
have
battened
down
some

nized. Scarce materials should not
be denied to productive areas

period

;of

r a

by unnecessary mu¬
or political use.
have a wonderful
Ship of

hatches,

seems-to

exces¬

augmented

construct

State

any

platform for the improvement of
roads in his state.
It

trickle; you might say
they have practically stopped.
same

e s

nicipal

connecting highway in areas
plants. The same rules
are
applicable
to
housing. - At
present, there is a state politician
campaigning for reelection on a

the

should be dependent on the
avail¬
ability of materials and credit for
defense purposes. A
scarcity of
defense
materials must
not
be

scarce

of defense

York, the commerical loans
larger banks have slowed

During

pro¬

weeks

municipal se¬
my-personal Opinion

highways to resort loca¬
tions, and construction, of this
type should be deferred in favor

member

Credit

speed

the

down to

Company,
E.
Henley,

why

inventory to production.
the

issuance

curities,

used

It is rather the channeling

The

favor of repair work on roads in
a
defense area. I see no reason

yardstick

For

nancing a bond issue for this pur¬
pose should be held in abeyance in

only meas¬
"failure of the

surface.

roads ' that

may

that

difficult than

suers.

you

Lee

laws—was sought to
prevent Un¬

com¬

of Virginia, Richmond, Vir¬ would not care to serve on such
ginia; E. A. Camp, Jr., V.-P. & a committee. We want to retain tal Issues Committee covered both
mittee, under the Chairmanship of Treas., Liberty National Life In¬ freedom of action for our indus¬ privately issued and publicly is¬
Co., Birmingham, Ala.; try. We do not wish to operate sued securities. Under the title
Federal Reserve Governor Oliver surance
S. Powell, consists of twelve men, W. W. Bodine, Chairman of the under the direction of a "tough "New Investment Issues—Special
four representing each of the fol¬ Board, Penn Mutual Life Insur¬ first mate." Some people believe Problems," we find:
lowing groups: Commercial Banks, ance Co., Phila., Pa.; William F. that the Voluntary Credit Re¬
"Roads
Insurance Companies, and Invest¬ Treiber,
Committee
V.-P., Federal Reserve straint
program
is
Bank of New York.
"The original draft of the first
doomed to failure due to the fact
ment
Bankers.
>
The
Investment
Eastern
Investment
Bankers are represented by Mr.
Banking that this program is based on policy statement of the Capital
Board

eral

ficials—public utility commis¬
sioners, bank commissioners, and
administrators of State
blue-sky
approved issues.

suburban community wishes to

the

con¬

ample

New

Insur¬

York;
Robert
President, Life Insurance

the

success

During

Chairman,

Life

member of the

secondary

sive

Lincoln-

Committee:

New

ap¬

able

less

reshuffling

Co., Boston, Mass.; Frederick
Ecker, Exec. V.-P. Metropol¬

itan

Credit

this

opinion,

reduction

gram.

ance

defense production.

empha¬
my per--

probably wondering how this

this is

aircraft, etc., increased $39
Connecticut
General
Co., Hartford, Conn.; million—net, $6 million decrease.1
The Voluntary Credit Restraint
Anthony,
President,

President,

making

been

quantities of
while at the

use

Voluntary

Wilde,

Voluntary

of available credit into
production
for defense. We
may witness
a

Company,

Insurance

have

this

not

ure

Arthur Phelan, V.-P. Federal Re¬
serve Bank of New
York.,

of the program is

purpose

Trust

should

Rochester, N. Y.; Horace K. Corbin,
President,
Fidelity
Union
Trust Company, Newark, N.
J.;

System, the Attorney General and
the

Vice-President,

We
vast

goods

concur

New York; David C. Barry,

Senior

following is

can
be made applicable to mu¬
nicipal financing. In my opinion,

per¬

Rochester

country. Pro¬

our

be of
short duration prior to the infla¬
tionary impact of defense orders.
I feel, and the committee
may not

tral Hanover Bank & Trust Com¬
pany,

(3) The public was urged not to
purchase any unapproved issues.
(4) The cooperation of State of¬

inflation*

remarkable

are

sonally feel that

Diefendorf, President,
respect to financing under this Marine Trust Company,
Buffalo,
section of the Act. A program for N. Y.;
George Champion, Senior
Voluntary Credit Restraint has Vice-President, The Chase Na¬
been developed by representatives tional Bank of the
City of N. Y.;
of financing institutions and has R. E.
McNeill, Jr., President, Cen¬
been approved by the appropriate
government officials as required

credit

If production is the
greatest
batant force against

untenable

the

reduction in loans. The elements
of deflation are present. I

Morgan

Smutny

Chairman of the Board, J. P.
& Co. Inc.; New York;

man,

au¬

straint Committee.

Restraint Com¬

starting our defense program.
production
has
caused
a
weakening of the price structure
presaging a short period of de¬
clining prices, which should cause

Voluntary Credit Restraint Com¬
mittee are George Whitney, Chair¬

Sys-

available

opinion

National

Thus

investment bank¬

and

and
other
exchanges,
agreed not to list any
unapproved
issues.

in my

say,

The New York Stock Ex¬

change,

future regarding

near

size that the

time

Francisco. Members of the Second
District Commercial
Banking

Federal

tem his

located in

ing houses have been organized,
one
each beipg located in New
York, Chicago, Dallas and San

the

President

delegated

one

municipalities. I wish
sonal

duction in my opinion is the most
virulent combative force against

re¬

been

have

due

productivity of

Restraint

ing Districts. Four geographical
regional committees for insurance

act.

subcommittees

themselves

position

each of the Federal Reserve Bank¬

the

objectives

find

organized to deal with commercial

programs
wh i ch will

that

Credit

program.- Twelve

reasonable

use

(2)

;

Municipalities are political en¬
(5) The Committee
believes, and I personally
attempted
in this belief, that inven¬ tities, hard to control with politi¬ to secure the cooperation of
gov¬
cal influences that
ernment
may deviate
tory loans are high, having been
agencies,; which- donus from
our
purpose and render trolled the
increased excessively due to fears„
allocation of resources
the
of scarcity.
Voluntary Credit Restraint —War Industries
Industry and individ¬
Board, etc.—-to
Committee program less effective.
uals having large
deny resources to recalcitrant is¬
commodity loans

banking problems,

ag reements

and

further

Voluntary

Committee

The

production for

;(1649)

concur

undesirable under the terms of

clearly drawn.

mittee

appropriateness of loans which are
not readily classified as desirable

authorized

the President of the United States
to encourage

the

evident that the National

Voluntary Credit

control program and role of investment
tion. Urges investment

duction

held in the

spond willingly and offer your
services quickly even though
you
do not approve of how
spme of the
sails are set.

Partner, Salomon Bros. & Hutzler
Members, New York Stock Exchange

are

opinion, that conversations will

asks you to

Senior

emphasis being
defense.

the

By RUDOLF SMUTNY*

lines

CHARLES

SKINNER

Correct—Attest:
OAKLEIGH L. THORNE

NORMAN
WM.

MacGAFFIN

WATSON

[Directors
,

■>»

The Commercial and Financial Chronicle.

(1650)

Cwmty Trust Company at Kittan-

writers
and has
already been
Uin&
u
•. f
placed. Directors of the bank r©-*
"Frank R. Denton, Vice-Chair- cently declared a dividend of 90
man of the Mellon National, said ;Cents per share for the six-months'
J. £. Roth, formerly President of period from April 1, 1951, to Sept.
The First Boston Corporation,
the Fourteenth Street Bank, w|ll 30, 1951, payable in two dividends
serve on the Advisory Committee
0f 45 cents, per share each, on 100, Broadway, New York City,
for the branch."
July 1 and Oct. 1, 1951, to share- announces the election of George

News About Banks
NEW BRANCHES

and

REVISED

First BosiuiEleets
Woods and

CONSOLIDATIONS

NEW OFFICERS, ETC.

Thursday, April 19, 1951

Bankers

CAPITALIZATIONS

holders of record

"(including hold-

Woods

Linstoy

Chairman

the

ers,of the new shares) as of the
close of business on. June 20 and
Sept, 20, 1951, respectively. The
urban National Bank of Silver
plans to increase the capital were
Spring, Md.f has served to increase,
noted in. our issue of March 8,
the capital of the bank from $700,page 1039. ,
000 to $800,000, effective April 5:
*

the
amount of $100,000 by the Sub¬
The

President of art, President of the New York
Bank and Trust Company, who is Chairman
Trust Company of New York, has of the campaign's City-Wide Cor¬
announced the promotion of the poration Division, "Realizing the
following at the Main Office of value of the Fund's aid to 423, vol¬
the bank: James F. O'Donnell, As¬ untary health, welfare, family, and
sistant
Vice-President
to
Vice- hospital agencies, ray section will
President and John J. Kubach, exert every effort to make the
Manager of the Foreign Depart¬ 1951 campaign for $9,000,000 out¬
ment to Vice-President in charge standingly successful," Mr. Cham¬
of that department. Other Main pion stated. He will also serve as
Office promotions announced are Chairman of the Banks and Fi¬
Henry E. Podsen, Assistant Caster nance Houses Group in the Section.
to Assistant, Vice-President; Ed¬ Frank A. Christensen,. President
ward D. Tisch, Assistant Cashier and director of the Continental
to Assistant Vice-President; Henry Insurance Co,, was named. Chair"
C. Weisbecker, Assistant Manager man of the Insurance and Real
E. Chester Gersten,

National

Public

The

has

been

ap¬

of the American Trust Company,
of

New

York/

which

economic

life.

Company is

has

with

identified

been

Mexican
Trust

American

continuation of the
.

York, which was

organized

by Mexican and New York bank¬
ers. Today, under the, direction of
Harvey L. Schwamm, President, it
intensifies its banking services to

;

. ;

Pan American Trust Company, of
New

of. Brooklyn, N. Y.» Charles D.
Behrens, President, announced pn
April 12. Mr. Weis, who joined
the bank in 1934, is a graduate of
the American Institute of Banking
and in the 1952 class of the Gradu¬
ate School of Banking.,
'

pointed Representative in Mexico

closely

Robert E. Weis has been uppointed Assistant Mortgage Officer
of the Kings County Savings Punk,

Grenas

Eduarda

...*,

'• * •

♦

tpe terms of

the

scrip certificates issued "by
Manufacturers Trust Company of
New York at the time of the pay¬

ment of the stock dividend in Oc¬
tober

last

announces

stock

year,

that

the
has

company
sold the

represented by the

rendered

scrip

unsur¬

certificates:

The

District National Bank

Trust

conrt

result of

of $150,000,

April 2, from $200,000 to
$250,0,00 as the result of the sale

its

capital

of March 21

Y.,

will

af
be

increased from $200,000, consisting
of 3,006 shares, par $66% each, to

$275,000 in shares of 5,500, par $50.
each.

■

'■ •-;

s|«

Kelley

ment
as

City, N. J., an¬
April 11 the appoint¬

of Jersey

nounced
of

Howard

Webster

Potts

Assistant Cashier of the hank.*

In his

Union Bank

rience
mer

as a page boy during sumvacations for Commerce Trust

to increase the capital stock from

$16,000,000 to

$18,000,000. and io
$16,500,-

increase the surplus,from

1950'

corporation.f

2.In •addition"tri- th'p;abow,namwi

Too 000

and

'^rovMelSfhe°'bank
laoiSl^«SpdSb^ahd

nnaurirjori

n-niHe

$36

.L.Ce

with

promotions and

Chairman of the. Board, and^Max- Wn_ and 1J. Parker Kuhn, ViQeSeli, Carlson, President.^^Charles Presidents.
...
!
Jj; Uremn^r was transferred to -^Mr. Woods started his career;in

Columbia Valley branch ill the investment field in the. old
?nc*.promoted to _As- Harris, Forbes & Co. organization
f^hf^shier First employed by m 1918. He jomed The First Bos.Sj ?na ?ani r?i?mier?e ^on Corporation in 1934.
'

?n 193T' "e later left the bank to
Mri Linsley started in business
ani
a;\ the^Citizmis with Harris, Forbes & Co. in 1922,
f e ^ok in Omak, Wash. He softer his graduation from Masia-

J^turnedto the National Bank of
Commerce in October of last year
where he was assigned to ^credit
administration at the Head Office;

linderwritint

chusetts Institute of Technology,
an(j

was

associated with the buy-

|ng an(j underwriting department
0£ the" business.

has

been

^avnJTS Arailtant
^easy» ^ssisiam

yic®"Pr-esldent alld director nf

e^ville branch,

investment bankers headWalker, Austin & Waggenef, First Southwest Companyt

group of

official' «K^;''toe'fcecutiYe" Ckteltiee''

transfers, at the National Bank of includes William H. Potter, jr.,
€Werce Of Seattle, Wash., have and Nevil Ford, Senior Vicebeen announced" by- Andrew Price, Presidents, and Francis A. Can-

since he joined that organization

The

First

Boston

Corporation

same position at the hi 1934. He is a governor of the
ScuirSi Investment Bankers Association,

^an f^

new

^afhc^

Mr. Linsley has served as

ber

a mem-

the Corporation of Massa-

chusetts

Institute

Technology

and is Presently Vice-Chairman of
the MIT Development Program.

e. p

n r g am?

Walter G, Bernthal With

Filor, Bullard & Smyth

Filor, Bullard & Smyth, 39
Broadway, New York City, merabers of the New York Stock Exchange, announce, that Walter G.
...

•

Three Added to Staff

Sentof vIp '

with the

■

n„noo«

formeriv

institutions. Later he engaged in May 1,1951. Mr. Woods, formerly
tionai Bank of Dallas, Texas, were bank svstem work for Burrouehs Chairman of the Executive Cornon April 10 by Fred
F: Adding Machine Co. until 1942,
succeeds Harry M. Addin'Florence, President. At the regu-: 'VyLori hg resumed'his trust career snHr.who will .retire^^ as-Chairman
lar monthly meeting of the direct- «
^ith First National Trust and Sav-' ^
board on May 1, 1931, in
tors held that day, a resolution
jpgs Rank 0f Santa Barbara as accordance with ^ the company's
was unanimously adopted,
cullingj.{rust ' officer, subsequently being retirement plan, but will continue
for a special meeting of the share-;: Earned
Vice-President and Trust with the corporation as a director
holders on April 23 for the puivi
Officer T
——> pose of voting upon the proposal
partmen

■

Hirpr+nr*

announced

Mr. " Potts

■

1940 he was associated with t
i°rmerly Senior ViceSecurity-First National Bank of President^ as Chairman of the
T,bs Aneeles and its nredecessor Executive
Committee, effective

hr^mh

City of Wood River, Illinois

Duncan r. Unsiey

capacity as an officer, and Dallas Rupe & Son, to under-.
will
supervise
the write the proposed issue .of new
operations of the Bergen. Square shares. Three months ago the cap-;
i"mo rlf
U S
pired on April 1 and holders of
office
of
the
the armed forces, returned to
bank, succeeding ital account of the bank increased.
outstanding scrip certificates are
C. Newell Hogah, who has re¬ $5,000,000, at which time the capinow entitled to receive $4.43 for
in
anS
signed
because
of
ill
health. tal was raised from $13,500,000 trf the Waterville branch m l948, and
each twelfth, which includes the
Prior to joining the First National $16,000,000 and the surplus from }^af ?)ected*^ Assistant Cashien
pro rata portion of the dividends
organization in 1929, Mr. Potts was $14,000,000 to $16,500,000. Ttems Jftjear, Myron J. Ellingson of
paid in January, and April on the
associated
with
the
Alexander bearing on the increasb in capital the Kennewick branch was elected
shares sold.
The stock dividend
Hamilton Institute in'New York. * at that time appeared in our issues to Assistant Cashier, he was first
was paid to those who were stock¬
#
*
*
of Jan. 11, page 176, and Feb. 8; employed as Assistant Auditor by
holders of Manufacturers Trust
the bank in 1948. He joined the
The
First
National
Bank
of page 647.
Company on Sept. 18, last, before
%
«
«
Kennewick branch in 1949. Stan¬
the merger with Brooklyn Trust Belleville, N, J., was placed in
The Anglo California National ley P. Wagner of the Goldendale
Company became effective. De¬ voluntary liquidation on March 30,
branch .was elected to Assistant
tails of the merger plans appeared, following the taking over of its Bank of San Francisco has con¬
Cashier.„ ;
business by- the Fidelity Union cluded its financing of $7,500,000
in these columns Sept. 7, page 907^
*
#
Trust Company of Newark, N. J.- in additional capital funds, it, was
and Oct". 19, page 1506.
The Bank of Montreal- (head
«WunC«The proposed absorption of the announced on April II by Allard
*
*
*
bank by the trust company was A- Calkins, .President The. addi- office Montreal) announces that
Gebrge Champion, Senior Vice- referred to in our March 1
issue, tional capital funds have been Charles E. Thessereault, Manager
President of the Chase National
derived from the sale of 250,000 of its Longueuil branch since 1943,
page 923. The bank, which is now,
Bank of the City of New York,
operated as a-branch of the Fidel¬ additional shares of common stock has been appointed to succeed
has accepted the Chairmanship of
at $30
per share. Shareholders of Gilbert A. Rheaume as an Assistity Union, had a Capital of $264,-""
the Finance and Insurance Section
500, of which $189,500 was cam-,, record', at the. close pf business "on ant Manager of its main branch in
for The Greater New York Fund's
March 9, received rights.to pur- Montreal, according to the Monmon stock and $75,000 preferred.
1951 Campaign, according to an
chase one-third of. a share of the treal "Gazette" of April 5.
Mr."
.,}
announcement by Charles J. Stewadditional stock for each share of Rheaume, it is added, is taking
The acquisition of the Four-,
the bank's stock held on that date: over
the, bank's Sherbrooke main
teepth Street Bank of Pittsburgh From the
proceeds, $5,000,000 will office.
••'*; ...
by the Mellon National Bank and be
added to capital stock, increas:
Trust Company of Pittsburgh was
$132,000
ing it from $15,000,000 to $20,000,approved on April 6 by the stock-*
000, and the remaining $2,500,000.
holders of the Fourteenth Street
will be added * to surplus/ raising
Bank, and on April 9 the latter it
from $12,000,000 to $14,500,000;
became the Fourteenth Street Of-*
These, together With the bank's
Sewerage Bevenue Bonds
fiee of the Mellon Rational Bank undivided
profits and unallocated
Robert D. Gibson, George
3%/..
& Trust. The Pittsburgh "Post Ga¬
reserves, estimated at more than Henry- and Mathew Strauss have
zette" of April 9 reporting. this
1970-197$ Yield 2.50-2.70%
$6,000,000, will bring Anglo's total become associated with Hirsch &
said:
capital funds to more than $40,-* Co.; 25 Broad Street, New York
Municipal Department
"K J. Benz, formerly Cashier; 500,000. The new stock issue"
was City, members of the New York
of the Fourteenth
Street Bank, underwritten by a grQup of in- Stock
Mr. Gibson
Allen & Company has been appointed, Manager of vestment houses headed by Biyth be in Exchange, Department; will
the Bond
Mr;
the Office. William N. Foulis,
Established 1922
& Co., Inc. All but 4,114 shares Henry will join the Foreign DeJr.,
is Assistant Manager. Mr, Foulis were subscribed to
30 Broad Street, New York 4
by the exer- partment and Mr. Strauss, will be
was
formerly
Secretary
and cise of rights. The unsubscribed located at the firm's 57th Street
Tel. — HAnover 2-2600
Treasurer of the Armstrong stock was taken up
by the. under- office.
announcement states that the right
to exchange the scrip for stock ex¬

„

George d. Woods

Trust Co., New York City, before
going to Los Angeles. From 1927

from

concluded

the Temple. Natipnal Co,, Kansas City. He subsequently
increased. spent two years with Bankers

Bank

Park,

Officer

elected

Bank of Temple, Texas,

Graham, Chairman of
the Board of the First National

of the Bank of New Hyde Park

Hyde

Herman F,. Hahn, President. Mr.
Burnham began his banking expe-

stock dividend

$40,000,000. The Nuance oi 100,-;
000 shares of additional stock, is^^
contemplated^ increasing the n'umbcr of
outstanding shares from
800,000 to 900,000, with a par value
of $20 each. The additional stock;
will be issued ratably to stockholders at $40 per share, thereby
providing $4,000,000,
of
which.
$2,000,000 will be allocated td
capital and $2,000,000 to surplUsT
Subject to tbe approval by the
stockholders of the
capital" in-,
crease, arrangements have beeri

Nevv

board of. directors, according to

capital, as of April H, from $200,000 to $300,000.

B. Burnhairi was

Trust Co. of Les Angeles, Cal., at
tne April, meeting of tne
bank's

sale, of new stock, increasing the

The First National Bank of In-

❖

The

Chicago, 111., has enlarged its capi¬
tal to the extent of $100,000 by the

wood, N. Y., increased its capital, 'with canital ami surolus

In accordance with

Samuei

of $50,000 new stock.
the Latin American countries. Mr*
\
"
*.#
*
*'
■■ £
Grenas, for several years Ex^eu*
The New York" State Banking
live Secretary of the Pan Artierican Trhde Committee, has repre¬ Department approved on April 6
sented the Banco de Fomento de la a certificate whereby the capital

Habitacion and lately the Banco
Hipotecario Fiduciario y de Ahorros, S. A., in the United States.

stock

new

ant Cashier at the Delancey Street
J'.:-.

Estate Group.
Charles L. Morse; $150,000 to $300,000.
•
#
*
*
Jr., of Hemphill, Noyes, Graham;
Parsons & Co. will serve as Chair¬
Plans for a $40,000,000 capital
man of the Exchanges Group in
structure, for the Republic Na-,.*.
the Section.
/

of Foreign Depart¬
Joseph H. Coyne, Chief
to Assistant Manager of
Foreign Department. Edward I*
Davidson was advanced to Assist¬
Manager

ment;
Clerk

Office.

sale

Of Hirseh & Ce.

bas become associated
Mr
Rprl

Pfs| ^as
i^l i A

adTJ0^ J:

& Co., and prior thereto
^ s a ^cmber of_ the. Investment
Committees Of National Securi-

Jiea &

^ear,cb ^°*

Manp-

lacturers Trust, Co.
"

...

Conn.tov.Etatikef$
Elect New Officers
Annuai Meeting of the
Connecticut Investment Bank61^
Association, the following officers
At the

■

were elected for-the coming ye§r:
President/ Howard J. Bruemmer, Brainard-Judd. & Co., Hartford, Connecticut; Vice-President,
Earnest T. Andrews, Jr., E. -T.
Andrews & Co., Hartford, Cohnecticut; Secretary-Treasurer,
William J. Falsey, Chas. W. Scranton & Co., New Haven, Connecticut.

Volume

173

Number 5004

The Commercial and Financial Chronicle

(1651)

NY Exchange Honors
Schram at Dinner
Emil

ident

Schram,
of

the

Exchange,

New

dinner

given April 12

"the

change.

The
was

held

the

y 1 a n ,
Chairman;

Schram
behalf

the ;

The

board.

dinner

was"

attended

the

full

board.

Emil

Schram

membership

the

"Emil

Schram

contributed

has

strictly and fairly,
the

high level of

principles

Exchange.

sized

the

value, to

of America's
enterprises.

empha¬
industry

nation, of public

ership

"Most

trade

has

real

and to the

own¬

productive

important, Emil Schram

has

symbolized the integrity and
sense
of public responsibility of
the

Exchange

"BE

the nation's

ket place.

mar¬

;

THEREFORE

RE¬

SOLVED, that the Board of Gov-.'
the

ernors

York

New

Stock

Exchange register

their high es¬
teem and great affection for Emil

Schram,

guided

the

destinies of the Exchange so

has

suc¬

who

cessfully

over

the past decade."

size

tne

Leonard P. Brauman
Brauman,

of the Research

become

his &

Manager

Department, will

partner in Kalb, Voor¬

Co., 25 Broad Street, New

York. City, members of
York Stock Exchange,
On April 30,

scale

great deal of that

taps

have

Babson ascribes trend to
ground

the New

May 1.

Caroline C. Towner

will .withdraw from limited part¬

breach

the

and

market.
are

orders.

This

been

can

hit

issues

as pure

assumed

least,

buyers, and it would

though there

governments, especially
cure-all

trend,

for

not

those that looked

inflationary

amazement

but

own

any

concern

MUNICIPAL

of those that

were

the

been

staunchest

bit

flying,

are

wise

them.
Likewise,
when old-time financial warnings

ram

appear, wise investors will diver-

rest

sify their funds carefully among
sound, well - selected common

the

flock,

does

the

bond

point

stocks, and hold

shift in the trend.
Advice

About

month ago it

bond

"reached

had

ended.

been

the long disagree-

Now, the thing
had

had

accord."

full

which they

upon

agreed was that a new issue

long-term government bonds
should bear 23/4% interest instead
of the 2lk%

years

advice

buyer.

all

boy

This

Bonds

told

send

don't build

Reserve

Both parties to
ment

"Never
errand!"

Treasury and the

tween the U. S.
Federal

My father

that the feud be¬

announced

was

reserve

highgrade short-term
against an "unexpected"

bonds

bond

sizable

in cash and

for

way

prices.

Roger W. Babson

Whatever

today's

long-maturity

do,

you

investment

.ago,

man's

fits

reserve

bonds,
quality.

matter how high the

A
one-per-cent rise in interest rates

can wipe out a number
of years'
income in the shape of a price fall
in your long-term bonds. That is

risk

should

you

costs.

avoid

all

bond

figure that had been
the going rate for similar issues.
Immediately
a' tremor
ran

buying, stick to
governments,
good
convertible corporation bonds, and
tax exempts that
you can hold to

became clear that the Federal Re¬

maturity.

had

serve

ment"

short-term

really "won the argu¬

raising interest rates,

over

government bond prices softened.
At

the

bonds

began

still

bankers

have

Treasury deficits which will have to be faced, before most oper¬
ators in the money markets are
very much older. This, it seems,
does not

that the government

mean

to get very

much lower before

market

going to continue

bottom is made.

The easy

avail¬

ability

or the easy access to reserve credit has been retarded, to
the least, but there are always a few stragglers that have to
be convinced the hard way, and this is what is
going on in the
government market now. If this method does not work, and it

say

is believed it will work

Commercial
frightened and
been casting an in¬

progress.

since

wary

many

at the

adjustment in the government market has been substan¬
losses are now staring owners of most
Treasury obliga¬
There are not too many buyers in the
market,
few scale purchasers, and they are not too sure of
because even recent purchases are now in the red.

order to

keep the market "orderly."

None¬

past, but pension funds should be
desirable holders of longer Treasury obligations.
recent
some

decline

increase

in
in

prices

volume,

governments

has

among

stock

Even the

A glance
of the popular stock

course

been

but the amount of securities

considerable

concern

whether

the

non-banking institutions with surplus funds.
The 2y4s of
1959/62, while under pressure along with the other restricted,
are
being boiight on a scale by institutions that liked them at
higher levels. This is now being termed "protective averaging."

partially-exempts

still able to find homes, in spite of the
trend of the Treasury market and the municipal market. Accord¬
ing to reports, not too many of the longer tax-protected obliga¬
tions

have

come

are

for

sale.

These

their best market among the larger

bonds

seems

now,

out-of-town banks.

have

sale

issue

new

$35,000,009

101.93%

yield

maturity.

bond market in

Possible
~

•

you

particular.

Effects

?i?e* *i!UI?P m f
that

bond

P^ces

Si studies

the time lag between

the fall

bonds and the later descent in

stock prices varies

times

f-1!!

widely. So

^own

years

have

k°nc*s

stocks

times,

two

passed before stocks have taken a
tumble. The reasons for this are
not

hard

find. As

bond

prices

fall, the yield therefrom rises and
narrows

the gap between the re¬
bonds

turn

from

stocks.

the

and

the

old

income

relation¬

ship between the two is to be re¬
cline.

Only

feverish

periods of
activity are

during

speculative

willing to overlook the
need for getting a considerably
bigger income from stocks, as
compared to bonds, to "pay them
back" for the greater risk that

buyers

stocks carry.'

•

However,
me

some

that

"different

this

out that the
and

bonds

plus accrued

of
is

bond

friends

going

time"!

They point

spread between stock

yields,

recent rise in the

The issue

•

the

say,

could rise quite a bit

bonds

higher with-

out greatly disturbing stock

sale

together

the company's

offering to stockhoidwill

construction

be applied

program

which

$83,200,000 for the electric system
and $2,000,000 for the transporta-

tion

and water

systems. During
1940.1950 the corn-

years

spent

pany

approximately

$115,-

260,000 for construction.
The new bonds are subject to
redemption at 104.93% during the
year ended March 31, 1952
and

thereafter at

prices decreasing to
principal amount in the last
year.
They are also redeemable

the

V"d?r at
fund
ended

101.93%

during the

year

March

after

31, 1952 and there¬
prices decreasing to the

principal amount.
Duke

Power

Co.

supplies elec-

trie service in the Piedmont sections of North and South Carolina.

Charlotte, Winston-Salem, Greensboro

and

Durham

(N.

C.)

and

Greenville, Spartanburg and Anderson

000.

Tues-

for the yearg 1951 and 1953 jg eg_
timated
to
cost
approximately

latter, is much

the return

awarded

was

bidding

stock

common

has

after

greater than usually exists. There-

fore, they

interest

126,255 shares of additional

erg

the

even

series

priced

are

approximately 3.15%

competitive

its

3%%

The principal communities receiving retail electric service include

"Diffcrent This Time"

tell

The

concurrent

frequently followed by a good-

1981.

bonds

+r0Upersistent and with Prot-eeds from
fnri
a

will find that

drawn-out decline
is

due

4.U

ing mortgage

^a^'
Proceeds

Stocks

The

Morgan Stanley & Co. and 22
investment banking firms yester¬
offered for public

day (April 18)

due

theless quite a bit of out-of-town bank buying in this obligation.
The iy4s of July, 1951, are also being well taken by banks as well

Bds.

premium eligibles have gone into the shortest maturities.
there

Duke Pwr.

prices; they are the bellwether for
finance in general and
for the

established, stock prices must de-

not

Offers $35,000,000 of

Duke Power Co. first and refund¬

selected issues in

loans.

Morgan Stanley Group

"averages" will show you that,
since
early March, stocks have
been reactionary. That is why I
say:
Watch
government
bond

of the shrewdest followers of the

markets, there will be more undesirable ones forthcoming
form of involuntary controls.
This would not be at the
expense of lower prices.
the

at all appli¬

eye

market has lost its pep.

money
in

corporation

price decline that

became

creasingly

time,

same

cations for

9/15/51-53 will be called (the deadline is May 15), there is none¬

signals
skippers
heed

the

ate

■

i Nevertheless, it is a well-known fact that there are refundings that must be taken care of in the near future and there are
^

While

HAncock 6-6463

right. But, I should like to
leave this thought with you: When

corpor¬

too

of the

WHitehaU 3-1200

any

selling on that score.
These objectors may, of
course,

market

supporters

though some holders want to sell them while they are above the
par level.
A good part of the bank funds realized from the sale

cause

amount of

storm

and

wages

the

and

coming into the market has not been large when compared with
what has gone on in the not distant past. Most of the securities
showing up are the tap bonds, although there have been a few
more
of the longer bank issues appearing because it seems as

BOSTON

money and that higher

govern¬

(as in the past when prices were steady
to better) when the list
continuously registers declines, especially
when long governments are off more than xk of a
point in a single

The

45 Milk Street

very

being carried

are

jnteres{. rates will not

ment

does not rest as well

one

without

INCORPORATED

headlines.

an
"orderly" or "flexible" fashion. Nonetheless, this "flexible
protection" is not to the liking of those that have sizable positions
in Treasuries, and this goes for
nearly all of the banks, insurance
companies and other financial institutions. It should be realized

SECURITIES

& Co.

have_ just borrowed

financial

below-par idea.

market in volume in the

Aubrey G. Lanston

stocks

leads

There has not* been and most likely will not be
any really
unusual development in the market because it will be
protected in

the

Street

the

They also cite the fact that
few

through the financial world. As it

though the house-cleaning has

many

reserve

old belled

the

theless, there is the belief that the market as a whole has gone
through or is about through its worst stages. It seems as though
there, are not a few yield buyers that are
very much interested
in governments, but they too are
trying to pick a bottom before
making important commitments. Present prices, it is believed,
will bring in a different type of Duyer Jhan has been in the

STATE

NEW YORK 5

1930's

Just

the powers that • be are
letting prices find
The market is being cleaned
up beyond a doubt,

bond

drawn-oat

15 Broad

late

its

because

levels.

thorough for
of the

below

and

investment

for its money,
as well as for

broad smiles

well

bonds

paying

principal supporter of the market, the Central Banks, have
gone to the sidelines except in those few instances when they take

U. S. TREASURY

;

corporate

Business is

particularly the loan
not wringing their hands,

seems

The

and

materials.

The

the

made

and

pressure

glee, because the most distant Treasuries are
formerly sacred levels of 100. Theirs is a look
their

issues, Mr.

government

frequently followed by good-sized

Cautions against

the

this action

upon

themselves

-F

since

psychologically
far as prices of long
lower prices for long

bond

new

persistent

proves

hignest interest rates

tne

seem,

happy now. They are
joy of a "Simon Legree," nor are there

are

with the

the

bottom

The advocates

was

concerned.

are

except for

"■

issues

luck.

tions in the face.

•

New

be^rxng

position of importance in the government
occasion, not to mention others, where there

one

long-maturity bonds.

sellers than

Treasuries

tial and

experience

slump in stocks.

rates

developments in

decline in bond prices is

charged up

hardest

the

Says

restricted

This is

nership in the firm.

;

market.

It is not, however, the amount

bonds.
The short-term
issues, which
attracting buyers, have been on. the firm side.
The financial
community, that is, the money market segment,
is in just about as low
spirits and as confused as it has ever been
particularly since the monetary authorities stepped into the

trading session.

