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FEB:
v
i
wr3
ESTABLISHED 1S39
Reg. U. S. Pat. Office
Volume
167
Number 4676
New
Inflation Control
In
Outlook for Business
Democracy
a
By
Lionel
By IRVING S. OLDS*
Chairman, Board of Directors
Dr.
United States Steel Corporation
\
supply, but doubts any
political party has courage to
'
-
Likens in¬
.
to me to have two distinct phases.
is
of
materialize.
of Marshall Plan.
success
at
Sees
they
whether
the
the
of
w e
in this
move¬
ment. Little is
be
by
disaster
country
whether, by
miracle,
or
gained
trying
can
The
symptoms
of
mind
such
of
afflic¬
this
an
in the
tion in the absence
of
knowledge
.-
•
A
causes.
should be
effected
of
rather
causes
in
than
price
break, is fear,
of
its
cure
of
country,
light of
the
a
state
in
removing support for government bonds, and endorses larger
requirements and voluntary credit curbs as proposed by
reserve
American Bankers Association.
Bankers have
special interest in inflation, which has been the
dominant economic force of recent years, because
banking and infla¬
tion are both concerned with money.
In modern economies, banks
a
create the money that makes inflation possible.
*
EDITORIAL
re
....
Lionel
Edie
D.
The
lem,
prob¬
I
as
see
it, is to try to
determine whether that is justi¬
fied; and, if justified at all, to
Sound Fiscal Policy
being said these days by various public
concerning "sound" governmental policies. Much
of it has to do
directly or indirectly with what is sometimes
known as "fiscal
policy." \ This latter term has expanded in
recent years to take id a
good/deal of territory not formerly
included, and in current official thought and plans there is
embodied (sometimes, we
suspect, without full realization
the
on
of the planning officials) not a little of the
mitigation of effects.
philosophies of men like Lord Keynes and Professor Hansen.
what extent and for what reason.
The second
phase is the dis¬
Not
infrequently men with backgrounds which one would
I should like to deal with it in
semination of the knowledge thus
terms
of a number
of
specific hardly suppose would give rise to such strange meanderings
acquired, so as to create a com¬
in
part
-
determination to resist temp¬
mon
tation to indulge in further meas;
of
ures
the
sort
(Continued
*An address
Yale
i
on
which
have
The
first
question that I will
myself is this:
Does this
put to
sharp break in farm prices mean
36)
page
in the realms of Alice in Wonderland
questions.
that
by Mr. Olds at the
Alumni
Luncheon,
New
Haven, Conn., Feb. 23, 1948.
immediate business
an
sion
faces
have
no
us,
reces¬
in this country?
hesitation in
(Continued
on
I
saying that
page
26)
York
Havana
Lithographing Go.
inflation.
to have become
A recent address of his
of
present
our
inflationary
developments,
but
they are
the instru¬
ments
they
R. H. Johnson & Co.
and
help
can
to continue inf 1
tion:or
a
bring it to
an
end.
Woodlief Thomas
basic
The
why we have been having,
continue to have, infla¬
reason
and may
tion is that effective demand is in
of
excess
the
supply
of
goods
available for purchase. The origin
of inflation lies in the wartime
(Continued
*An
the
began with these rather sooth*
in¬
of
flation,
?
-
not
are
the instigators
address
Minnesota
on page
30)
by Dr. Thomas at
Bankers
Minneapolis,
ence,
on
Confer¬
Feb.
13,
1948.
ing sentences:
primary fiscal
is
concern
of the United States Government.
(Continued
on
the financial integrity
The
page
only
way
in which
26)
Stale and
City, Feb. 19, 1948.
Established
—
seem
badly involved in the meshes of these enticing doctrines.
Some of the things that the
present Secretary of
the Treasury has of late been
saying are cases in point.
"Our
*An address by Dr. Edie at 35th
Annual Banquet of the New York
Credit
Men's
Association, New
sponsible
Banks
A good deal is
officials
mean
to be held
are
for
Iff!|§4s We See It 1§||;
This does not
that bankers
3>
i
v
System
Foresees, with further price rises, an over¬
borrowing demand of $20 billion in 1948. Points out danger
mistakes."
escape
it.
Reserve
contributes to inflation.
all
over-expansion of credit and
,
we
to
with
Federal
serve
techniques for maintaining adequate bank reserves are no
longer effective and, therefore, continued expansion of bank credit
some
the
deal
terms
wage
the
on
great
infla¬
tionary
'
the
analyst reviews current inflationary forces, and
holds anti-inflationary effect of government
surplus is being offset
by heavier business and consumer borrowing. Warns Federal Re¬
end of inflationary trend.:
our
of
Federal Reserve
from
no
Governors
verge of some
■to
•
immediate
of
wonder
are
present
Y
no
sharp break inTarm commodity prices, and this break in farm prices
has scared executives and banks until today they are in the state of
mind where $
origin
S.„ Old*
Board
Estimates increase in national in¬
fundamental
Irving
City
means
concludes "we have been correcting
ascertain¬
ment
may mean
for first half of 1948
,
controls.
the
it
argues
Copy
By WOODLIEF THOMAS*
Co., New York
sharp price breaks and holds third round of
no
a
Inflation and Bank Credit
This topic is not an easy one to handle at this particular
moment,
because, in the last three weeks, we have had in this country a very
The problem of inflation seems
first
&
Price 30 Cents
EDIE*
"
be curbed without
TJie
Edie
D.
6% to 9%, and contends
Federal Reserve will not reverse deflationary
policy until latter
part of year. Says recession will come when capital expenditures
are
reduced, and much will depend on international situation and
supply arising
from bank bondholdings to suc¬
cessful counterfeiting. Concludes
can
Looks for
come
money
inflation
LIONEL
Edie, maintaining break in farm prices
increases may not
credit
creased
D.
business recession,
Mr. Olds lays primary cause of
inflation to expanded money and.
reduce these factors.
York, N. Y., Thursday, February 26, 1948
STATE
Municipal
MUNICIPAL
and
X ''"'X '
U-V
Bonds
1927
BONDS
★
INVESTMENT SECURITIES
Hirsch & Co.
Members New
■
'
York
and other
25 Broad
Exchange
Exchanges
r '-iX
St., New York 4, N. Y.
HAnover 3-0600
Chicago
Teletype NY 1-210
Cleveland
Geneva
64 Wall
London
:
(Representative)
BANK
.
"
'
BOSTON
PHILADELPHIA
THE NATIONAL CITY BANK HART SMITH &
Members
Troy
"Albany
Buffalo
Harrisburg
Wilkes-Barre
Woonsocket
Syracuse
;>:.'
on
request
Bankers
Head
OTIS & CO.
(Incorporated)
Tele. NY 1-809
Branches
New York
Chicago
Columbus
Denver
Toledo Buffalo
Government
26,
THE CHASE
.
y
Bond
1-395
Montreal
'
'
Toronto
Brokerage
NATIONAL BANK
OF
and
and
Ceylon,
Portland General
Electric
for Banks♦ Brokers
£4,000,000
£2,000,000
Reserve ' Fund
£2,300,000
conducts
and
every
description
exchange business
Trusteeships and Executorships
also
Company
Stock
/
and Dealers
Bought—Sold—Quoted
Hardy & Co.
Kenya
Subscribed Capital
banking
NEW YORK
ira haupt &co.
Zanzibar
Paid-Up Capital—
Bank
CITY OF
Common
Bishopsgate,
Burma,
Aden
THE
In
London, E. C.
India,
1899
CLEVELAND
Cincinnati
in
Colony
The
Street, New York 4, N. Y.
the
Offices
-
Corporate Securities
Established
to
■
IIAnover 2-0980
Kenya Colony and Uganda
Distributors of Municipal
INSTITUTIONAL INVESTMENTS
Tel. WHitehtU 4-5770
New York
of INDIA, LIMITED
Underwriters and
•
CO.
Security Dealers Assn.
Bell Teletype NY
Bond Dept. Teletype: NY 1-708
NATIONAL BANE
Gordon Graves & Co.