Kalb, Voorhis Admit
Leonard P.

give

have been

better relations
between the Exchange and Gov¬
ernment.
He has interpreted the
importance o'f the Exchange to
the American people with force¬
ful -clarity.
He
has
upheld,
equitable

Noting recent higher yield
to

decline,
with the Vies, the Junes and the
near-eligible~1959/62s leading tne
parade on the ciown side. Volume has not been the
ruling force
but the lack of buyers.
The bank-eligible 1967/72s, the longer
partially exempts, the .'56/58s and the '56/59s have followed the
pattern

The Resolution said in part:

significantly

prices and

The

enlarged volume.

continues

encouraging, but
limited scale purchases will not turn the tide.
Likewise, there
is not much likelihood of this
procedure/being changed immedi¬
ately because the general feeling seems to. be that quotations will
work slightly lower before a
bottoming out takes place. It is
being remembered, however, that very few buyers get the bottom

presented
an
illuminated

market

Some have already given
this opinion because there has been a stepping
up in some

instances

Mr.;

government

government issues harder to resist.

way to

Resolution

defensive

under somewhat

Links Club.

/.Robert

offerings that is causing the price de-clines, but the absence of buyers. Pear that quotations of Treasury
obligations will continue to recede is keeping many prospective
buyers of these securities on the sidelines.
Nonetheless, there
is a growing realization that the level
of prices is making yields

Ex¬

dinner

By ROGER W. BABSON

of pressure in the form of

Governors

The Bond Mailcet

Governments

By JOHN T. CHIPPENDALE, JR.

Stock

York

the Board

Reporter

Pres¬

guest of honor at

was

farewell

retiring

Our

(S. C.)

The service

area

population of around 3,000,-

The

company

1950 total operating

reported
revenues

for
of

$82,761,564 and gross income be-

fore

income

prices. 421,516.

deductions

$12,-

W#W

J-4.

"'U»,,lfc, dtoh*1

The Commercial and Financial Chronicle

(1652)

The Life Insurance
Dollar and Inflation
By CLAUDE L. BENNER*

President, Continental American Life Insurance
Wilmington, Del.

ownership before you have completed your payments? The answer obviously is, you cannot. But
we all know it happens every day
in life insurance. Most policies are
settled long before they become
fully paid up.
Looking at

Company,

Insurance executive,

dollar

this

life insurance
point of view,

Thursday, April 19, 1951

plant capacity was used in the
production of such goods. Is it not
obvious, therefore, that unless we

large to date to be primarily
responsible for this price increase,
The actual orders have been slow
in being placed and it probably

can increase our total production
by the same amount that we increase our armament production

will be mid-summer before actual

that there

must be fewer peace-

work on war orders will be in time goods produced? The "$64
large volume, and some time in Question" is, "Can we increase our
before

1952

the

level will

total output of goods by the same

be reached,
An old-fashioned speculative
have taken during the recent past, inventory boom, made possible by
the life insurance dollar, when a huge expansion of credit of all
compared
to
all
others,
has kinds, particularly bank credit,
nothing of which to be ashamed, has been taking place since last
It still remains, in a very real July. A tremendous increase in
sense, the most needed, the most the demand for all kinds of goods

amount that we increase our out-

able?

after defending life insurance in an infla¬

there

another

valu¬

peak

spite of the beating in
purchasing power that all dollars

blames "easy credit" policy of government for
Says basic problem in
fighting inflation is to effect a reduced demand for peacetime
goods. Lists as ways this can be done: (1) let prices go up;
(2) rationing; (3) increased taxes; and (4) increase in con¬
sumers' saving. Concludes, if consumer buying can be curbed,
tionary

from

where

the

ary. Neither has spending for the
defense program been sufficiently

era,

much of current inflationary pressure.

put of

goods?" If

war

cannot,

and I do not know any responsible
economist who, thinks we can, the
demand for peacetime goods will
have to be reduced.

Reducing Demand fur Consumer

has come into the market, as witGoods
any person ever ness the increase in retail sales,
There are four ways that this
receives. This is true now and will the build-up of inventories and can be done. (1) Let prices go up.
Today one hears a good deal of necessities of life when prices are continue
to
be
in
the
future the growth of installment credit This will cut down demand. This
loose talk based upon specious high as they do when they are whether we have more inflation end commercial loans.
is the road of inflation. (2) Goods
This buying boom was set off can be rationed so that irrespecreasoning that it is foolish to buy low?
or
less. Never let your prospect
life insurance. Prices, it is said,
Because the basic purpose of life forget it.
by the Korean war. Most of us tive of how much money an inare
contributed something to it. I am dividual has, he can only purinsurance is to guarantee the con¬
likely
inflation

can

valuable and the most welcome of

be halted.

all

that

dollars

Tax Free Insurance Payments
afraid that all classes of indiof
The life insurance dollar also viduals, from the housewife up to
demise,
value of the
has a tax angle, the value of which the purchasing agents of our large
an increase in his earning power
insurance
calls for more insurance, not less. cannot be overlooked.
We all corporations, thought that prices
dollar when it
This is particularly true if the in¬ know that a dollar before taxes would go up and, to put the matis paid to the
crease \has been due to a general
and a dollar after taxes are two ter in a nutshell, they all tried to
b eneficiary
rise in the price level. In this different things. Not enough em- buy ahead of the expected price
will not com¬
case, the situation is exactly the phasis is placed upon the'fact that rise. Certainly all of you in your
same with life insurance as it is
dollars paid to beneficiaries from own experience have seen evipensate
for
with
fire
insurance.
Everyone the proceeds of life insurance are dence of this both in the retail,
the sacrifices
which the in¬
readily admits that additional fire tax-free to the beneficiary, even wholesale as well as manufacturinsurance must be placed on a when they are taken in monthly ing fields. To make matters worse,
sured and his
house when its cost of reproduc¬ payments
under regular settle- governments themselves began to
family must
tion
make to carry
increases, otherwise there ment options. No doubt the pur- stock-pile goods, each nation bidwill not be sufficient money to chasing power of any dollar is ding somewhat against the other
the insurance.
rebuild the house should it be less than it was some years ago, for the world's limited supply of
Fortunate, in¬
Claude L. Benner
burned.
Likewise, if an
indi¬ but I think you will have no dif- wool, rubber, tin and the other
deed, is it that
vidual's
income
has
been
in¬ ficulty in getting every prospect commodities needed in war. Prothe large vol¬
ume of insurance currently being
creased, how can its continuance to agree to this—that our dollar duction could not be increased
sold proves that not too many are be guaranteed except by purchas¬ is still the best monetary unit in sufficiently to meet this enlarged
the world and the most likely to demand and a rapid price increase
paying serious attention to this ing more insurance?
fallacious reasoning. But inasmuch
The
carrying
of
a
proper retain its purchasing power in the followed.
as all of you in your day to day
amount of insurance
and other future, and that when he comes
work frequently hear this excuse- investments are never competi¬ to set aside .some of his current in¬
Federal "Synthetic" Inflation
given, and as you are altogether tive. In the priority of their im¬ come to buy future dollars, either
Our Federal Government itself
likely to hear it even more fre¬ portance, they are entirely on dif¬ for himself or his loved ones, must share a grave responsibility

to increase so

tinuance of the earning power

chase

much that the

the insured in case of his

method is hard and cumbersome
to administer. It calls for price
controls, another OPA and will
be accompanied by the inevitable
black markets. (3) Increase taxes
so
that people will not have
enough left out of their incomes
to buy more peacetime goods than
are available. This is the pay-

quently in the days ahead, I pro¬

ferent levels and in different cate¬

pose to examine this insurance,
dollar to see how it compares with

gories^ It is

that may be pur¬
saved. In doing this, I

dollars

other

chased

to look at it from two
points of view—-first through the
eyes of the insured who pays the
premiums, and second, from the
point of view of the beneficiary
who receives the proceeds.
propose

has
goodly volume of life
insurance and who has not been
able to pay the premiums without
some sacrifice, my own reactions,
I think, may be taken as typical
of those of the average insured. As
I proceed, please check them with
you own experience to see if they
•

one

carried

who for many years

do not agree with yours.

dividual

only after the in^

has

completed

in¬

his

program that he has a
right to consider other forms of
surance

investments.

do not

to
few

propose

discuss what those fortunate

there is
to

better kind of dollar

purchase

than

the

insurance

dollar which frequently is

far

price rise. At
should

bought somewhat

for less than 100 cents on the dollar and which is almost always,
the beneficiary is concerned, tax-free.
so

for this
credit

should do with their money who

have

given

as-you-go

amount.

plan, and I

This

in favor

of it to "the fullest extent possible,
It calls, however, for a broad tax
base that will reach down to take

in practically everybody with an
income above the very minimum
to

necessary

decent

living

and

would entail real sacrifices which
will be difficult to get the people

to accept. (4) Demand can be cut
down through increased savings,
All forms
of savings must be
encouraged to the fullest extent possible.
Campaigns should

be put on to teach people that
it is patriotic to save and

time when

not to spend. The Federal Gov-

made

ernment should take the lead and
set a good example in this respect,

been

difficult and

ex-

pensive to get, such governmental AH peacetime expenditures not
agencies *as the Federal Housing absolutely
essential should be
Administration, the Veterans' Ad- avoided. Every governmental unit
ministration, the Board of Gov- should follow the same example
ernors
of
the
Federal
Reserve —states, cities, counties, down to

Nothing that I have said thus
lucky enough to haye some far in defense of the insurance System and the United States the smallest unit. This is no time
after paying their taxes, dollar must be
interpreted as con- Treasury all worked to make to make expenditures for imliving
expenses
and
insurance doning inflation. All kinds of dol- credit cheaper and more abundant, provements that are not vitally
premiums. It is my belief that lars have recently been losing Bank loans increased by nearly necessary. The ultimate purpose
everyone should have a right to their purchasing. power far
too $10 billion in. six months, and un-. to be kept in mind is always to
lose it in his own way and in a
fast. And, as it is important hot til recently no really effective reduce consumption so that scarce
manner which will give him the
only to the institution; of life in- steps were taken to restrict this materials and labor will be availmost enjoyment, even including
surance but to the welfare of the
expansion.
able for the production of war
taking a few chances on numbers whole country that inflation be
in no nlace are the evils of too
&oods and so that total demand
or betting on the horses. If your
stopped, I now want to discuss much and too cheap credit better for peacetime goods will be reconscience
doesn't
permit that, some of its causes and what can
illustrated than in residential con- stncted to the smaller amount of
there is always the stock market.
be done to bring it to a halt.
struction. Mortgage money during sucb goods that will be available
the last few years was made so when the defense effort is once
The Dollar and the Insurance
Progress of Inflation
cheap and offered on such easy Ut its peak.
Beneficiary
Before setting forth some of the terms that
almost anyorfe who
If savings can be encouraged
Now, for a moment, let us look principal causes for the rapid could sign his name could buy a sufficiently and if the tax base is
at the life insurance dollar from price rise since mid-summer of house. When there were hot pri- broadened widely enough, we can
the point of view of the benefi¬ last year and the steps that must vate funds available to purchase finish our defense program ydth
ciary. We hear a good deal of talk be taken to bring this increase the mortgages thus created, the very
little increase ■. in prices,
today about the 60-cent dollar— under control, let me give you Government itself, through thev There is grave danger that this
that it takes over $3 today to buy some
figures to show the extent of Reconstruction Finance Corpora- will not be done and that the pubwhat $2 would a few years ago. the rise in
prices since the- start tion furnished the money, The re- lie may be misled into believing
This is true and I am not one to of
the
Korean
war.
Wholesale suit was to create a demand for that inflation can be prevented
are

left

over
,

First, I have never been able to
any conflict between any sav¬
ings program which I tried to set
up and the insurance which I was
buying. It has always seemed
crystal clear to me that I had no
moral right to begin any savings
program until I had first pur¬
chased enough insurance to take
care
of the obligations which I
had assumed and created by get¬
ting married. Certainly no hus¬
see

band

and father who

thing for his wife

any¬

children

and

feel otherwise. It must

can

cares

never

forgotten, therefore, that

dollar for the purchase

the
of insur¬

minimize
recent

the

rise

seriousness
in

the

prices and the
doing
everything

necessity for
possible to stop it. But when you
come

to look at the heart of the

insurance

dollar

from

the

view¬

point of the beneficiary, ydu get

rightly comes first, imme¬ a different slant on its value. Here
diately after the purchase of the, you frequently find that the life
life, certainly before insurance dollar, instead of being
the luxuries, and obviously ahead a 60-cent
dollar, is the only 100of any possible other- savings and cents dollar that I know of that

ance

necessities of

investment program.

has been

This reasoning is just as valid
whether prices go up or go down.
As a matter of fact, the rise in

frequently purchased for

less than 50 cents.

This
think

becomes
of

the

clear

number

when
of

you

policies

prices such as has taken place that you have settled where the
during the last few years makes the beneficiaries received twice
the purchase of insurance all the as many dollars from the proceeds
more imperative. Likewise,
any of the policy as the total amount
price rise that we are likely to get of premiums which the insured
In the immediate future, war or paid throughout his life. Is not
that purchasing 100-cent dollars
no war, will not call for any other
action.

not

women

and

chil¬

dren need money just
even

more,

as much,
in order to buy the

! *A« address by Mr. Benner delivered
before the Philadelphia Association of

L^e Underwriters, Philadelphia,

Pa., April

10, 1*51.

for 50 cents? Where else

done?

can

this

Can

you
take more
money out of a bank that you de¬
posit in it without going in debt?

Can you buy a bond, building and
shares or a home, on the

loan

installment plan and get complete

cost
of living during
this
period of time has increased over
10%, 3% of which was in the

houses in excess of what it was
possible to build on account of
insufficient building materials and
a scarcity of labor. In a situation
like this, the price of houses last
year reached an all-time high,
until today the home-buyer gets
less house for his money than

first

ever

commodity prices have risen

over

20%. Twenty-eight of these basic

commodities, such as rubber, tin,
non-ferrous materials, wool and
cotton, have increased over 60%.
The

two

months

this

year,

Never, either in peace or war, has
this

grtce
time.

country
It

had

such

imperative
stopped promptly.
There

rapid

merely to postpone it.

facing this country today is how

p^od M to reduce^he demand for peacethat it be time goods if the defense program Role

mystery about the
basic causes for this price rise,
First may I say, in order to correct some erroneous conceptions
no

before.

The basic fundamental nroblem

with price controls, priorities and
rationing. I do not want to go
on record as being opposed to all
forms of these controls. Some,- no
doubt, will be necessary; I do want
to state, however, with all the
vigor of which I am capable, that
controls alone will not prevent inflation. The best they can do under the wisest administration will

astrous

Life

completed without dis¬
inflation.

One

gets

Life

Salesmen

insurance

salesmen

have

vital role to play today to en¬

clearer idea of the extent and the courage savings, even as they did
burden of what our defense effort during the last war. Looking at it
will be by considering what per- fr°m the good of the whole counnow current, that deficit financing
cent of our total production of try as well as for the welfare of
on the part of our Federal governgoods must go to the production of the ms.ured arm his dependents,
ment was not one of these causes, armaments than by merely think- there
1S n° better avenue to
To date, the Budget is not only in ing of the total number of dollars encourage
sayings today -than
,

balance, but at the end of the fis- which will be spent for such through the medium of life incal year it will probably have a goods. It is not improbable that we surance. If defense expenditures
surplus of nearly $3 billion. On may be forced to turn more than rlse> as they no doubt will,, to an
the cash basis, including Social 25% of our manufacturing plant amount greater than taxes will be
Security Tax, the Treasury will capacity to the production of war ab*e to pay, the funds of life inprobably take in somewhere be- goods in the next year or two. I surance as in the past will be intween $6 and $8 billion more than believe that during the height of vested in Government bonds and,
it pays out. This is not inflation- the last war about 40% of our to the extent that the Treasury

Volume

173

Number 5004

The Commercial and Financial Chronicle

(1653)

finances its deficit in this fashion,

a "garrison state" for a good many
inflationary results will follow. years. No one can see the end of
In a very real sense, so- far as it and we are almost certain to be
the Federal Treasury is concerned, .spending two or three times as

Edwards, Iiic., President; Tom G.

will

make

difference

little

ices

bond

purchases additional in¬

Canadian Securities

much money for our armed serv¬

whether the individual buys a war
or

Hilborne, First National Bank &

indefinitely in the future
accustomed

were

Treasurer.

CANADIAN BONDS
Government
Provincial
Municipal

■

lowering in

standard of liv¬

our

ing?" I do not think so. I close,
therefore, on an optimistic note.
all-out

and

the

be avoided

can

war

conflict

Korean

brought

close, the productive capacity
this
nation is
increasing so

rapidly that in a few years we are
going to be able not only to main¬
tain expenditures for defense two
three times

'48

time

than

did

and

'49,, but at the same
going to produce an
of peacetime goods suffi¬
are

amount

cient" to
of

the

permit

standard

living of this country to again

continue its upward progress.
won't be able to do it
two

three

What

Are

during the

but we

years,

should be able to by

the

1955.

the limiting factors to

are

productive output of a nation?
they not the amount of its
raw
commodities, its land

basic

and its

minerals, together with an
technique of production

efficient
and

sufficient

and

energetic
its

cate

the

which is

five

and

years

the
of

DiSalle
to
proposi¬

and

long-term

our

amount

larger

than

Russia.

Our

population

should

regular

the

hands

departments

the

govern¬

ment. We do not want emergency
officers and arbitrary controls a

part of

fundamentals

coming

therefore,

flourishing,

people

our

united

ing

adequate

sufficient

given,

period

either

come,

which

will

averted,

about

ahead

time

same

will

defense

still

and

gradually

rising

produce all the

what

These

us.

perilous

for

times,
day

tion

arma¬

are

doubt

knows

man

to lose faith in the produc¬

nation,

our

the

maintenance

curity.
will

The

individual

life

continue in

insurance

se¬

dollar

the

future, as it
always has in the past, to be one
of the great bulwarks of security
for

the nation.

that

completed

bringing
we

the

desire

12th

that

reported

was

Stanley Pelz & Co., 40 Exchange
Place, New York City, is now do¬

ing business
are

as a corporation. We
informed that the firm

now

continue

the

partnership

corporation

and

will

cannot

the

further

the

remain

the

Stanley

Zipp,

general

Pelz

Co.

for

consumption

have

cannot

and

Gordon

ner

Kay will become

Wall

Street,

part¬

Kidder

Co.,
City,

York

New

members of the New York Stock

Exchange, on May 1.

Sartorius

arms

"butter," too. For a
two there must be some

reduction in the total
consumer

cut
on

down
a

demand

this

demand

"pay-as-you-go"

demand
creased

for

goods. The best way to

not

taxes

basis.

reduced

in¬

and

enlarged sav¬
ings, it inevitably will be through
higher prices and inflation. If, as

becomes

for

necessary

Treasury to do

some

borrowing, it

must be from individuals and

ings institutions.
must

not

cial

banks

our

money

The

done
a

the

borrowing

from

way.

sav¬

commer¬

Admit

are

will

Karpas

retire

partnership
April 30,

limited

from

the

firm'

time

when

the

understand the apparently

very

popular

of developments that
to be at least inopportune,
it not opposed to main objectives.
appear

Minister

charged."

It is

now

home

unity of

than

necessary to preserve

minded

singlebotn at

purpose

and

abroad.
Until recently
partisan politics have con¬

all the

therefore

world

The

Financial

Marshall

bolstered

now

with

aggression immeas¬
strengthened. These pol¬

urably

icies had hitherto received whole¬

hearted

bipartisan support in this
country and the metnod of their
had

execution

approval

abroad.

desirable

this

longer

with

met

national

inter¬

never

sharply

are

grim

political

tending to ob¬

realities

ex¬

Similarly with regard to finan¬
cial policy, issues of fundamental
importance have been raised at a
time

when

confidence

Becker

have

been

the

Any

been made in the im¬

time when the country

faces

the possibility of another and even
critical

bitter

and

world

conflict.

extended

The

struggle

be¬

the Treasury and the Fed¬
Reserve
Board
has
served

tween

eral

further to confuse
the

and

public opinion,

apparent

defeat

ultimate

of finance

bewilderment

5%%. The Dominion bond market

Canada, however, was firm and
appears to have reached a stabil¬
izing point. Stocks after an initial
strong

that

advance

carried

the

industrials almost to their all-time

high and Western oils to

the

authority
is

home

source

and

official policies has produced con¬

tradictory effects.

third

With R. S. Hays Co.

In the foreign

now

advocate the

aggressive

entail

which

the

war,

are

world

risk

meas¬

curiously

enough, also those who have been

(Special to The Financial Chronicle)

prominent

some¬

Hall is associated with R. S. Hays

for

measures

ment,

the

Company, Inc., Ill Corcoran St. military

opposing

adoption

service,

and

rearma¬

universal

additional

dian
to

long experience with Cana¬
industry will be of benefit

you

in selecting suitable in¬

through which to par¬
ticipate in Canada's growth.
vestments

can

assist you.

Co.

Members:
The Toronto Stock

Exchange

The Investment Dealers' Association

Spring Outing
OKLAHOMA CITY, Okla.—The
Oklahoma Bond Club and South¬
western
Bankers

May

will

Association

spring

their

22,

The program

scheduled is 10:00
tennis
and
cards;

noon—Luncheon

12:00

Sudbury

Windsor

Brampton

at the Country

for

INVEST IN

CANADA

the

Club and for

the ladies at the Beacon Club atop
the

Brantford

Hamilton

outing on Tuesday,
the Oklahoma City

a.m.—Golf,
men

Bay St. Toronto, Canada

hold

and Country Club.

Golf

oj Canada
330

Group of the Investment

National

First

Information

Building.

tennis,
swimming
(if
weather
permits), bridge, canasta and gin
rummy at the country club.
At
5:30 p.m. there will be a social
hour at the Oklahoma City Golf
Country Club, to be followed
by
dinner and entertainment.
Registration fee is $15; for the

the

Committee

request

Morgan

MEMBERS

Montreal

The Toronto Stock Exchange

(

266
38

Members

Robertson

and

ladies, $6.

Available

all

Securities

Canadian

special program is planned for the
ladies
in
the
afternoon.
Golf,

Montreal

Stock

Curb

Exchange
Market

Notre Dame St., W., Montreal

King Street W.

Toronto

Queen St.
Ottawa

charge of the outing are Philip J.

Rhoades,
Trust Co.,

First National Bank &
Oklahoma City, Chair¬

Honnold, care
Oklahoma
City; William B. Cochran, SmallMilburn
Co.,
Oklahoma
City;
Philip

man;

Page,

Oklahoma

Honnold,

Edgar

City;

Inc.,

Edwards,

Eval

Committee—E.

CANADIAN
INDUSTRIAL

WESTERN OILS

Davis,

Oklahoma City.

Ticket

MINING

SECURITIES

Clo-

hessy, First Securities Company of

Inquiries Invited

Kansas, Inc., Oklahoma City.

Committee—Herbert

Prize

Canfield,

Canfield

Canfield,

Oklahoma City.

Established

1922

Kippen & Company, Inc.
Members Investment Dealers Ass'n

Golf

—

proposed

increased

IN CANADA
Our

Oklahoma Bond Club

& Co.,

ures

INVESTMENTS

In both instances the untimely
opposition to previously accepted

adoption of

Boston 9, Mass.

JVLilner, R oss

Tulsa; B. G. McCall (in charge
of transportation), Harris, Upham

Company of Chicago.

Fifty Congress Street

reached

abroad.

ties

maintenance

consideration.

previously with First Securi¬ field those who

C. —Lansing

which

the

should

paramount

Chp.onicle)

Co., 120 South La Salle Street. He

dollar,

another low point for the year at

the

domestic

considerations
the

affairs

With

situation

and

general

Unfortunately

state

prevails.

was

DURHAM,

Canadian

their

and

resist

1-1045

weaker

were

meet

effectively
will

New York 5, N.Y.
WORTH 4-2400

sympathy with the trend of the

Plan

and U. S. willing¬
resolutely the com¬
munist challenge whenever it was
made, the economic situation of
to

ness

the domain

CHICAGO, 111.—Walter L. Ben¬
son

drums. The internals

a 16-year
peak level subsequently lost part
fused the main issues, U. S. for¬
of their gains.
Les§ interest was
eign policies had achieved a truly*
shown in the base-metal and gold
remarkable
measure
of
success.
issues
and
prices showed little
Through
the operation
of
the variation.

when

incorporated

Two Wall Street

vital at this critical stage of

A. E. Ames & Co.
•

affairs

foreign

supposedly

Joins A. G. Becker
(Special

supply.

thing that is going to be completed
in two or three years and then
forgotten. We are likely to live in

the

prevailing, it has been difficult to

York

that inflates

undertaking is not

south

mediately postwar period and not

& Co., 39 Broadway,
City, members of the
New York Stock Exchange, will
admit Margot D. Herzig to limited
partnership on May 1.
Irving D.

This rearmament program which
we

looking in

scene

change in the basic rate of interest

Sartorius

New

is likely before we get over the
hump of expenses for rearmament
during the latter part of the year,
it

border

should have

year

both

against

ternal affairs.

A. M. Kidder Admits

peacetime goods must be reduced.
We

the outside

domestic

scure

infla¬

outlays

From

the

divided

Kramer, limited part¬

pro¬

success

struggle

Pelz, Robert
perilous opinions here
partners, and

will

increased

enlarged

armaments,

Stanley

of the prob¬

that, to the extent total

duction

be Jerome S,
necessarily ner.

tion is to make the people under¬

meet

April

can

inflation,

essence

preventing

state

little chance of

common

Dominion

the

the Allies of this country has been

the "Financial Chronicle" of

consists

program

further

The

so.

stand

nership

wish

without

have

lem

defense

our

to do

Correction

inactive in the interim. The part¬

conclusion,

CANADIAN STOCKS

External Affairs also pointed out,
"Canada's hopes (and those of all

the

may

capacity of

and

Conclusions
In

waning
of the

would

bring forth, But
In the field of
of this we may be certain, come
for example it is
war or peace, there is little cause
ever

out¬

come.

in the standing

bonds.

adequately to acceptance

necessary

protect

will

its

confidence

the

over

ments the general staff now thinks

there

forbid,

doubt

should

God

contributed

ment

history, that personal and
partisan objectives should be sac¬
standard of living for our people. basis of civilization is
immediately
rificed for a united policy on both
At the rate which we are now ex¬
imperilled, it is not difficult to
panding our total production, we understand Canada's present mis¬ domestic and foreign issues.
During the week despite price
should be able by 1955 to turn givings. To the external
observer,
out more peacetime goods than we removed
from the highly emo¬ mark-downs the external section
of the bond continued in the dol¬
are
now
producing, and at tne tional political atmospnere now
look

time to complete our rearmament,
two things are certain: war,will

has

has
un¬

Affairs

however, "that without the leader¬
ship of the United States there

shoulder this burden of maintain¬

be¬

are

—

External '

life.

our

I also believe that

growing more rapidly than ever
before, our schools and research
are

courageously undertaken the

communism, and that there will free nations) for world peace de¬
be times when it will be more pend largely on -the
acceptance
longterm, after we have once caught important to maintain a united by the United States of responsi¬
front against the foe than to press bility for world-leadership and on
up with our defense needs, we can
how
that
responsibility is dis¬
quite indefinitely in the future a point of difference."
permanent

institutions

ister

Corporation

task
of
tion, the control, management and enviable
criticizing
a U. S. dollar and the value of the
equipment of our armed services friend. Mr. Pearson emphasized, vast total of publicly held savings

ultimate value of its currency, or

present total steel production
Soviet

the need for life insurance for the

production in the next few

years

Hollywood,

Toledo.

regard. We bid fair to increase
steel

scale, certainly there
for pessimism in this

cause

has

currently going

accelerated

one

that

plant capacity

our

last

able

to fabri¬

When

increase

place in

during

industrious,

manpower

commodities?

considers
taken

Secretary-

By WILLIAM J. McKAY i

past. This means that we must
as I stated at the
Now is not the time to indulge aid to potential allies.
Similarly
individual certainly is rely just as little as possible upon
in petty politics, to create con¬ in the case of the battle of the
morally bound to continue to buy arbitrary controls, unless we want
such
fusion
in
the
controls
to
public mind, to interest rate, the purported objec¬
insurance until his program has
stay with us
We should put this pront by such confusion to realize tive of the Federal Reserve Board
been adequately completed, allow¬ indefinitely.
increased
expenditure for arms personal ambitions, and thereby was the curbing, of inflation. In
ing for the recent price increases.
Inasmuch as expenditures for as a regular item in our Federal unwittingly assist those who seek, effect, however, the undermining
defense, after we have once be¬ Budget, raise taxes sufficient to divide and conquer. Profoundly of confidence in the Treasury pat¬
to pay for it and take the bur¬ disturbed by
come rearmed, are likely to con¬
the current uncer¬ tern of interest rates provoked a
in
our
stride.
tinue at least twice if not three den
Then, after tainty concerning the manner in more violent phase of monetizaare
once
times what they were in 1948 and we
fully prepared, which the United States will dis^ tion of the public debt. Further¬
its
responsibilities
of more the loss of stability of the
1949, the question naturally rises, Mr. Wilson should go back "to charge
"Will
this
mean
a
permanent General
Electric,
Mr
Johnson world-leadership, Canada's Min¬ obligations of the U. S. Govern¬

Stuart,

And,

surance.

outset,

and

Vice-President,

Co.,

Charles

the

Trust

Ray

Dusek,

Merrill

Lynch, Pierce, Fenner & Beane.
Officers of the Oklahoma
Club

are

Bond

John H. Edwards, R. J.

of Canada

610 St. James St., W„ Montreal,

P. Q.

Telephone Lancaster 5101
Direct Private Wire to Toronto

The Commercial and Financial Chronicle

(1654)

But this is

rebelled.

Basic Inflation Problem

Pointing out basic problem in

market, the

Federal Reserve nas
not issued paper money directly
in exchange. Rather the exchange

Institute

and which, unless Treasury is willing to

time

the

discussing with you the
of your government

bond

portfolios

make

should

observations

general

some

de¬

recent

velopments in
the

money

market

and

the

some

uncertainties
the

imme¬

diate

future.

For

many

the

years

market

money

has been con¬
trolled largely

minimize

the

C. F. Distelhorst

cost

servicing

the
debt.

Federal

interest rates if such is

being,

that

hope

must

one

For the

general public really does not
that rising bank de¬

understand

neces¬

market is still
a
controlled one, so whether this
historic
shift in policy will
go

The

sary.

money

not

been

absolute,

and natural forces in
have

found

themselves.

late"

of expressing
recently as con¬

way

dom of

have

had

exerted

press

aintain

"orderly market" and

support
which

rates

of interest
apparently too

pattern

was

artificial and too low.
You

familiar

xall

are

with

the

struggle which has been going
Car

months between
States Treasury and

united
Federal

..ifferences
trols

their

how

con¬

Reserve because
in

views

credit expansion, interest

lates and monetization of the Fed¬
be exercised. On

eral debt should
;he

hand

one

the Federal Reserve

simply defending its statutory
cuthority cf 38 years' standing.
Left to their judgment it was ap¬

was

parent

the

that

inclined

"Fed"

was

permit bond prices to

history

brake

debt-moneli-

lower

face

willingly

bond

prices

and

that sacrifice in
sound monetary pol¬

make

defense of

the

other hand,

the Treas¬

ing

the

Federal deficit at the
possible cost, was at odds
view, and was. exerting
heavy administrative pressure on

lowest

vith this

"Fed"

the

continue

supporting

its low-interest rate program. For
all practical purposes, the Treas¬
was pressing its views to the
point of usurping the Federal Re¬
serve's satutory powers.
ury

The

controversy was climaxed
early March when an "accord"

was

reached.. You know the

sults.
new

re¬
The Treasury announced a
issue of 24 to 29 year 2%s

ness

How

Basic

Debt Is

Federal

explain

Problem

the

basic

our

position further,

economy

problem of inflation in
today

not the self-

surface,

least,

that

the

Federal

Reserve's viewpoint has prevailed.

Whether

partially

fuliy,

lime

has yet to reveal.
To me this has
more
one

sensible
the

velopments
ary

front

heartening

of the

and,

one

accordingly,
encouraging de¬

the anti-inflation¬
recent

thing

years.

that

The

having

aken the first step, the
Treasury

(assuming
voice

still

monetary

has

strong
policy) may
a

debt

eral

which

neveh

will

con¬

program

rates

higher than the
and my faith

the

.and

ury

re¬

between the Treas¬

Federal,

that

means

yields will be permitted to rise in
to open-market sup¬

preference

purchases,

port

ommendations

governs

currently

rises in short-term and intermedi¬
ate-term

Should these in¬
yields not materialize

yields.

creases

then the 214s of 1967/62
favored

even

are

position.

Of course, if one fears a further
in yields in the next year or

rec¬

how

year

two

you

years

be able to invest in mortgage

may

loans,

then such funds

invested

where

should

short-term

securities

price fluctuations

may

continue

hold

their

rise

that

judgment

own

true, then we must expect
of

holders

(1) Com¬

are:

all credit and

over

than

government

bonds

continue to offer them in the
ket in greater volume

Alternatives

funds

mar¬

than other

Bank

Notes.

term
In

Treasury

yet been reached in the bond mar¬
ket

nomic freedom
nancial

disaster

additional cost.
interest

Treasury
such
higher
as

to prevent fi¬
is

the

worth

higher rate of
greater burden than

the

serve

or
it
a

to assume, then

cares

interest

rate

may

useful force in
non-essential

very

excessive

expenditures.

what official policy will be, espe¬
the

for

the exchange period

after

cially

2%s

new

offerings

ended.

has

bonds

continue

gesture of the "too

alternative

The real¬

remains,

a more
natural level of interest rate.-Ef¬

dodge

realism

can-but

the

aggravate

real

government bonds in the open
market is that the owners of these

problem of inflation, namely the

bonds have been seeking a higher
return on their funds. The six or

portion

Federal

debt

billion dollar switch

seven

part

the

life

the

insurance

com¬

form

the

tions to residential mortgages was

The

government

may

yet

large
trans¬

of money in

sream

additional

printing

$250,000,000,000

our-

ferred to the

posits

from

danger that

ever-present

obliga¬

panies

bank

de¬

press money/

similar

caused

inducement

savings

you

executives to do the

savings customers.

that

association

same

for your

Pension funds,

multiplicity of other
funds have similarly been looking
other

than

the

government

our

yields.