30 Broad
York
52 WILLIAM ST., N. Y.
Springfield
Washington, D. C.
and
Information
New
OF NEW YORK
Scranton
PORTFOLIOS
Analyzed and Appraised
Bond Department
Street, New York 5
Stock
undertaken
Members New
of
York Stock Exchange
Members New York Curb Exchange
30 Broad St.
Members New York Stock
and
111
New York 4
other
Broadway, N. Y. 6
REctor 2-3100
Tel. DIgby 4-7800
Tele. NY 1-733
Boston
Exchange
Principal Exchanges
Teletype NY 1-2708
Telephone:
Enterprise 1820
2
THE COMMERCIAL
(898)
Foreign Dollar &
Sterling Qbligations
York 5
Teletype NY 1-583
7-56GO
LONDON REPRESENTATIVE:
3
London, E. C.4
King William Street
on basis of both earnings and!(assets,! current prices of stocks are cheaper
depression years 1937-38. Cites as illustrations, U. S. Steel, Anaconda Copper, Montgomery
Ward, Wilson & Co., and Atchison Railroad. Ascribes low stock prices tq fear, which, he says has
brought about depression price levels.
-
There
this paper. It
is- well known
sold, at
a
low ra¬
tio
to
•
at
e
do
y
nresent.
Dow
At
of
in
to
a
intention
the
not
a
this
of
article
discuss earnings trends of the
future but just
Jones
-
either
recession or
through intensified competition.
They even consider present earn-!
ings particularly vulnerable be¬
cause
of the high "break-even
point" of many companies. It is
as
t h
down,
go
consequence
their
earnings
to
sure
are
have
such
<e>-
seldom
stocks
parenthetically
one
dex of approx¬
factor may be pointed out which
is often overlooked.
One impor¬
imately
tant
Industrial
the
frfc pONNELL & CO.
Members
New York Stock
New York Curb
120
Exchange
Exchange
BROADWAY, NEW YORK 5
Tel. REctor 2-7815
In¬
s
i
n g
this index sell
at
t i
F.
about
Bought—Sold—Quoted
Rosenstiel
H.
Steiner, Rouse &Co
Members New fork Stock Exchange
high replacement costs of plants
and machinery alone would justify
much
higher
before the
dollar
profits
statistics show the dollar to have
Direct wires to
this fact
nized
are
by
well as
not yet
fully recog¬
managements
by many economists.
some
WE WANT TO BUY—
as
Dorset Fabrics
It is the purpose of this article
to show that leading stocks, wlvc)
Interstate
Far Reconstruction
and Development
2%%
due 7/15/57
3%
due 7/15/72
,
Hosiery
Kingan & Co.
May, McEwen & Kaiser
Standard Screw
Telfair Stockton
Members Baltimore
Stock Exchange
120 Broadway, N.
Y. 5
WOrth 2-4230
■
The International Bank
branch offices
our
only 50% of its 1935-39 purchas¬
ing power, but the implications of
1 a s t ■'a/!
V(; ■.]/:,,+}
year's earnings. In the boom year
1929, they sold at 14^2 times, in
the moderately prosperous year
1939, at about 15 times and in 1945
ume
often more than
at about I6V2 times. However, the
balances ing. companies.
'
!•; ;-l:v-!j
Dow-Jones Index consists only of smaller profit margins.
Higher
United- States!' Steel::
'; i -'
leading shares which normally percentage profits would obvi¬
sell at a high ratio to their earn¬ ously lower the break-even point
At the end of 1937, when the
ings; a large number of other but the venomous campaign of steel industry was working at
shares of well managed but less
economic
illiterates against the only ! 25% of its capacity, U. S
well known companies sell at only "scourging of the public" .has ob¬ Steel shares sold at $54,
At the
2 to 4 times present earnings. The viously impressed and intimidated
end of 1938, the stock had recovbears reply to this that earnings many companies. Actually, today's
(Continued on page 35)
m e s
NY M557
Now Orleans, La.- Birmingham, Ala.
the
for
reason
St., Now York 4, N. Y.
HAnover 2-0700
than
Even the official
war.
25 Broad
high break¬ are admittedly cheap in relatior
even point of many companies is
to their present earnings, are jus
that they voluntarily hold down as cheap in relation to their assets
their profit margins; they often In
many cases, stocks are actually
do that not because of inability to considerably cheaper than during
raise
their prices,
but because the depression of 1937-38 if one
profits in dollars and cents, in cbnsiaers the improvement in theU
contrast to percentage profits, are
liquid asset position achieved since
already very high compared with then. This can be. illustrated by
the balance sheets of many lead¬
prewar figures as large sales vol¬
170,
(shares
comjpri
Louisiana Securities
two ways
to approach the buying of stocks: buy them as gambling chips
or
buy them for income and intrinsic value. In the long run, only the second approach
pays as A. Wilfred May recently pointed out so convincingly in a series of articles in
are
before
Bought——Sold—-Quoted
Alabama &
.
and S. Bieichroeder, inc.
Investment analyst contends,
that
Long champs. Inc.
Thursday, February 26, 1948
than in
New York Hanseatic
BArclay
CHRONICLE
By FREDERICK II. ROSENSTIEL
Economist for Arnhold
Foreign Internals
Corporation
FINANCIAL
Stocks Cheaper Than During Prewar Depression!
British Securities
120 Broadway, New
&
Bell
Teletype NY 1-1227
Central States Elec. (Va.)
Common
Detroit Int'l Bridge
Aspinook Corp.
KENTON
By
York 5, N. Y.
20 Pine Street, New
Prominent banker points out postwar demand
CLctual Ttlarhexs Qu
Aetna Standard Engineering
American Time Corp.
for private loans has more than offset government
borrowing, and because of drying up of capital markets and price declines'in high-grade securities,
banks have been called upon to supply more credit than anticipated. This has led to tightening
money market and rise in discount rates.
Says banks must retain consderable government bonds
to guard liquidity, and success of banks' anti-inflation program will further tighten credit.
Advises
business concerns to keep financial house in order and borrow only when essential ■
Bates Manufacturing
In
Established 1923
Members New
Boston & Maine R.R.
Clyde Porcelain Steel
that
the
General Aniline & Film "A"
Hood Chemical
taking place
right now — I
Northern New England
refer
Punta Alegre Sugar
of
Pacific Telecoin
easy
credit.
Time, Inc.
g
United Artists Theatre
is
e
r
awareness
United Piece Dye Works
Telecoin Corp.
e. n
bank
While
there
Title Guaranty & Trust
the
to
of an.era
end
Taylor Wharton Iron & Steel "
Merchants Distilling
is
decades
Newmarket Manufacturing
Taca Airways
de¬
guage
without resorting to the
technical terminology with which
economists
usually
discussion of money
problems.
;
velopments in professional
Kirby Lumber
U. S. Finishing com. & pfd.
sig¬
nificant
International Detrola
this
a
a
1
of
change
Curb and Unlisted
Securities
becloud
any
and credit
In
recent
months
we
have
ex¬
perienced the greatest tightening
in the money market since the
1920's.
The last segment in our
the banking business is
finally increasing the price of its
product. .Back of this occurrence
economy,
is the
same
force
that has been
and above the amounts they are
required by law to carry — in
short,
idle,
unemployed
funds
Obviously, such funds would pile
up only in a period in which there
attractive short-term loans
are
no
or
investments
available
to
Joseph McManus & Co.
Members New
York Curb Exchange
Chicago Stock Exchange
the
banks to
employ their cash. What
has happened so drastically to re¬
verse this picture?
Let us review
39 Broadway
New York 6
Teletype NY 1-1610
Digby 4-3122
the events chronologically, step by
step.'
•
;',!■_.
>...
War's Effect
on
Excess Reserves
operating in every other type of
Douglas Shoe
The first change
came
about?
business for some time—demand
banking f r a- has overtaken the available sup¬ with our preparation for and pros¬
ecution of World War II when,
Kenton R. Cravens
ternity, to a ply.
you will recall, the government's!
large
portion
Looking back at the period be¬ needs for credit were
of the general public it comes as
steppe'd up
fore the war at a time when our
a shock and a surprise.
enormously and quickly used up
Few know
excess reserves were over $6 bil¬
or
understand the story of just
the
banks'
unemployed
funds.
how and why this came about. I lion, it seemed to us in the bank¬
ing business almost next to im-. Actually, unless the banking sys¬
would like to present it as far as
I am able in simple everyday lan- possible that this change could tem had been provided with tre¬
occur.
Parenthetically, I might
mendous additional cash reserves
explain that we use the term "ex¬
*
a
technical process
An address by Mr. Cravens be¬ cess reserves" to describe the un¬ through
inside
HAnover 2-9170
oi$>
one
most
the
Common
—
Prior
Preferred
,
Warner & Swasey
&Teene<miComponu
Members N. Y. Security Dealers Assn.
37 Wall St., N. Y. 5
Bell
Hanover 2-4850
Teletypes—NY 1-1126 & 1127
the
fore
Associated
Equipment
invested cash which the banks of
Distributors, Chicago, HI., Feb. 16,
H. Hentz & Co.
the
country hold on deposit with
1948.
Established 1856
the
Federal
Reserve
Banks over
Bought—Sold—Quoted
"vv;
the
Federal
on page
York
Stock
Exchange
York
Curb
'Exchange
25)
ACTIVE MARKETS
We Maintain Active Market* in U. S. FUNDS for
York
New
Cotton
Commodity
Chicago
Exchange
Exchange, * Inc.
Board
New Orleans Cotton
of
Trade
Exchange
And other Exchanges
N. Y. Cotton Exchange Bldg.
NEW YORK 4,
CHICAGO
DETROIT
N. Y.
PITTSBURGH'
GENEVA, SWITZERLAND
Noranda. Mines
United
Brown Op.
Rhodesian Selection
Minn* & Out, Paper
Gaumont-British
Placer Development
Scophony, Ltd.
Canadian. Securities
Department
Kingdom 4 %
'90
British Securities
f
Department
REAL ESTATE
STOCKS & BONDS
Bought
—
Sold
—-
115 BROADWAY
TM.oltnn, R4rrl»v. 7-0100.
NEW YORK 6, N. Y.
T»1#tvne NY 1-672
SIEGEL & CO.
39 Broadway, N. Y. 6
09
Quoted
Goodbody & Co.
Members N. Y. Stock Exchange and Other Principal Exchanges
DIgby 4-2370
Teletype NY 1-1942
Members'
"
.(
Dealers Ass'n
Teletype—NY 1-376-377-378,
System, the
Reserve
(Continued
-
New York Security
whereby cash is created through
Members
New
New
j
'■<
YORK B
NEW
Teletype NY 1-1140
inviting me to participate in this meeting I assume you would like for me to dis¬
current developments in my business—the banking business—and what sig¬
implications, if any, these developments may have for you. It so happens'
Electric Bd. & Share Stubs
York Curb Exchange
64 WALL ST.
with you
nificance and
cuss
^
Frank C. Masteison & Co.
Artcraft Manufacturing
Baltimore Porcelain Steel
•/
■''''!''!:■/';
R. CRAVENS*
Vice-President, Mercantile-Commerce Bank & Trust Co., St. Louis, Mo.
Teletype NY 1-2846
HAnover 2-8244
Loft Candy..
Implications oi Changing Credit Conditions
WM. E. POLLOCK & CO., INC.
%
Volume 167
Number 4676
THE COMMERCIAL
&
FINANCIAL
CHRONICLE
I N DE X
Articles
Outlook for
Business—Lionel
and
News
.Pase
Edie-.o.
i_>:_Cover
By JOSEPH STAGG LAWRENCE*
D.
Inflation and Bank Credit—Woodlief Thomas_-__
Inflation Control In
_.;____Cqver
Democracy—Irving S. 01ds_"___
a
Stocks Cheaper Than During Prewar Period!
—Frederick H. Rosensteil__-__-___
Vice-President, Empire Trust Company, New York
City
•;
I
Cover
Calls for
security.
a more enlightened attitude
through tax reform
accumulation by individuals and new and more
con-
.
—2
R.
Graves.-^
|
2
___
—______
Profit Motive and National
Security—Joseph Stagg Lawrence
The
4
,
Versus Inflation—Donald H.
McLaughlin
Today
Foreign Trade—I. F. Baker
C
—__
*
'9
j; C. Benson
March 2__
u-
There
this
is
tial
;
1
ing
Jos.
en¬
The former
recognizes
19
As We
v
IBank
Business Man's
,
Canadian
Cover
___.
___
Stocks.
I
Bookshelf
ig<—Britain
From
__
_
Observations—A*
Wilfred
_
_.
_
Securities Salesman's Corner
j
CJ. S.
Reg.
,
'Weekly
WILUAM
Dominion
Other
Bank
£25,00
$25.00
N. Y.
the
Publisher
.&
*
RIGGS,
Business
bank
clearings,
.city ncw$, retc.).
Other, Offices:
135
S.
La
Salle
St.,
Chicago 3, 111. (Telephone: State 0613);
I Drapers' Gardens, London, E.
C., Eng¬
land, c/o Edwards ,& Smith.
Copyright
1"&48 by William
B.
Dana
and
Company
ary .25,
as
.1942,
York, N.
I, 1879.
;Y.,
.
at
the
under
matter
per
rate
equipment
post
the
in
office
Act
United
Territories
Pan-American
Union,
and
$35.00
The
costs
our
op¬
and
both
to
rapid
raises
rise
the
in
depreciation
extent
that such
upon
of
charges.
charges
original
To
are
..cost
-of
during
provided
an
year.'
made
in
year.
account
postage
(Record
(Foreign
of rthe
—;
New
York
at
of
country.
our
be
preoccu¬
pation with the "cutting edge,"
that
an
"
exaggeration
of
extra.)
Monthly,
^fluctuations in
funds.
„■
99
WALL
re¬
quate
have subjected American business
a1
STREET
NEW TORK 5, N. Y.
ported profits due to such inade¬
we
importance of
'
vital and healthy
depreciation
may
actually
SUGAR
*
industry which
meet
can
perative demands of
the im¬
great
a
.to
to
war.
a
*An
before
address
a
the
facturers'
capital levy.
A tax that im¬
Pennsylvania Manu¬
Association,
Philadel¬
capital patrimony of
country is
by Mr. Lawrence
Raw—Refined—Liquid
tax which in effect amounted
pairs the
a
time
phia; Pa., Feb. 24, 1948.
We
CERTIFICATES
tax which at the
undermines
the
ff- \( ponti-nued.<0*1
Bond &
Mtge. Guar. Co.
lawyers Mortgage Co.
same
ability
*
Exports—Imports—Futures
a
/://,
•
,
DIgby
4-2727
/"
'
:/
of
page -44)-
year;
of
in
Bell
Teletype
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37
You_
Susquehanna Mills
Members N. Y. Security Dealers Assn.
no
18
___
Lea Fabrics
Warren Brothers "C"
a
.an
Doctrine, impor¬
though they be, are merely
the military and diplomatic "cut¬
ting edge" of a power which we
State of Trade and
Industry—
Published
by
Alegre Sugar
Hydraulic Press Mfg.
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12
!
Securities Now in Registration.^—
The
be
ean
Broadway
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ma¬
industry
without- fair
1908
Security Dealers Assn.
2-4500—120
Bell System
.country,
recognized that
fleets, mobile armored
columns,
a
modern
navy,
the
atomic bomb, the Marshall Plan
:8
________
and
healthy
necessary
is a
power
There
this
.statesmanship should
following policies.
•It should .be
Swift air
39
Railroad Securities
Washington
a
of
greatest-
share
32
—
Public Utility Securities,
The
is
such
tarians will induce
tential
Prospective Security Offerings
:
chimeric
or
16
,
..REctor
sider the
our
armory is the atomic bomb.
It is to he hoped that no frivolous
5
,
Members N. Y.
their
19
May
Goyer umenls_
on
of
"Established
■
Punta
welfare
wise
is an obvious
Whether universal
question.
vanced
;
Our Reporter's Report
Our Reporter
terial
an
with .great striking power avail¬
able for quick mobilization at in¬
candescent trouble spots. The ace
14
.___
.
of
in
News About Banks and Bankers
J.K.Rice.Jr.&Co.
as¬
ing living standards and the
gr.eat enough to
return
33
Funds
superla¬
finally
the welfare of American
industry.
As a defensive
measure, and en¬
tirely aside from any desirable ef¬
fects which it might have on ris¬
powerful navy and armored units
7
1
those
which
try demands that first considera¬
tion be given to the
vitality and
doubt
regarding the need for
adequate, modern air force,
18
Indications of Business Activity_
with
weapons
8
_________
Losing Her Gold
Washington Ahead of the News—Carlisle Bargeron___
Mutual
services
8
Dealer-Broker Investment Recosmmendations__
nz
a
design
component
moot
16
Coming Events in the Investment Field
Fi
power
requirement..
military training
8
Securities
seeks
promoting
the probable failure
aggressor's
10
._
Plan
by
power
,
assure
See It (Editorial)_„.
and Insurance
Military
' / "
.