Federal Government

cares

could control switching
types of securities by fix¬
ing all interest rates on all obli¬
to other

gations,

private

full-scale

war

public.
I

can

Short

hardly

visualize public acceptance of such

complete control

over

credit

and

interest rates that switches out of
government obligations could not
be made to advantage.

Or, still insisting that low yields
should
prevail
on
government

obligations,
seeking

bonds

sold

those

higher return elsewhere

against which the Federal Reserve

vices that
of

help to prolong the day
reckoning. Once purchased they
the

lock

investor

that

manner

and

around

take

one

cannot

yet

they

move

advantage

obligations is

-and

such

higher possible yields.
of these

The design

ingenious

achieve

little

than to defer the time when

they too will be presented for re¬
demption by dissatisfied investors.
While

not absolutely pertinent
topic assigned to me I would

to the

like to make

tion.

one

further observa¬

In expressing the view that

higher interest rates
I

are

essential

not

thinking of it so much
of preventing the fur¬
expansion of private credit.
Frankly, that is not the point. In¬
as

means

ther

sofar

nation

inflation is concerned this

not

ruggling with the
$5 billion or
billion of private credit ex¬
pansion for production purposes.
The real struggle on the front of
monetary irflation is whether or
s

consequences of extra

$10

not the

be called

now

they

turn

may

$250 billion of Federal def¬

the series F

in which
out

secondary liquid¬
In view of the cur¬
a

reserve.

attitude

toward

saving and
savings,
is a long time. The prob¬
abilities are increasing that such
bonds might have to be liquidated
before maturity.
In that event
their
redemption
schedule
and
relatively low yield pattern for
the increased turnover in
12 years

would

much

take

tion

the Fed¬

are

eral Home Bank notes.

of the

The

months.
a

April

new¬

There

available

now

variety of Federal Home

good

Loan Bank notes

June,

2, bears

August,

vember

maturing in May,

rising

interest rates, should that develop.
In addition, the fact that 30 to
nearly 60 days may be required

redeem the F

emergency

arities

the

attractive

the

and

funds.
peculi¬

source

because

However,

G bonds does

very

bond

redemption schedules which pro¬
vide yields upward to '6lA%
to
3Y2% to maturity, after they have
been held

several years, I do not

and

No¬

recommend"

even

dis¬

these bonds prior to maturity.

October

which

better posi¬

advantage

not make them

most attractive

short-term securities

Bonds

G bonds for the in¬

vestment

the

Purchased?

longer like to recommend

longer investments than intended.

redeeming

any

tribution of invested funds would

yield

1 % %.

short

maturities

price decline

reason

the

but

are

A few

their

dangers

slight con¬

sideration.

ties

their

above

of the bonds held by sav¬

Most

ings associations

other

This

occurs

li¬
which

secondary

reauirement

quify

savings associations have

surplus funds invested in securi¬

have

and

investment

outlet.

where' Ihe

areas

provide a associations have attracted
savings
secondary liquidity reserve. Be¬ somewhat in excess of local home
cause of the difficulty of judging
financing available. By the very
are to

in advance when withdrawals may
exceed

offering of series E, F, and

primarily to achieve higher earn¬ G bonds and now the non-market¬
ings for their policyholders.
It able but convertible 2%s are de¬
was

event

rate for the short term of 614

little, too late" variety.

The primary reason that the Fed¬
eral Reserve has been called upon. forts to
to purchase billions of dollars of postpone

not

may

and the Federal Reserve will

istic

the 2s of 53/51 and 54/52

issue, da led

cent "accord" between the Treas¬

but

and

with the latter, it
recognized that such

now

Series
Be

atmos¬

now

est

re¬

Should

some

the

ixk%

and

change-period prices, then ihe
ury

notes

until

most of their life is quite unat¬
One
could
do
better
and tractive.
short- holding short or intermediate term
bonds. issues for yield and, in addition,

bills

is to support the ex¬

the decision

become

Perhaps these alternatives need
to be explained a little further.

further" testing

expect

connection

terest

eco¬

Treasury

yield slightJ.y more than
up to 134% is available

issues

price for

time deposits or

deposit
in your
Home
Loan
Banks at
114% or
1*4% and (3) Federal Home Loan

believe that

Since I do not

bonds

what

and

shorten

and

holdings
phere clears.
your

rent

Treasury

day

and

(2)

years;

certidcates

present low yields.

the

Funds

short-term

notes

change of its obligations for print¬
ing press money. If a higher in¬

firm foundation has

for

(1)

are:

losses

some

ity

must

short-

Short-Term

private investors will buy them at

rate

available

market

yields may' be. In view of this
uncertainty it seems wise to take

return

obligations.

interest rates, private and govern¬
mental or (2)
the ultimate ex¬

net

bond

ernment

interest

the

leave

and

lower
term

portion

three

The Treasury must be will¬
yields on government obligations
pay a high enough rate of have not
yet risen to a natural
interest on its obligations to in¬
level in our present economy. If
duce investors to buy and; hold
this is
The alternatives

earned

bills

;

ing to

plete control

all

paid.

them.

relatively minor. The danger of
investing in long-term bonds is
that price declines may wipe out

How

rise.

High enough to induce in¬

high?

permit further increases could all be purchased by Ihe Fed¬
eral Reserve at a price
reflecting
*An address by Mr. Distelhorst before
low yields.
This, of course, has
'he
Southeastern
Group
Conference
of
been the
*ie U. S. Savings & Loan League, Palm
policy of recent years

interest

mit

agree to

Beach, Fla., March 14, 1951.

natural level

highs

(perhaps blind faith) that the

only sensible alternative is to per¬

been

;

supporting bond prices to main¬

vestors

dares

the

Go?

inflationary

bonds.

99.

appear

Must Interest

Rates

tries, but the overwhelming Fed¬

bond market for higher

High

liquidating debt of private indus¬

decline in government bond prices
with the Victory's going down to

would

expansion

tain uneconomic interest rates, the

supported

the

the absence of absolute

trols

shortly

than

I hope Ihe same

price.

the

pay

trusts and the

dangerous

device

It is a
inflationary

private credit which liquidates it¬
self through production.
~

applies to the leaders if our busi¬

available by conversion to holders
of the Victory 2V2s.
This was

followed

recent

cent "accord"

far

From all that I can see the
to

icy.

Federal

most

appear

are

day

My feeling that
of interest rates is

of monetizing the debt.

ess

life insurance folks are willing

than to support low yields by
purchases which
monetized the Federal debt.

ury, concerned more with financ¬

few billion dol¬

private credit expansion in

curbing

open-market

There

zation, will also have the courage

decline and yields to rise, if neces¬
sary,

retained.

For such

attractive and they
maturity range where the
passage of time is to their ad¬
vantage.
Their fixed coupon of
214% affords some protection, in
the passage of time against -further

proc¬

the
the

many

better their confidence is more or
less

as great or
danger than prin.ing
money. So until they know

greater

214s.

bank-ineligible

holding period the 214s of 1937/62

be the turning

natural

our economy

have suggested the wis¬
higher interest rates, con¬

ditions

trols

however,

to arrange your government bond
two
then
neither
the
bank"too little, too reckoning and whether the, stream
portfolio.
ineligible 214s or the new ,2%s
point in fi¬ of money is inflated by rolling the
Aside from my
In the first place, how funds should be held.
nancial freedom and fiscal sanity
printing presses or by inflating
should be invested should be re¬ personal belief that yields should
has yet to be determined. My sin¬
deposits in exchange for bonds,
lated to their future need, if you rise further, the picture at the
cere hope is that bond-holders, all
continued purchase of bonds by
moment is too clouded to really
are accumulating temporary
sur¬
cf whom must see the wisdom of the Federal
Reserve to support
plus funds which in a few months know who is in control of the gov¬
the free-play of interest rates as low interest rates is a direct
down in

The control
has

debt
far

check.

six-fold makes them
dangerous thans artmg

the money presses rolling.

new Treasury interest policy,
Vi% in interest rate is sufficient.
interest rate adjustments as required.

rates.

yield pattern remains unchanged.
If the yield pattern is a rising one
the holding period may be ex¬
tended to ten or fifteen years be¬
fore a net yield of 214% can be
realized.
For holding periods of
five to fifteen years one can do
better holding some of the shorter

significant challenge than raising

that such bank deposits may

posits, so*created, are
Before

Federal
That is

the rate to hold

even

but doubts recent rise of

management

overwhelming
private hands.

be expanded

monetized, Mr. Distelhorst lauds
further

private hands

day and tomorrow is to keep that

lars of

ever,

pay

high enough interest for investors to hold it, tends to become

Recommends

port fictitiously low interest

has been in the form of credits to

ing debt of private industry but overwhelming Federal debt,
which is permanent

remain

interest bearing obligations or
be monetized in an effort to sup¬

bank deposits. The very fact, how¬

is not self-liquidat¬

our economy

will

I
repeat,
the
greater
function
that interest rates can perform to¬

money

CARL F. DISTELHORST*

Savings and Loan

icit
as

inally

Vice-President and Educational Director
American

been covered by issuing
instead of interest bearing
bonds.
True, in supporting the

Is the National Debt!
By

essentially

of exchanging bonds for
money which is no different today
than if Federal deficits had orig¬
program

Thursday, April 19, 1951

not

the inilow of savings it is

whether this li¬
quidity reserve will, in the end,
prove to be short-term or longto

easy

say

funds.-

term

However, with the
shifting attitude of savers seeking

the
rapid increase in the turnover of
savings in recent months, now ap¬
pears to be the time to shorten the
hedges

against inflation

term

•average

the

and

nature of these funds it is reason¬

able to invest them

yield
ries

recommend

them for

members

Bank

There

serve.

sion

invest

of any

2%s

Victory 2*4s into the

in the

for

liquidity purposes.
The 2%s do not prov da Eny great
refuge from future rises in inter¬
new

new

bonds.

&3As

remind

who

reserve

portion

required

are

some

are

Home

liquidity

be required it is

conver¬

nitely do not recommend

at¬

G bonds for

Federal

are

that since such

defi¬

System

maintain

ways

little

the

sociation

portfolio.

the two,

consideration in every savings asbond

be ween

se¬
rec¬

associations which

Savings

issue and

can

long-term investments.

Loan

attractive

bonds

tractive than the F

investments

are

and

2%s make them

Loan bank

2%s and the

new

liquidation provisions for the.

in the liquidity reserve. Again, for
this purpose, the Federal Home
no

the

ommended.

the

primarily for
such circum¬

under

and

stances

re¬

feel

will al¬

proper

that

amount

series F and G

them that there

be times such as during a
period of heavy construction fi¬
and, in fact, the full nancing ac ivity that they may
2%s will not be earned unless prefer to have that 6% liquidity
they are held 24 to 29 years, the reserve entirely-uninvested. Ac¬
call and maturity periods.
If the cordingly, I 4o not classify any
est

% higher coupon is offset against
their under-par

(through
would

five

may

rates

the

liquidation value

114%

have

six

years

version at

notes)
held

portion of that 6%
manent

they

least

par ;

for

believe

reserve as per¬
investment purposes.

would

the

better

of wisdom to treat that mini¬

(assuming con¬

mum

reserve

99) to yield 214% if the

same

manner

recuirement in
as

the

the remainder of

Volume 173

Number 5004

The Commercial and Financial Chronicle

(1655)
the

association's

quidity
fri

li¬

reserve.

conclusion,

possible to
ernment

with

secondary
I

wish

were

the future of gov¬
prices and yields

see

bond

little

ing the

certainty. Dur¬

recent years

rela¬

tively

easy task.
If one could be
that the United States Treas¬
and
the
Federal
Reserve

sure

ury

By PAUL EINZIG

•

"accord" really means that inter¬
rates will be permitted to find
their natural level under

countries

conditions

the excessive

the

today's

anticipate
terest
be

feel

higher

rates

tainty.

with

could

level

reasonable

are

growing

complete

and

may

provide

continued

artificial

in¬

jrise.

rate

the

If, in

year

evident

have to. go
much further, however,
before they could be expected to
produce any

worthwhile

from now, it be¬
that my judgment

forces

spect

■

The

tions

MacCoy Named V.-P.

Dr. Paul

Of NY Stock Exch.

has announced the appointment of
a*

promotion

the

Board

approved

ticable

MacCoy

sine

joined
the
public
rela¬
tions

tant
of

dismiss

dent

MacCoy

July,

1950.

His

As
now

duties

result

the

even

Recognizing that the volume of
tnat

the

New

Saturdays indi¬

public

York

served

Exchange
wishes the Exchange service to be
available

Saturdays, the% Board

of Governors decided not to make

any change at this time in the
policy of the Exchange to remain
open

Saturdays except during

the four

summer

months.

Figures presented to the Board
showed that
the
the

over

volume

the last 11 years

business

done

public with members firms

Saturday mornings has exceeded
the

hourly

average

business

volume

other days.

Tiie view of the Board of Gov¬
ernors

that

was.

of' the

public's

market

this

Saturday

the

mornings

opinion

regarding Saturday clos¬
taken by the Committee,

opinions

received from 1,098

were

members.

members,

who

aggregate

last

those*

voting,
produced in
58%

year

447
the

the

non-member commission business
-done

the

Exchange,

favored

continuation of the present
policy
of

remaining

open

throughout the

ing the four
651

Saturdays

year

except dur¬

summer

months, and

members,

who

produced

the aggregate 42% of the

favored closing

ing the entire

by their

business,

Saturdays dur¬

year.

■

y,,

: '

drive, the governments have

full employment is now essential not
prosperity but also for the purpose of
It is simply inconceivable that the governments

would

now

allow

firms

arms

anxious to avoid discontent that would
arise
of any factories through lack of credit

are

closing

Place yourself in

down

resources.

him

Isn't it true that he desires
that he can trust to lead

through

the

haze

the

labyrinth

the

with

and,

cess

Telephone

thrust

accumulations

No wonder

disinflation, since it is obvious

they

that

are. not

even

anxious
were

succeed if would defeat its
object. So long as disinflation is ap¬
plied in moderation is pursues a useful
task, in that it checks the
pace of its progress, or at any rate it mederates that
pace.
The

government would take really energetic
disinflationary
measures the reversal of its
policy would be a mere

time.:

question of

past when full employment was not considered to
be, rightly or
wrongly, an economic, social, political and
military necessity. Most
people nowadays prefer inflation to invasion, or even to wide¬
spread unrest due to large-scale unemployment.

Although

certain degree of financial control is
necessary and

practicable, it has

to be accompanied by a much
higher degree of
physical control. If purchasing power is mopped
up, the govern¬
ment will have to ensure that the
curtailing effect of disinflation

should be directed

solely to those branches of activity which

not essential to the rearmament drive

to civilian

result,

cases

have

within the

months of where cus¬
have taken their accounts

competing firm.

very

I am not
referring to the experienced spec¬

know when I go in to talk stocks
is the man who takes my order. It

ulator

isn't the big boss in New York. It
If you have your hand out
in willingness to help
your cus¬

and

are

trader.

class

must be

These people
by themselves and

treated

manner

is you.

en¬

tirely different than the investor.
But

there

are

many

tomers

in¬

and

ness,

know this

you

seems

vestors than traders and I believe

battle

they want to beded, not pushed.

me.

that

busi¬
your

90% is work.

Before You

Can

10%

The

won.

other

Teach

Laity A. Higgins

Knowledge is something

man

does not need to advertise in order
that others may know he has it.

But if you don't know what you
are
doing, you haven't a chance
of

hiding it.

others
do

How

Lawrence

(Larry) A. Higgins,
55, of 1409 Lincoln Street, Evanston, died April 15 in a veteran's
hospital at Bay Pines, Fla., after

successful

investment

talking about theory
alone, but if you can show people
what can be done to improve their
safety, obtain better^ income, de¬

velop
and

securities

asked

that

when

you

widely

and

Salle

Street

had

active

been

the

National

sound plan for investment,
you
know enough about

was

known

program.

not

World

broad outlines of what constitutes
a

was

ensign in
War I.

understand and appreciate the

ill-

ness.

you

month's

expect
unless you

can

Security
Traders

Association

are

question you don't have
to r sit and stutter for the
answer,

for

going to gain confidence.
gain confidence primar¬
ily because of your background of

past President

knowledge and your willingness
td help.
The greater the degree

Club and since

you are

You will

of both which you show to others

the

and the

accounts

will

you

open

better your business will

become.

years.
a

was

of the

Chicago

Bond

Traders

1927

Larry A. Higgins

Manager of the Trading
of Hulburd, Warren
& Chandler, members of the New
York Stock Exchange and other
Exchanges.
Burial was in Chi¬
was

Department

Study Is

You

can

are

cago.

Constant Thing

never

New York Stock

Exchange
Weekly Firm Changes

stop learning in

the
so

securities business any more
than if you are a doctor. " Every

The New York Stock Exchange

day

new
things are happening.
Every hour there are changes of
vital importance which affect the

values

You

can't

individual
sit

you

are

you

will

lose

securities business is

business.

laurels

your

Those

The

other

done

some

day

man

know

one

whom

business

works for

the

prizes.

called

with

The

demanding

who

most "first," collect the

tomer's

man.

out.

Proposed

the

past.

the

nation's

the

partnership in Gruss & Co.
April 30.

Interest

the

Glore

ceased

March

late

The

31.

Charles F. Glore

Charles

Forgan

Glore,

was

unemployment thus

created

absorbed

Estate

admitted

to their clients.

March 30.

Interest

Covo

the

Hentz

late

Jose

Co.

requirements of essential industries in the

discontent

would

not

assume

Prompt Wire Service
FOR BROKERS AND DEALERS

But provided that the

dangerous

same

districts

To Western
LOS

ANGELES

•

SPOKANE

•

Markets in
DENVER

SALT

•

LAKE

CITY

proportious.

What matters is that the
governments embarking on disinfla¬

J. A. HOGLE & CO.

tion should know what

they are aiming at. The time when it was
sufficient to put up the bank rate and let
everything else take care
of itself has gone. Disinflation must
be planned with care. Other¬
wise it is bound to become the
prelude for a new dose of 'inflation.
To avoid such ups and downs it would be
wiser to determine in
advance how far and in what directions it is safe to
disinflate.

ESTABLISHED
Membeis
and

50 BROADWAY

Tel:

WHitehall 3-6700

New

other

York

1915

Stock

Principal

Exchange

Exchanges

NEW YORK 4,

ceased

requirements.

immediately by the in¬

Co.

limited partner on April 1.

leading stock exchange members.
They advertise constantly of how
anxious they are to give service
When I asked for

Ex¬

from

cus¬

have

transfer

change membership of Arthur B.
Behal to Joseph S. Gruss will be
considered by the Exchange on
April 26.
Mr. Behal will retire
on

following firm

changes:

securities.

investment

an
you

has announced the

can

proceed too far without causing discontent.

the

The salesman and
the# cus¬
tomer's representative to the
"pub¬
lic are the firm.
The only man I

course,

only be achieved through the application of controls
capable of discriminating between the various
types of financial
requirements. Even in this direction the government could not

creased

few

tomers

little opportunity to make it back
if -it is lost.
Of

•;

This is the answer to those
who. think it would be possible to
solve the problem by means of financial
control. They live in the

This

past

Think

with

come

concerned to revert to inflation.
overdo

moment

information—as
heard of several

American

Telegraph.

never

of ,do-it-yourself if
you want some

doing
their lips

has

promises made in its adver¬
tising. There is a grudging attitude

for a moment, too, that this
money
represents in many cases a life¬

The paradoxical situation has thus arisen that any real suc¬
of the disinflationary efforts would
compel the governments*

performance

are

prayer on

blind

last

to the

(if they were honest about it)
that they know
very little, about
now

some

the

On ether occasions I have asked
for little favors, but this firm's

you

investing and that they

told

sale.

investment Of his money?
Think
of'the people who will admit to

stock

their board for

they didn't have it on
I finally persuaded

controversy he

and

surrounds

which

certain

a
on

him to look again, and after

;
...

sorry that
the board.

hOw

see

does

is long as I can remember, and is
right directly in front of this
fellow's desk, he told me he was

You Must Know

civilian

the

offer

can

customers

quotation

Which has been

one

would begin to handi¬

resources

rearmament

want?

For

purpose

the governments
from

indication

interest

should be taken into account.
In
the
poll of membership

ings

•

engaged in the
contracts, or even firms producing more or less
goods, to curtail their production for lack of
adequate financial resources. Even the production of less essen¬
tial civilian goods would be
sought*to be maintained, so long as
it does not require raw materials which
are in scarce
supply. For
essential

Stock

the

conflict.

execution of

the

Korean

engaged

NYSE Open Sats.
Except in Summer

national security.

activities.

cates

•

succeed

The

you

prospective

understanding.

some

possibly
important

most

the investor's position
Und
he feels about it.
What

prac¬
with full

interfere

unemploy¬

the

■.

inadequacy of financial

only for the

Exchange's public relations

business done

not

reason
for; reflating the moment disinflation'
threatens full employment than they had before the
beginning of

will continue to include direction
of the

government

credit expansion.

Department.
He was
Assistant Vice-Presi¬

appointed

•"

••

does

ment would be sufficient for the
government to decide to reverse
its policy and to authorize and
encourage the required degree of

Public

Relations

political

curtailed, they would immediately
that,, unless the bankers can be in¬
change their attitude, it would be necessary for them to
large number of their workers, The threat of

duced to

in
was

Director

the

which it

bankers that their loans must be
inform their political friends

Ex-

Assis¬

maae

is that under prevailing condi¬
politically impossible to disinflate

moment, that stage is reached disinflation
could proceed no further. If
manufacturers were informed

reorganiza-

change
1938, he

extentw to

production.

cap

staff.

the

only

the

which the

Following the
of

truth

that

your

time

•

mopping up a really large
amount of purchasing power—whether
by means of a budget sur¬
plus or credit restriction, or even by means of a
highly successful
savings carhpaign—a stage would be reached sooner or later at

1928

Should

Exchange

when

•

armament

employment. '

has been with
the

party to declare itself against full
employment, or even to show
itself lukewarm in its
advocacy of full employment. This is the
basic fact of the situation. It means that
disinflation is

Governors
Mr

•

any

Vice-President.

was

inflationary

inflation on an adequate scale would have
been impracticable in
Britain and in many other countries.' For
it would have conflicted
with the all-powerful demand for the
maintenance of full employ¬
ment.
Nowadays it would be political suicide for

The New York Stock
Exchange

MacCoy

present

effectively. Even before the beginning of reduring the second half of 1950, dis¬

Einzig
*

The

easily outweigh disinflationary forces.
change to be expected in this re¬
so long as
the 'rearmament race con¬

tinues.

right.

effect.

Nor is any

was
wrong, I hope that you were
able to foresee what was

power

would

ing

comes

Some degree of credit restrictions have
adopted. All these and other measures

been

pattern.
atmosphere
clears
a
policy in the form of
shorter-term holdings is in order.
Until

wai

other

curtail government
expenditure and capital in¬
vestment programs.
Money rates have been
raised
fractionally, or have been allowed to

interest

made to

support for

purchasing

stop to think about

moment you will

agree

have been urged upon
the governments; concerned. Some
of these dis¬
inflationary measures have actually been put
into practice. Timid efforts have been

cer¬

use

Britain

mopping

volume of

open-market

continue

it for

preoccupied with the problem of how to deal with
of inflation. Various devices for

other control

devices

menace

But the "accord" may not

support purchases

By JOHN BUTTON
If you will

commodity that

LONDON, ENG.—All the best brains

est

then

Securities Salesman's Corner

Eitizig contends, despite measures taken or proposed to be
taken, it is politically impossible under prevailing conditions to
bring about disinflation. Says all parties are committed to "full
employment" doctrine, and effective attempts at
disinflation,
which could reduce
employment, would thus be avoided.

of unqualified

bond portlolio has been

Dr.

price support the management of
a

N. Y.

Teletype NY 1-1856

The Commercial and Financial Chronicle

(1656)

supplies enough to satisfy

crease

The Use oi Production Controls

basic

for

prices if

For Mobilization

materials

This

By HERBERT STEIN*

present

inflating money
rapid rate.

we go on

incomes at

would exist

all the demands that

point

illustrated

may

story that appeared recently

better—tin

for

not

rationalized

be needed

gish

of price to

controls

with

price

after they

com¬

tions

materials

times does not necessarily

need direct

c o

nt r o 1 s of
the
priorities

and

tions

o c a-

type

such

shortages

controls,

if they impinge to

even

extent

some

ordinary
require

defense procure¬

it is not
matter of crucial importance if

ment. In ordinary times
a

deliveries

tank

schedule.

behind

months
an

lag three or four

carry out a

for.

mobilization

and adherence to schedule is con¬

program, and

sidered

must

why?"

need

The

for

production
distribu¬

and

tion

is,

even

by people who
think that price-wage controls are

undesirable.

and

unnecessary

believe this general opinion is cor¬
But asking why it is correct
be helpful in deciding how

rect.
may

far

must go

with such controls

4»nd under what conditions

get rid of them.
Qur

and

willing to

the

pay

compulsion

oise

to do

general, this principle works.
why can't the government,

wants

steel

ten

badly

and buy it?
ment has

private
than

out

Certainly the govern¬
money than any¬

the

and

government
want

buy

existing price

available, the price will
presumably
rise,
discouraging
of the

some

purchasers.

And since

the government can afford to pay
a

The

fact

Crux

the

shortages,

higher price than anyone

else,
it won't be the government that
is priced out of the market.

the

The
I

Stickiness

trouble

some

don't

with

would

exist

would

ideal

controls

the

and

needed

shortages
if

even

fiad

anti-inflationary

mone¬

this

rise

picture,
markets

circumstances, prices
enough and far

fast

enough to clear the market. Prices
remain

relatively stable despite
of demand, and a back¬
log of orders piles up. Of course,
an

excess

the

available

out

somehow.

celled out
ness

supply is
But

parcelled

not

par¬

the basis of willing¬

to pay more than the quoted

price,

except

counts

that

markets.

for

marginal

flow

through

ac¬

grey

may

allotted

proration

mili¬

the

tary

program

would be

Still

-rises.

shift in the pattern

increase of

demand,

and

those parts

there

of\he

lof

de¬

econ¬

like to raise two ques¬

I would

tions

about

controls

this

interpretation of
means
of supple¬

menting the allocating function of

low the

prices to rise, if they will,

reduce

eliminate

the

need

the controls. It may be asked

distribution control sys¬

could

tem'

free

leak

work

prices

from

Would

delivery to the government
else willing to pay
the price, the prices in those areas
and

everyone

must

rise.

And

where

not

rise

and

distribution

sufficiently,

prices

production

controls

will

needed.

were

system, - away
orders,
if
non-essential

Also, I think, the controls-would
if

even

didn't have

there

limitations

are

price increases, the

voluntary

practices

business would in
sult in
to

government

some

private
cases

re¬

sluggish response of price

excess

demand.

higher

charged

prices.

system might break down if

suppliers

could

orders.

charge

orders

unrated

than

But

rated^

not

But of

course inflationary pres¬
resulting from
inadequate
monetary-fiscal policy, combined
with general price controls, wni

make the need for

production con¬
trols more widespread and more
persistent. The inflationary pres¬
sure

will increase the number and

size of the price increases needed
drive competing demands out

the

market

and

permit

the

government to satisfy its military
requirements. And the price con¬

control

might

discrimination,
but not to prevent non-discrim¬
inatory price increases. Both in
1940-41 and in 1950 priorities con¬
trols operated without price con¬

somewhat

could

allocation

had

question

contrary

con¬

trols. For example, it is sometimes

suggested in the

rationing
controls.

hold

down

direct

any

believe

of meat that

case

would

without

price

that

the

price

prob¬

the kinds

tems

for

use

their

prevent

allocations

materials

prices from

rising.

ended.

open

would

not

That

is, the supply
exhaustively allo¬

Deliveries

cated.

orders

pulsory,

but

against rated

would

deliveries

after

delivery in this private
system.

fact,

the

munitions industry is likely to be
an especially disfavored customer.
This

kind

whenever

thing can happen
industry is operating

at capacity. It seems to have been
true in

the

spring of 1950, before

Korea, that defense expenditures
were

lagging because

demand
tractors

increased
had

*Tran script

Stein
nomics

before
of

trouble
of

private

defense*

getting

statement

Conference

Mobilization,

The

other factors in the postwar years,

the

into

divert

without needlessly disrupt-

our

will

lenders,

program.

manpower

...

and

other

and

injustices.

even

These must be minimized

elim-

they become apparent,
'
But the big thing is we must get
inated

„

aided, abetted and encouraged its the job done.
citizens to go on a reckless

ing

spree

frerfzied
was

which

business

spend-

developed

activity

which

mistakenly called prosperity,

With

the

ment,

we
our

continued

live

debt

standing,

and

remain, out-

sought

both

collectively

this

job,

their

want

volun-

tarily and wholeheartedly and in
the

fullest

agencies

cooperation

charged

with

the

over

war

our

clouds hang-

horizon,

al-

increase

are

youngmanhood, will

and demand

masse

that political expediency and ex-

travagance be put aside and that
first things come

programs are

current

the

first.

welfare

sacial

called

These sospending

still to be found in
requests for appro-

priations. Public housing is asked
for

the

under

new

name

de-

Tbe recent report
0f the Federal Security Adminis-

fense

housing

trator

urges

upon

the

President

and

the Congress the extension

and

expansion

calling

the-grave

of the cradle-togovernment-aid
pro-

including the Federal

even

Health

the

Program,

Insurance

for

government

white

even

them

peacetime.

and

continuance

The

enlargement

wartime

nothing

of
but

sheer

N'ikolay Lenin stated: "Some day

in Korea and the preparedness

program

rise ahnost

re-

first Ihings should come first. The

time, with

the

country,

&reat

this

the

sponsibilities in the various fields,

war

the

think

ours.

^^were^leedhirth^^axpaye^s

to dole out billions of dol-

ing low

ernment

hour is fast approaching when

associations

want to do and to play their full
We

S^ind exceeding

thT'mil^of ^TepresentaUve^ov-

cost of which can only be wildly

In dealing with these problems,

At the

said: "The mills of the gods grind

and

individually

the

and

ways

lars to millions of people.
same

be-

means, allowed our tre-

mendous

means

govern-

helping

bankers

high taxes bringing in tre-^part.

mendous revenues to

yond

do,
has

one

gram,

is.

slowly, but they

rifke?of^s

the

problem

politics?
Some

omy.

government

think

not

duration

Our

ing

and

gear

above
it

patriotism

the

lies

the

We must

sentatives

people

economy

agencies

full-scale

to expect our reprein Washington to put

unrealistic

to both the size and

its

upon

are
pro-

foreign shores and our whole way "<
of life is at stake, is it politically

economy

and

the

Congress will do it.

our

program

upon

for

prepare

duration.

long

•

overwhelming

that

tremendous

and that this program may be

war

sponsibility for this
effects

however,
upon a

gram

I do

ignore the bank

certainly

all

inflationary embarked

Many banks refused to

earnings will probably be 6c or 7c lower
ago, when the rate was 40%.
The 1950 balance sheet is not
yet available but at the end of
1949 the common stock
equity was 42% based on the holding
company balance sheet, and 29% after

than

pro-

Govern-

Federal

government,

have been

and^

prop¬

the

centage

amounting to $5

and

terms.

very

The

problem by helping to offset in-

..fv

the

and

tremendous

devised

unsound both in their amount and

75,000

high efficiency, using only two-thirds of a pound of coal per
kwh,,
due to the very cold water available in New
England for cooling
purposes, b'-v-"/
."V■>.:- \

pic-

lowed our military strength
equipment to disappear.

the

later.

purchased power, should bring total capacity to 1.4 million kw.
double

the

upon

In this program,
leaning of the facts leading to our prespolitical crutch of housing ent economic situation not befor veterans, terms of credit were cause I want to indulge in needestablished, backed by guaranties less criticism at this time. I have

hydro¬

new

members

who are well in-<
this
subject that
a;
of
$7
to
$9
billion

the Congress

could

ment.

in, in the fall of 1951, and a
In 1955 the company expects to complete
the Littleton hydro project with
150,000 kw. which, including firm
similar unit

been

boom

33,0C0 kw. Worcester

also

electric plant of similar capacity a few
days later.
kw. steam unit at Salem will come

has

housing

level, the management has decided

the vagaries of the weather. .The

eliminate

way

proposed budget which
before the Congress.
It

minimum

the Home Front

gle inflationary factor based
private credit in the whole

the

this

the

now

This kind of action would strike

cautiously in restoring the $1 rate, and it now looks as
though there will be no increase until late this year or early next
year even if water conditions continue favorabld.
By the end of this year the management will feel less depend¬
steam

page

Mobilization

unfavor¬

move

ent

from

and hence earnings have
earnings of $1.48 in 1946

added

has been stated by some

Continued

1947 was dropped to 80c.
early in 1949.
conditions the share earnings have now

the

could

from

stock late in

better water

almost

(B)

I do not know how much

this list.