Marshall
.of
secur¬
as
buffers and possible al¬
lies in :the .threatening conflict be¬
tween East and West.
Anticipatory Buying 20"
.
our
A proper and
intelligent solici¬
tude for the defense of this coun¬
serve
Adolph Berle Says Present Crisis Means No War With Russia
20
Regular Features
Engineers Public Service
provide ample
armed
forces and
world peace.
the
the recovery and
strength of warweakened r nations which might
19
*
on
The
Finishing Com. & Pfd.
Electric Bd. & Share
(Stubs)
sured
Greece, Turkey and 'China
ity.
4-6551
to
population, while at the
time we .equipped our
fight¬
tive
Stagg Lawrence
balance
[ Arthur "Fertig & Co. Warn Retailers
able
for
•same
poten¬
shall Plan.
in
17
(Boxed)
U. S.
were
choice .between
victory. We not only met
imminent victims our own
requirements but made
totalitarian aggression are
substantial contributions to our
steps
in the right direction.
This is the ;allies,
including the one which
basic reason for
support of the has now succeeded to Hitler's in¬
Truman Doctrine and the Mar¬
famous role as the chief threat to
r
Home Insurance Co.
Reports Record Business
countries
grim
a
WALL STREET, NEW YORK
Kingan Com. & Pfd.
of
13
Be Pared____
to
were
food
Secretary Snyder Says Truman Budget Cannot
Wonder
reprint-
.civilian
outer bastions of American
We
free
a
Dorset Fabrics (w.d.)
couragement to
10
Rate
no
Charles E. Merrill Says Venture
Capital Must Re Encouraged 15
Rukeyser Views Price Slump as Step Toward
Normalcy__L_ 15
>
you
Telephone: WHitehall
butter, industry and
agriculture, in .the United States
we
to
.allies,
99
been
and
guns
single
to
already
other
forced
problem.
Aid
12
Wigton Claims New Construction Is Under
Prewar
Where
a
answer
____
on
o n¬
E
has
forgotten
that the prodigies
performed by
American enterprise under
pri¬
vate
management, owned by mil¬
lions of private investors and
op¬
erated by free
workers, made vic¬
tory during the late war possible.
r-
of
,
Thomas I. Parkinson Urges That Federal
Reserve Be Free of
Treasury Influence
:
10
.___
It
rasian despotism?
;
10
Dutton_____
o
ruthless
10
Time—John
f
simple.,
New South Wales Bonds Called for
Redemption
Next
Unassuming UTOPIA
send
subject.
<$>-
of
slaughts
/,.
New York State Bonus Bonds to Reach
Market
will
while they last—of
"Fortune's" eyeopening editorial
on
this
money at the turn of
and recovery in the '30s.
'20s, reform
can
midable.',
21
—
Sees Little Volume of U., S.*Russia Trade
The
day is adequate national defense.
survive
the
Rathje_L_--^__ 12
/ :.v<;,■• / /;/'
s'l
way
How
w e
Problem—E. Fleetwood Dunstan_r____\___ 20
■/'//
the
preserve
our
The Unsatisfactory Pattern of
Exchange Rates—Camille Gut't 16 '
World Bank
of
the
life?
7
Building Cost Trends—Max H. Foley
The
issue
great question
is:
How
can
6
—
Economists and the Cultural Lag—Emerson P. Schmidt
Money and Prices—Roger W. Babson___
paramount
the century, prohibition in the
we
The Status of Mortgage
Lending—Frank C.
policy to promote stability.
Other periods have been characterized
by the dominant issue of the
4
Credit Problems in
—the
We
day—slavery in the ante-bellum days, sound
Inflation and Third Round Wage Increases—Jules
Backman_
_
structive monetary
,■
8
Roundup of Investment Stocks and Their Industries
—Carl T. Hyder__
Gold
wealth
on
Implications of Changing Credit Conditions
—Kenton
AND COMPANY
j, Prominent economist urges protection of far profits and healthy
j industry under pri /.ate enterprise as means of promoting national
25
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4
1
<
THE COMMERCIAL
(900)
Inflation and Third
Sounlup of Investment Stocks and Their Industries
*
'
•
Economist,
Shields & Co.
ties
industries,
as
well
Beginning
reached
as
those
In
the
of
out
36 years
stocks
sold
nave
be¬
aver¬
an
age of 85 on
the down side
this
index.
past
diversified;-and broad enough
not to be tied to one type of busi¬
ness or even one commodity.
Sec¬
36
the
av-
ondly; he should verify the term
of the franchise or the specific
has
erage
person
is
Also, in 21 of
years,
a
used
on
the company.
Fourth; I would consider the rea¬
sonableness
of
the
rates
and
being
changed by long-continued v dis¬
placement of price levels.-"
These averages are not the pri¬
vate opinion of anyone; they are
earnings
their
whether
are
too
of
monopoly. Fifth, I would
excessive to have the privilege
not
prejudiced, but are the public
record inscribed by our investors
and speculators; The average in¬
being
a
efficiency
the
into
look
of
the
Sixth, I would consider
vestor unfamiliar with stock mar¬
company.
ket
analysis in theory and prac¬
is
prone
to
be sceptical,
or hostile.
Distrust and
bewilderment are perhaps natural.
We often have predictions by self-
the facilities of the
analysts and tipsters ex¬
pressed in inflammatory language
which are bound to fill a conservative
investor
with
either
the
leverage. Eighth, one should know
the balance of the load; that is,
specific
to
writing what does
amusement. But one
a. piano for the
tion js used. This would be determined by the^ diversity of the
styled
or
.
.
One could
.
have
to
of
shot
a
price spiral to kicking
i
increases
furrow.
cutting
plowman
a
Formerly
a
•The
upon
with
man
one
nine
men—lighting
the
tor and two car drivers.
/
there is
but it
is
a
an
industry served,
not call
exact science,
It
science.
is
an
em-
j
The
as
this way growth as applied to a
particular industry I use it only
^ntific nation find that it is
as an
diffieult to bring the public to
scientific in their investments.
be
I
believe it is interesting, therefore,
,to note that
rib.
we on
11
example. Other types of in-
^ustry have
are
better
terms
thnn
characteristics which
exoressed
erowth
in
bv
a
were;>termS than growth m a
-,j
manner.
this average four points above
the low made in October, 1946 and
,
other
similar
,
only about 8% above the focal
point of this average, established
that
with
nationalization
the
36
over
k
years.
Abuse of Term "Growth"
(See "Chron¬
icle" Feb. 19, 1948, page 4—Edi¬
tor) I gave you a few of the
4# In my first lecture
common'terms used in the invest¬
ment business and
some
I pointed
of the characteristics of
vertible
preferred
stocks,
out
con¬
de-
ascribed the provisions of sinking
.funds, gave you a detailed illus¬
tration on leverage. Tonight may
T add to this another term which
is much used in Wall Street today
—growth.
,
'
I think it is very mUfcH .abused.
■f-; *This is the second of two lec¬
tures by Mr. Hyder before the
Small Investors Forum at Colum¬
bia
University. ..New. York
Feb.
City,
12, 1948. The first appeared
in the "Chronicle" of Feb. 19.
nium.
The action of
some
of the
he cannot get another $10 a
week. The press also .gives out
much misinformation. The English situation is the case of a good
customer going broke,
A normal businessman
does not
cut off a
He talks
fine customer.
establishment of
of theatres,
on
the
a
commercial
I
-
Glevil
solely because his country had no
it
nor
was
as
not intended
an
act
as
against
charge
bits the
gins at
current
the
cost
screen
a
usually
and services available at
ports."
r
;
round wage
And
again at page 46:
"We
and
tion enough within the
the
inflationary dangers of the
coming year."
Similarly,
;
emphasis
upon
the need for regulation of credit,
income
but
beginning
to
with
When the film
the charge-off be¬
pre-determined rate and
results in the complete
In
the
am-sure
,
of
case
that
the
higher
pensive postwar films
^ost damage in
the
causing the
middle of
1947.
Seligman, Lubetkin &) Co.