(A)

could

which

others

formed

hydro company,
somewhat irregular.
Pro forma
declined to $1.08 in 1948, when water
able, and the $1 dividend rate which
a

been

new

probably

about any particular one of
things.
There are many

argue

potential buyers.
capital gains tax on the sale.

veterans.

sound

sale of the gas properties might yield

harbor

veteran

rather low earnings-price ratio might
be warranted in fixing the sale
price. The company has asked the
SEC for exemption from competitive
bidding, and there are said
to

and

and even the extension of
benefits
to
physically
I do not wish to

—yes,

or more, it is estimated.
The
aggregate book value is around $22.5 million, and "normal future"
earnings (after natural gas is received) have been estimated at
$1.5 million; since the purchase could perhaps be financed par¬

money,

river

works,

projects, and buying of mortgages

1950-51

neighborhood of $30 million

tially with senior

many

improvements, public housing, so¬
medicine,
reclamation

million, and

others,

among

come,

public

being de¬
building up the electric properties, thus deferring the
necessity of equity financing. Last year's sales yielded over $12

voted

people

some

cialized

V::"'

from the various sales in

which

subsidies; price support programs,

sold, the management favors further

the

medicine,
but also at
postponing and deferring, if
abandoning, many proposed
etc.,

might consider desirable in more
normal
times.
In
this category

River Electric

Fall

Association

socialized

plans,

expenditures

company). Another recent move was
eight small companies into Worcester County Electric.

Cash

and

that

After the gas properties are
mergers

residential

least

received

modern, streamlined system.
has

merge

stopping cold the further expan¬
of so-called
social welfare

sion

35%

Holding Company Act at the time of the bread reorgan¬
June. 1947, a program is under way to weld it into a

had
to

about

is to decrease, by cutting to
nonmilitary

and waste in government
operations, important as it is.
1
am
talking now about not only

paper,-textiles, chemicals, metals and
are

govern¬

gance

through
serving a population of 2,150,000; principal cities
Providence, Worcester, Lowell, Lawrence, Quincy, etc.

rubber

increased

part

mental expenditures for war pur¬

expenditures.
I am not talking
just about attempting to get
more efficiency and less extrava¬

subsidiaries

Include

Obvi¬

now

conducted

are

first?

the bone, government

pas

now

set

poses

England Electric System

England Electric System, with annual revenues of over
S100 million, is the
largest electric utility system in New England.
Revenues were formerly about 82%
electric, 10% gas, and 8%
transit, but the bus properties were sold last year and the
are

should

what

New

properties

ag¬

ously the most direct way to off¬

By OWEN ELY

New

seriously

gravates an already serious situa¬
tion.
Under
these
conditions,

large

shall

economic

spend

Are

permit

his

force

the

going

our

stand

Our

States

destruction."
by

government to

the

1924

United

itself into

prediction?

military .tives

suicide.

and

fulfill

representa-

Congress

will

act

Volume

173

Number 5004

The Commercial and Financial Chronicle

(1677)
when
ents

enough

make

Must

their

constitu¬
known.

wants

Have

has

Balanced

been

the

last

factor
The

Budget

unbalanced

years

the

for

major

present

and

bud¬

situation.

great Federal deficits of the

last

World

War

and

government

borrowings from the banks to
help finance was the great credit

inflationary

factor

the

last

the

which

material factor.

actually

declined

spite of the defense loan program.
gyeat

are

mistake

must

gauge

\yhat

the

same

again,
then
expenditures

our

new

to the minimum

from

nonbank

the

sary

the

erts

added

(2)

and

money,

purchasing

neces¬

reduce

which

power

ex¬

inflationary pres¬
the fiscal year of

During
1947, out of the total of $150,295,000,000 "adjusted gross income"
sure.

this

$118,000,000,000

country,

received by people in the in¬

was

come

per

of less than $6,000
It is perfectly obvious
large amounts of taxes

group

year.

that

must

raised,

must

banks

these

come

largely from this group, because
that is where the income is. It us
also

dislike—to drain off the purchas¬
those

who

upon

increased

the

receive

purchasing

levied

That
in¬
cludes the wage earner who, by
full
employment and overtime,
power.

receives the bulk of this increased

purchasing power. I have heard
many
proposals coming out of
Washington to tax corporations
individuals

and

seen

the

high-in¬

brackets, but I have not
realistic program to tax

come

any

not opposed

high taxes

in these times to
high incomes, but

the time has
of taxation

when that kind

come

alone

simply will not

do the job and hold the

mast

wholesome

welfare of

learn

of modest

through

costs

line. The
for the

country would be

our

for the citizens

the

thing

means

taxation what
government
again it is a

their

believe

that

the

bankers

this

actually

infla¬

retard

(5)

the

of the
to

to the ex¬
they augment purchas¬
ing power which is used, are an
purposes,

effort

inflationary

factor,

payments

others

which

purchasing

mainten¬

Let us meet
this spirit and

competitive advantage.
doing we shall make a pa¬
any

triotic

contribution

and

citizens.

power

bankers

pointed out, there
are many other things of greater
Private banking and the credit
significance in this picture which

furnished

are

vital

and

must also be done. As

a
big,
job to

and

necessary,

financing

paredness

program

porting

sound

the
and in

The banks

omy.

never

sup¬

to do

better

There

position

this

vital

impaired

usefulness

function

warranted
ment

Their

war.

ernment

must

stymied

curtailment

their

not

ability to

voted

even

the

over

before the present

must

Ameri¬

our

American

de¬

economic

system and way of life resist all
attempts to use the present emer¬

tion.
The fact is that

gov¬

citizens believing in and

can

func¬

controls

emergency,

un¬

large volume
of bank credit will be required to gency as a means of fastening a
finance the essential production government-m anaged and con¬
trolled economy upon our country.
program.
With the greatly in¬
Eternal vigilance is the price of
creased cost of labor and mate¬
a

freedom,

and we must in these
trying times renew our determi¬

rials entering into the production
of

commodities,
a
very
much
larger loan volume is required to
finance

the

nation

loans

without

for

purpose

made

sound

loan

disposition

the

loan

conclusions

upon

preserve

enjoyed.

ally abhor

and

regimented

economy

safely be trusted with control
even
during
an
acute

can

emergency.
Let

each do

part in help¬
ing to make this Voluntary Credit
Restraint Program work. It will

our

the

contribution

extent

inflationary

pressures.

said:

official

"Let

each

Washington

put

our

and

sometimes

eral Reserve Board with the sup¬

on a

political basis have only

port

the

firmed in the minds of the Amer¬

Association,

ican people the absolute necessity
of the maintenance in this country

launched

been

and

cooperation

American

Bankers

than

Bankers Association.

until

that unless and
meet frankly and hon¬

say
we

you

estly these fundamental and un¬
derlying factors,
the
puttering
economic

with

around

this

Fed¬

Insurance Association

America,
tempt

the

the Life

the

and

to enlist all

leadership

voluntary

lenders

Investment
at¬

under

system

vital part of

as a

in a American
screening,

their loans and for the emergency

extend

credit
con¬

sound, free, privately owned,
independent
dual
banking

and

engage

program

our

free

economy.

Bankers Greatly Concerned

thumb¬

About Inflation
refraining from making loans for
screws
is largely just so much unproductive
purposes
even
We bankers are deeply inter¬
shadowboxing. Alone they can¬ though the credit is good, which ested in the
preservation of the
not and will not do the job.
contribute
to
inflationary pres¬ integrity and purchasing power of
sures
by unnecessarily and un¬ the American dollar. We are the
Bank Loans and Inflation
wisely increasing purchasing custodians of other
people's

let

Now

while

bank

about

which

much

these

discuss

credit

days.

statements

make

inflation,
hearing so

There

which
a

little

basis

are

should

for

this

discussion:

(1)
tomers

present
even

credit

Bank

bank

cus¬

did

not bring about the
inflation and was not
major contributing factor

to it.

The arbitrary limitation of
bank credit will not stop inflation
and might well have serious con¬
upon

power.

You

from
to

the

productivity

of the economy in the support of
the defense program and in the

and

have

the

received
and

program

the

Federal

statement
request

Reserve

Board

comply with the provisions of

the

Statement

Principles,

which is the heart of the program.
It is a good Statement of Prin¬

ciples

and

should

banks

and

other

used

lenders

measuring stick in the extension
of

(2)

sequences

money

and

are

few

for

funda¬
eco¬

price

terms

stag¬

can

human

citizens of this

adopted by

both

local

bankers

country,

and

national.

will

conducting the
business
banking in this country that
contribute
the

the

maximum

national

the

defense

domestic

credit.

mittee
the
and
on

bankers

preparation
the
the

overall
are

the

program,

representatives
credit

men

confidence and

com¬

participated in

banking

committee
our

representative

restraint

who

support.

merit

The

property.

That money is not
impersonal. It is human money.
It
represents the "blood, sweat,
and
It

tears"

and

the

millions

product

people.

their

brain

their brawn, their thrift and

their

labor,

their

industry, and

gence.

their

and
their intelli¬

economy

It represents their protec¬

tion against want in their declin¬

ing years; it represents the

sup¬

port and education of their child¬
ren,

the

care

cf the family when

they are ill, and their comfort and
happiness in a thousand ways.
We

cannot

stand

these funds dissipated by

and

see

inflation,

devaluation, and deficit financing

indi¬

great.

are

now

military

over

ex¬

The Congress has
large emergency powers

our

ment

economy to the govern¬
enable it to make quick

decisions
The

amount

citizens

by fi¬

take

and

quick

action.

liberty-loving, self-governing
of

patriotic

program

economy

keep

granted

part

our

the

this nation

penditures.

governments,

our

that sound fiscal policies

see

what made

are

engaged in a great
war
mobilization
program,
which involves huge

misery.

are

for

reason

individuals

opportunities

this

country

reasons

for

are

suffering

their

liberties to be restricted and their

nancing essential production and

already heavy burdens to be in¬
Now is the
time, if ever
in the history of this
nation, for
purposes which needlessly lead to an alert
citizenry to stand by as
further credit expansion.
minute
men
solemnly resolved
the

time

same

making

loans

Inflation

refrain

for

from

creased.

unproductive

cannot

eliminated

that

wartime

controls

economy

ernment credit and other controls.

mentation

of the people

become

permanent

The

job

can

our!

elements

done

and

live

This

country

elements

the

by sound busi¬

has within

challenge which

day.

necessary
we

shall not

part of

must

not allow

our

the

for losing our American
heritage
of a free political and economic

all

life.

meet

face

regi¬

present
emergency to become the occasion

settle

—

wartime

economy and of our life.

and

principles.

ness

the

—

labor, business,

population at large

down to

if all

only

economy

the

and

the

over

merely by the imposition of gov¬

the

to¬

must

not

lose

fighting to

great wealth
(as
as
a
great debt).
We have
great industrial plant with tre¬
mendous productive capacity. We

freedoms which

very

home

are

abroad.

preserve

have

well

Jacquin, Stanley Admits

have

great

agricultural

Mrs. Parsons

produc¬

tion capable, with improved techr

niques, of greatly increased
duction.

have

Street, New York City, members

pro¬

of the New York

people

who
have the productive "know how"
a

at the1 management, research,

skilled-workmen

tighten

our

lick this

can

was

levels.

Parsons,

capacity
which was the deciding factor in
the winning of two world wars in
I

But at this time let

ard

living.

This

not for¬

for

our

SEC

registered

years

and

the

Theory

originator of the
of timing stock

is the daughter of the late
Judge

fruit

Adonirum
Parsons

Judson

attended

Joiner.

Baylor

Mrs.

College

and later studied at the Conserva¬

tory of Music, Cincinnati, Ohio
during World War I. For a year
she

ment-controlled economy.

was

with the Ziegfeld Follies,
an extension

after which she took

The story of the growth of this
great country from its small and
modest

beginning to its present
is
a
thrilling and
un¬
paralleled chapter in the history
stature

of mankind. It embodies the span¬

ning of the continent from the At¬
the

Pacific, with the
pioneers crossing barren
parched deserts,
and
towering
snow-clad
mountains

sturdy
plains,

dogged

moves—a method of mar¬
ket performance diagnosis.
A native of
Belton, Texas, she

socialistic system of either
government-owned or a govern¬

with

number

investment adviser wiih the

Joiner

private

market

the

lantic

brokers

women

general partner in a
Exchange firm.
She was

productivity

grew and flowered and bore

become

Stock
us

country was made under the lifegiving air of personal freedom
and individual opportunity. Pro¬
ductivity of the individual is the
key to the American high stand¬

under

of the few

one

get that the great progress of

Joiner

associated

Mrs. Parsons, wife of George
Kingdon Parsons, well known in¬
dustrial engineer now in Formosa,

productive

this century.

Exchange

became

the firm in, 1949, has been
admitted to general partnership.

other job.

any

who

Barbara

with

belts and get to work,

our

Stock

that

announce

and

Partner

Jacquin, Stanley & Co., 44 Wall

■

country ahead of our party."
In
this connection, I should like to
add
that
actions
speak louder
words.

can

very

der any

has

portant

vio¬

but

and

talents

great. They must be preserved as
a
priceless heritage because the
same
things that made this na¬
tion great are the
only things that

American
system of
initiative, incentive, and
opportunity. It was not built un¬

above

of
putting
patriotism
politics.
Recently an im¬

nations

nor

simple

that

from achieving their purpose. Re¬

economy

■question

Here

are.

experience

use

own

nation. This freedom and

vidual

materially help to prevent those
who want to "hamstring and hogtie" the private banking system

This brings me to the Voluntary cent developments as to how some
Credit Restraint Program which- governmental credit agencies can

really

gering

who basic¬

powers

the effect of bank loans upon the

their

who

individual citizen

which

basis

sound

have

sons

the

not

vigilance

Only those per¬
sincerely believe in the
freedom and independence of the
we

was

are

proper

reach

the

and

proceeds

the

children the constitutional

our

freedoms and opportunities which

analysis of the

which

and

for

essential

his

both

success,
as

these

The

mental facts of business and

managed

They wanted increased

economy

impair¬

and

men

the

bankrupt.

nomic life without paying a

the

people in high

abilities, to achieve his ambi¬

and

nation.

government,

appear to want

and

powers

any

national lev¬

controlled

economy.

some

are

places who

their splendid
that field during

time, as citi¬
government, at

our

domestic economy.

sound

upon

performance

own

make

it, and they have the "know
based

that

our

els, does the things necessary to
possible the restoration of a

econ¬

are

part

know

neither
late

become

is true of

same

the local, state, and

ready, able,
and willing to do the job.
They
were

our

zens, see

pre¬

domestic

field and at the

vital

bankers,

should

constructive part of our economy.
The banks of this
country have

mortgaging your future;
keep it up long enough,

will

and

have

and

borrow

you

right, in

and by the

way

development

and if you

emergency.

own

our

must

service

his

bor¬

tion is the fundamental

to assist

upon

patriotic

challenge

curing

which is used.
I

prosperity.

are

econ¬

domestic

called

are

this

the

and

the

put aside any petty thought of se¬

all

are

whether

money

government

increase

needed

sound

rendering

the

goods and services

and

Loans for unproductive and

restraint

time not impair the pro¬

same

duction

essential

omy.

that

tent

the

exercise

man, woman, and child to set hia

and spend more than
you take in,

therefore,

which will retard inflation and at

capi¬

you

ycu

can,

this accumulated

way

sound

same

tifically. The opportunity in this
great country of ours for every

thereby

goal and then have the

be made of the

and

purchasing

We know that
you cannot
row
and
spend
your

of the loan and

proceeds;

the

tal.

to the purpose

reduce

of the dollar and

confiscate

the disposition to

intelligently

serve

goods and
only
source
from
which
services needed for the defense
enough money can be secured to
pay
the cost of the armament program and for the maintenance
of
a
strong domestic economy.
program
and save the country
This is true both in industry and.
from inflation. Why? The answer
in
agriculture.
Figures
which
is obvious. It is not good politics
to tax the mass of the voters.
I merely show the dollar volume of
the

and

the last

they

tion.

zation program is to be offset, the
taxes—to use a phrase which I

must

because

loans

such

how"

power

economy

functions, and the produc¬

perfectly obvious that if the
inflationary effect of the mobili¬

ing

domestic

inflationary in their end
They should be made by

speculative

even

raise the

in¬

ance

accomplish it. High taxes in
this period must be levied for two
to

proceeds

defense

(1)

its

whether

goods and services resulting from

the interest rate has to be raised

purposes:

which

and raised

investors,

essential
not

result.

ing is required, it should be held
down

Association

power

tion and distribution of necessary

by taxes and
deficit borrow¬

Bankers

raise

can

for.

pay

avoid

American

vigorously supporting this volun¬
of the loan tary effort, and I sincerely hope

Loans for productive pur¬
in support of the defense
program or in the maintenance of
are

was

made

use

determines

domestic

(4)

the

normal

poses

World War. Bank lending to bank
loans

the

country will do their part in
creases
or
retards
inflationary the banking field to comply with
pressures.
Figures merely show¬ the Statement of Principles and
ing dollar amounts of loans do not thereby help to make the effort a
alone provide a basis for intelli¬ success.
The lender is in a posi¬
gent understanding or action.
tion to analyze a loan application

customers

Bank

(3) It is the purpose

The fact that the Federal

get

support

economy.

determination

and

in corporation
and
.law at Chicago University.

course

She

•

has

done

service work
fare

work

College under
gram

extensive

did

and

Sarah
a

Red

trb&t

\
social

child wel¬

Lawrence
Cross

pro¬

at the nursery school there.

She
inaugurated a radio series
for young artists and has
appeared
on
radio
programs
speaking on

the

stock

market

and

women

finance.

in
V

unbounded courage. It tells of the

inventive ingenuity of the Ameri¬
can

With Jackson & Smith

people who, because of their

ambition,
industry,
veloped

their
and

(Special to The Financial Chronicle)

initiative,
their
their thrift,
de¬

productive capacity and

thereby secured a standard
living never before equaled

GASTONIA,
Smith

affiliated

C. —Davis T.
with

Jackson

Smith, Commercial Building.

dreamed of in the history of
this old world.
even

Joins Joe McAlister
(Special to The Financial Chronicle)

The

American system is based:
NEW BERN, N. C.—Henry B.
free individualism and free¬ Duffy is now connected with Joe
dom of opportunity. If you want
McAlister Co. of Greenville, S .C.
more than you have and are will¬

upon

ing tp pay the price in brain and
brawn and thrift and intelligence
and industry, there is no limit to
what
you

and

you
can

That

life. It has

the

kind

came

life

TEXARKANA, Tex. — A. F.
Wadley is resuming his invest¬

ment business from offices in the

new

geographically

what

of Texarkana

National Bank Bldg.
frontiers, He has recently been with Slayton & Co.
and scien¬

American

opened

Wadley Resumes

(Special to The Financial Chronicle)

produce and

opportunity

known

both

can

have.

A. F.

way

(1678)

The Commercial and Financial Chronicle

Continued

from first

Asia, where colonialism has flourished for centuries.
we should be unrealistic were we to shut our
eyes to such facts as these. It is at such
points as these

page

See It
We

that it often appears to us

General MacArthur

without

cannot

deep anxiety leave our foreign policy
party and to an Administration which for so

wholly to a
long had a so completely unrealistic idea of the position
and intentions of the Kremlin; which for so
long was so
vacillating about Korea and related Oriental questions
only to reverse itself at the eleventh and a half hour when
we

But Is He

the

military

who has raised many questions in

man

late

months

whether

has

the

current

controversy

be counted

listed

to him.

When he

not

tells

round

intervene, etc., etc.,

that

could knock Com¬

(and

gives

antiquated) notion that Orientals (including the Russian
indoctrinated Chinese) would respect and
accept a show
of

strength and vigor

sition.

the part of the West without

The Chinese Communists

of cat—at least

far

to be

seem

new

China is concerned—and

oppo¬

tate to

accept the theory that they would readily knuckle
under to the Occidental
powers, some of which have long
been engaged in
exploiting China as truly if not as sys¬

tematically
If

the Kremlin

appears

Europe

vs.

some

of the

in the White House.

successor

the question was

real

one.

were

engaged in a fighting
Germany in Europe and Japan in Asia, and there
way of ducking the question. If we musiJ now

with

war

was

regard ourselves as engaged in
in the
East, several Russian

Russia in both the East and the
issue is still with

cold

even a

satellites

war

with China

Europe, and
West, somewhat the same

us.

But the situation
is not

War

by which we are now confronted
nearly so clear cut as was our position during World
II, and the complexity and the vagueness of the

position

have

now

assumed present real hazards.

Cur¬

rent confusion of communism with
Kremlinism does not

help. In Asia (and in vague talk everywhere) we are
engaged in battle against communism or totalitarianism
v

and the like.

Yet Communist
Yugoslavia in Europe is an
We proceed cheek by jowl with Socialist Britain.

ally.

We do not like Peronism in
it

our

sacred

of Francoism in

Argentina, but do

not

regard

duty to unseat it. About the same is true
Spain. Many other peoples in many other

countries fall far short of

our

ideals of democratic rule.

organized
benefits

are

to undertake to root
out

authoritarianism

before
we

begin, and it

"concentrate

sentially the

makes little difference whether

forces" in Europe
blunder we made

our

same

Asia.

during the

It is

es¬

only untenable, practically
speaking; it is quite contrary to American
tradition, which
has
regularly accorded other countries and other
the full

right to determine

ernment and the

type of

prefer, and today

are

people

for themselves the form of
gov¬
social and economic order
they

according such rights without

question to such countries
slavia, to say nothing of
Latin American
in

our sense

Great

Argentina and

countries, which

are

of the term.

The meaning

Wise

connoting

Yugo¬

number of other

hardly democratic

term aggression is likeseems to be
regarded

It often

any tampering with the status
quo. But we
can, conceive of
cases, indeed we know of cases
(as does
everyone else), where the status
quo has a long and un¬
savory history and must be
regarded as anything but
sacrosanct. Nowhere are
there more such situations than

Many

excess

point

the

have

.fr'

Obviously the first problem for
management is to know whether
it is in the
excess
profits tax

that
as

dollars

little

off

dollars

get

profits, then

should

Needless

be made to

get in there, because
only then will there be cheap dol¬
lars available to meet competitive

aggression.
a

profits,
must

will be in

company

then

know

the

this

excess

management

fact

soon

should

the

con¬

should

department

hook

trans¬

expense to the

gressively greater

of the fiscal year go
comes
ness

the

months

by, so it be¬

necessary to have in readi¬

optional

the

hoarding to
already referred.

will

the

permit adequate
managerial level,

anticipation
executives

pe¬

retire¬

approaching

lack

for

years

of time

as
evidenced by
participate in the

discussion and formulation of
na¬
of vital importance
Useful

ried

say,

those

that

programs
can

experiments in
training,
of executives and su¬
be devised, and the"

can

programs

even

can

if the cheap

car¬

dollars

vanish.

Measures likely to be
taken af¬
fecting capital structure and cap¬
ital

items

generally

difficult

are

foresee, partly because

short time of possible

partly

because

legal

reasons

changes. It is apparent

however that many
companies
not

the

concern

relating to valid business
for capital

benefit, and

are

suitably

capitalized for effi¬
operations under an excess

profits tax, and much
be given to
the

study will
overhauling of
capital structures if it seems
likely

quickly started, quickly termi¬
nated, and should create no prece¬

that the tax will be
continued be¬

dents—except, and

yond

this is impor¬
possible to ex¬

tant, it will be
periment with new developments

possible, and for how much. The with the idea that the new might
ability to forecast will differ with perhaps justify itself on a regular
different companies and with dif¬
ferent comptrollers. The accuracy
of the forecast will become
pro¬

into

labor

cient

can

of per¬

area

ments, many companies have been
understaffed at the top executive

committee

OE account.

manager

t i mes

retirement age. Apart from
retire¬

the

programs.

OE
to

used

point

projects

$77,000 in taxes—and the

Particularly,
be

The

under-expendi- tional policy
as
$100,000 will to business.

ferring his regular

size,

s o m e

riods

dollars be only in
figures, tne stakes are level

bracket and for how much.
If the company is not in excess

effort

its

ments

OE programs should never be
fused
with
regular
not

lasting

thereby lengthening training

should

general offi¬

some

staffing

manage¬

program

too great for casual

cost you

This

company.

getting

profits,

not to let OE dollars become
iden¬
tified with regular
expense dol¬
lars. • The control of

every

with

business

produce

any

worthwhile

different

vestment.",-

basis.

expense

Production
the

excess

■

opportunities under
profits
tax
include

1953.

All possible

......

charge-offs for bad

debts, obsolescence

and

deprecia¬

tion will of course be
made. Divi¬
dend payments
may be made par¬
tially in cash and

partially

stock.
will

Assets subject to
mortgage
be

readily acquired.
taking of capital gains and
capital losses will be timed with

everything but those which re¬
quire new capital investment not
subject to accelerated deprecia¬

The

tion.

in mind.

Research

excess

profits

tax

considerations

The holding of State
and
designs, tooling up for municipal bonds will be examined
Bear in mind that over-spend¬ new* markets,
reorganization of with a jaundiced eye.
ing will give you a carry-back or production flow, testing of old and
Buildings and machinery will
be

that

programs

can

fiscal

year.

carry-back

of
can

value

Also

trollers

unless

servative

that

the

remember

are

company

that

comp¬
con¬

that their habit is

under-estimate

over-estimate

products

new

products under problematical

such

profits ceil¬

constitutionally

and

new

conditions, importation of experi¬
mental skills,
materials, and ma¬
carry-forward is
Also

exceed its excess

ing.

and

quickly put into operation.

rather

than

year-end

profits.

chines
any
or

are now in order.
In fact
current expense for
economy
improvement of product that

seems

to be too speculative under

ordinary

tax

circumstances

may

repaired
and
maintained at
great advantage over
competition
with no OE dollars to
plan with.
Long-term commitments involv¬
ing annual amortization will be

avoided;
and

even

leases, for short-terms
at high
rates, will be

preferred.

prove to be prudent for a man¬
It is apparent that
even
those
agement with cheap dollars at its simple and obvious
questions 'deal¬

was a good prac¬ disposal.
ing with capital items will
give
The
absence
of
tice, but under the excess profits
OE
dollars management under excess
profits
should not be used as an excuse tax
tax, it may turn out to be ex¬
plenty of scope for imagina¬
tremely expensive. This is one of for delay or unwise restrictions tive planning.

Formerly,, this

the number

danger points for

one

If your company

is in the

excess

profits range, you have two kinds
of money to account for and to
control.
the

normal

ments.

management.

They

are

currencies

different

two

different

The

production

develop¬

existence of OE dol¬

What

about

the

stockholders?

How do they

benefit through the
merely, increases the area of
entrenchment of their
company
managerial movement and forces
by the expenditure of OE dollars?
lars

prompt

decisions

competitive

advantage is to be fully realized.

It is true that
on

When people think of

a
ceiling is placed
earnings at the level at which

marketing excess profits
begin. The benefit
in
connection
with
the
They
must
be
excess
sep¬
to the stockholder
arises from an
profits tax, they generally think
budget estimates and
increasing coefficient of certainty
of advertising and of
accounts and, in my
opinion, it
prodigal ad¬ on the leveled off
earnings of the
would be wise to have a separate vertising at that.
Advertising may
countries.
arated

assign to the

unrealistic at-dimes.

Britain and
a

this

five

which

(1) Accounting and Control.
(2) Production.
regular ex¬
(3) Marketing.
pense is a separate and an ancient"
(4) Personnel.
problem. It is the OE dollars that
(5) Capital Structure and In¬ are new.
The administration of

•

war, and

which led to the
present impasse vis-a-vis Russia and her
satellites. Such a
position is not

the

the low six

mind

educa¬

projects.

be undertaken in the
sonnel
without

cer, not in the account division of
the
business.
Even

ture

from

follows:

throughout the world and impose upon all other
peoples
something like our own idea of democracy, we are beaten

assigned to

amount

commu¬

a sounaiy con¬
ceived contribution increases
geo¬

supervision of OE planning. Bear

carry-forward to the preceding

Beaten Before We Start
If

for

goodwill value of

uncertain,

ment

full

need not be scattered in
well-intentioned but unproductive
areas; the distribution can be so

amount may be even
greater if especially
managerial discretion corporation taxes are increased.
pervisors,
affected by the excess profits
tax,
Particular care must be taken successful

leading Re¬

At that time

touch

aspects

publicans, incidentally) disagreed* with President Roose¬
velt and his

discussion

will

amount

as a

General MacArthur (and

course,

ac¬

to be doing now.

battleground in a war on communism
or in defense of "freedom"
again confronts us. This is a
question which plagued us during World War II when, of

The

1952 will be the year of
tivity and progress.

accept the premises of the Administration, the
old, old question of the relative importance or urgency of

Asia

1951 will be the year

planning and of decision.

year

welfare

management
overlooks.

going

expect

money

encumbers it. If only
General MacArthur could

though

The year

hesi¬

and

metrically

day

hazardous

can

which

be desired.

breed

allowable deductions

promote the process!

presumption of managerial
inadequacy—not proof necessar¬
ily, but certainly a symptom, that
the planning and control of a com¬
pany's affairs leaves something to

suspect somewhat

top desk
some

nity, regional, and national

danger of Chinese intervention,

and his rather melodramatic

relations

where

tional

Under the Excess Profits Tax

cock-sureness only a few months
ago that he could march
to the Yalu River without

his

advantage to be taken for legally

Responsibilities of Management

two, and that Russia would
find it difficult to forget his

folder in

marked, "Maybe
try it!"

can

field,

Continued from page 6

now

Public

standing of things Oriental which is commonly attributed
munist China out in

prod¬

your

other

drawer

many

under¬

knowledge of
to

response

against competition, and a
risky ventures that
every restless sales manager has

now

over

greater

dozen

precisely in trying to reach sensible conclusions

much of the dead wood which

Right, Either?

Most of us, we believe, will be about
equally hesitant
about accepting without question the admonitions of a
minds

uct

nor

always realistic.

regard to such questions as these that some of the
slogan thinking of the day plagues us most. One recog¬
nizes the right of Britain,
Argentina, Yugoslavia, Spain,
France or even China to choose this
type of government
or that
only at the risk of being cited as pro this or that,
or, possibly still worse, dubbed an
appeaser. We shall lose
heavily if we do not find a way to free our thinking of

Washington

consumer

cus¬

developments

new

packaging,

with

military disaster only by the skin
of our teeth; and which has
continuously revealed itself
as unready for
any such role of "world leadership" as it
imposes upon itself.
,
,

that neither

tomers,

Slogans, Slogans!
It is

•

able to avoid

were

are

Thursday, April 19, 1951

intensive cultivation of

Certainly,

'As

name

for the

new

money.

I sug¬

well offer some

company.

opportunities, but tainty

This

increase

cer¬

earnings will be re¬
gest the letters "OE," standing for management knows that market¬ flected in
relatively higher prices
Optional Expense. Thus we can ing goes far beyond getting a for the company's shares, with the
have OE dollars, OE accounts, OE brand name on a billboard. There possibility of
long-term capital
controls, and OE
For

company

programs.

that is clearly

is the extension of branch offices

and warehouses to uncertain
areas,

gains.

some

cases

the manage¬

ment will feel able to
recommend
a

larger

percentage of

earnings

i \

> •'

Volume 173

Number 5004

The Commercial and Financial Chronicle

(1679)
lor distribution

dividends than

would have been the
for

the

added

earnings

certainty

given

basic

the

existence

of QE dollars at
management dis¬

posal.
VI

There is

;

great

one

;

area

that

embraced

The existence of

dollars

newer

able

consumers

foreign undertak¬

the

profits

tax

chance

and

program

orie^

the in-,

ternational

front

limited.

will

have

The date of the Conference will

But
be

can

extremely

made for

ably

many

cases

developed

show

Did You GUESS?

dollars

be profit¬

can

should

even

disappear.

The

Here's the

greatest

of the two

risks will

have been taken when
it is least expensive to do so.
And curiously, this support by

private

business

the

Point

the

Treasury,

1951

The program for the

Conference
"The

version

Effects

angels appearing

follows:

Inflation

Speakers
Howard H.

will

party at the Waldorf

Costs,

include

This

A. Wil¬

fred May, Executive Editor, "The
Commercial and Financial Chron¬

icle"; Philip

these

are

opportunities,

since
the very companies that

will

now

have

cheap

dollars

dent

•;

What is

profits

excess

1953?

v.-

;v,.
'
likely to happen to thp

Even

tax

after

the

defense

July

if the

even

its

toward the vanish¬

way

ing point, it is by
tain

that

the

means

cer¬

profits tax
lapse. Although

excess

will be allowed to

in 1950 business

imous

from the tax

revenue

against

almost

was

the

unan¬

tax,- by

1953
business managers will have
their competitive position
substantially improved by reason
of the cheap dollars at their dis¬
posal. They cannot reasonably op¬
many

found

pose

revenue

that

measure

helpful to their companies.
On the other
ments

who
an

the

have

they,

mistaken,

were

unequal

and

consequences

because

business

unpredictable

having

standard of dollars at the
of

front

double

But there
in the labor group
representing workers in the more
powerful and profitable companies
will

managers.

those

industries

and

ciate

the

uents.

will

value

their

They

support

the

can

continuance

tax.

the

unlikely that
profits

excess

made

affairs

some

the

tax

and

company.

the

board

Seagrave

directors

Corporation

fighting
is

equipment.

associated

With J. A. Warner Co.

of Colum¬

Stock

Exchange

Nordeman &

Mr.

Globus

the New York

with

firm

Bruns,

Arthur

120

Warner

Broadway,

Springer

and

New

that

announces

Co.,

York

Inc.
City,
F.

Kenneth

John

Bonnin

the

are

over

how to end the Korean

most

American competitive system
production and distribution.
In

spite

the

controversy
that we are likely to have in the
latter part of 1952 and early 1953,
my guess is that the tax will be

Take'

permitted to lapse. The reasons
are simply that the tax will
prove
to be in practice extremely com¬
plicated to administer, that it will

nue

ahead.

The

excess

friends
or

were

profits tax had few

among

the

those

Executive

knowledgeable

matters.