INCORPORATED
N. Y.
However,
unless the English
is fixed up, profits will
situation
toboggan further in the first quar¬
ter of 1948. About $17 million net
and pick up a ball,
*Excerpts from a statement by
Backman before the Emer¬
Dr.
forces
dominant today. Further wage
will
•
purchasing
to those
will
to
add
consumer
and hence add
power
inflationary forces.
higher
They
and
spiraling because of higher costs.
mean
prices
only a limited
of further short run
gains in physical volume of pro¬
duction of goods and services, as
There is
Third:
possibility
indicated in the citation from the
President's report a
little earlier.
wages will
bring forth any more food,,
the major area of shortage; it can
only increase the pressure on that
food supply.
dollars
Additional
of
not
Railroads and
Fourth:
ture
draw
common
areas.
the
upon
labor pool
agricul¬
basic
rural
same
in
many
Railroads draw their cleri¬
cal help from
the
same
labor pool
in suburban and rural areas. Local
wage
increases would be quickly
in
reflected
areas.
higher costs in those
/--V v.
.
cannot
Railroads
Fifth:
raise
their rates continually in a wagerate
The net effect must be
race.
intensify losses to other forms
transportation with a conse¬
quent weakening of the position
of
railroads.
Sixth:
place.
lean forward
Inflationary
Secondly;
are
increases
for
rates
analogy for this wage-price spiral
is found in something that is fa¬
miliar to all of us.
You try to
we
services.
of
freight will be necessary, if a fur¬
ther increase in wages were to
take
prices for all types of goods and
to
had the ex¬
Hence
increases cannot win the
price increases. There
with
no possibility of absorption ef
higher wage costs in the railroad
industry.
The resulting higher
railroad rates will mean higher
railroads I
The illustration that is the best
of release.
Bought—Sold—Quoted
New York 4,
-
last
the
of
is
-
..
his
history
two rounds has demonstrated that
race
cannot increase indus¬
agricultural produc¬
next few
months to catch up fully with
market demands, or to surmount
i
trial
The
First:
v
.
wage
<
concerning third
increases:
propositions
requirements for final consump¬
tion, private capital formation,
Government services, and ex-
present
I would like to state a series of
satisfy the combined
prfoes to
in
which
factors
.
ucts.
current
charee-off in the first six months
Petroleum Heat & Power
amount of goods
the
of
excess
1947
year
with
tionary setting become increased
cost to industry, and hence in¬
creased prices for industry's prod¬
the
total demand for goods was in
the
.
DuMont Laboratories
Graham Paige 4s, 1956
41 Broad Street
"Increasingly through the sec¬
of
labor,
including
groups,
increases
conditions would
simply
aggravate
the pressure
now existing in the economy, and
will drive many prices still higher.
Increased
wages
in this i infla¬
which give impetus to par¬
half
earnings.
previously referred to
the alarm expressed by the Pres¬
ident concerning the inflationary
picture. In that same report he
called attention repeatedly to the
need for restraint on the part of
I; have
A third round of wage
I Again at page 41 he says:
ond
particular, than the failure of re¬
wage increases to improve
under
ticular wage-price spirals."
|
illusion to the na¬
an
whole, and to labor in
a
as
economy.
,
fhe actual release.
'
hoping
the
of goods, and
at strategic points in the econ-;
omy,
of
more
tion
might add to the pressure on our
Hollvwood in the interest of the the opposition to a reduction in
profits for the publicly- British film industry. The real taxes, recommendations for selec¬
reported producing motion picture life line in the film business has tive controls, and so forth, con¬
companies were over $50 million been the theatre cha'ns. Columbi a tained at pages 47 to 51 of that
in 1947.
The
11 months actual and
Universal, not having any report, were all designed to meet
was
$42,751,000. The 1946 profit theatres, show the widest fluctua¬ the problem of too much purchas¬
tions in earnings. The big decline ing power.
was $46,714,000; 1945 was $23 mil¬
, - - :
lion.
Having thus set up an all- in the take in these theatres came
I agree completely that our in¬
time record of profits the industry in the period from Anril. to July flation problem arises from
an
proceeded to show an extreme before the foreign trade had de¬ excess of consumer purchasing
teriorated to the low point. This power. A new round of wage in¬
drop in earnings. Among the ba¬
sic reasqns for loss of earnings drop in admissions was caused by creases, such as demoded by these
were,
producers who start rapid climbs in food, clothing and employees, and their insistence
with d^Uaget and when they are durable goods while wages and upon receiving more than an in¬
cents an hour, can
halfwS^ finished they double the personal income trailed badly. crease of 15
budget when they know that un¬ Needing pay envelopes for food, only add to the inflationary pres¬
less the film is a world-beater it families cut their movie budget.
sure.
<
will lose a fortune. They do not
Another reason for this drop in
This pressure will result in two
worry because they have collected the same
period was the pecu¬ ways: First, by increasing the
much press notices and prestige
liarity of the film business in that amount of money in, the hands of
in the meantime. Secondly, there any shift in cost is subject to a
consumers, it means more money
was
a time when
studio workers
delay of from one to twifo years, to bid for the limited supply of
and. technicians worked all hours
depending on how fast a film is goods, v;'. >"•
v"-.
with no extra pay. Now that they released after it is manufactured
And secondly, by increasing the
have signed agreements with the and in the can. Standard operat¬
costs of basic industries it means
producers and it has been reduced ing procedure in the industry is
that in many cases they will have
to not charge the cost of the film
to raise their prices.
Electrol, Inc.
•
side,
..
,
e ,pt^ studio sPac^-of ComHal1 stated to the House <
mons that the tax was simply and
„
<
think
I
be
all
part from relative scarcities
in
again.
connection
ex¬
over
power
supply
total
The
Foundation Co.
„
national chain
clamored for emphasis
orrir.
.
available
industry will come the millen¬
against
t-'1
inflation
suffering
are
we
of buying
cess
6f
which
■,
5, he says:
the
arises in part from the
revenue
Moving Picture Companies
of
nature
"The
It is something
catch up with.
:
nothing has proved to
reach
you can never
cent
few and very
from
'
dollars and
on
1
a
follows: Residential
precedents which are always expanding. <?We as a financial and
a
brief ones.
- For example, on page
)
!
result of that in¬
their real wage
myself to only
Jules Backman
as a
foot kicks the ball out
our
I
shall confine
•
and
crease,
crease
<
However,
doubt
of power
use
conclusion.
small clique of noisy, ex¬
tremists to propagate the belief
the
cita¬
given from
this report to
support this
■
that the studio workers have al¬
lowed
foot kicks it out of reach
The wage-price spiral has
going on and we lean for¬
ward in the form of a wage in¬
been
tions could be
If reflec¬
no
and your
again.
of
; ;•
;
Many
Now all this has yet to prove
that the worker deserves such
as
chief
dangers.
,
treatment,
his
advisers, has
been upon the
inflationary
camera¬
are
ple.
President
and
operator, k focus
puller, a ..number boy, . camera
grips,; electrician to carry the bat¬
tery and motor, an assistant direc¬
tors
of
terances
camera r
man,
wage
the current situation, and the emphasis in that report, as well as
in
many
ut-$
*
would go in the country
spend the day or part of a
day. Now this simple shot calls
for
ball while reaching for it, and holds
emphasis in the President's Economic Report is primarily
camera
a
a
.
already granted have been reflected in higher prices and
and
is distributed things oveh Hollywood, however,
25%; com- domlnated by long-haired documentary boys who have been cla¬
pirical science, an actuarial sci- mercial, 20%; manufacturing, 50%;
moring for nationalization and the
ence based on a body of market
miscellaneous 5%. In defining in
the stock market
-
thus have not benefited workers.
is
topheavy j why
the hours at which peak consump-
should not blame
faulty tune."
company
'
increases will add to
wage
it
Just suppose the scene
mean?
stars, paid out of all proportion to
they will need to buy new plant,
their; worth, who fluff a scene
expand/ and do they have the
while they receive $5,000 a week
capacity in excess of demands to
do cause: the worker. to wonder
be safe. Seventh, I would not wish ;
tice
puzzled
contempt
plant—whether
newfound of
pressure, first, by increasing money in hands of conand secondly, by increasing industrial costs. Likens wage-
sumers,
needed,' two -more elec¬
tricians} arid-if stage^ props on
right which the company has to
110, where it
nail
to be driven
or
the plow
operate in that territory. Third,
is selling as of
touched with paint there will be
he should look inter the type of
the
close
on
Carl T. Hyder
three men — a property man, a
Feb. li. ^ The k;; regulation—whether the local po¬
painter and a carpenter. If make¬
center or the focal point for this litical situation or the price at
up is needed for close shots or
index over the period of 36 years which you are buying the security
sound it takes more than 50 peo¬
is 102.65 and
this can only be illustrate the type of regulation
failed to reach
a
inflationary
In every year for 36 years except 1928 and 1929 stocks
buys a public utility;
for ' example,
because
it
has
growth, he certainly must look
beyond that statement for certain
qualifications. ' First, he should
purchase—and I am speaking of
an
operating utility, of course—
securities of a company where the
character of the territory served
If
on
ibis index.
Dr. Backman contends
the industry.
be-
140
the
By JULES BACKMAN*
Associate Professor of Economics, New York University
talk, I thought it might be interesting to know just where the mar¬
relation to its past. In 1946 the New York "Times" index of stock prices
high of 146 in May.
a
sold
low
in
Bound Wage Increases
my
ket stands with
low
;
the position and outlook for securiagricultural equipment, and textile
of mail order houses and railroads. Notes standing of individual stocks
and their position in
!8
.
v
Hyder, after analyzing present stock market position, reviews
ot moving picture companies, oil, steel, food, paper, tobacco,
Mr.
ave
'
By CARL T. HYDER*
J/
^
Thursday, February 26, 1948
CHRONICLE
FINANCIAL
&
There
considerations.
are
international
The
monies
ap¬
propriated to help foreign coun¬
tries will have smaller purchas¬
ing
power.
It
means
we
get Jess
and services for- our * ap¬
propriations. If we are to try to
goods
get the
same
services
it
volume of goods and
means
a
still
further
drain upon our budget and upon
(Leiserson)
Board
ap¬
the taxpayer. In time it will also
profit will be. lost.* Liquid or cash pointed by the President in the
railroad wage ^ dispute, ..Chicago, mean that the high wage structure
position of the major companies
;/;
(Continued on page 5) ;
X.T (Continued on page '29) ; J.:*< 111., Feb.; 23,. 1948, :> .<J
gency
-
Volume 167
Number 4676
THE COMMERCIAL
&
FINANCIAL
.
CHRONICLE
,
(901)
5
Inflation and Tluid
V"
The
'J*
.
77V.77 7777;:
•
More and
EXPORTS
SOME
ERP
Production
Round
Electric Output
~
Corloadinge
Retail Trade
•of'Trade
By A.WILFRED MAY
BRITAIN
Steal
and
Food Price Index
Auto Production
i.
and
j
Industry
Fail urea
r-
industries
%
loose talk is
being bandied about, among wellmeaning Americans charging that in our • Marshall Plan-planning we
are
"pikers," that we are being ham-stryng by that, "ever-bigoted'v 7 y> Oversell:iadustriai production declined fractionally the past week,
Congress, that we have already acted like Shy lock instead q£ Santa though the /level of output was generally above that of the like
Claus in imposing impossible conditions with the week-.-of. 1947.t"7'v'-;.' •». -v.
;• •. V;T
-V'M
j
more
•
,
J
-
at
competing
Buaineea
•
the
propped-up wage struc¬
ture in this country will put
many
"
REALISM
Wage Hikes
(Continued from page 4)
Commodity Price lades
in International
kets.
a,
disadvantage
/,
in
mar¬
•..
Seventh:
The
working
capital
industries ha~
been weakening. -Every notch in
the wage-price spiral means tha
more funds are
\ ■ r In,the week heavy snows worked to delay the shipment of raw
required in order
materials In soihq areas. • However, .most producers were able to to: meet; payroll, carry raw ma
obtain their current production needs., terials, and so. on.- There is -al ¬
7*'"'
77
Total employment held steady and at a high peak last week with ready developing a serious short
labor disturbances at a minimum. Late in the week reports stated age of working; capital in many
small, and medium sized induf
that a meeting has been called of chief negotiators for the soft coal
position. of
many
.
.
.previous British Loan, that.it would be disgrace-.'
,.s
7;: ful
dollar^imperialism to
,»' pending European aid with
accompany
our k
im-
any political provisos,
and that far from making penny-pinching cutbacks we should give double or treble the pres-
J
ently
specified
-
•
amounts as a cheap * insurance
Allies' collapse and ensuing war. 77
operators on Wednesday of this week presumably, the report states,
combatting the widespread confusion in to discuss John L. Lewis'
pension demands. It was pointed out that
■7
this line of agitation as well as in the converse
the date is significant, sinee many industry leaders expect Mr, Lewis
isolationist doctrine on this side of the Atlantic,
to serve notice about March 1, that he wants to open contract nego¬
7
this column takes leave to offer first-hand testi¬
tiations on April 1.
>
•
mony contained in last and this week's issues of ■v7v
.v.. •'
.t,'.;'v\Y"-Y.. *
*
,
* 7.1!7 7.,, ■ '
•, />.
.• v.'
V 7'The Economist" of
London, the respected pub¬ 7
Notwithstanding the drastic break in commodity prices returns
lication which has constantly supported a maxi¬
to the farmers from the sale of agricultural products continue to
mum of the doings of its Socialist
government, j
•
against
.
our
For
<s
-mr.
.
k'/
.
■
those
Let
exceed those of
of
who
to
want
soft-pedal the
A. Wilfred
May
necessity for our friends' self-help in their quest
1.. 77/3
'V '77' i
for solvency ponder these exhortations of "The
Economist" to its fellow-countrymen (in its leading
editorial, "On the
Kocks," of the Feb. 14 issue):
"When
family
a
us
faces
bankruptcy, either
and pauperism, or
ereignty by vigorous action—by buying less, by
kind of expense and by straining
every nerve
life
of
perpetual
it
makeshift
goods and services.
A nation
is in
no
its
restores
cutting down
sell
to
different
case
to
of
a
its
the choice
same
difficult
choice between
pauperism and gruelling recovery.
The only ques¬
tion worth asking today ... is what further
steps the British people
can take to consume less and
produce more, to reduce their standard
of living and at the same time do harder work.
.
.
Clearly the
.
gov¬
ernment's plea that neither wages nor profits shall rise at this
junc¬
ture is one small part of the much .bigger effort that
is needed
to restore solvency to the British
people."
•
Alongside
the
continuously released reports of current pro¬
duction achievements, must be considered further
conflicting con¬
clusions of "The Economist."
After observing that
"bankruptcy is
a
family responsibility and no section of the community can avoid
its hardships," the publication urges that "the real need for
work¬
ers
and managers alike is longer hours and
financial
new
more
output for the
is too
being
pressure
consumption at home.
practice
much
So drastic
to
created
to
divert
those
to
goods
further wage increases
below
save for cases where workers are genuinely
adequate level of subsistence must be endorsed."
;
an
American
consumption
little
if
frank
suggestions
for
Britishers'
further
tightening
up
on
customarily derided as smugly selfish. But surely
has been uttered by us, the creditor nation, as
definite as these further
prescriptions from their own
are
anything
and
"Economist":
'7 7/
77'y7:.
v
"The brute fact remains that standards of
consumption in Britain
do not reflect the insolvency which
may lie only
a few months
ahead. Can it be said that rationing of domestic fuel has been
drastic
enough in view of the vital importance of coal as an export?"
On
bureaucracy, "It is easy to make a case for keeping two million
government servants, but if 500,000 were returned to
industry, would
the gain in output not ease the burden of the controls?"
Again spe¬
cifically, "By what yardstick
million
Receipt from livestock and livestock products, the bureau pointed
out, would be down about 15% this month as compared with last
month, while it estimated that receipts from crops would be down
30%.
:
-'7 7
-7•
7; /7; >777
;V'•
can
'tourism' in 1957 be
on
the
overseas
expenditure
of
justified?"
£50
V-7;7:j"7
Referring to the domestic capital-expenditure program this bestfriend-and severest-critic declares, "In spite of recent cuts in
capital,
.
it is clear
for
has to be done.
more
wishing
to
build
better
No one will criticize the
government
schools,
new
hospitals, and more and
But this program has added to Britain's in¬
solvency by diverting materials and manpower from export indus¬
tries; in that sense it is Americans, Canadians and South Africans
January,
v.,".':
*
increased
1948,
Estimated
'• *
-
*
8.5%
Specifically bearing
Plan and the size of
our
on
the likely direct results of the Marshall
are "The Economist's" further
grants-in-aid
"Continual
drinking.
tends to
-
borrowing
The
fade.