Congress

Branch

who

about

tax

In the absence of public

hysteria and in the presence of a
legislative failure, it seems to me
unlikely that sufficient strength
can

mustered

the friends,

objective, but if no such objective is apparent their
national impatience is certain to manifest itself. "Yet it is clear that, as of
today, we have no clearcut objective in Korea; there does not
appear to be
any quick political or military end in sight to the
fighting.
' \
*

is certain to dramatize the need for
answers

some

...

definite

pressing questions.
"Are we getting
anywhere in Korea, or are we
becoming more deeply mired in a strategic 'morass'?
"How

can

the Korean

"What should

our

war

be ended?

foreign policy be in Asia?"—

Hanson W. Baldwin in the New York "Times."

Yes, and

old and new, of excess profits tax¬
ation to reenact such a measure

for

in 1953.

and still

"General MacArthur's sudden replacement-

answers

hope it
a

may

"dramatize the need"

number of other and still broader

vital

questions.

in¬

from

Rockies
that

lower

yourself

does

profitably.

and

now

somewhere

they're running
near
$1.50 a

dends!

So I conclude my lineup for to¬
working day's game with only one dis¬
capital around $33 a share, and cordant note. While I was beating
year-end book value roughly $47. all this out, DGR went and slipped
492,464 shares of common plus below 60 to a meek 57V2. How in¬
What

else?

$2,400,000 in notes is the capital¬

considerate!
age,

last

Zenith

you

word

common

has been

know,

however

still like my pack¬
—

in TV!

written,

sold,

Cost

this

Total

rent

moulting.

The last of my
is

the

Denver

1950

Dividend

$60

3.50

4.50

$246

$13.00

Yield about 5.28%.

All four of these in 1951

might,

with

a little
luck, increase in (1)
earnings;' (2) dividends, and (3)
market price. If they do they will
quartette today in truth be
"going like sixty."

earnings could support

fancier

deal

<t-

About

four-way

that lines up like this:

and perhaps
it's the answer to your $64 ques¬
tion. Paid $3.50 last year but cur¬
was

;

climb the

DGR

but

day in the week, and
It's possible that DGR

every

always 1 share DGR
market marijuana!
Reference to 1 share ACD
its
alphabetical position on the 1 share Zenith__
Stock Exchange listings may well
1 share KCL
suggest to you that Zenith is the

•

interest

may never

April 30. Even for the common might make mountain
in
last eight months of 1950, how¬ music
your
speculative list,
with an obligato of mountin' divi¬
ever, earnings were close to $11

which,

clear and stated

from the tax will become pro¬

gressively
and " proportionately
less, even within the short period

produce grotesque and conspicu^ous inequities, and that the reve¬

casualties when there is

to end Dec. 31

derived

charges. You

spectacular performer this year,
being the only TV to top its 1950
high. There's talk of a split-up

war.

problem is bound to become more acute
as the weeks
pass, as the American toll of casualties
becomes bigger and bigger, and as no clear end to
the fighting appears. Americans are an impatient
people, as Lieut. Gen. Matthew B. Ridgway, Gen¬
eral MacArthur's successor, has noted.
They can

changed

"This

imaginative, alert and aggressive,
and that this type of indirect sub¬
sidy
thereby
strengthens
our

been
some

ization.

General of the. Army
Douglas MacArthur has had at least one beneficial
result; it has served to dramatize and define one
of the basic problems we now face in the Orient—

for

have

Zenith has

its fiscal year
stead

was formerly with
along
Byllesby & Co., Inc.

Yes, and Other Questions, Too
controversy

results

$132,000,000.

Springer

H. M.

managements which

companies

above 1949 in total sal.es, to

month.

benefits of the tax go to the busi¬
ness

30%

have joined the firm's sales staff.
Mr.

Co.

"The

that

McLaughlins—and all their

page

truly impressive, with 1950

The

bus, Ohio, one of the oldest and
largest
manufacturers
of
fire

students of public

grounds

from

Operating

Morton Globus has been elected
to

will

the

a case

for

like Radio, growth of the Pacific Coast, the
Admiral, Philco, Du- zooming operations of Geneva and
on Monetary Policy.
my
nominee for the Provo Steel, larger coal produc¬
Homer J. Bateman
Henry Christman, Jr.
James Washington Bell, Acting speculative Oscar here is Zenith. tion, and since last June heavy
This outfit has been expert with traffic
in Korea-bound i military
President of the Committee, will
(A) Homer J. Bateman, Pacific serve as Chairman.
electronics from the start and has hardware have
brought new di¬
Northwest
been dealing in tone for a very mensions to the
Company,
Exchange
profitability of
Building, Seattle 14, Wash.—Pres¬
long while—radios, hearing aids, DGR.
Per share earnings blos¬
Nat'l City Appoints
ident of Seattle Security Traders
then television and now its new somed from
$6.33 in 1949 to $12.50
Association.
The National City Bank.of New dreamboat, phonevision.
Only this in
1950.,
Continuing
excellent
York has announced the appoint¬ past week Zenith was talking up traffic
(B)
Henry
Christman,
Jr.,
plus lowered costs through
O'Neal, Alden & Co., 421 West ment of Walter W. Bittner as as¬ phonevision for Canada. Here's a dieselization, suggest a bigger net
Market Street, Louisville 2, Ky. sistant cashier. He was also ap¬ "hep"
management that's never in 1951, and something more than
—Former
President
of
Bond pointed assistant trust officer of cluttered up its forward motion, the. mousey $2 dividend vouch¬
Club of Louisville.
City Bank Farmers Trust Com¬ in its chosen field, by excursions safed in 1950. Another
thing, debt
pany. He will be attached to the into appliances such as ice boxes
refunding now in progress should
pension trust division of the bank and ironers.
add to net earnings the
Globus Director
savings

/ \

It is not

child

mont—but

constit¬

expected

sixth

Motorola,

mittee

cheap dollars

the

Going Like Sixty

,of the Economists' National Com¬

appre¬

welfare

the

for

who

Continued

beautiful

disposal

attending his own cocktail
Friday, April 13, the night of the STANY

begin with "J."

San Antonio; and Walter E.
Spahr and Leland Rex Robinson

the

past advocated
profits tax may decide

excess

the

hand, certain ele¬
liberal-labor

Myers

baby girl, Barbara Elise, to Mr. and Mrs. Elmer E. Myers
(George B. Wallace & Co., New York City) on April 14.

crisis

lessens; which is not likely, and

Chairman of Frost National Bank

Elmer

Kennametal,
Inc., and
Chairman, Gold Stand¬
ard League; and E. C. Harwood,
Director, American Institute for
Economic Research; J. H. Frost,

their disposal.

makes

names

M. McKenna, Presi¬

National

McLaughlin

A boy, James
Hugh, to Mr. and Mrs. John H. McLaughlin
(McLaughlin, Reuss & Co., New York City) weighing seven lbs.
15 ozs. on April 11 at
Mercy Hospital, Rockville Center, N. Y.

Hon.

promising

dinner.

Buffett, U. S. Repre¬

sentative from Nebraska;

John

third child prevented Mr. Kugel from

its

and

Mobilization

Kugel

baby girl, Candice Ann, to Mr. and Mrs. John H.
Kugel
(Kugel, Stone & Co., New York City). The arrival of the Kugels'

Business Earnings, Labor's Stake,
and the People's Savings."

44.

page

will

Causes

Luncheon

policy will fall to the companies
strong
enough
and
competent
enough
to
follow
through on

John

to the present time.

rials, designs and markets that in
few

Sherman, who was born on
May. 10, 1823, in Lancaster, Ohio,
and whose experience in bringing
about reestablishment of the gold

age the public interest with ag¬ standard after the Civil War con¬
gressive competitive enterprise.
tains valuable lessons applicable

mate¬

raw

Secretary

John

its ability to associate in one pack¬

preliminary explora¬

tions

Monetary

coincide with the birthday of one¬
time

great

test to

great

Economists'
on

at
the
Hotel
Willard,
Washington, D. C., May 10.

and

the

Policy

in the replacement
capital goods.
Management-under the excess

double standard

Crisis, will be discussed

auspices

National Committee

economy

True, the time avail¬

dollars:

maintenance

A Trio of

Credit

Conference to be held under

the

not be prudent-if
a

able to pian and to execute
company

products, wider
the more accept¬
goods, more effi¬

World

will

and better

availability

and

policies of United States in Pres-

wisely, as

them

Fiscal

Monetary,

be,
this inflationary influence will be
offset by social gains in terms of

to take risks in

did not have

used

are

most of

believe

ciency

ings that would

Hold Confer, in Wash.

unquestionably in some measure
an
inflationary influence. But j if

possible Point IV enterprises. '*
Here is the opportunity in 1952

Monetary Economists to Something New Has Been Added:

cheap OE dol¬

lars in the economy, even if every
of them is prudently used,: is

one

these

area open

management in which cheap dol¬
lars can be ventured in a
way that
will support
strongly national pol¬
icy and- the general welfare. This
great

VIII

except

ease

Rio

lot

Grande

Meanwhile you have had the rare
Only 351,677 shares of fun
of
seeing a bizarre
stock
common
represent an
equity grouping of a
ranch-oil, a chem¬
geared up, for market purposes,
ical, a rail, and a video. How di¬
by the powerful leverage of $92,- verse can
you get?
800,000 of funded debt and $32,531,300 face amount of preferred
stock (convertible into common)
Bache Open House ;
Western.

ahead of it.
DGR

Bache

miles of
road
from
Denver
and
Pueblo,
Colorado, west to Salt Lake City
and Ogden, Utah. Its location is a
runs

some

2,400

strategic
bridge
with
Missouri
Pacific, Rock Island and Burling¬
ton feeding it on the east, and
Southern Pacific and Western Pa¬
cific

interchanging

the

box

and

York

hold

open

house

Exchange,
at

the
will

Suite
on

589,
April 23

April 24 for editors or pub¬
lishers attending the ANPA Con¬
vention
pany,

New

which

tising in

York.

The

currently is

newspapers

com¬

adver¬

throughout

the country, will have on exhibit
a

and

burgeoning

members

and

ingswise

the

Co.,
Stock

Hotel Waldorf Astoria

gondola cars at the western end.
Prewar days were not fat earn-

but

New

display of its recent advertising
sales literature.

■

The Commercial and Financial Chronicle

(1680)

Continued

from

page

Our Two Major National Problems
have not heard of any one

in this

country, in Washington or outside
it, who does not believe that
government is profligate in its
wastefulness. Every one seems to
of

that current operating ex¬
penses of government could
be
drastically
curtailed,
and
yet
nothing is being done about it. We
seem suddenly to have gotten the
idea of a balanced budget and
agree

that is

even

gain. But the plan

proposed for attaining this bal¬
anced budget gives no considera¬
tion to reduction of current oper¬

of government.
proposed is higher and
still higher taxes, even at the
grave risk of destroying the in¬
centive for production which is
the first over-all need in this sit¬
ating
The

expenses

cure

uation.

tically every act we perform^ or tle attention, if any, was given
every policy we adopt, is infla¬ to the long-range effect of this
tionary and obviously so. Even kind of confused thinking. Wash¬
though we try to keep objective ington still thinks the cure for in¬
in appraising our acts, we find it flation is more taxes, and nothing
either difficult, or impossible to of any moment
is being done

such

the sales of ly the most effective vote-getter policies over late years.
If we
public at the known. We seem to be thinking could come to a clarity of view
same time that the public was rec¬
on
some of these
problems, we
only of the short-range aspects
ognizing the currently reducing of the situation and to be over¬ could find a far better basis for
prices of the old bonds.
looking the continuous piling up knowing how to proceed on our
of obligations, provided only we immediate problems. Let me try
Governmental Tug of War
can keep indulging the hope that
to sketch a few of these tugs of
It seems like a typical govern¬ we can defer them into a suffi¬ war which have been going on
for a long time.
mental tug of war, as we look ciently indefinite future.
One wouldn't have to be too
For example, we are subsidiz¬
back on it. It arose, I believe, from
two decades of funny—or phony cynical to understand the difficul¬ ing the silver mining companies.
if you wish—economics. The sim¬ ty of cutting Federal employment. We don't need silver for money.
In a time like this we don't need
ple fact was that we had become If you realize that each member
to support the price of silver by
slaves of our own previous poli¬ of Congress would be subject to
thousands of pressures to keep direction or indirection so far as
cies, and that alone imposes a
tremendous additional obligation jobs alive, it isn't too hard to un¬ world markets are concerned. We
had

increase

bonds

new

the

these

upon

who

men

trying derstand why the situation is

are

current needs and not

our

as it
There isn't any excuse for its
but it does help one

is.

level which

increase the adverse effects of the

they have now reached, there is
already grave concern on this
point and I doubt that anyone in
calm judgment can justify an in¬

past two decades of curious poli¬

in taxation rates until aft¬

crease
er

the

has

action

reasonable

every

been taken to cut current operat¬

ing expenses of government and

appraisal made of revenues
laws.
Along with this cut in operating
expenses could equally well come
a
large cut in the public works
budget. In addition to reducing
the demand for supplies more ur¬
a new

from present tax

gently needed for defense, a cur¬
tailment or postponement would
leave the public works available
for undertaking when the more
urgent needs for war production
have been met, and when

shall

projects will be needed. On
or both
of these points a
material reduction in the demand

new

either

goods could be effected with
comparative ease.
We seem to have dawdled in

for

step we have taken. Even

every

when

to agree on what

seem

has to be done

seem unneces¬

sarily slow in bringing the plans
to
completion.
There isn't any
reason
to blame any particular

party for our failure, for
there is plenty of blame to be as¬
group or

concerned

all

sessed

gov¬

ernment.
From June to November we ar¬

gued the comparative merits of
direct
versus
indirect
controls.
Instead of arguing about the com¬
parative merits of these two plans,
we

should

—the

have

indirect

introduced
far

both

These

policies of the

had made

Credit's

not

creates

tackled

the

its
an

After

emphasize

Crux

too

much

utilization of credit
mere
existence that

inflationary situation.

seem

have

settled

controversy
between
the
Treasury and the Federal Reserve

controls

Board,

that

never

assume

had

any

would be effective

materially slowing down infla¬
tion, let alone stopping it. We did

limit credits

installment sales.

on-

the

now tackling the
curtailing borrowing
by voluntary action of banks who
are endeavoring to limit borrow¬
ing to the essential purposes of

problem

are

We did require more
ments

down-pay¬ preparedness. I have a belief that
purchases of homes. We this plan will be reasonably ef¬

did limit credit

had

have
effect

But

transactions.

stock exchange
all
combined

little measurable

very

the whole economy up

to this time.

fective.

How

effective

will

depend entirely upon its adminis¬
tration, but the plan itself does
hot differ, in essence, from the
work undertaken through a capi¬

We did argue at length about tal issues committee as previously
which branch of government was applied in other similar situations.
correct
the
Federal
Reserve While this debate was going on
—

inflationary
dangers < it
been comparatively
We did talk of slightly higher easy to prevent this credit from
money rates on government se¬ being used. Nothing was gained
curities with their collateral effect by delaying action so long.
Board or the
the

excess

upon

talk

Treasury—regarding

reserves

all money rates. We did not
much

change
have

upon

ment

about

the

money

savings

should

have

These

are

only

few illustra¬

this tions which I am sure are within
would the field of observation of every
govern¬ one here. They could easily lead

effect

rates

the value of

securities.

little about the

ing

of the banks.

did

talk

need of institut¬

campaign

the

one

the

conclusion

that

for

years—starting in the early thir¬

ties—Washington tried

every

de¬

part of our people. We did not vice it could ih order to create an
inclined to recognize the dif¬ inflation and that inflation came
ficulty in selling increased quan¬ only as a result of war.
tities of government bonds to our
Now in the past five years we

seem

can

also

understand

don't
were

the world. We less-i

rates, starting off with the

wage
steel

industry, though it was per¬
fectly apparent then that this
would be the start of a merfy
whirl of inflation.. It was certain
there

that

was

warrant

Tri

granting wage' increases to one
part of the population unless all
parts were to be similarly treated^
Of course there was
economic
the

fantastic

for it'iri
argument that the

unsound

need

justification

increase.public buy¬

was

ing power. At that time the gov¬
ernment feared

an unemployment
of 8 million workers.
pent-up demands from the

April

recognize the fact that we The
major contributor to de¬ war had not made themselves felt

the

stroying the monetary system of and it seemed entirely clear then
China through the original Act. that we could have an adventure
But

formula, to put prices of farm
products so high as in turn to
guarantee high production—pro¬
duction far beyond our needs—
occur.. '
•
and then, in turn, having created
the excess production, be forced
Motley Views of the Deficit
Let
us
look back two years to destroy the excess rather than
ago when it became apparent that put it on the market and bring
there would be a large Federal the prices down reasonably to our
deficit. A great motley of views consuming public.
were presented.
Some of us
concerned about
Some were by
selfish interests who merely want¬ shortages of critical materials and
ed more for themselves, some re¬ their
imperative
need in this
sorted to fanciful arguments based country in the event of war, were
upon unproven ideas, some mini¬ very strong in arguing for plans
mized the importance of a deficit for buying up large quantities of
in the neighborhood Of 7 billion critical material years ago. It is
dollars
per year,
some
argued true that the Congressional appro¬
only for full employment, some priations were not adequate but,
argued for the need of increased on the other hand, the Adminis¬
public buying power—and nobody tration did riot present its needs
favored the hard path of living nor stress the importance of an
so as

to have

funds available to meet inventory
needs
should
further
inflation

within the national income—then

These

did

npt

gains proportionate to those of the
highly unionized industries. And
hear the

fantastic argu¬
union labor represents
all labor. If this argument is seri¬
now

ment that

ously advanced by proponents of
the cause of labor, I think the
facts warrant the charge of breach
of trustee

relationship. It is true

that many of these other groups
did make some dollar gainsybut it
is also

equally true that they suf¬
more
in true buying
power from the increased costs
imposed upon them. They had p
fered

far

buying
power,
eyeril
increases had beeri
made to the great body of publiq
reduced

though

some

servants

expanded policy.

increases

wage

evenly
throughout
the
economy. In general terms, the
white collar workers did riot make
spread

—

school

teachers,

fire¬

peak compared to all previ¬
history. Very few were think¬
ing of the long-range effect of
our program.
'
•
a

When many

parts of the world
were in such great need of dol¬
lars, we might very well have
made long-term contracts for the
On top of this 7 billion dollar things
they already
produced.
deficit, we were urged to spend They might, have been bought at
still more for further social ad¬ very favorable prices to the pro¬
vances in the field of medicine. If
ducing
nations,
and * then
we
anything was to be done in this would not have been at the mercy
field, consideration had to be giv¬ of commodity markets in a situa¬
en
to the sources of the funds. tion such as was caused by Korea.
Here we were with the highest The policy we followed exposed
national income in history, with us obviously to just exactly the
the highest peacetime tax rates, situation which we did encounter
with the highest national debt— when the threat of war arose. Our
and we were operating at a cur¬ failure to buy when world de¬
rent loss—and yet we proposed to mand was not at the top only re¬
ous

people when they were showing kept preaching that we are trying
willingness to sell their holdings to stop an inflation, whereas prac¬ pay out still more. Seemingly lit¬

over

government endeavors to

kept by corporations

cannot

either plan of control.
We started a few little indirect

right to

understand why it exists.
We

prior

slaves and we

Utilization

and

both much earlier than

inflationary sit¬

helped create
uation all

controls, and

we should have pro¬
vided effective management over

oc¬

that it is the

incident

Korean

curred. Not only did we jump intd
the
market
but
our
demands

over and above all this matter
in prosperity and keep everyone
why
of buying something we neither employed. There never was any
let the
want nor need, there is no justi¬ official attempt to justify the first
were no longer free agents to do
people know how active it is, and
what reasonably should have been is to become, in ordering supplies fication for paying more for it big wage increase on any basis of
for
defense.
When
economics, so the .natural infers
Washington than we need to pay.
possible.
We talk very glibly about aid ence is that it was good politics—
We did not recognize that large talks
about the
large demands
to the world. We talk of free trade and this seems to have been dem¬
reserves
were
potentially infla¬ upon the economy and when it
over
the
succeeding
tionary but not necessarily so. We doesn't take a hard-bitten attitude among nations. We argue for its onstrated
benefits. We establish it as thor¬ years.
had had previous periods, and not toward
inflation,
it. practically
too far back, when these reserves says
The merry whirl of inflation
to every citizen that his oughly sound on a theoretical ba¬
didj
sis. But on the other hand, we
did not have an inflationary ef¬ pockethook
follow this course and we have
will be served by
fect. We had seen the period when buying early those goods which won't grant import permits which had
succeeding rounds of wage
will increase our domestic supply
the government for years tried to he might want over the
emer¬
increases
each
year
since,
produce an inflation in this coun¬ gency period. It practically says of things we badly need, even seem to have overlooked the fact
try, but inflation did not take in to every producer and distributor though oUr own domestic market that the biggest factor in
i%
spite of large'reserves. We had of goods for
this country or is one far above parity or any oth¬ creased prices lies in increased
likewise seen inflationary situa¬ abroad, that they would be well er formula. We seem willing in
wage costs. They certainly make
tions which arose in spite of hav¬ advised to buy in advance of re¬ those fields to allow export per¬
up 80 per cent, or more, of the
ing no excess reserves. We seemed = quirements. The very indefinile- mits and even to finance the pur¬ costs in our entire economy. Some
to overlook that it was not the ness of these demands creates in¬ chases by other nations from our of our unsound leaders tried to
existence of excess funds that was flationary
pressures
which are own short supply here. It would argue that industrial efficiency
important—for the only inflation¬ bound to be felt through the be very helpful if we could get would improve so fast as to offset
some understandable policy in this
ary danger could come from their whole economy.
:
;
this increased labor cost. The idea
field. In this aspect our econo¬
being utilized for the purchase
never
Wri
had any validity, though
talk about the increased
mists don't differ half so much as
of goods for war, or by business
it did gain acceptance from those
amount of industrial borrowing.
our political leaders do. The econ¬
or
individuals in fear of greatly We don't
who thought only of the higher
attempt to measure it
omists seem to find it harder to
increased demands by government.
in quantities of goods. We think
pay they would receive. The re¬
We did not tackle the problem
go in two directions at once. When sult of
the across-the-board sweep
only of the amount being larger
of reducing the buying power at
politics enters economics it ap¬ was
than a year ago, or at some other
easily foreseen. By the time
the spots where the buying power
pears that no government is able
all other groups had negotiated
time in our history. We don't rec¬
to say "no" to any economic pres¬
existed. That buying power had to
similar wage increases, costs gen¬
ognize the inflationary situation
sure group that is insistent enough
be drained off, either by an in¬
which has continued so strongly
erally were up enough to absorb
in its arguments or strong enough
crease in the savings or by an in¬
in its entirety the wage increase
over the past year. The increases
in its voting power.
crease in income taxes. The tax in prices alone since a year ago
granted in the prior year. Then
One of our most difficult prob¬ the
programs so far enacted have been would
argument was advanced that
justify a very substantial
lems is the matter of a fair basis
helpful but they have not tackled increase in such
wages should be increased to coy¬
borrowings. We
the real problem of avoiding in¬
for prices
of farm products. I er the increase in the cost of Hy¬
don't try to get at all the facts and
flation. They will help balance the
think our people will be entirely
ing. The argument has great plau¬
lay them bare for public under¬
budget, but they don't reduce the standing in this • situation. We willing to take such action as sibility but it is inherently un¬
buying power where the large don't attempt to find out what would eliminate the extreme risks sound.
:
of farming. They are not ready by
body of income now exists.
part of these industrial borrow¬
direct action, or by establishing a
Wage Increases Uneven
ings are not put to use but are

cies.

years

possible,
and price and wage freezes ac¬
companied by only the necessary
as

the

when

bonds.

government

continuance

taxes

Thursday, April 19, 1951

ened the capacity of European na¬
Not understand our failures. The sim¬ broadly on the expense side of tions to rearm by raising
the
only did we have to reverse the ple, cold fact seems to be that in¬ the budget.
prices in world markets.
In February of 1946 the govern¬
trend of public thinking in this flation is very attractive in the
A part of our problem arises
regard, but to be at all effective field of politics and that it is like¬ from the vagaries in our national ment stepped out to raise hourly

to meet

With

sulted in greater pressure

policemen, city and munici¬

men,

pal employees, and many white
Their effective
collar workers.

buying

power

creased

whirl

back in

has not been

result of the

inflation

started

in¬

merry

away

February of 1946.

one

can

this record

claim in the face of

that union labor has

the

represented

other

workers.

The drain of increased local taxes
—to

state,

cover

the increased costs of

county

ments—that

and local govern¬
followed these suc¬

cessive rounds

of w.age

increases

for union labor does not get much

attention, but the taxpayers are
to buy all/aware'Of it iri general teriris, if

Volume 173 ^Number 5004

not*

knowing

started their troubles."

Despite all the

tions

the

protesta¬
of higher

pious

advocates

that prices would not in¬

crease

result

When we were youngsters in depressions.* If the cost of
living
for. We have al¬ high school we first heard the idea is lising, labor argues for compen¬
that perpetual motion was a phys¬ sating increases in wages and sel¬
ready gone so far that we have
strained our taxing capacity and ical impossibility. That may be dom
takes
into
account
the

economy can pay

wages

.1... t-

what desirable social advance which the

specifically

•

The Commercial and.Financial Chronicle

in¬

wage

have

that

proven
for

reserves

situation.

had

meeting the present

Still

have

less

any

true in the field of

science, but if

wages can be

power

These

money?

merry

byying

power

income

all

not

in the form of wages.

It propor¬
tionately reduced the value of all

savings, of all rental income,

all interest and dividends, of all
insurance policies and, sad to say,

all

the

annuities

and

pensions

which labor has struggled so
hard m late years. Here were the
over

groups—the forgotten men of our
economy.
all

people had

increase

same

1946

this

and

—

should

nanced

received

the

the steel workers

nothing

have

less

been

than

counte¬

sent

little less than

of the 60 million work force. Fur¬

stand, but until there
greater equality in the levy¬

three quarters had never had the

war.

can

ing of income taxes, there will not
people sufficiently con¬
cerned
to stop this gradual as¬
sumption by government of an in¬

thermore, it is not
opportunity

quarter

if the other

join

one

with the

be enough

meet my own

fishing

problem by getting

rod

and

tions and

rewards in the special¬

painful to

have

far

been

the

current in¬

come is concerned, and we would
merely have had a redistribution

think

the

and

gun

who

men

parts of the pop¬
ulation, but would not have been

valued gold some years ago in the

half

hope they would create

ruinous

have

many

followed.

generally

that

rates

wage

policy

Public

opinion

to have failed

seems

recognize

the

these

increases

certain to result

were

taining take-home

pay.

policies

Whenever
to

are

job,

That's

brief of

at least the approach

to it.

Neither knowledge nor wisdon*
be taken from you by the

will

process

inflation

everything else
down in
In

period

when

but

—

have will go

you

the crash.

world

history

strong America is essen¬
tial to the continuity of our way
of

life, to risk undermining the

entire

business

structure,

national

the

even

security,

and
for

recognized,

they
should
work transitory gains to a small por¬
and, for an example— tion of the total population is in¬
the demands for rising wages to defensible national policy.
both ways

compensate

for

increased

cost

living should take into account

reduction in wage rates when the
cost of living goes down.

Bond Club of

Chicago

Day

let

would

position

does not work, then it
is presented in the form of main¬
or.

the

Annual Field

of wealth which would have been

workers
same

all

argument

principles

the difference."

fringe

demand is to raise pay in order to
create purchasing power. If that

the wisdom to know

and

can,

unions, for the 45 million now out
of unions have not only had con¬
Plenty of the fault lies in the
stantly tc reject the offers of vol¬ end with the plain citizen who—
creased field of activity and in¬
CHICAGO,
111. —The
Annual
untary
union membership,
but if he is to be free—must know
creased Federal expenditures.
they have had to resist almost as what is the right thing to do, in¬ Field Day of the Bond Club of
Somewhere along the line, and constantly the rugged efforts to sist on himself and his representa¬ Chicago this year will again be
I believe we have
tives doing the right thing, and held
at
Knollwood Club, Lake
already reached force membership on them.
the point, we are certain to reduce
be impervious against the misrep¬ Forest, on Friday, June 1.
The
Management Must Coordinate
production and then we will have
resentations
and
other wiles of following General Committee has
a naturally induced inflation—not
been appointed:
Management's job is one of con¬ the demagogue.
one
created politically,
but nat¬ tributing to, stimulating, coordi¬
But, the greatest fault of all lies
Chairman:
John
W.
Clarke,
urally. If that comes I can partly nating, and judging the contribu¬ with the businessman in general John W. Clarke & Co. *
ized, and therefore interdepend¬
hunting dog, but I don't want my ent, activities of the participants
grandchildren to have to live in in the bread winning process of
the situation resulting from our our economy—and doing so in a
lack of hard common sense.
way that serves the balanced best
It is a whimsical thought but interests of these
participants who

by government—then

the

benefits,
pensions, and so forth, which have
creases
operates a little longer, mounted far beyond the public's
we ought to be willing
to accept realization. If the country is fac¬
the belief that perpetual motion ing some
unemployment, then the

No one
taxing the

of successive rounds
of
increases also decreased the economy

wage

starting

knows just how much

whirls

their

this successive series of wage in¬

creases—they did. Once more we
hearing the siren sopg that reserve for meeting the demands
raised substantially should war develop. While I don't
without a corresponding rise in expect a war to come, I would has been attained.
make no pretense of being able
More care needs to be used by
our cost and price structure. Are
we
to learn
nothing
from
the to read the mind of the govern¬ all concerned in the use of the
mental authorities in Russia. On word "labor." The union officials
past?
too
.Don't we recognize
successfully pre¬
that
this the other hand, I think they are have all
practice did not create any more realists and that fact ought to be empted the word as referring to
an
adequate
deterrent
against themselves, whereas they repre¬
production and did reduce buying
are

amount

(1681)

tion.

re¬

infla¬

People who like to monkey

with

money are now asking for
upward revaluation of gold for
the purpose of stopping an infla¬
an

for

not

having realized that he
Vice-Chairmen: Edwin A. Ste¬
failing his leadership assign¬
phenson, Chase National Bank;
ment by not learning and teach¬
Rowland H. Murray, Ketcham &
ing sound economics, and not be¬
Nongard; David J. Harris, Sills,
coming forthright and effective as Fairman & Harris.

was

leader in performing his politi¬
duties.

The General Chairman has

cal

ap¬

pointed the following Committee
going to
get
out of
Chairmen:
tors or owners, government and Washington in this crisis just the
Arrangements—Robert B. Whitthe
whole
public.
Management actions and the regulations the
Enter¬
succeeds—and even holds its job public as a whole thinks are about taker, F.'S. Moseley & Co.
tainment
Robert
A.
Podesta,
—only
by
successfully serving right.
the

are

customers, workers, inves¬

are

—

Cruttenden & Co.

those balanced best interests.

Fortunately,

under

John W.

Politics Must Match Economic

free

our

Inc.

Realism

Refreshment—-

Newey, Newey & Ayers

Dinner—Myron F. Ratcliffe,

in future buying tion. There would be some excuse system, when management is do¬
for a man taking either
view, but ing its job in a way that serves
pensions, annuities
there would be no excuse, for the these balanced best interests, it is
and savings plans.
nations accepting both.
also serving both the short and
A Fair Adjustment
We seem to be overlooking the long-term best interests of each
If we are to talk about equality fact
that
in
all
this
discussion of the claimants for a piece of the
of sacrifice, we might seemingly about foreign trade, in which we pie —i.e.,
again the
customers,
talk of letting the underprivileged naturally have to walk a tight¬
workers, owners, government and
people catch up in wage rates rope in order to avoid giving of¬ whole public.
with those who have received so fense
to other nations, \ye
Thus labor constitutes one' of
are
much, either at the hands of gov¬ guaranteeing that we cannot ex¬ the elements or claimants in this
ernment or in keeping with politi¬ port goods to foreign markets for interdependent group coordinated
cal pressures created by govern¬ we will have priced ourselves out or
"managed" by management.
ment. Cynically I have no hope of those markets. Never mind ail If workers move up to sit with
that anything like this will occur, the
other
difficulties
involved, management, they become man¬
tout it would seem to be inherent¬ just think of the social problems agement and are no longer work¬
that will arise through unemploy¬ ers—and they certainly must no
ly fair. However, in a period of
war, I can see no reason to con¬ ment in our own country when we
longer
represent
workers
but

Event—Charles K. Morris, F. S.
gain the
Indoor Sports—
fairly simple economic facts of in¬ Yantis & Co.
flation, regain their courage to be¬ Jules F. Cann, Lehman Brothers.
Further details on the Field Day
come vocal, and then make a hab¬
it of temperate but informative will be issued later.
free
speech
on
the
currently

tinue

troublesome

reduction

the

power

progressively

magnify

ticularly
threats
in

can

see

strikes

order to

gain

in forgetting that at

logic

and

slowdowns

selfish advan¬

start
importing the products of rather must represent the bal¬
foreign labor in larger volume, anced best interests of all the par¬

the

time

same

really taking work from

are

our

own

people. We

may

This

does

degenerate into class warfare
less there is

parties

are

un¬

realization that both

interdependent

ployment
thinking.

revise

tug of

our

lies in the

war

great degree. This factor of inter¬

efforts of the Administration

dependence

the

relates

not

only

management and workers

but

over

to lower interest rates

years

the

that

time

same

were

those who are
not
specifically trying to increase the sales of gov¬
joined in this issue—the consum¬ ernment bonds and while we were

the stockholders and the

ers,

eral

interests

•country.

the

gen¬

decreasing

whole the funds

ter do

Explosive

will

Inflation

whether

tional

policy

our

for

present

full

getting

seeking

nation, is not a guarantee of a
continuing explosive inflation—a
guarantee that in the end we will
faave utter devaluation of

As long

sharply
among

gaining

members

upon

retain

any

situations

toe

able

has

raising

does.

agree

position

been

the

structure

effectively than Russia
able

handicap

the

war

adjustments

every

by businessmen,
farmers, government, and—more
importantly—by the very union
leaders who are now professing to
be

trying to stop rising prices in
the public interest,
right while

they

dom

steps

natural

such

aside

to
to

processes

adjustments.

reason

govern¬

force

any

and it sel¬

the

same

it cannot stop further and

maladjustments.
definite

the fact.

are

The

re¬

strongly
though
the

pressure

inflation

far

—

from

mean

must

soon

the

get

all

costs

the1
increased

down

It is sad after all the discussion
several

standard

fair

whole

country—businessmen

wages,
there isn't

years

that

for what

and
one

for

there

constitutes

that matter

either

admitting

industry shared in the
profits—after the govern¬
ment takes a half. No recognition
left

Co.
Tennis—
Webber, Jack¬
Investment—Rajph
S.
Longstaff, Rogers & Tracy,
Inc.
Dividends—Hobart E. Smith,
Stifel, Nicolaus & Co." Trophies—
Robert
Mason,
Merrill
Lynch,
Pierce, Fenner & Beane.
Special

the

and

controversial

public

matters

interest—such

misunderstanding

short-sighted view of
country which tolerates it.
If

0. E. Abbett Joins

Staff of Douglass & Co.

the

and effects of inflation and

the

(Special to The Financial Chronicle)

BEVERLY HILLS,

any

Abbett

over,

has

Calif.—Cecil

become

associated

free

speech is neglected as with Douglass & Co., 133 North
unused right, it will with¬ Robertson Boulevard. Mr. Abbett
disappear—and

our

free¬

has

recently been with Harris,
& Co. Prior thereto he
spiritual well-being will dis¬ conducted
his
own
investment
appear with
it. Dictators get to business in Los Angeles and was
dom and

our

material

through

talking

the rest of

Upham

and

mainly

power

louder and

longer than their op¬

position. Dictators slay in power
through then forcefully denying
any opposition the right to talk—
if not denying any opposition the
right to live.

who

man

can

live

officer of Slayton &

has

pel

gone

cleared the way

which

dation

in decency,

Marache Sims Adds
(Special to The Financial Chronicle)

LOS ANGELES,

made

The

benefits

which

Life

Calif.—Michael

Foydl has been added to the
staff of Marache Sims & Co., 634
M.

com¬

unless the Gos¬
there first and
and laid the foun¬
decency

and

security possible.
Just

Company,

Inc..

is no place ten South Spring Street, members of
this globe where the Los Angeles Stock Exchange.

there

said

miles square on

fair

form of

& Co.
Base¬
Schanck,
Jr.,

& Curtis.

son

fort and security

prices.

the

May I invite your attention to a
the
very
putting more parallel from the lines of Lowell,

inflation

Golf—Robert

Co.

in particular have got to

Joins

have

for

taken

American
has

Way

provided

Blyth Staff

(Special to The Financial Chronicle)

SAN
Bruce

Wages come out of the granted the benefits of the Gospel,
economy first and if anything is so we have taken for granted the

permit the
bring about

For

that

measures

over

duty to themselves, but

as a

promoting

are

pipeline

politics

profits.