;
777,77>v."'.
7
-
.
have the same effect as continual
borrower's—like the drunkard's—sense of reality
can
Britain already has had the American loan and the
and will get the South African loan. All have been
.Canadian loan
•necessary, but all have helped to mask from government and people
alike the country's true economic straits. A standard of
living has
maintained,
on
a
economic
Railroads, based
represent
same
in
month
1947.
freight
and to
which
scale
77':V7--:.7-.7—;/
4.1%..
use
industry,
Undertake
in which
continued
volume
responding week
to
Finally, productivity ha
only moderate gains since
Joins A. ML Kidder Staff
(Special
to
The
DETROIT,
Bridge
with
A.
was
did
become
M.
Kidder
Street.
with
Sutro
business
*
,
dealer
"
,•
'•< '
.
as
preceding week.
compare,favorably
Wholesale volume declined
remained
current
above
very
the
level
of the
with that
and
individual
an
Detroit.
•;.7:
n
cor¬
of
Abitibi Power & Paper Co.
moderately, but retailer buying was
like
the
week
of
last
year.
Brown
Buyers
Bonds
cautious and continued to place moderate orders for
i v
SET AT
for week
prices and extras under considera¬
tion by one steel company have been deferred pending the clarifica¬
tion of the widespread hysteria over the increase in semi-finished
steel products—a group of steel products which is a small percent ol
total steel shipments and which have been selling at close to the
price of scrap for some time, states "The Iron Age," national metal
working weekly.
:
7 >
,
7;
...
1
not
—
f;
Company
Preferred
——
Common //>>
Minnesota & Ontario Paper 77
SLIGHTLY HIGHER LEVEL
/;7.>v77'
Some increases in steel base
Whether
Co.
lifted retail
Retail dol¬
delivery.
STEEL OPERATIONS
7:7777
he
past
&
*
ye^r ago, but unit volume was moderately below
tlje 1947 level. Spring promotions of clothing continued to emphasize
Easter items with consumer response generally fayorable.
somewhat
in
Co., ,60?
the
Bros.
A
associated
&
In
HART SMITH & CO.
52 WILLIAM ST., N. Y. 5
7,
HAnover 2-0980
Bell Teletype NY
New York
1-395
Montreal
Toronto
major steel
companies will boost their prices
strip remains to be seen. But nonintegrated steelmakers—those mills which buy their raw materials
from
large integrated steel producers—either have or will soon
advance their prices on cold-rolled strip and some grades of specialty
sheets, the magazine adds. This action is made necessary due to the
such
or
products
as
sheet and
increased cost of slabs and billets.
No
major steel producer this week had raised its prices on
sheets and strip.
Consumers of these products will now be pay¬
ing three different prices:
Those charged by major steel firms;
higher quotations put into effect
non-integrated
makers
and one-half to three
and
or
to be effective soon, by small
market prices
gray
which
are
two
•
times the average mill price.
Underwriter
The failure of some steel companies last week to make public
explain the advance in semi-finished steel accounted for this
action receiving more attention than it probably deserved. Contrary
or
to
information from
not
some
the
sources
simultaneous
semi-finished steel price
in¬
they necessarily similar,
three days lapsed between the
notifications sent out to customers by at least three large steel procreases
were
the trade paper
nor
notes. At least two
(Continued
were
or
on page
II. I. klill COM RIM
170
Broadway, New York 7, N. Y.
WOrth
28)
2-1534-5-6-7
have been eaten upr expenditures under¬
is quite out of accord with Britain's real
And. what guarantee is there that the Marshall
the same way?
The only proper, the only
Time Inc.
Dravo
the s/urplus thus created to build up
reserves, modernize
develop economic
integration in
Western
Europe and
the
long
program
of hard
Kingwood Oil Co. I
Corp.
A
American Maize Products Co.
living and hard working
crude
has
over
had
the
oil
producer
continual
past
that;
earnings!,
seven
years.!
in the long run salvation alone will lie."
Bought—Sold—Quoted
All Europe
Must Move!
Market
3%-3%
'
'
,7
This week (in its Feb. 21 issue) "The Economist," after
castigat¬
ing Europe for its record of great phrases and virtual inaction as all
it
has
to
show
"show signs of
for
a
tha,^recovery not
Elsewhere
in
the
first
two
vigorous will to
months
recovery
of
and
Analysis Available
FREDERIC H. HATCH & CO., INC.
1948,
exhorts it to
that it shall pursue
Established
as a queue but as a team."
the
same
issue
(Continued
a
MEMBERS
correspondent
on page
21)
-
shows
.
...
that
,7
>
Eng-
63
Wall
?
V
Chronicle)-
MICH.—Edward
has
Griswold
Financial
a
would be for Britain to pursue now the policy it
if the Marshall Plan were reduced to half or a third
now
Ninth:
shown
decreased
passenger revenue
77/ 7:,,\v77-
A slight increase in consumer buying during the week
lar
not be used
pursue
only mean an increase/,
danger of subsequent collapse.
in January, 1948, was greater than in
revenue
courageous course
would
and will
reserves
position.
may
the
above
January, 1947, by 10.7%, but estimated
add a bathroom to the house just as the receivers walk in."
observations seemingly out-Tafting Taft:
Plan
...
January, 1948, covers only operating revenues and
does not reflect rising trends since 1947 in operating expenses.
things, hut it is not
usual to
Further price
^increases will brin
us into still more rarefied levels
The estimate for
who have been paying for part of the British
program of development
at home. No one denies the desirability of these
taken,
v'/
81.7% of total operating revenues, that estimated operating revenues
in
better equipped houses.
been
■
Is is learned from the Association of American
on
Let Not the Receivers Finance the Extra Bathroom!
v
:•
advance reports from 83 class I carriers whose revenues
on
same
departure from current industrial
but at least the principle of no
a
hope for,
-
•
because of recent price declines.
1
I
In this way more goods could be produced for
export with¬ volume somewhat above the level of the
income.
out
year ago.
77/- 77 7.7"
Eighth: Wholesale and consume r
prices are now in the stratospher,
the prewar period.
Wages hav
According to an estimate of the United States Department of
increased much faster.
Hence, uni;
Agriculture the past week, total cash receipts by farmers from
labor costs have risen, and pushed
marketing would amount to $2 billion or 10% higher than in Febru¬
prices up from the cost side. This
ary, 1947, but close to 20% below January receipts. The Department
noted, however, that some decline from January is usual because of tendency would be aggravated by
a new round of
wage increases.
the shorter month, but the decrease this year is greater than usual
sov¬
every
more
and
for the British people is in reality precisely the
open
under
goes
it
one
tries.
N.
Y.
SECURITY
Street, New York 5, N. Y.
1888
DEALERS
77/
7
"'r
-*..7:
ASSOCIATION
Bell Teletype NY 1-897
'
■
PETER MORGAN & CO.
31 Nassau Street
Tel. BA 7-5161
\
j
New York S, N. Y.
Tele NY 1-2078
6
(902)
THE COMMERCIAL
&
FINANCIAL
Gold Versus
DONALD
By
;; •;v- *:/
Mining executive
H.
r.,J
•!'
CHRONICLE
.
McLAUGHLIN*
i
tr j
President, Homestake Mining Co.
'
1
:•;/ ;
/:...
'J zi
established.
worries and problems m financing current
foreign'
Mr. Baker points
out,, because of shortageof dollar exchange,
export and import licensing and
business concerns
many other factors, the American
dealing abroad should fortify themselves with
adequate and sound information regarding
foreign conditions.
Looks for easing of
foreign exchange conditions with operation of
Marshall Plan,, but holds
foreign currencies must be stabilized and
..
ivii»4.
y:-
Prices
by
paid ;for goods and services in paper currencies are undoubtedly determined
interrelated factors, but among them none is more specific in pushing prices
higher and higher levels- than the vast increase in debts and monetary' obliga¬
tions
of
provements,
stimulated
by
the
tically all ma¬
jor governments.
in
is
e
r
nothing unor¬
thodox
in
the
situation
in
which
the
gold miners
find'
them¬
selves
today.
With
wages
and the
of
H.