Ahead

cannot

downward

part of the economy,

planners

favor

shortages—the
shown

has

ment

against all so-called social ad¬
in

and

pressures.

Maladjustments

and its

favoring

selfishness

actions

the duty of leading citizens to

that

of businessmen. In fact, the
rise in prices will have actually
been due to improper or at least
unwise

Not
as

been

and

realism

to match the realism of

economics.

rising prices just an
by the failure of the er and

believe

which

group

Further

sult

caused

and for¬

economic

Now please don't assume that I

vances.

are

have

free market to curb the greed

consumers

all of the classes
selfish
advantages
for

our

its

about

greater

power.

and

as
producers. If we
change
our - thinking
around to that end, we will solve
a lot
of the problems arising out

group

public will

led

thinking

just

United Nations through the use of
veto

American

the

quickly

causes

degree that the present
campaign
succeeds,
the

union

themselves
can

with

concerned

the

around to

With all the maladjustments in

one

were

wreck

the economy—the aftermath of the

in this regard, one member would
even

invested. We had bet¬

no one

much for his

the soundness of

position

his

other

if all others

cur¬

power

have Ihese

competitive
can

without

Even

our

union labor leaders,

them

bring

na¬

employ¬

buying

thinking about being
all of our people, for that

one

ment, regardless of its costs to the

rency.

of them all

This whole situation makes

wonder

the

some

fair to

Guaranteeing

pie.

power

Another

will

and

whole

the

have all

not sound at all the friendliness possible in our
equality of sacrifice— desire to improve conditions in
or equality—or sacrifice either.
the less-privileged portions of the
This controversy
may
readily world, but when we get unem¬

tage.

ticipants

—

the present inequalities, and par¬

Bache

if we want to be saved—
against even ourselves, much less Holt, Blair, Rollins
ball—Francis
R.
Stalin
businessmen,
educators,
editors, and other conscientious Bacon, Whipple &
Art H. Oehl, Paine,
citizens
simply must get busy
So,

FRANCISCO, Calif. —
Alstyne has joined

E. Van

the staff of

Building.

Blyth & Co., Inc., Rusa
,

With Consolidated Inv.

a
(Special to The Financial

Chronicle)

living so high that
SAN FRANCISCO, Calif. —
seemingly given to the fact that there is no place ten miles square
Kenneth E. Gwin is with Consoli¬
on this globe where a centralized
profits are a secondary charge—
a by-product if you will—whereas
government, either Fascist or So¬ dated Investments Incorporated,
labor has the first mortgage on cialist, has been
able to do as Russ Building., c
much for all the people. Our pres¬
all production.
standard

If
then

corporate profits are high,
the argument based on ca¬

pacity to

pay

is presented, quite

regardless of the character of the
industry involved—whether it is
a
stable industry with relatively

ent system
for

matched
world

needs no justification,
produced
results
nowhere
else
ill
the

has

its

entire history.

Two With E. F. Hutton
(Special to The Financial

Chronicle)

FRANCISCO, Calif. —
Nathaniel S. Chadwick and James
SAN

philosopher once said:
the serenity to ac¬ C. Fallon are now affiliated with
E.
F.
Hutton &
Company, 160
stable profits, or whether it is a cept those things I cannot change,
cyclical industry with recurring the courage to change those which Montgomery Street.
An

old

"God grant me

The Commercial and, Financial Chronicle

(1682)
t

Continued from first

trial

the

last

of the fact that this

retailers

and

consumers;

at second, the Government's stockin piling program for raw materials;
and third, the fact that the nation
was suddenly called upon to produce
more
than its plant and
that number are equipment
would permit.
And
present time,

Up to the

war.

buying by manufacturers, wholesalers,

just nine months of fighting,
nearly 10,000 American men have
been killed in that war and almost, four

times

there is no denying that some inventory speculation took place in
almost every line of business.
cent about the war, and our fears
Supplies of materials for civilof all-out fighting this year with ian use now are far more plentiRussia have been definitely eased, ful than was expected last Fall,
the fact remains that our military So the adjustment that we are

missing in action

wounded. In

spite of the fact that the country
as
a
whole has become compla-

preparedness program is only beginning to gather momentum. It
will, during the rest of this year,
increasingly affect our business
unless

situation

economic

and

there should be an abrupt about-

going through at the present time
is essentially one which began on
the consumer level. It will not, I
believe, be severe or prolonged,
This

adjustment has its

roots

public's fear
by the military and produc- of shortages has been almost elimplanners in Washington. Gen- inated by the fact that month

face

tion

MacArthur's

has begun to

—

try today has a backlog of orders
that cannot be filled within the

still

nevertheless

country

dulled

has

months

few

awareness

production

grow by leaps and bounds. For
example, the machine-tool indus-

The Business Outlook
our

a new Voluntary Credit.same time, the Government beControl Program by the banks, gan several rounds of bonus and
Let me emphasize that this pro- insurance payments to veterans,
gram
is designed primarily to some of which were justifiable;
eliminate loans that would be used (8) as the cost of living mounted,
by borrowers for speculation, or tne unions came in for five rounds

two things; first, the

to acquire inventories they ob- of wage increases, which in turn
viously do not need.
increased the cost of production
minUtes. Third, in spite of very
A great deal has been said about and wnolesaie and reiail prices;
spotty, temporary unemployment the expansion of bank credit and (9) state and local governments
in certain sections of the country, inflation since the war in Korea began spending in excess of their
consumer purchasing power is still began. Bank loans have expanded, tax
revenues,
and
borrowed
at the highest level in history and it is true, by more than $7 bil- money with which to do it, and
it will probably continue to grow lion, to a total of about $53 bil- (10) at the same time, business
throughout the rest of the year, lion of loans by the commercial and individuals borrowed money
It will very likely be about $15 banks. However, as you know, the from the banks, insurance com¬
billion higher by the end of this actual production and distribu- panies, and other private lenders,
year than it was last year. This tion of goods and services in this which
in
turn
expanded the
purchasing power in the hands of country has also expanded tre- available purchasing power. All
the public will enable consumers mendously since last June. To be of these factors, worKing together,
to sustain a high level of retail exact, at the time the Korean War created a sort of "chain reaction,"
business. But the public will not began, we were producing at the and by viewing them as a combuy foolishly, so long as goods ap- rate of about $270 billion of goods plete process, you can get a good
pear to be available, or at exor- and services for the year. But picture of exactly how and why
bitant prices, regardless of how during the last naif of 1950, the the stage was set for further price
much purchasing power is avail- rate of production increased tre- riSes when the Korean war and
able. In spite of the temporary re- mendously. By the end of the the rearmament program were
adjustment period we are going year, we were producing at the placed on top of the pile,
through, I do not believe we are rate of $300 billion annually. You
You
have
heard
in
recent
in for a recession or a depression, can't produce anything without m0rjths a great deal of nonsense
next year and a half. I shall say
more about this in just a few

dismis-

after month, plenty of consumers'

sal, and the possibility of a Spring
offensive
by the Korean Reds,

goods have continued to be on the
shelves and available for sale, and

however, are again centering publie attention on the war and help

second, many of the very sharp
price rises were artificial, in the
sense that they developed out of
panic-buying, or buying for the

fo.r bank loar^s expanded, and it is
still expanding, although at a
Now with respect to capital and slower pace.
ana
credit: The investment of busiBut jn spite of the growth of

era!

abrupt

will be

that there

assure

let-

"own in the rearmament program,

^own in the rearmament program. panic-buying, orbuying JorJhe
^

There

four

are

separate things

future in the face of the fact that

might like for me production of consumers goods
discuss today. To a large ex- not been cut back sharply by

thought

you

tially opinion. But the conclusions
we shall draw today seem to me
The four phases

to be reasonable.

economic

our

would

interest

what's

ahead

picture

felt

deal with
production and
raw; materials, the availability of
capital and credit, a look at the
you,

period of reaajustment is an essentially sound
business picture and over the long
tun I think we shall look back
on it as being a rather healthy
business development, in the same
sense that the anti-inflation effects of the business readjustment
during 1949 were a good thing for
whole
wnoie.

I
1

whole

the rest of

during

ooint
point

•

The acute shortages of raw mamost businesses and indus-

terials
month

and

ago

about

until

some

still

are

ex-

countrv

{£? SSv

TTLh

essarv

onrnfc
is

far

b-Hter
now

for

and

the expanding they want to do,
because of the demands of the
defense program for machinery,

are

nrice and sudMv readjust-

ences.

were

some

the

common

severe

were

ness

shortages
few

commodity

mices

—as

knnw-mnupj ,fn ch'r„i'.

all

weeks

however

aeo

thev

to have' reached ' their
peak. Some have declined rather
sharply from their highs.
The

^emed

average

rise

price

most

commodities

the

the outbreak of the

60%

was

vanced

60%

lead

ad-

recently

115%

shellac

rubber

50%

150%

there

instability

great

This

silk

wool

has

been
prices

some

itself^as created

uncertainty

lot of trouble for producers who
of these items

use some

ago,

tin

was

than its

A month

selling for 140%

ore-war

nrice

Durinfj rho

few

weeks,

tin

has

Three

Factors

of Underlying

Streng^^^

Picture' There are three o£ thesa
factors. First, thus far, a large part
of °"r
.haa
merely , been in the planning
stage, but it will soon begin to roll
off. the Production lines and the

volume will become increasingly

dp-

ndl! for national defense and world
aflvinpf-H Et rearmament. As the next few
ThLT months go along, the inventories

the

average

anc? stockPiles of raw materials
which have been accumulated
meat prices for examnle rrfsp far thus far by the g°vernment wil1
more swiftly
r be cut down, as the guns, the
rp.
,
planes, and the tanks actually bear^ rlSe ir? business vol- gin to roll off the production lines,
um
ana prices until recent
weeks
of

course

matic

manv

nntahip

executions

rhthincr

onw

The second underlying factor of

was
were

aue

first,

three

fear

^things.
or

These strength is that the capital goods

scarcity

Basic

course

this

dollars

are
•

evenlv balanced

m0re

Y?gun

Businessmen who have read or There
deal

great

about

the

ex-

mPnt

prices have

Stet tEew£

tnemseives.

e "l" *

is no way

that any governit«?eif

legislate

nan

out

Son o/c?edhto rt°ent montL

™turally bave become somewhat The next time you hear some
apprehensive. They are afraid Government spokesman say that
of tba* they may be faced^ with lending by the banks is the cause of
..
shortages of credit when , they go inflation, I hope you will discount
of to a
bank to borr,ow money. I his statement, because it is 99 and

items
...

expansion

is the questmn of whether

cam. assure

you' that adequate 44/100%

credlt for every real, justifiable

„T

pure applesauce,
.

■

or not industry will have the fi- business need will be available
We. in business, industry and
nancial resources to carry out this from the banks. However, as an banking know that the rest of this
expansion. The answer to this anti-inflation measure, the banks year will not be easy because
question is an unqualified yes. are voiuntarily screening appli- there is going to be a great deal

indirect

wavs

including

govern-

a new

nlant

all

toe

government

nature of the inflation problem
?Plte of tbe present period of
bu.siness an^npI7ce udjustments,
p"cfs areT stl11 above tneir levels
°
rV°s^ ev^ry°ne
1S ready with an explanation as
a

industries

—

the creation of

new

Established corporations will be the end of World War II. I'd like
able to finance much of their own to present to you what I believe
capital requirements from the are the ten basic causes of inlarge surpluses of funds they have flation in just a simple listing
on hand. This includes undistrib- here today. These are—(1) the
uted profits and depreciation ac- great growth in the national debt
counts. i-.ast year, corporations during World War II, which gave
spent about $28 billion to cover individuals and businesses tretheir outlays for new plant and mendously greater liquid assets
equipment. They used $20 billion at the start of the peace-time
of their own money to do the job, period than they had ever had
and borrowed, or raised through before; (2) then, business began a
sales of new stock, $8 billion. It tremendous post-war expansion
isn't possible to estimate exactly program; (3) this was intended to
how much will be spent for new enable consumers to satisfy their
plants and equipment during 1951. great, pent-up demand for autoBut we do know that it will be mobiles, clothing, houses, and all
substantially more than was spent the other things they went withlast year.
out during the war; (4) on top
At least two-thirds of the of this, the Government underneeded money again this year will took some very foolish programs
be provided by industry itself, to support agricultural prices at
There is certainly an adequate very high levels; (5) the Governsupply of money available from ment also began foreign-aid proindividual investors, long-term in- grams, starting with UNRRA,
stitutional investors such as in- which took billions of dollars of
surance companies, and from the scarce materials and products out
banks, to take care of every legiti- of
the country;
(6) it also
mate need for short- and long- launched
a
housing program
term capital.

No Serious Business Recession

The Inflation Problem

sStag " ^et'S r/Vbew. bf??y the, real

cLtoaS; trnurchLe

outout of

A moment aS° 1 mentionea tnax output of a new plant, government
there are underlyin8 factors oi guarantees of loans, and prepay- to why we have had a long-term
strength in the current business ments on government contracts.
trend toward inflation ever since

little slower than

materials

raw

10%

produce very
basic
civilian necessity. -. ,

ment

A moment aeo t mentioned that

would

which

to t* deploried' ™ 'g^ers^eeraI

business boom.

comnln^^f^mtongtdarunyawaCy ^anLflltooufhlt
b?^^"ybo0m
g ' run-away stances' a^^

clined sharply

uoward

to the defense program

undergoing, they are preferable itself into the places where it is

the Government
and

aptalin

jjore "bank credit"
w
harder

business adjustments we may be goods will tend to direct capital

labge as the m0"ths 8° by The
defense program has required only
But it is still 75^" about 8% of our total national
more than its' we-KorL nrirp
production during each of the past
ThV!!l
there months. This government
rpariv mpntin^T I
J?
purchasing for the most part has
amnnp thp mnct^^r
«*"d large been jn tbe "supplies" category,
of
nrlpp rtoS Ail 6 6Xa??
Tbe real "hardware" of war is
inpliidinv
aariVMH,,rCiimm0--S' ^ust beginning to be produced. By
forpstrv
anH nthpr
1?immg' the end of the year, unless there
hv
9vp1 TDhn f
l°j?u is an a°rupt reversal of the reabove thpir Wi bTrLT r
armament program, about 20% of
sumers' nrices whirh aiwavc
our ind?strial production will be
last

withdrew its bid

onlv

Not

trutn

farther

Higher costs of doing business, cati0ns for bank loans. Those who °t confusion. In some lines there
heavier taxes, slightly lower merely want to speculate with the will be still further sharp and
profit margins, and government m0ney, or to acquire unneeded in- sudden changes. We will be
policies all must be considered, Ventories, are being turned down, wondering whether the decisions
however. For one thing, direct and j beiieve you will agree with we make, day-by-day, are the
government control or allocation me
they should ,be turned right ones.
that in sPite of the temporary of certain construction and capital down>
7
. :w

since

in Korea

war

examDle

105%

For

wholesale

and certain

materials

essay pnce ana suPPAy yeaajusi- course, is ine quesuon 01 wxieuiei

ments, than to go on rocking and
whole world Some of these short- swaying upvyaid wl^h the uncomages were temporaryinfonveni- fortable certainty that eventua ly
Others
that a, sevemt exPlosion would
take
businesses
faced with
p*ace* There nas never in all hisshut-down.
Until
recent
weeks
tory been a period of inflation
the general shortage of raw ma- ^
*1 did not enc* in collaPse» ,°y
terials had been the most serious 2V
drastic economic and social
single worry in the entire busi- cbanScs,
if inflation went far
picture
As a result of the enoug
1 Pers9nal*y believe
periencing'

.V
..

f
,

lend

to
be

could

quaffi

gSSSte.lha? contribute tolctly

fhe

Nothing

plant and equipment wmcn. the f,ve years since the end of alj the other factors were at work,
th1s'vear World War JI, there is a smaller but aiso they might have risen a
mfcmM^nd fnriiis^rTare eLand: am0.un,t of. bank .?redlt °utstand- great deal further if the banks
Business and industry are expand mg today, in relation to total pro- bad not been lending monev to'
mg their capacity to produce and ducti0n, than there was in 1939, or enable business and industry to
^
even in 1941, before World War
TSScS
oL
mills,:for example, are bei g
IL began. In 1939, for example, goods and services. Shortages of
withm 75 mi es
bank credit outstanding amounted fuppiy, coupled with huge dematter of fact, some business con to 24% of total national produc- mand alwavs mean higher nrices
cents will not be able to do all tfons.-Tbday, it Is onljt abort 20%/Sl^n^^S^Sp1^

«"sTon

LLufil?

Raw Materials

experienced

this

tries

refused

simnlv

monev

nrices have risen
during
But in spite of the growth of prices have risen anvwav during
anyway
ness^°n^™s and mdust;ries in bank credit outstanding during the whole period of time, because'

this out because during the past construction materials, ana certain
nine months prices, have risen too
of

been

present inflation problem, ana li

have

could

inllatlon

nally, some comments on business
trends throughout the country as

and

stopped dead in its tracks had the

Capital and C ed t O

the
ine

nmhlpm

infHtinn

nrpcpnt

countrv
country

that the present situation will the use of capital and credit. So
continue very many more months, the need of business and industry

has new
the

tent,* what I have to say deals defense program.
the future, and it is essen- '
Underlying this

with

Thursday, April 19, 1951

. . .

plants and equipment for indus- about

vaae

•

(

backed by Government guarantees

In Making

But in
ite of the busineSs
uncertainties we feel that we face
today> we have no reason to fear
that tbe econ0my is in for really
rough sledding, or that a fullfledged business recession is in
ih.

ronital

]nn(,

f°ad.s
Znthn^t
g

heheve

the

pTw!r conUnue^
holds

£Leaf
wp
..

tal

™

areaseSorP
P.

thev

hManee

abrupd

Lx
wflt
The

drasfic

its

nresent

reversals

aDruPt or amstic reve sals

jCdurr^rearmament
.

projram—

Ser? 1S n0 reason believe t at
the temporary readjustment that
lines of. busf\ness an^m"
arf g0.inS throu^h today
will develop mto a lecession
Slzable proportions,
The events of the past year
have demonstrated that this
country has an enormous capacity for growth, if we handle our

prospects soundly and wisely. I,
for one, sincerely hope that the
economic expansion which was
spurred by the beginning of the
war in Korea may eventually be
turned into the pathways of peace,
Only ten years ago, the technical
skills and the industrial capacity
we have in this country today
would have staggered the imagination.

hope

that another

ten

A great deal has been printed in and subsidies, and expanded pub- years from now, we may be privithe newspapers in recent weeks lie works generally;
(7) at the leged to look back upon this year

Volume

Number

173

5004

The Commercial and Financial
Chronicle

(1683)

which

this

sent

strain, but

Continued

one

from

faster

country

page

•

Food Price Index at $7.15 Touches Lowest Level Since

along the road toward
we

progress. If
spared the catastrophe of

are

all-out

war

our

use

ousness

have

with

Russia,

energy,

and

judgment,

ment added that real estate
to affect
housing

the

for

Industry

credit

curbs "apparently have
begun
activity." However, the preliminary figure of
93,000 non-farm dwellings started in March was the
largest for
any March on record except for the 1950 month.

fear

January 23, Last

The State oi Trade and

and

industri-

our

good

nothing

future.

The

wholesale

Steel Operations to Rise 0.6 of

Columbus & Southern

Korea

index

Those who expect the

new Controlled Materials Plan to
bring
improvement in steel supply are doomed to
disappoint¬
ment, according to "The Iron Age," national
metalworking weekly,
the current week. CMP will mean
more steel only to those who
get
their tonnage requests
approved by proving themselves essential
to reviewing officials.
The impact on non-essential
parts of the

Ohio Common Offered

about

By Dillon, Read Group
Dillon, Read

Co.

investment

heads

Inc.

banking

group

yesterday
issue

(April

value,

par

18)

200,000

Southern

Ohio

have

been

new

officials

Columbus

Electric

$20.75 per share. The
on

common

Co.,

Consumers'

new

for

listing

authorized

the

sale

will

wring out of material requests, and

CMP

are

(2)

the

forms

consumers who fill out

months; others

added to the general funds of the

will

processed

once.

The strain

may

forms may not receive CMP steel for
many
receive tonnage under the
program.

never

the economy will be such that there
Economic unbalance, labor

bound

are

to be

construction

ties among the small
plants which have not gotten defense orders,
will have to be worked out.
Meanwhile, there will be a steadily
vanishing supply of free market steel.

repay

part

bank loans obtained for that pur¬

The company's

pose.

for

program

the

construction
1951

years

and

improvements

electric1 properties
cost

stacked

estimated

approximately

The

$55,000,000.
includes construc¬

program

tion,

already started, on a
^generating unit of 60,000

third
kilo¬
watts capacity which is scheduled
to
be
placed in service at the

Poston generating station,
Athens, Ohio in March, 1952.
A fourth unit, also of 60,000 kilo¬
watts, is on order for this .station

scheduled

1953.'
The

for

service

■"

restore order to mill

company

;

operating

confusion
NPA

■;

public utility engaged principally
in. the generation and distribution

because of

directives, and

scheduling which has been kept in a state of
constant changes in DO set
asides, special

new

government programs.

The

American Iron and Steel Institute

Ohio

in a territory in
comprising portions of 23;
counties and having a population

operating rate of steel companies having
93%
steelmaking capacity for the entire industry will be

approximately 745,000. About
78%
of the company's
electric

capacity

operating

102.4%

revenues

consolidated

derived

are

operating

that

for

industry's

steel

$27,896,341 and net income,
preferred
dividends,
was
$3,448,022.
The
company
has paid cash

the

increased

week's

ingots

were

beginning April

capacity
or

Jan.

16,

1951,

2,045,000

year

every

the

compared

1926.

ments

have

rate of

The

$1.40 per share since 1947.

been

the

annual

Deetjen
in

partner

will

become;

Emanuel,

vious
the

Exchange,

Pearsall

change,

will

admit

partnership

Gerald

Owens Invest.

The

5.6%

Medical

Dental Building, to
in the securities business.
Owens was formerly with M.

Mr.

N. Hogan

& Co. of Medford.

158,076

(Special to The Financial Chronicle)- '

has

Ore.—Earle C. May
joined the staff of Foster &

Marshall, 89 West Broadway.

For

Jr.,

are

now

week

William,

connected

with

Courts & Co., First Citizens Bank
& Trust

Co. Building.

the

electric

14, 1951

was

according to the Edison Electric

the

price

pound

per

upward movement

Most grains, except corn, finished moderately

lower in fairly

active trading last week.
was

slow and mill demand

only

was

moderate.

Some selling of wheat was induced by reports of bene¬
ficial rains over the major part of the Winter wheat belt. Market¬

ings of spring wheat increased materially as more box cars became
available. Market receipts of corn were smaller, being hampered
by a continued scarcity of box cars. The corn market developed a
stronger tone, aided by an improvement in export demand and a
lack of hedging pressure.

last

Trading volume in grain futures showed little change from
week.' Daily average sales on the Chicago Board of Trade

totaled 27,300,000

bushels, comparing with 27,000,000 the previous
26,000*000 in the same week last year.

week and

Prices for cotton in domestic spot markets remained gener¬
ally at ceiling levels during the past week. Futures, except for the
May delivery, registered further losses despite a late rally.
Bearish
mand

influences in early trading were continued slow

for cotton

de¬

textiles, favorable weather in most parts of the

cotton belt, and the growing belief that the

approach

1951 cotton

crop

may

11,131,000 kwh. above that

was

total

of the pre¬

corresponding period two

represented

with 84,200 bales the

ing week

years ago.

39,474

cars,

States

year

There

alone, total output

153,801

was

units

last

units,

140,762

year

compared

Canadian

with

9,792

late

current

March

and

very little trading in the Boston raw wool market
prices showed an appreciable decline for the first time
Small lots of scoured woolen wools were sold for
government account at prices well below previous high levels. In
the first day's trading on Monday,
April 9, in wool and wool tops
futures since the general price freeze of Jan. 29, prices dropped
sharply as the result of heavy liquidation induced by the recent
decline in wool prices on the world market. Values in Australian

and

wool auctions continued to work lower

week

ended

1950
and

and
were

and

Aoril

Inc.,
1949

down

of prewar 1939.

6,478

built

industrial
from

reports.

when

201

195

about

12% under

made

was

States

and

of
a

122,714
total

Trade Volume Reflects Little

Change for Past Week

Despite widespread promotions, consumer spending through¬
out the nation in the period ended on Wednesday of last week was
virtually unchanged; while there was a slight rise in the interest
in some lines of soft goods, shoppers generally bought less durables
than during the prior week, according to Dun & Bradstreet, Inc.,
in its current summary of trade. The total dollar volume of retail
purchases was slightly above the level for the comparable period
in 1950.

■

;.c

was

mild increase in the retail buying of apparel last

week; total dollar sales were about steady with a year ago. The
demand for suits and coats increased, as did requests for ^

consumer

men's shirts and small articles of haberdashery. The call for dresses
continued to be
many

limited, in spite of vigorous promotions of this item
communities; some lines of formal dresses were in
':

■

Housewives purchased slightly less food in the week than dur¬

ing the previous week; both unit volume and dollar volume dipped
very slightly.
'V
^

Over-all dollar sales

moderately above those of

were

year

before.
Total retail dollar volume in the

of last week
a

was

period ended

Wednesday

estimated to be from unchanged to 4% above the

year ago.

Regional estimates varied from

these percentages:
New England

a year ago

and Northwest 0 to +4; East —1 to +3; South

Pacific

to +5; Midwest and
west+2 to—2.

Coast

+6;

South¬

and

-f,

/.<

slightly in the week with
the like week a
year ago.r Heavy inventories for some retail lines continued to be a
factor in the limited buying.
The number of buyers attending
various wholesale markets was slightly below both last week and
Wholesale ordering

declined

very

total order volume moderately above the level for

period.

Department store sales on a country-wide basis, as taken from the

Federal

Reserve

Board's

index for the

week

ended

April 7,

1951, declined 9% from the like period of last year. This compared
a decrease of 14% in the previous week and 1% for the four

weeks ended April 7, 1951.

failures
in

the

184

weather

172

preceding week, Dun

declined

concerns

moderately

failed

the

from

respectively,

sharply, 45%, from the 313 in the similar week

trade

in New

York

last week

conditions and intensified

estimated

Decline

declined

For the year to date department store
14%.
v

sales registered an advance of
Retail

in Canada.

Casualties
and

in the absence of United

with

Business Failures Record

Bradstreet,

totaled

and

reports.

2,530 trucks

Commercial

in many months.

the similar 1950

31,087 trucks built in the United

cars

week
ago

by parts shortages and government restrictions
agency

previous week and 104,900 in the correspond¬
Domestic mill buying decreased and foreign

Excessive rains continued to delay crop prep¬

Total output for the current week

cars

the

week

output rate is being held

levels

materials, this

output

units

was

last week

level of

ago.

of 16,000,000 bales.

aration and planting in eastern and central areas of the belt.

corresponding week in

United

a year ago.

increased demand, however.

increase

exceed the government's goal

Spot market activity continued to fall off with sales in the ten
spot markets totaling 72,600 bales for the week. This contrasted

There

Output Moves Upward in Latest Week

the

10,075

7.545

C.—John

Thurman

ended April

against last week's revised total of 148,284 units, and in the like

(Special to The Financial Chronicle)

FAYETTEVILLE,

100%

1950, but a decrease of
2.4% below the comparable period of 1949.

Two With Courts Co.

N. Hauser and

distributed

energy

(revised) units and 147,240 units

The

EUGENE,

and

Moderately in Latest Week

electrical

units for the like week of 1950.

With Foster & Marshall

total

chief function is to show the

index. The index closed at 323.01 on
April 10, comparing with 324.76 a week previous. On the corre¬
sponding date a year ago, the index stood at 252.22.

revenue

the

Auto

FALLS, Ore.—Wil¬

engage

101.1%

Combined motor vehicle production in the United States and
Canada the past week, according to "Ward's Automotive
Reports,"
totaled 163.876 units,
compared with the previous week's total of

Service

Investment Service with offices in

the

above

May 1.

liam Owens has formed the Owens

week's

18,261 cars,

its

in the closing days of the past week
failed to wipe out earlier declines in the Dun & Bradstreet daily

(Special to The Financial Chronicle)

KLAMATH

was

freight for the week ended April 7, 1951,
totaled 739,523
cars, according to the Association of American
Railroads, representing a decrease of 15,912 cars or 2.1% below
the preceding week.

bers of the New York Stock Ex¬
Cross to

rate

Carloadings Turn Lower

Co.,
120
Broadway, New York City, mem¬

sum

and

States buying.

week, 883,728,000 kwh., or 15.1% above the total output for
ended April 15,
1950, and 1,404,244,000 kwh. in excess

Loadings of

higher than

Following Earlier Declines

Hernon, Pearsall Partner
Hernon,

the

ago

industry for the week

power

of
of

week

May 1.

month

of the output reported for the

Co.,
120 Broadway, New York
City, members of the New York
Stock

The current total

Deetjen

ago.

estimated at 6,746,975,000
kwh.,
Institute.

Emanuel, Deetjen Partner
Carl

amount

light and

rate

increase of 0.6 point.

Electric Output Lifted

Pay¬

the
the

2,021,000 tons. A year ago it stood
of the old capacity and amounted to
1,906,300 tons.

common

since

week

based

production yielded

1950, and 24.3%

Wholesale Commodity Price Index Ends Week Higher

operating rate is equivalent to 2,057,000 tons of
castings for the entire industry, compared to

and

after

dividends

this

102.9%

week

week ago,

This

revenues

announced

the

For 1950

area.

represents the

foods in general use

demand slackened.

The open-end feature of the
new
program, concludes "The
Iron Age," is an effort to
keep controls at a minimum. It is ques¬
tionable that this
half-slave, half-free market can survive. For one
thing, controls breed controls. Also, competition
among consumers
for the 25% or less of "free" steel
will be
indescribably intense.

of electric energy

from the Columbus

20,

Compared with the headaches of processing consumers' CMP
forms, the transition will be smooth for producers.
CMP will

near

and

crisis, and casual¬

This week the larger steel firms find their
order-deck already
to the tune of 50% for defense
and essential programs.
Some middle-sized firms show
bookings about 40% for these pro¬
grams. Even smaller mills, which had not
expected to get hit so
hard and fast, find steel
bookings to these users as high as 35%.
These figures are only good for this
week. They will become stead¬
ily higher, as more consumers are included under
CMP, this trade
authority assets.
;
;
."VL:

inclusive, contemplates ad¬

ditions

cracks.

some

•

1953,

index

Export demand for wheat
all

not

company and will be available for
or

June

general trend of food prices at the wholesale level.

processed.

Military and supporting requests will be processed
first, then spe¬
cial programs, and
others in the order of their importance. Some

the New York Stock Exchange.

Proceeds

able

are

speed with which forms

and

wholesale commodity price

Manufacturers of consumer durables, especially autos and
ap¬
pliances, will be hard hit. The speed and impact of CMP
depends
on two
things, the magazine points out: (1) The amount of "water"

which

$5.96

economy will be terrific.

released an offering.to the
public at the close of the market

the comparative 1950 level of
$5.75.
of 31

Point This Week

food

price index, compiled by Dun & Bradstreet, Inc., leveled off the past week following three successive
declines. *The April 10 figure remained at
$7.15, the lowest since
January 23 when it was $7.08, but still 20.0% above the pre-

The

of stress and

as one

10%

or more

sales

responded

to improved

promotions by rising an

above the like 1950 period.

According to the Federal Reserve Board's index, department
store sales in New York City for the weekly period of April 7,
1951, declined 5% from the like period of last year. In the preced¬
ing week a decrease of f6% (revised) was registered below the
1950. For the four weeks ended April 7, 1951, a

similar week of

recorded under that of

and for

decrease

the

to date, volume advanced 14% from the like period of

year

last year.

was

year

ago,

•

The Commercial and Financial Chronicle

which

Continued

jrom

page

ine.

to finance the

shal] do well to exam¬

conditions

full

employ¬

high and rising rate of
capital expansion, unaccompanied
by a corresponding increase in the
rate of saving, tends to create a

have

condition of sustained inflationary

inflationary side of the-scale.

ment,

Undei
Changed Economic Ideas

Canada's Progress

pressure.

been

finance

has,

•

near

employment
sible in

•

have

condition

certainly

not

been

troubled with deflation. Even before the

dian

Korean crisis

higher

World War
look,the cost of
range
;

'dollar

end

was

the Cana-

thjm

erab]y greater

price

level

was

worth

cents

at the

trend- of

capital*, investment

year

been crowding more into the

1945, 62 cents in new industrial plant and equip- forefront has, super-imposed' new
at latest reports merit, in. development of natural and additional pressures, differing
registered 56 cents.
'
V!- -resources-, in housing,-in schools,; only in intensity '
' ' ' •
'*•
The history of Cariada's post- hospitals and other institutional
a Question that must-be in vour
war external trade is replete with
and public facilities has been the
{ ?
t this noint is "Well
the
examples of the unforeseen. At the most striking feature of Canada's
uL
capital expansion has been ac¬
outset we found that our credits postwar story.
Last year these
complished, hasn't it? How has it
to overseas countries were being capital outlays added up to a total
actually been financed?" The fact
drawn down much more rapidly of $3,800 millions.
That figure is * that the lion's share of the
than expected, which in turn was means more when
we are told Industrial1'ffrowth^f''recent" vears
a reflection of a rate of overseas
that it represents not only a new has been
reMay

;

August

1950,

and

much

recovery

slower

than

ex-

peak in absolute tenns, but

ffnanced Lt orthe

Mustry'ttself.

a rec-

Sfjfw
J vn °Ur eXP°rtS t0 Son! SIS
I® T From an anti-inflationary stand£rf to "
°fe ,Wel;e ?T
0 A inH,,etrv
ported l an important extent by provision ^ capital facilities. thA Point, it is an excellent thing that
of
itself
hppn
able to
,

offshore

has

purchases

under

ERP.

recent official survey shows that

S™' the whole period, comparable$4,300 millions.
outoys planned for
major factor
1951 total-

however, by far the
maintaining

SjT
tromjhe

over-all

our

that

Unly a

haven't

time,

market

year

our

shipments

not

decline,

the problem of

ess

of catching

is also

citing

But

up.

broad

Thursday, April 19, 1951

The

demand

for

supply of and
capital funds

y<Laii'

balances

tacularly,

....e

timism

field

the

rather
publie financing that has been done
time,

same

the

limited amount of corporate

industry

government has had cash surpluses

but

sober

easy

op-

appraisal

permitting
$1,500

reduction

million

the

some

Federal

contrary of this country's long-run poten- direct and guaranteed debt. That

diminished

and the

within

the

been
pres¬

intensified correspondingly,

sures
At

have

inflationary

and

Canadian

generally, based not

Actually,

of
ex-

widened

fact that since the end of 1945 the

with the sterling area seemed well

the

spec-

inevitable de-

tialities.

The

net

result

that

Canada, postwar, has been adding

has,

nancial

made way in fimarkets for private and

were,

cllnes in .overseas exports were ft) her over-all capital facilities at other non-Federal investment. An
oflset by increased

demand from
°"r
neighbour
to
the
south,
Throughout it all, actuality has

probably a more rapid rate than
any other country in the world.

perversely eluded prediction.

important

This

process

has had

economic

some

very

implications

economist talking to other economists

would

hand,

policy, on the other
manifest in official influ¬

have under-estimated the

postwar demands on our produc¬
tive facilities. It is also beginning
be

that

apparent

equally

demands

those

meet

ability to
the basis

have over-estimated our
on

present patterns of produc¬
In this respect there is a
danger that we may be fascinated
and misled by statistics. We have
all seen estimates of the growth
of

our

tivity.

Policy

Easy-Money

tion,

national produc¬

of Canada's gross

tion. These compilations show

(that
nationals product cwas
valued at something like $5
doillion in 1939, $12 billion in 1945
pressure. We have, up to a few
and $17%
billion in 1950. this
months ago, been operating in an
year there is a good chance that
officially-influenced environment
the corresponding figure will be
of easy money. Thus the rate of
something like $20 billion. Now
interest
has
been
ence

the basic level of interest

until very recently, done
relatively little to curb inlationary

rates has,

largely

from

vented

effects

brake

traditional

its

increases,

gradual

the rate of

capital expansion and as a stimu¬
lant to the saving process. That

picture has now changed to a
significant extent. Official mone¬

active anti-

tary policy is now an

inflationary force. But had it been
the

inflationary

which

pressures

contending

now

are

could

earlier on,
with

operative

fully

is I

think not unfair

that

suggest

been

have

conceivably
It

eased.

the

have

realm of interest rates, as we

had

in the field of

exchange rates, an
of
the
tendency of

illustration

government to distrust the forces
of the market

dam

hope that their
may in some way or

the

consequences

another

The

avoided.

be,
adjustments

seems

place and therefore

underlying pressures,

perhaps

gross

pre¬

through

exercising,

our

lesson

however, that the
are
forced in due

impressive but it

that looks very

is much less so when we eliminate

the amount of air that has gotten

these

into

figures

the concurrent

then

result of

blow-up in prices,.

comes

perhaps

some¬

thing of a shock when we discover
that, after eliminating price
changes, the actual physical vol¬
of the total flow of Canadian

ume

services increased in
1947, 1948 and 1949 by
only about 2% per annum — in
and

goods

the

years

other

words, by

net increase in

between

contrast,

chalking

were

than the
population. By
1939 and 1946

no more

our

gains in real

production at the rate of 7%

per

annum.

sion

1950

tual

expan¬

output of close to 4% in
But this

real terms.

attained

achieved

was

speed-up of operations to vir¬
full

tions,

capacity in
it would

direc¬

many

and

that

appear

what little leeway there was early
in

1950

for

increasing output by
course, and are the more drastic
drawing upon immediately avail¬
in their impact for being delayed.
able
reserves
of manpower and

productive facilities has
pretty well vanished^

and

The Effect of Rising Wages

Inflation
It is not
a

surprising that against

now

„

Added

Pro¬

ductivity in More Leisure

buoyant postwar background we

should have witnessed throughout

Dividend

Taking

The

question

which

course

leapfrog process going on with

leaps to the mind is why in the
and living costs as partici¬ face of such a rapid trend towards

wages

would argue greater industrialization have our
in common postwar annual gains in real out¬
justice, be a relationship between put been so markedly low. The
wages and living costs. But there answer is certainly not
insuffi¬
Now

pants.

one

that there should not,

broader
point cient purchasing power. That we
question still un¬ have had in abundance.. And at.
answered. I suggest in all serious¬ the same--time; as far as one can
also

which

ness

much

poses

that under conditions, of full

tell

from

the

•

rather* crude

over¬

employment (which is of course all statistical measurements avail¬
a desirable objective)
the annual able;- there: have been significant
demand for higher wages tends, gains in man-hour productivity.*
The answer is,. I think-,, to be
regardless of living costs, to be¬
come about as routine an affair as
found
in, a-, different- direction.
the annual report or the annual With the trend to a shorter work
meeting. If I am right in this, we week we have, as; it were, chosen
have, regardless of what may hap¬ to take a good part of the dividend
pen in other areas of economic in-^ of economic progress in the form
fluence,; one very potent force of additional leisure rather than in
pressing upward on production greater outputs The inevitable co¬
costs and on prices. From a long-^ rollary is that, as. a nation, or for
run standpoint therefore, we seem that matter as a continent, doing
to be in for a continual race be¬ less for a dollar has meant getting
1
tween wage rates and the ability less for a dollar.
;

technological
improvement. It may well be that
costs

reduce

consequence

cept

the

prewar

distribution

con¬

are now

back in. a-situation

where the demands, upon our pro¬
ductive capacity are sharply ex¬

the panded by the preparedness * pro¬

gram and where at the same time
at
lower the demands on that same capac¬
prices, may have given place to a ity for civilian purposes are at an
all-time high.
new dispensation with the accent
Everybody wantsIf
on
distribution at rising prices, more of the productive cake.
that cake could be enlarged so
through rising incomes. Things
that everyone* could have more,
certainly seem to be tending that
well and good. But without" bor¬
way, and I don't think that any¬
one
has really faced up to the ing you with the statistical de¬

fruits

economic

through

progress

goods

without these

towards

expansion

trade

profitsS For

tlle gap between the

trend

equally awkward surplus in trade

tion of

resources, and more yet has been greatly facilitated by the

insoluble.

a procsome

product of rather

developments

®laf United States and our of natural
adverse trade balance reflects
the

of this buoyant trend. Some

S- ^cesslon of u> of course, represents

did

ago,

causes

with

nigh

nor

savine through the reten-

some

buoyant demand need, to go into the underlying would undoubtedly

United States, and even

of 1949 the value ot
to

export

the anti-

Monetary

the concur_

Let us look next at some high- rent expansion in civilian produclighis of the domestic business tiom The price ♦ ceiling masked
picture. I mentioned the earlier this
major
disparity
between
fears that postwar expansion of money and goods but in the early
capital projects would be at a low postwar years the inherent and

ebb and would be insufficient to. p e n t - u p inflationary pressures
than at the close of absorb the volume of saving. What worked themselves out.
II. To take a longer we have had, in fact, is a situa- u -And,'as I have already indithis time in terms of : tion of precisely the reverse na- cated, the postwar situation in
living index, a 1939 ture. Indeed the buoyant upward which capital expansion has each

wholesale

55%
■%) ;

Developments in Canada

full

is practically posimperfect world; And
as

balance, been

moment's reflection

Moreover, our experience with wiu make this rather abstruse
cussed "baby bonus" was, I think fixed
exchange rates illustrates, principle very clear. The people
it may fairly be said, just as much again rather clearly, the difticul- employed in building, for exama
measure
to maintain domestic ties encountered in attempts to. pie^ a highway, a power plant or
purchasing power as it was a step fix prices when underlying con- a manufacturing plant, all obtain
in the direction of social security, ditions refuse .to stay .fixed.
1 incomes as a result of this activity.
And
in addition there was the don't think that up to September gut they are not engaged in propervasive fear that Canada's post- 1949 our experiments in rate fix- ducing the things on which that
war
business
expansion would iug had really very much effect income will be spent.
The men
not
be
great enough to absorb °n the actual course of our mer- working on these jobs don't want
the volume of saving available, chandise trade, although our ac- a piece of the highway, a dynamo,
One recalls, as an illustration of tion in
only getting down one or a punch press. They want autothe
then-prevalent
view,
an third of the way with sterling at mobiles,
refrigerators or new
article
written
in
1944
by
a that time
was undoubtedly ad- dothes for themselves and their
prominent
Canadian
economist, vantageous since it helped us to families. Of course some, but cerThis article pointed to then-cur- increase our purchases from the tainly not all, of the capital exrent estimates that, postwar, the sterling area. The several abrupt pansion
means that more conaggregate saving of Canadian in- alterations in our exchange rate gamer goods will ultimately be
dividuals and corporations would, did, however, have a very power- available. But the inevitable ro¬
under full employment, approxi- lul effect on the movement of out- suif 0f a capital program mvolvmate $1.5
billions annually and side
capital into Canada ai*d ing a high and increasing proporconcluded that "there does not therefore did much to accentuate tion of the nation's resources is
seem
the
slightest chance that the recurrent rags to riches pat- that wages and salaries available
private capital expenditure alone tern of our holdings of gold and f0r spending, unless offset by savwill be large enough, year after U. S. dollars. Our return to parity* jng, tend to increase more rapidly
year, to offset the saving which
tn 1946 cut off abruptly a flow of than the supply of consumer goods
would be produced by full em- U. S. portfolio capital into Canada available,
ployment." The inference was that which, in the circumstances of the
bGC&usG of this disD&ritv full giti- time, wc could ill sfford to lose.
An Armament Program Is An
ployment was highly urriikely un- Lack of that capital hastened us
Inflationary Generator
less remedial measures were apour way to the emergency
We can see at once, therefore,
plied. And one of the necessary measures of late 1947. The retreat that an armament program is an
measures,
in
this
economist's from Parity in September 1949 inflationary generator "par excelview at that time, was to provide brought problems ol a completely lence." No one working on a tank
a wider range of basic social seopposite nature. In less than a wan's to buy one. And casting our
curity measures so that, and I year we were confronted with minds back, we can readily recogquote, "assurance to everyone of what was for us a veritable tidal nize the fundamental cause of the
a
basic minimum would increase wave of incoming U. S. money inflationary pressures that built
the
tendency
to spend, among which, under the conditions then Up during World War II. The war
those
who
because
they
lack existing, intensified Canadian in- production program was in an
facilities fOr pooling of risks, are flationary pressures and greatly economic
sense
a vast capital
at present saving too much."
complicated our problem of deal- project which pushed incomes up
The actual course of Canadian in& ,with them.
In the final an- far out 01' line with consumer
events
since the end of World alysis therefore, it was the un- goods which were available only
War II is a rather vivid commen- planned and unpredictable move- jn very restricted volume. Taxatary on the limitations of human pent of capital which was the tion and saving drained off some
foresight. Indeed, if someone can immediate
influence dislodging 0f this purchasing power, but not
be found who can truthfully claim the Canadian dollar from its lowly all of it, and the result was in¬
to have called all the turns, his perch and which precipitated, per- evitably a huge addition to the
place I suggest is in a circus along haps" belatedly, the sensible de- supply of money. In the six years
with the other oddities of nature, cision, in September 1950, to break to the end of 1945 the public's
Instead of the expected slump we out of the strait-jacket of fixed liquid assets in the form of curhave had almost uninterrupted rates.
v
rency and bank deposits more
business expansion. We have had
than doubled, an increase consid-

t,;

helping

involuntarily

private capital expan¬

sion. In other words, fiscal policy

ports. Then again, the much-dis-

;

outlays of govern¬

ment; and therefore making a re¬
duction of Federal debt possible,

point is that,

The significant

under

(1684)

point

out

this

juncture that the public by paying
more taxes than have been needed

dollar
gradually declining in terms of
purchasing power. Thus I leave
with you, in passing, the great un¬
solved problem of full employ¬
implications of life with

economics.

ment

How

can

maintain full
the

employment and at
time evolve wage poli¬

same

cies which by their tie-in with
productivity, will help to main¬
tain

earner's

value

the

dollar?

And just

wage-

un¬

aspect of the problem,

derline

one

let

remember

the

that

recent

tails of
say

calculation, I might

right

now

that

far

well
can

the physical

quantity of total
national production is not likely
to be further enlarged in 1951 by
a much greater extent than 4% or

see

5%, this on the assumption that
very major changes take place

in the composition of the working
force
of

and

the

present pattern

working hours.
If this

not

economy

premise is correct, it will
possible to fit into the
the demands of rearma¬

the wage-earner's stake in ment, the supporting capital ex¬
the long-run stability of his dollar pansion on the part of private in-!
has been steadily increasing with dustry and at the same time pro¬
the widespread growth of pension vide us civilians with the flow of
years

goods

plans.
To
seems

sum

up,

this

point,

pretty clear that, as a na¬

and

services

which we

have become accustomed.

To strike

balance under pres-

(1685)
Volume

Number 5004

173

between civilian
and the goods available to

ent; conditions,
wants

three forces can
Higher taxes will
reduce civilian spending power—
but only to the extent these taxes
are not offset by additional wage
increases.
Secondly, individuals
and business entities can exercise
restraint in their buying for civil¬
into play.

come

ian

and, by saving, re¬
duce the impact of demand. And
thirdly, if the gap is not closed by
purposes

long-range

bination

Moreover, one
the

of the lessons of

past and present is

and

peace,

that world

attainable,

when

than mere
absence of war. Behind the head¬
lines of conflict and of diplomatic
maneuvering there is a story of
vast
populations stirred into an
must

much

and a desire for,
something approaching the living
standards we enjoy in this fortu¬

awareness

of,

forces,

another

the

will

remaining

and

some

time or

dollar of income of those individuals in the $26,000-andabove categories, only three-quarters of a billion of the needed
$10-20 billion gap would be secured.
Instead, we must broaden
the base and capture some of the $140 billion of personal incomes
now left completely untaxed, by lowering exemptions—no matter

every

And it may
good part of the

anticipatory.

short, I cannot

above

$100 of tax-paying coupons per

bring myself

that for the rest of our

shall need in
well be that a
this thinly-populated country to
price pressures inherent in the be worrying about a dearth of in¬
present
situation have already vestment outlets, or to be cudgel¬
been discounted, and perhaps in
ling our brains to think up ways
working lifetime we

size

not

pumping-out of purchas¬
printing-press and pricethe national debt—a sure '

oil, and meal prices.

Ki -

■ ;

sacrosanctity of the military

some

save.

now

in the process.
take some of the
steam out of the short-run infla¬

his future income

All

this

may

extend the area

of social benefits.

approach to such
programs, regard
them as what
tionary curve and dampen specu¬
they are—namely, benefits pro¬
lative enthusiasm;
vided by those who produce to
/But to admit the possibility of those who for one reason or an¬
abreathing-spell from a price other do not or cannot produce for
Standpoint is one thing. To sug¬ themselves — and evaluate their
gest that we are likely in the merits accordingly on social
foreseeable future to go back to a
grounds. Let us look more than
significantly lower level of either twice and with great caution at
business activity or prices is quite
any suggestion that social security
another.
We have all had the benefits must be extended simply
feeling
that postwar conditions to keep the rest of the nation busy.
Ihus far have been "abnormal."
I am not arguing that we can
But let

us/in

"Cross-Examination" By Mr. A. A.

can

however, "normal"
totally unlike any¬
thing we have ever designated as
such in the past. The demands of

For! Canada,

bids fair to be

the defense program are

likely to

for some years to come.
And taking a broader view, I sug¬

be with us

gest that, for as far ahead as we
can see, the overall demands on

tkis country's material resources
are '■ likely
to continue to put
spmething of a strain on the pro¬
ductive capacity of a relatively
small population. Indeed it may
be that our only hope of coping
effectively with these strains lies
in a much greater inflow of im¬
migration than we have thus far
been able to achieve even in the
postwar years.
Some
■

Conclusions

that government

I arguing

part to play in

process.

What

at our

time

has

the economic
do suggest is,

governmental action is
subject to definite limitations, po¬
litical and psychological as well
as
economic, and, secondly, that
for many years to come we shall
have little need
of philosophies
and practices born of the dismal
thirties. '
/'• /•'■' /-/v f-:
In the final analysis, the vast
struggle going on in the world to¬
day between two ways of life is
not going to be settled by tanks
bazookas but by

the energy,

imagination and realism of the
peoples involved. All this may
seem rather far removed from
a

you

proposed civilian expenditures.
•
Similarly,
Senator George, Democratic
Chairman of the Senate Finance Committee,
and experts of the Committee for Economic
Development; have shown how from $6 to $9

from
'

first, that

and

price increases ?tem from
underlying economic conditions?
Margins and the cost of specu¬

Now, having

at
shop in the
possible.
The

lation—The principle of buying
the lowest price is to

market

broadest

principle of shifting risks is to get
them in the hands of those peo¬
ple who will carry them for the
smallest premiums.
Low margin

requirements broaden the market
for risk and reduce its cost; effi¬
ciency; of marketing is increased;

ful

basis
If

return

rather modest re¬

speculator were willing
risks for a 10%
his risked capital < and

market

take

margins were doubled he would
be getting only 5%. Fewer peo¬

ple would be willing to speculate
and the market for risk would be
narrowed.
Further, if a 10% re¬
turn

price^or risk bearing, an
in

increase

the

increase

assumed.

risks

requirements
corresponding
cost of getting

margin

result

would

the res¬

risked capital is

ervation

•

;

■

ment for

eliminated from

in proportion to the $70 or $80
"
• . !
Answer—That does not seem to me the way to look at it.
Besides the specific amount that is being unnecessarily spent
there, it is an indication of a general spirit of extravagance. I
remind you of President Truman's recent defiant throwing-out
of a "dare" to any Congressman to cut the budget. And I don't
think we should blandly assume the Pentagon's military bill to
be so sacrosanct. Do you know that the military asked for $110
billion from the new budget; that figure being quickly cut by
over 45% by Under-Secretary of Defense Lovatt's committee?
In any event, I can't see how you can get away from the cold
.

■

The argu¬
Federal control of mar¬

Control of prices

non-military
expenditures.
'/' /";:
/>'■■'/ ■ J\- ■ /
Question—Suppose it is possible to make
those cuts in the non-military; wouldn't that
can

just "a drop in the bucket"
billion of our spending total?

must operate.-on

speculators

the

...

in higher farm

prices, and lower consumer prices.
Speculators perform an essen¬
tial marketing function. Success¬

billion

Adolph A. Berle, Jr.

every

did

discussion
of
current business
spent good deal of
problems. I hope you will agree
emphasizing the limi¬ with me that it is not. The Korean
tations of forecasting, I had better
crisis has suddenly confronted us
tread warily. Nevertheless there
with the need for a national stock¬
are certain conclusions that are at
taking in material terms. It con¬
fact that the non-defense budget should not be inflated over its
least suggested by the march of
fronts us at the same time with
liberal amount of two years ago.. That fact to me seems both
world
events.
We are in this
relevant and vital.
.
'"■.;/
."/, ■;
country caught in the
grip of equal need for a re-examination
.1
' '
*r
of popular economic beliefs.
economic destiny. For we have, I
Budget efficiency together with a non-political tax program,
think, a situation unique in the
in the setting of a free market, would go far toward "meeting the
With Slayton & Co.
world today. We possess resources,
strain of national defense."
greater than we had dreamed, and
(Special to The Financial Chronicle)
which are daily becoming more
QUINCY, 111.—Wayne L. Earls
Joins J. M. Dain
important to the life of this con¬
is now with Slayton & Company,
Coburn & Middlebrook
tinent, as some of the basic natural
(Special to The Financial Chronicle) (
Illinois National Bank Building.
tSpecial to The Financial Chronicle)
resources of our neighbor, to the
MINNEAPOLIS, Minn. — Wil¬
"/
' • • "" '
'i. i".•
PORTLAND, Maine—George C.
south begin to show signs of ex¬
liam H. Smoch has joined the staff
Weeks has become associated with
haustion. And along with these
With Glore, Forgan
of J. M. Dain & Co., 110 South
Coburn & Middlebrook, Incorpo¬
gifts of nature we have the price¬
(Special to The Financial Chronicle)
Sixth Street, members of the Mid¬
less advantage of well-developed
rated, 465 Congress Street. He was
west
Stock Exchange.
He was
BOSTON, Mass. — Francis H.
formerly with R. H. Johnson &
industry and agriculture and the
Cummings
is
associated with Co. and Boardman,- Freeman & formerly with Paine, Webber,
institutions of political and social
Jackson & Curtis.
Glore, Forgan & Co., New York
Co.
stability. Where else in the world
City.
today can one find a similar com¬
-

time today

speculative.. For

75%

purchase there is a sale, for every
long a short. Losses from short
positions must equal profits from
long/positions and vice versa.
Was trading itself inflationary or

turn.

appreciate, Mr. Berle, the
disposal here doesn't permit a "line-by-line" examination of the President's voluminous budget,
even if I were qualified to do it.
What I can
do to answer your question, is to offer you the
result
of
others' expert and disinterested
studies. I have here [displaying book] a study
issued by the Committee on Tax Policy, con¬
ducted
under the chairmanship of Roswell
Magill, Under-Secretary of the Treasury in"
the New Deal Administration of the 1930s—
showing exactly how $8/2 billion can be cut

Answer—Unfortunately,

ourselves to the prospect
"ever-normal boom." Nor

Berle, Jr.

May, that the budget
in social security, for

example?

commit
of

profits from long positions, in soybeans were much greater than
the margins required. The Com¬
modity Exchange Authority states
that the summer market was 67

Such savings result

our

Question by Mr. Berle—You said, Mr.
be reduced.
In what specific items;

1950

In the summer and fali of

done?

Question—How can this be

freight cost to Chicago. If

anything, Chicago prices were de¬
flated in terms of cash soybean,

further inflationary

Answer—Apart from the

prices were

much below Chicago prices

the

balanced. This must

East-

margin.

cash

Illinois

unusually

an-.,

processing

meal

and

Oil

crop.

reflected

wide

budget,
specific instances, over-dis¬ of keeping ourselves employed
there surely is no excuse for non-military outlays for pet social
counted.
At this juncture there and of diminishing the incentive
welfare projects and the like being one-third more than they were
number of influences now
to
The long-run struggle will
two years ago.
,/..
'..///•.■:
' !
operative which can have a direct, be, I think, rather to meet the de¬
and also
psychological, effect in mands upon us, and to do so while
Question—How about price and wage controls, Mr. May?
dampening down the inflationary maintaining some kind of stability
Answer—They should not be used, although I realize tempo¬
fires. There is the budget of two in the
purchasing power of our
rary use of some strategic materials' allocation is necessary.
Ris¬
days ago. There are the strong currency. To accomplish that ob¬
curbs
instalment buying. There
ing prices are merely symptoms, not causes, of inflation.
If
jective may well call for a great
inflation is stopped at the source through monetary, budgetary
is the voluntary program of credit
re-thinking of the relationship be¬
restriction which
the chartered tween effort and remuneration.
and tax measures, no general price rise will take place. And if it
is not so stopped, then the inflationary effects are merely post¬
banks have undertaken in cooper¬ We shall certainly need a re¬
ation with the Bank of Canada.
poned.
1
'
awakened awareness of the func¬
And there is the likelihood that
In practice, controls can never be limited to the duration of
tion of saving and its incentives.
in some lines inventories are by
And while we are about it, some
a so-called emergency.
Look at rent controls in Europe, kept on,
high enough to induce a revision of our approach to the
since World War I.
Controls are a cumulative process, one set
healthy element of caution, while
leading to ever more via chain-reaction, entailing permanent de¬
problem of social security would
the consumer himself is probably
struction of the free market. Regimentation cannot be partial.
perhaps not come amiss.
It is
pretty .well stocked up on durables natural and desirable that an en¬
If we imagine otherwise, we will surely lose the victory at home
and in many cases has mortgaged
while preparing to win it in a Hot War abroad.
: ,
lightened nation should seek to
are

the

values

government's spending?

to prevent

soybean futures was about 10
million bushels per dav, an
of 8 to 10 times the

Central

ing power to the people—a money
raising operation.
Deficits increase
instrument for socialization.

values.

commercial

annual' rate

individual could be supplied,

and must, be

above

In De¬
cember 1950 the volume of trading
in

Question—How about the

volume of trading does
futures prices are

mean

real

mitigate hardship.

be done

below that level.

A large
not

under present needs, is undeniable. B(y cutting
demand to fit the reduced available supply of goods, it would
serve an economic purpose; and also it would add much needed
revenue—to the tune of say $7 billion. Food should be exempted;
and

af¬

They cannot be held

ford to pay.

national retail sales

that the logic of a

maintain

onto the mar¬

ket for what the market can

consumers'

Also,
tax,

Regulated?

Grains must move

politically unpalatable that might be. The same applies to
corporation taxes, where, as in England, any further hikes would
confiscate capital and prevent needed capital formation.

Answer—The budget, can,

to believe,

how

about it.
In

Price movements, of course, are
often

Margins in
Futures Trading

Strain of National Defense?"

take

another.

from page 16

Should

"How Can We Best Meet the

ad¬ nate quarter of the globe. Realism
place auto¬ tells us that there is, after all,
matically through upward pres¬ very little that Canada can do, by
sure? on prices.
The price level herself, to raise the living stand¬
itself can, of course, conceivably ards of, for example, the 570 mil¬
be frozen although this involves lion people included in those na¬
great practical difficulties.
But tions which are on the "receiving
we
might as well realize that end" of the Colombo Plan. But
freezing a price level, even if it the demand will be there, it will
were possible, does not freeze in¬
be intense, and we, along with
flation. The pressure is there and other relatively wealthy nations,
must work itself out in some way
will be impelled to do something
these

justment

Continued

growth Continued from page 5

factors?

them,

supply

Financial Chronicle

The Commercial and

—

excessive

gin requirements is that

price changes are caused by ex¬
cessive speculation and that the
volume of speculation can be con¬
trolled

by adjusting margins re¬

the

and

increases

against price
low margins

leveled

been

criticisms

Principal

quirements.
have

required by the exchanges. The
implication is that if margins and
the volume of trading can be con¬

price

excessive

trolled

changes

As it would be

be prevented.

can

judged that prices were too

prices

would

control

prices.

margins

Some

„

considerable doubt on

beside the issue.

The use of mar¬

other than

contracts is a
the principle of com¬

guarantee

„

violation of

commodities

pricing „of

and

would

out

pricing
economic
submit it to more ad¬

the

forces and

control.

would work is

gins for any purpose

petitive

control

the statements

practicability of such

Whether or not it

the

margins

That is, to

decreased.

above cast

the

too low

were

high,

increased, and

margins would be

tend

to take

hands

ministrative decision.

....

(1686)

The Commercial and Financial Chronicle

Thursday, April 19, 1951

•f-"

form in

Tomorrow's

only confuse you
probably wouldn't con¬

vince you anyway.

Whyte

oays—

Shortcomings
01 Wartime Planning

specific example is the
least

group.
If you'll go way
back in this market you'll see

that the oils were first to step
Defense wth#Bt Inflation_A1.
just finished reading out. About nine weeks ago ber{. q jjart—Twentieth Century
the reprinted speeches of va¬ they
stopped advancing and Fund, 330 West 42nd Street, New
rious statisticians and market other
groups went to the fore. York 18, N. Y.—cloth—$2.00.
technicians.
They all agree Last week the oils again
Economics of the Money Supply,

that

the

market

will

go higher but
will have to go lower.

even¬

first it

this

might be argued

oil

strength could
be the beginning of a general
move of some
magnitude, us¬
be ing the past as a yardstick.

moved out. It
that

Such

The —Chamber of Commerce of

the C.—paper—50c Washington 6,
Unlted States, (lower prices
quantity orders).

Effects
rate

Taxation

Mergers

Corpo¬

J. Keith Butters,

—

♦Business

{The

views

article
time

Under

circumstances

that

expressed

this

necessarily at any
those of the
They are presented as

but

would

give me a set of arguments,
technical as well as financial,
that I could cull from my con¬

temporaries and pass it .pn to
you as bulwarks for my the¬

Elliott

—

Walsh

Investment

Prescott

sjs

Re¬

Co., National City
Building, members of the

Bank

Murch

was

Joins H. L. Robbins

(Special to The Financial Chronicle)

Having

down

than

the

up,

WORCESTER,
J. Kaczyk

see

down

—

perhaps

lqt

'Mown than I anticipate.

reasons

for this

have

upcoming

confirmed

their

indica¬

Co.,

was

ferred move."
on

market

•

'•

■

that

per¬

Boucher
are

and

Saunders,

Olson

Co., 112 Mill Street.

With J. W.

J. S.

New

Exchange
New York Curb Exchange (Associate)
San Francisco Stock Exchange
Chieago Board of Trade '
14 Wall Street
COrtlandt

7-4J50

New York S,

San

Francisco—Santa

(Special to The Financial Chronicle)

MANKATO, Minn.
is

with

Otto

—

Waddell

CALL

Co.,

298 East Washington Street.

Mission

5mos.

mos.

$437.50
187.50

July 2 325.00
July 13 225.00

250.00
350.00

.@35

Subject to prior sale

Explanatory pamphlet

price change
on

request

THOMAS, HAAB & BOTTS
Members Put & Calls Brokers & Dealers

Association, Inc.

Broadway, N. Y.

4, Tel BO 9-8470

to be one

the

sort

attitude

1941, it

with

the

might

one

was

bargain.

well

10% Oct.
Std. Oil N. J.. 110
July
Phillips Petr...85
July
St. Regis Pap.. 14% Oct.
...

two

237.50

First,

that

ian

purposes

and

for

have

The

Calls

I think

much

Put

Call

Assn.,

30 Pine St., N. Y. 5

other

your

this for granted
the question,
there of getting

are

economic

con¬

have them?

that

rise, of

occurred

once

tem

last

ten

I think

the

surely ought
pletely to alter our attitudes
least profoundly affect our

adopt

inflationary path
with

away

whether
herent

atti¬

there

make

are

the

not

forces

almost

what is

rather

to get

Now,

pro¬

one

ele¬

ket

mentary

consideration
which,
however, has not been mentioned,

is meant to

long

achieve

greater

the

325.00

purposes.

225.00

little

550.00

212.50

Inc.

WHitehall 3-9177

an econ¬

then faced at

are re¬

basic

with

once

economic

issue

between alterna¬

systems.
At once
people that have control of what
incomes

will be, will insist that
people should not be remunerated

re¬

according
.their

the

services

actual
the

value

rest ;of

the

is, basically, no limit community, which is not a matter
which you will not sooner or later of merit
but sometimes very dif¬
reach, once you have to decide to ferent from individual
merit; but

Request

get

you

There

325.00

are

tive

expected, and for that
;who\ wants
to
bring about by inflation what he
accomplish, has to
progressive inflation. „•

longer subject to the mar¬
guiding consideration,

the

that

anyone

reason, and I believe
major reasons, is that

as soon

been

means

one

duced.

only

than

practically impossible

efficiency and productivity

and that is that inflation achieves

what .it

soon

rid of.

omy no

which

got rid of?

record

measures

longer required by the

ficult if not

in¬

which

inevitably

this

can

a very long
story to discuss in detail; the rea¬
sons why certain
types of controls,
once
adopted, are extremely dif¬

might get
inflation, or

mechanism

namely,

That again would be

the

these

are no

and

you

minor

starts

all

way

which

emergency, by the monetary emer¬
gency, they can be swept away

Again, the conclusion will de¬
on whether one seriously be¬
one

raises,

issue

expecta¬

they

danger of inflation.

once

ever anticipated.
perhaps this is in a

tion and the hope that as

pend

lieves that

govern¬

may or may not be expedient for
wartime purposes in the

com¬
or

permanent

fundamental

program

major general fall in prices will
be permitted.
that

toward

advocated controls in the first in¬

in fact

Now,

most

past found

stance had

is that

years

that

the

beyond anything
which the majority of
people who

result of development of opin¬
the

ment control far

prices

rather,

the
system; of controls once
they come in? Everywhere in the
world undoubtedly the two wars
have greatly accelerated a ten¬
dency away from the market sys¬

is going

ion

it,
have

exceedingly difficult to get rid

purposes,

war

as a

300.00

Brokers

„

ask

your

you

countries

anything which is certain

pect

Filer, Schmidt & Co.
Dealers

Why Permanent?

permanent rise of prices.

375.00

once

Why

other consideration is that

know

350.00

Members

again

know be¬
comes

deliberately choose what to do.

use

com..24% Oct. 23
Steel.39% July 23
Hooker Electro 50
May 15
and

take

merely

trols

ments of

250.00

Puts

con¬

doomed.

are

want to

and

There is no longer that excuse
for resorting to inflation, that you
had no other plans ready; but you

300.00

237.50

granted; namely, that if

what chances
V:

fairly clear idea
of what magnitude this involves.

Paul

could

liberties

possibly spare from civil¬

can

400.00

Booklet

war

shall have to mobilize

200.00

St.

which

planned system, then

into

respects.

Crucible

result of war economy
you
abandon the free market and
per¬
manently retain the more or less

evil

take

shocks to

live

taken for

temporary rise in
prices which people imagined an
mean

property, is probably

of the most serious

stability of the type of society

The

that the sort of

which

po¬

supplementary in¬

issue I want, to raise as
fundamental has been something
which I thought was
really to be

very

inflation would

class, basing its

some

•'

possible to argue, and
frequently argued,

was

ceived.

which people entered the war in
1914 and perhaps still in 1939 or
it

last

main considera¬

our

from

one

it, but I think it ought

the

tions.

Pepsi-Cola

May 25 225.00
Sinclair Oil.. .@38%
May 25 212.50
...

Copper Range.30
July
Bait. & Ohio. .20% July
Bait. & Ohio. 19% Oct.
U. S. Steel. ..44
May
Homestake ...39
July
Schenley
35% Oct.

16 $350.00

425.00

237.50

enter-

raise

to elaborate

sort to

(Plus Tax)

350.00

450.00

Schenley

100 Shares

OPTIONS

June 15

Corp..@83% June 20

free

this issue.
It
would take far too long if I tried
merely

reason

June 19

which

doubt that elimination

come

the whole constitutes.

Britain

can

sition

preserved the ability for

readjustment

price

Great

of the middle

through general controls

had

has

Int'l Tel & Tel. 16% 4-14 52
Northern Pac..38%July 23

Steel...@44% July 2
Nickel... @35% July 14
Am. Car & Fdy@33% June 22

but

years,

■> in fact
There, again, I only want to put

Reed,

OPTIONS

had not relied

economy

major inflation of the French type,*
even
the degree of inflation

but

shall be in

gressive.

»ECULCALL

Per 100 Shares Plus Tax

Calif..@46
lnt'1 Tel &
Tel@16%
Allied Stores.@42%
Bait. & Ohio,.@20
East. Air Lines@21

Monterey—Oakland—Sacramento
Fresno—Santa Rosa

Pittsburgh Stock

With Courts & Co.

Per

N. Y.

Barbara

and

ATHENS, Ga.—Albert V. Butler
has joined the staff of Courts &

With Waddell & Reed

Teletype NY 1-928

Private Wires to Principal Offices

York

(Special to The Financial Chronicle)

Int'l

Stock

Exchange.

(Special to The Financial Chronicle)

Goldsbury & Co., Twin City
Building.

J. I. Case... .@58

York

Stock

staff of Vercoe & Co., Huntington
Bank Building, members of the

Goldsbury

Std. Oil

New

members

Midwest

Elimination of Middle Class

much stronger position if
on directing our

very

Vercoe & Co«. Add

Federal

•

Members

Co., Ter¬

Building,

MINNEAPOLIS, Minn.—Robert Exchanges.

Securities

Schwabacher & Co.

L. Pitz has become affiliated with

SPECIAL

Pacific Coast Exchanges

Fred

COLUMBUS, Ohio —Sidney S.
Allen, Jr., has been added to the

(Special to The Financial Chronicle)

tudes about the

Pacific Coast

Stiver

Tower

the

Thomas P. Hanwith W.

Inc., of Kansas City.

Executed

Co.,

FALLS, Minn.—James

now

may

purpose

should arise, I

situation

convinced that

which has

Ohio —E.

(Special to The Financial Chronicle)

FERGUS

that

and

Macks has been added to the staff

minal

Two With W. R. Olson

Roxin

Orders

Shields
,v

CLEVELAND,
v

change their habits,

on.

But I don't think anyone who
problem is completely to
readjust all the things we have has seen the effects not only of
been ' preparing to
entirely new the catastrophic inflations of the
central European type or of the
objectives.

can

(Special to The Financial Chronicle) ;'

Latter is based

habits

past

Curtis

With Saunders, Stiver

Inc., 390
formerly

■

main

tions

through what is tech¬
nically called a "ten week de¬

officer

the

Vincent

are en¬

Here and there these

moves.

'■

naher

tirely within the market. For
the past few weeks individual
stocks have shown

Street.

associated with

now

Robbins

—

Co.

Jackson

..Inc.

E. Mathews Co.

The

Mass.

with

with Trusteed Funds and Edward

than

Main

market will do just the oppo¬
site.
In short, I think what
we'll

watched markets
for a lot of years, I now find
myself in disagreement with
the majority. As a matter of
fact, I now feel that instead

Ohio—Henry

was

„

State St. New York and Midwest Stock Ex¬
previously with J. Arthur
changes. He w.as„ formerly )yith
Co., Inc. Fulton, Reid 8c Co. and Maynard

was

starts

war

the

investment

Now the situation is different in

CH*!mcus)

Warner &

that

forehand

Corporation, 53

with

as soon as

the

habits of the people, on their abil¬

rid

Jordan has become associated with

BOSTON, Mass.

then
find

the structure of

—

Prescott & Co.
CLEVELAND,

extent

some

population,

ity to shift

Henry F. Jordan Joins

(Special to The Financial Chronicle)

ories.
"v'

Slichter

and

rather than the next, and

war

Differences From Previous Wars

those of the author

be comfortable

g^eet, New York City.

with

entirely human, I would
only.]
ordinarily welcome wholesale
agreement. Not only would it With Investment Research
are

Sumner

—

Little, Brown & Co., 60 East 42nd

not

coincide

Chronicle.

mili¬

our

always in the past, to plan for the

vidual stocks.

that

last

unanimity must
*
*
*
John
Lintner,
and
William
L.
very cozy. No arguments, no
I think such a move will be Cary, assisted by Powell Niland—
complaints. Just follow a blue
Harvard Business School, Division
print and you're bound to seen. But I don't think it will of Research, Soldiers Field, Bos¬
be long or sustained.
come out ahead.
To bor¬ ton 63, Mass.—cloth—$4.25.
Having been
of the same opinion as my row a biblical phrase, "The
Theory of Investment of the
Firm—Friedrich and Vera Lutz—
."
worthy contemporaries, I now first shall be the last
Princeton
%
*
University Press,
*
find myself jammed in tight
Princeton, N. J.—cloth—$4.00.
with company that is a little
What should you do from
1,0
-p.
,iri
Welfare State, The — A mort'stifling. I too felt that stocks here. Do ..what you ve been gage on America's Future—Jules
would go higher after a fur¬ doing for the past two weeks. Abeis
Duell, Sloan .& Pearce,
ther break. The trouble was Sit
tight and watch them. If Inc.; 270 Madison Avenue, New
would the break be general or you're
long and worried, use York 16> N. Y.—cloth—$3.00.
would it be limited to indi¬
coming strength to lighten.
What's / Ahead for American
.

possibility

leaders may do again what
generals have been supposed to do
tary

I've

tually

page

Worldwide

„

oil

By WALTER WHYTE;

jrom first

this in better detail

but it would
and

Markets
Walter

Continued

cycles of ten. I could

describe

inflation

one

of the instru¬

ceases

effective

You have to

for

inflate

to that

while

merit of these
Such

•

degree of inflation, and so
indefinitely.
From a long-run point of view,
an
appraisal
of
the
conse¬
quences of this would, of course,
have to be based -on a fairly de¬
tailed analysis of all those redis¬
tribution' effects and changes in
the
stratification jof
population,
which
inflation
brings
about.
Therefore we can't generalize too
much about it, because it depends
on,

attempt should be made to

various classes of
people according to what the>majority view is about what the

people get used

remunerate the

the

more.

After

that

finance; once people ex¬
given degree of inflation,

classes is.

•

remuneration, according
imagined merit, is inevitably

very

different from

value of these

inevitably in
ation

which,

the

relative

services, and results

system of

remuner¬

longer provides

incentives and makes people
pro¬
duce just what is wanted.
•
The

result is that you
get this
equation in which the position of
many, classes is determined to a
much greater extent
our

even

than in

present economy by more or
less direct
subsidies, and that the

Volume

173

Number 5004

The Commercial and Financial Chronicle

(1687)

perpetuation of the position of the dustry they were saved
elass depends on the maintenance of the troubles
they had
of your system.

There

petitive

has

sidering.

think

Europe's Rent Experience

that

the

Perhaps the most permanent ef¬ has in
economic

controls

they

idea

the

should

the

direction of the

building

new

longer determined in
market for rents. '

any

was

of this ' war
respect been slightly

way

them

completely and

whole large

tion of economic

manently

activity

problem

doubt

which

exists.

free

is very different

which

market

also

aspects much
dent

system,

not

which exist, but
it generally flouts the principle
that in wartime efficiency should

War

friends

our

elsewhere.

rather

were

their

modities

Great

Britain

where, * to

the

direct

from
com¬

they would like, with

price of which
So that in

decline.

the whole

sys¬
per¬

petuate

people from

ought to

price control tends to

tem of

that could be
they relied to fill

upon,

Insofar

the result of leaving money over
to be spent on the commodities,
the production of which and the

economists

leading posts

meister

way,

the

state

distribution

which

resources

find

community than any result of the
ourselves in these situations.
the business community.
-v
enterprise, you are likely ever to
It is frequently mentioned that
You have gone through the same
get completely rid of it.' This is
mobilization changes the relation¬
experience as the planners In Eng¬
the one part of the problem, one
land
in World War I, of these ship of prices, and then this state¬
of the aspects, which I want to
ment
is
considered on
the
as¬
people finding it delightful not to
mention.
be constrained any longer by the sumption that this is something
There
was
one
other
aspect
trammels of competition, having bad. We should have remembered
-which I thought I must not pass
that the main argument against
the
power of ordering about a
over.
However, it is extremely
controls and in favor of
whole industry; but who have now price
difficult to put convincingly in a
returned to some extent to indus¬ using the market system is es¬
short exposition. It is the sort of
trial
life
with
the
ambition of sentially that these changes in the
psychological aspect of wartime
finding similar attractive occupa¬ relationship of price are highly
controls on the future leaders of
tions outside the government .desirable- to
bring
about
the
business.
rather than inside.
necessary changes at .every point
I can only give you an impres¬
where
the
Government
cannot
Again I am discussing a partic¬
sion in the short time at my dis¬
ular aspect as an illustration of a bring them about without possess¬
posal and not give a full support¬
ing itself all the knowledge which
ing argument, but I might just very much wider question of how
far the experiences of a planned the individual entrepreneur has
from
memory
quote
something
to use when it is a question of
which I said nearly 10 years ago economy are likely to affect atti¬
tudes of the people who will guide economizing on this material, or
on that particular matter when it
..

immediate

affairs and

problem.

When

wrote

the

book, "The
Road to Serfdom," I put in some¬
where a footnote saying that when
I
had
come
to England
in the
early 30s, on the whole, what was
regarded as a typically German
view—that

eign

have
a

British

feeling

thinking,

twice

being

but

attitude,

and

that

the ^ex-planners
who

were

World

have

doubt

that

the

can

movement

any-

.for

planning in Great Britain in the
.postwar period has been led and
advanced

largely by men
who had been "in charge of war
planning during World War I, had
tasted the pleasures of the job,
and

had

their

very

been

persuaded

re¬

sue

this

question

ought to

under

the

Krisem

(Capt.), Bradley, Montanyne, Weissman, Gannon

High

think

remarkable

thing was that the most ambitious
planners among them were not
the academic

people who had gone
into planning, but rather the busi¬

have

that

Price

Declines

Needed

are

sential

far
in

about
in

possible,
manner

saving to the

see

also

bring

should

doubt that in the nones¬
industries, the industries

which

demand

turns

away,

discouraged; and
the

available

should

about

industry

from

the

than

any

nonessential

other

means

conceivable.

to admit

the

Tibert With Mathews Co.
BOSTON,

Mass

—

Frank

of course, forces us
to face the doctrine that it is now

They had

whole in¬

and if that is so,

price or no wage

allowed

from

statutes.

evening went to Vin Lytle (Shields & Co.).

page

decline;

course we are

either

law

common

under

the

SEC

"In my

opinion, the anti-fraud provisions of the SEC
violated by the employment of any legend,
hedge clause or other provision which is likely to lead an
investor to believe that he has in any way waived any
right of action he may have, assuming, of course, that the
mails or other jurisdictional elements are involved."
Now securities tlealers and brokers are assigned the
wholly new function of being mind readers. The Commis¬
statutes

are

sion

would

will

have

determine what their

them

will not believe

Isn't it

reading

customers

particular legend.

possible that different customers may have differ¬
concerning the same hedge clause? "
; " ^

ent beliefs

Who is to be the ultimate

intend

judge, the SEC? Does it
sample clauses meeting with its ap¬
Is it their intention finally to have all hedge

proval?

prepare

clauses submitted to them in advance for

Is every brokerage firm expected to
tistical bureau?
If so, aren't the sources

O.K.?

maintain

a sta¬
of information

common to all?
Certainly it can't be expected that each
dealer, broker and investment adviser will audit the books

of every company whose securities he handles, or con¬
cerning which securities he gives advice.
Such a requirement would be completely unworkable
and utterly absurd; no more so, however, than the Com¬
mission's implied suggestion that those in the securities

field become mind readers.

•

opinion serves no useful purpose is shown
by the following part:
,
"A legend in common use states in effect that the
information is obtained from specified sources and is
believed to be reliable but that its accuracy is not guar¬
anteed. Assuming the truth of the representations as to
#

the

Street. He has

was

recently been with

Funds, Inc.

officer

the

information

and

the

belief

that it

of this legend
in connection with a communication supplying informa¬
tion is not objectionable."
my

opinion that the

mere use

How about information which is not

readily and easily
favored position? Must
he disclose the source? Are the rights, duties and obliga¬
tions of brokers, dealers and investment advisers identical
in this regard?
available, which places

The instant release

Trusteed

one

was

issued

No. 3411 under the

Securities Act of 1933, as No. 4593 under the Securities
Act of 1934; and as No. 58 under the Investment Advisers
Act of 1940. :
1
„

No discussion of

hedge clauses, nor any opinion con¬
cerning them would be complete without taking in the rel¬
ative, and in some instances the contrasting, duties as be¬
tween the broker, the dealer, the investment adviser and
his customer.
This the

Joseph Jordan & Co. Prior thereto
he

source

reliable, it is

opinion of General Counsel fails to do.

We haven't heard the last of this.

Edward E. Mathews Co., 53 State

that,

ever

Hedge Clauses

com¬

in the amount elsewhere?

must

212.

have

wise

(Special to The Financial Chronicle)

Tibert has become associated with

planning activity.

;;X

that whatever

amount

pensating price declines which
are required to offset the increase
Now

Well, what's all the bother about?
there

that

prices should fall actually below
cost; that production should be

•

not willing

into

any

sources

Compensating
**

believed that

materials

leaders who had been called

directing

un¬

any

ness

found that in

which

certain

results

cannot

from

will

the. most

en¬

that

time..- '■

large-scale

a step further spread over a long period during
hope of avoiding the war; and that this would be
not. only
minor
inflation,
but a more effective means of bring¬
ing about a rapid transfer of re¬
major inflation, is Utopian. ' •

will

and say

game of the

He bowled

economy as a whole.

pur¬

Then I think

brought

which

.little further.

circumstances

use

This should,
be

they thought it this, I think we have to face a
ought to be preserved for peace¬ problem;
What kind of policy
success

the

Is it really assumed that any hope
that any price might be reduced

tirely Utopian?

concerned

now

should be stopped or discontinued

are

of course,
in
-demand

doubtedly makes it desirable that
in
many
industries production
should be curtailed, or at least

Now, I think

War I

the

about

is,

shift

lot of

relative

been

that

tioned.

was

thinking entirely in the

don't think there

to be

using

abandoned, and the
might bring about
the
fall
of
some
prices, if we
wanted to avoid (a) inflation, and
(b)
have a change in relative
prices, does not seem to be men¬

identical terms in which my Ger¬
man friends had been
thinking.
1

bring

idea

re¬

when I came into the company

with

sibility of price decline seems to

experienced

suddenly

seems

about

prices

what I regarded as the

turned to

What

distribution of resources, the pos¬

life—was still very for¬

once

German

Wrhile there

■

Price Declines

discussion

is, the government de¬
the whole aspect- of

termining
economic

About

That the

Effective Price Changes
*

Authoritarianism

that.

shape opinion after the

war.

German

(Capt.), Lytle, Reid, Kruge, Swenson
Goodman (Capt.), Lax, Valentine, M. Meyer, H. Frankel
Mewing Capt.), Klein, Cohen, Manney, Chegan
Burian (Capt.), Manson, King, Voccoli, G. Montanyne__
Serlen (Capt.), Gersten, Gold, Krumholz, Young
Leone (Capt.), Krasowich, Nieman, Pollack, Gavin.
Bean (Capt.), Kaiser, Growney, Gronick, Rappa
H. Meyer (Capt.), Smith, Farrell, A. Frankel, Lapato

wasn't

19
18
18

Hunter

make

ing of some prices, they do
preventing
these
people
spending as much on those

num¬

drawn

the deliberate will of the

Bowl¬

Won Lost

Continued,

control of prices prevents the ris¬

large

YORK

(Capt.), Weseman, Tisch, Strauss, Jacobs
Greenberg (Capt.), Sullivan, Stein, Wechsler, Siegel
Donadio
(Capt.), DeMaye, O'Connor, Whiting, Work-

unlikely this
necessary price reduction which
would offset the price increases

was

ber

NEW

TEAM

direct price
probably likely to

are

Kumm

In another respect,

extent, in spite of the great

recognizable
clearly depen¬

prices

be the main consideration.

what the reaction

sure

World

the

prevent

planning agency

been

and

its

...

re¬

ASSOCIATION

Security Traders Association of New York (STANY)
ing League Standing as of April 13, 1951 are as follows:

remarkable

many

prices will be

any

Any system of price fixing not
the existing price
structure
and
gives a
sort
of
moral justification for continuing

were

before their experience

great

not

only sanctions

has been in this country. I rather
fear that in this respect you have

from that which would exist, qnder

Cured

controls

duced.

particular ambition.

much whether, once
result of war plan¬
ning achieved a price and income
which

likely that

toward
a
centrally
planned system, came back on the
thoroughly cured from this

direct

only does nothing in assisting this
crisis, but makes it very much less

whole

as a

structure

reliance

be¬

rffc.

SECURITY TRADERS

What I really want to drive at
is that I believe that the main

with

dffifNotes

NSTA

causes

transfers?

favorable

very

have

you

de¬

undesirable

controls

was more

price

is it not, on the con¬
trary, perhaps, an inevitable part
of the process of
speeding up the

experience.

war
i

treme

general

enterprise

their

who

the

think this is probably an ex¬
instance but it is a very

free

those

which

inevitably meets and

ciency;

were

that

was per¬

market mechanism.
I

beforehand

What

planning.

surprising that

sec¬

from

removed

wartime

confirmed in

taken out of the market

eposes was

can

who

lievers

entirely hap¬

was

not

was

hazard. In consequence, the whole
field of building for housing pur-

into

went

Rent control

far

really true that under
circumstances,

friction

thing?
Is it
even
necessarily true that under
these conditions, a bringing about
of some local and temporary un¬
employment is a loss of effi¬

add

different. The reaction with

economic systems

infla¬

mobilization

cline

whieh,
judge, the war
have been rent controls.
So far planners returned from their jobs
as I know, no
country which was very largely depended on their
-a belligerent in Europe in 1914-18
previous background.
has ever since then got rid com¬
The non economists among them,
pletely of the system of rent con¬ I think, have shown
very much
trols put into use at that time.
the same reactions as the planners
Those countries in which rent con¬
of World War I. They were fasci¬
trols were then introduced had ma¬
nated by the
delectable task of
jor inflations following. It meant running a
big thing, and if they
that housing in general was trans¬
had the planning desire before¬
formed from a private industry
hand, they had only become more
into a kind of public service where
convinced planners by their expe¬
additional housing could be pro¬ rience.
vided only by the government or
It was very different, I ought to
by government subsidy, where the add,
with the
economists
who

Europe

But is it

experience

some

prices

extra

tion.

re¬

once

.relative

much

problem—that

change, in

must mean

greatly

affairs

in the direction of
whole monopolized industry.
I

all

Indi¬ -any

turning

industry,

cherished

wider

application
in
its
meaning but which is worth con¬

fect

again up against

many

outstanding illus¬

one

tration of this which I think
much

'' vidual ehtrepreneurs thatj instead
of the idea of returning to com¬

has

The Commission

something concealed in its sleeves. We hope to tag it

when it shows.
In

our

judgment this is another arbitrary effort to

extend SEC control

The

term

over

sales literature.

"hedge clause" is unfortunate- It sounds
accusatory. There must be other nomenclature.

(1688)

*
,

Continued

from

page

$67,296,299,

increase

an :

$4,372,505 since the beginning of
the

Mutual Funds

year.

INVESTORS

NATIONAL

Paper, Sears, Roebuck, Gulf Oil,
General Motors, Union Carbide,
Oil

Standard

(N. J.), Kennecott,
Texas
Company, Philip Morris,
and Standard Oil (California).
"Looking back a year to Dec.

31, 1949, it is of interest to note
that

eight of the stocks then

largest common
stock holdings are also on the list
the

1950

year-end," the study

said.
two

arrivals

new

'10 largest' group

in 1950,

as com¬

pared with 1949, are Philip Mor¬
ris

$30,429,949 on March 31, 1951,
compared
with
$25,954,758
on

Jan.

1, 1951.

Oil

Standard

and

173

March 31,

EATON

shows

31, 1950 to $8,March 31, 1951.
Dec.

on
on

EATON

balanced

HOWARD

assets

shows

fund

high

new

VALUE

Fund

LINE

assets as of

Feb.

net

reports

since March 1, 1950.
STREET

WALL

reports
of

compared with $1,-

$2,432,503

729,533

year

would mean, in terms of
national product in 1951,

about

purposes

substantial

appreciation

was

Portfolio

INVESTMENT

Designed for War
title

Hare's

$15

about

billion for all Federal

billion-$20 billion
for non-military purposes, yields

latest

sales

pam¬

Stock
&
Bond
In side by side
the
pamphlet re¬

the

second

Each

lyzed

industries

has

Fund

and

stocks"

each

for

ana¬

pamphlet reports

The

given.

of "portfolio
industry
is

list

which

holdings

the investor that,

"Stock & Bond

Group Shares is confining its in¬
vestments

the

stocks

com¬

panies which, in the opinion of
its management, should be able
to maintain satisfactory earnings
and
dividend
payments
either
under a semi-war, war or peace¬
time economy."
Copies

this

excellent

HAVE

Sales

Street

asked

How close are we to that break¬

ing point? My own feeling is that
even

the

without

Korean

emer¬

already moving

were

twilight zone.

The

Tax

discounts for National
apply to commitments
made by a single investor to buy
shares in an aggregate amount'
falling within one of these dis¬

brackets, but with individ¬
months

pe¬

less,

each

purchase being at the offering
price at the time in effect.
According to the latest National
counts

total tax burden. But

vance

the

that

purchases,
with

The

new

single sale to
considered

V
.

to the

distributor; and sales to

individual

corporate

trustee,

other

fiduciary or
custodian for his fiduciary or cus¬

guardian

accounts

todian

which

counts

(including
he has

reports

31,

This compares with $103,-

699,973, or $4.23 a share, on March
31, 1950.

of March 31,
oils; 24.11%
in utilities; 8.30% in retail trade;
5.63%
in rails and rail equip-,
ment; 5.10% in chemical; 4.08% in
portfolio,

1951 shows 27.72% in

non-ferrous metals; 7.23% in mis¬
cellaneous

other

and

ceivables were

BROAD

smaller

Cash
3.18%.

groups.

STREET

amounts

and

Corp.'s reports total net assets of

because

pertinent to

that

and

note in clos¬

Senator

Joint Committee

O'Mahoney's
the Economic

Report unanimously agreed on the
following
statement
about
the

peril-point of taxation: "At some
point taxation itself becomes in¬
flationary,

though the

even

budget

is balanced. If tax burdens
are, so

great

justice

shock

the

equality,

found

them

avoid

way Ms

some

them

sense -)

pass

into

higher prices. Just
where the limit is, is difficult to
judge, but it is to be hoped that
on

the total defense expenditures
may
be held to 20% of the national in¬
come, the balance of Federal ex¬
penditures,
including
veterans'

benefits and interest
lic

the pub¬

debt, to 8%, and the State and
to

8% of the na¬
tional income. Such general limits
are the more
necessary the more
expenses

closely the burden
taxes

approaches

additional

the

limits

taxable capacity."

page

expenditure.

Invest¬

people not to make investment

during the next two
years; not to make investment ex¬

penditures, at least, for

The Interest Rate

with

spect.

in certain parts of
has been laid on a high

the room,

rate of interest.

There is

challenge to the

pro¬

fessional within government to see

point.

seems

a certain
that what

are

ture in the order of $10 billion in

(5)

Nat'l Income

this country.

% of:—

If you

Nat'l Income
Total

Originating

high

National

in Private

been

Year—

Compensation)

Income

(Col. I

fundamentally trying to
with a high rate of interest

Gov't Contribution to

Industry

sympathetic

is to stop off investment expendi¬

(4)

V :"

this, but not beyond

Industry

(Col. 1

Col. 2)

Col. 3)

really put through a very
of interest —12% has
mentioned—you are disturb¬
rate

ing values throughout the whole
economy.
You are disturbing the
relation
between
capital values

not

are

the

n'ew

Great stress,

ex¬

penditures

that

in Private

directly

purposes

connected

effort.

arms

should say that

through your
corporate tax, income tax, and so
on, an adjustment could be made
the side of depreciation allow¬

by which firms undertaking

ances

investment expenditures would not

get back for two years their nor¬
mal
depreciation allowances on
the

that

tax;

capital outlay

new

undertaken here and

qualify in the

for the

now

next two years, except
to
the
arms
effort,

in relation
would

not

of normal law

way

for depreciation allowances.
I

believe

days

that

people

these

tremendously influenced
their conduct by anything that

are

1929

$5.1

$87.4

$82.2

5.8

6.2

1932

5.2

41.7

36.5

12.5

14.2

and

1939-

8.6

72.5

64.0

11.9

13.4

what the total capital of the United

assessment is

1944

34.2

183.8

149.6

States

tor than interest rates in influenc¬

1949

21.8

216.8

195.0

1950

23.9

236.0

212.1

1951—.

;

18.6

22.9

•

annual values.

11.2

10.1

11.3

billion

dollars.

very

drastic interest rate policy
would be disturbing the rela¬

you

$12.2

don't know

is, but it is in the order of

thousand

10.1

tion

that

affects

the

tax

assessments.
far

Tax

vital fac¬

ing decisions of people as to what
they are going to do. I have the
impression that the present tax

billion dollars, to its income yield

(6)

(7)

(8)

(9)

(10)

Gross

■

;

of Goods & Services

Private Gross

Calendar

of Goods &

National

Year—

Services

Product

Gross

National
Product

Private Gross

National

Product

(Col. «

(Col. (»

Col. 8)

$8.5

$103.8

1932

8.1

58.3

50.3'

13.9

16.1

1939

'13.1

91.3

78.3

14.3

16.7

1944_

96.5

213.7

117.2

45.2

82.3

1949.-..

43.3

255.6

212.3

16.9

20.4

1950....

42.1

279.8

237.7

15.0

17.7

1951

$95.4

8.2

8.9

222.5

check

^Estimated.

(13)

Total

Private

Payments

Personal

Year—

to Individuals*

Income

(14)

(15)

Government Payments
■'-i

■'

to Individuals
Total

have

(Col. 11

1932

$85.1

$7.0
7.7'

1939

$78.1

Col. 13)

8.2

9.0

49.3

41.6

15.6

18.5

72.6

12.3

60.3

16.9

20.4

1944

40.1

165.9

125.8

24.2

31.9

1949

38.1

206.1

168.0

18.5

43.0

223.2

180.2

19.3

23.9

$1951

•

$20.6

$25.9

and

tMiddle estimate of the Joint Committee

transfer

payments

the Economic

paid

Source:

Compiled from "National Income Supplement," United States
Department of Commerce, by the Conference Board: 1950 data from SCB,
.February, 1951; 1951 data based upon estimates of the Joint Committee
on

the

Economic Report in terms of Jan. 25,

1951, prices.

relying

expen¬

diture.

years.

anyhow for the next two
I stress my two years, be¬
I

cause

think

otherwise

people

would

the

say, "This is hopeless from*
point of view of American

are we

the taxes to reduce

expenditure,

and

how

doing to reduce investment

expenditure?
some

By banking control,

and I say it is not strong
I believe there is a con¬

say,

enough.
structive

task

that

here

for

with

high in¬

combine

you

heavy taxation

consumer, I believe that you

for the next two
years,
with

get away

system that allows the

sentials of
main

the

could,

es¬

free economy to re¬

without

having

any

exces¬

going to make a construc¬

stranger to do this.

daring
Perhaps

little

interest

arouse

It
a

Robert L DeMuth

very

Robert

DeMuth

fell

his

death from his suite in the Hotel

in it.
A

Tax Incentive

Carlyle
who

My suggestion is that we should
amplify, or reinforce, the mone¬

policy of a strict credit
by some kind of taxMncentive to

tary

and

sive amount of inflation.

proposal.

could

rate"

can

achieve.

tive

something stronger than
terest
that

We put up
consumer

Report.

^Estimated.

while

taxes, to reduce consumer

♦Compensation of employees, interest
Federal, State and local governments.

site,

business, which is, essentially ex¬
strong enough to stem the flow pansionary. People will never
stand for that sort of
thing."
of
investment
expenditure; this
If you
brings me to the essential point
say,
"This is for two
that I should like to put: I think
years only that we are going to
there is something we have still
make a severe tax deterrent to
got to think out, namely, a new
method
of
reducing investment capital expenditure, which will be

22.7

1950

strictly necessary.
I want the taxes to do the
oppo¬

icy of the normal kind will not be

% of;

Income

Col. 12)

1929.

Personal

Income
as

expenditure of

given my reasons for
supposing that a tight credit pol¬

Private

Personal

(Col. 11

thousand

proportion. It is doing a gigantic
thing in order to produce a rela¬
tively small result.

expenditure

(12)

(11)

Product

Col. 7)

1929

% of:

aren't

order

capital,

$10 billion. It is altogether out of

Government Purchases

setup rather encourages people to
make investment expenditures that

^Estimated.

re¬

Investing

whole

taxpayers in this re¬

in¬

1951, equivalent to $4.79 per

The

created

educate

assets of $120,246,864 as of March

share.

not

have to be stood off,
the banks are not making

There

ac¬

net

ment projects

Originating

FUND

Total

vestor."
AFFILIATED

National

co-fidu¬

single

Should

from

ing

Calendar

sales

minimization.

tax

Government

not

defense

spending before
we do undermine the
strength of
the
voluntary
system
we
are
fighting to preserve?

And Fiscal Controls

(Empiojee

ciaries) and sales to an individual
for his immediate family are con¬
sidered

year,

for

Insufficiency of Monetary

Calendar

separate

sales, aggregating $25,000 or more
within
a
period of 12 months,
under
arrangements satisfactory

minimization sufficient credit
available."

the

—Nat'l Income

Nat'l Income

for

but conceivably for

more.

Continued

fraternity whose primary job it is

'v./

include

(3)

Contribution to

not

subscribe.

of taxes. I refer not to tax evasion

Government

Gov't Purchases

"A
single investor is

increasingly

(2)

Street

prospectus states,

decade

■1•

Sales.

;

Full text of Commercial and Financial Chronicle : April 19, 1951, Vol. 173, No. 5004

FRASER