McLaughlin
>./
tion of gold
at
characteristic of
perity,
phony
mate¬
that
are
required ; in
the
produc¬
the high levels
'
•'
prices
all
rials
D.
a
or
period of
pros¬
otherwise—and
with
shortages of both men' and
machinery to contend' with as well
profits
less
drastic
in this way
in
in
a
industry'already
smoothly and efficiently operating
is
best
at
quently
rather, limited,
find
we
y
Conse¬
gold
still far
States
and
is
the
rather
most,
cost
of
painfully
producers.
producing
small
Technical-
for
i-m-
address
by Mr. McLaugh¬
Meeting of American
Mining and Metal¬
lurgical
Engineers,
New
York
City, Feb. 19, 1948.
lin at 166th
Institute
of
BOSTON
in
familiar
debt and
...
v •'
•
• '
Boston
&
Prior
asking for his.
hand, faith in the
gold
seems
stronger than ever, even though
the- returns from mining are tem¬
porarily
below 1 the
rate
that
makes the industry as a whole'
value' /of
This faith is revealed
of prospecting
and
exploration in all the gold
bearing regions without apparent
decline in enthusiasm and hope,
and
it
is
der
strict
dollar,
received
franc,
pound
government.
a
conditions,
ever
for
appears
gold*
to
measure
or
Un¬
Federal Street, Boston
*
■
Dan River
/; —
;
10
"
y
checked and held
cause
through the
discipline that only gold
can
to
pro¬
unsettled
It is
not
nothing to fear
bills
product.
were
and
Be
or
★
—-
G
:
payrolls
governments
all
more
and
more
as
they
toward rigid -For
ore
afford
a means
the
many
the
on
the,
so
are depen¬
factors outside
that' information
many
customer
tions within
country may easily
undermine the financial capacity
a
other!; countries..
;
at
a
unknown.-'
f
; One of his
;/■ //a
to
,
risk
" '
I
such
gave
time
licenses
.
;/:
to
secure
tion
the
by
;
be said
refer to
the
striking
a
'*An
RH 83 & 84
Telephone 3-9137
address by Mr. Baker be¬
New
England Export
the
Club, Boston, Mass., Feb. 19, 1948.
with
of
S;
future
SECURITIES
For
Empire Southern Gas
Pittsburgh Rys. Co.
Stix:
&
or
Co.
of
Sterling Motor Truck
jong Distance 238-9
.
Bell Tele. LS 186
H. M.
509 OLIVE
of Orders
Std.
Pac.
10:45
Time:
on
that
an
matter
a
By this I do not
should
you
indifferent
or
.While every
be
must
be
cynical
to
opportunity.
safeguard against loss
considered
in
view
oi
present conditions,, the line shoufd
be. drawn
never
destroys
finely that it
future position in the'
a
market/!'/
Z
Some
of
to the
same
•
so
G/
V':
:
them
will
always
exist
extent that there will
always be little
men in big jobs
dictate policies on hit-andthinking. Despite indifferent
leadership^ natural forces have a
way
of; exerting themselves in
every country.
Of course, this is
long-term thinking, but then for¬
eign
trade
was
never
recom¬
who
miss
been
in
true
trader
needs
to
into
this
business.
The
of
today needs courage to
stick it out.
Along with this he
conduct
continual
and
causes
world market
effects
in order to
estimations
from
reT
in
lift
the
When
banking friends visit me
service they can
invariably ask for a trial
to
I
he.
Floor
balance
11:30
shows
Sp-82
at
hours.
of what
on
the
of dollars.
a
STREET
STANDARD SECURITIES
St.LouisI.Mo.
CORPORATION
Members
PH
Standard
of
OFFICE
Stock Exchange Bldg. Phila. 2
Telephone
Teletype
RIttenhouse 6-3717
As
any
country which
in-and-out movement
I have
yet to
see
such
report, possibly because there is
way of one
being prepared.
no
Byllesby & Company
PHILADELPHIA
F.xecution
from
Exchange
other
•
Incorporated
get
you
basis.
order.
every
mean
and ask
INVESTMENT SECURITIES
Warner Company
BANKERS BOND
Immediate
Quotes call TWX Sp-43
A.M.,-
Nazareth Cement
Floor, Kentucky Home Life BIdg.
LOUISVILLE 2, KENTUCKY
when
this
on
confirma- 1
Investigate
shaking hands
fact, looking ahead is required
on
NORTHWEST MINING
.
Murphy Chair Company
partial
present confusion.
Empire Steel Co.
Consider H. Willett
1st
as
banks.
before
yourself
order
the
SPOKANE. WASH.
American Box Board
Botany Mills
'J*
priorities,
demonstra¬
mended" to any one expecting to
the
run
a
shoestring into a fortune,
machine was.
even though the reverse has often
r
fore
ST. LOUIS
Co.
and
even
U.
search
Bell System Teletype:
Private Wire System between
York and Los Angeles
American Turf Ass'n
Varnish
sign,
irrevocable letters of credit, but it
much
more
difficult
to
get
long-term
Reliance
Price"
of\ overselling that even
tion
RICHMOND, VIRGINIA
can
disappearing, d'ojlar.
In the first
flush of postwar enthusiasm he
American production
CRAIGIE&CO.
less
or
V
problems
self-made.
be
more
'
Pittsburgh, Pa.
matter
American, trader of today is doing
business,
•F.W.
Los Angeles
No
Philadelphia, New
American Air Filter
Any
/Today the trader must learn to
live; With .foreign/restrictionsand
ojf' the soundest customer, - Thes
economic, conditions,, in tur% re¬ regulations and not: be/dismayed
flect eobperation or discrimination. by: theih^se^ing; lack- of purpose/
what measuring stick is used,,the
NORTH and SOUTH
Exchange
Hagerstown, Md.
N. Y. Telephone—WHitehall 3-7253
foreign trader?
pledge allegiance tc
years,,
today trading, values
VIRGINIA—WEST VIRGINIA
Street, Philadelphia 2
New York
or
three Cs of credit—character,
dent
Dealers in
Request
York Curb
news
and capital—in judging
the worthiness of customers. Bu-
A:
Also Member of
New
1420 Walnut
of
capacity
RICHMOND, VA.
CAROLINA
on
flood
-
able to
were
of preserve
BUCKLEY BROTHERS
LOUISVILLE
At
enough dollars placed hi the U. S.'
,by
'Members New York, Philadelphia and
Los Angeles Stock Exchanges
Tele. CI 150
"Goods
went trading barriers and out
came restrictions
similar to war-'
condi¬
however, he is. hav¬
ing trouble appraising each sel'l-irq
area of the
globe for its real va'ue
MUNICIPAL BONDS
Tele. CV 174
the;
certain goods but
Down •/ went
on
dollars.
on
up
Whatever the
world events,
being forced, in. accord¬
with the pattern set by prac¬
(Continued on page
Steel
Data
CINCINNATI
short
information is
Despite
however,, penal¬
is,
LD 33
/
'■
CLEVELAND
dol^
on
is
DuMonf Laboratories
BIdg.
•
much
balances and
of themselves
o;
the
ing basic values as the paper cur¬ must *be of a more pertinent aric
rencies weaken, but, on the other •timely nature.
Economic condi¬
Corporation
Buffalo' Bolt Company
Richardson
& Go.
international
so
mestic trade to include' the world'
mee^
with, his
by
tically
for
Central: Illinois Public Serv. Co.
J Portsmouth
Union Cent.
by
times.
of
pressure
goods flattened the
interested in foreign trade, for he
has enlarged the- map of his do¬
complair.
allowed to
a
HlllllllllllllMlimHIMriHflllllllflllll.
Harshaw Chemical
Bldg.
caused-
tions of the
PHILADELPHIA
R.eld, Richards
is
origin, such
ulating and
vide.
regulation and curtailment of free
enterprise, to accept payment in
depreciating currency at a fixed
rate.
The
growing strength of
gold creates confidence that mine?
with good reserves or prospects
Mills
Lynchburg, Va.
Tele. LY 83
Drackett //<'
some
shrinking of the economic wor;d
although most of it can be traced
ance
Scott, Horner &
Mason, Inc. -
Tele. BS 128'
CLEVELAND
Baker
from this
at a reasonable level-
The
put a- staggering
existing
facilities
for
transportation, water supply and
electricity. After countries of the
world got out their balance sheets
the.y were seen to be a little ahead
this
about if lie
Bassett Furniture Ind.
Preferred
Tel. HUbbard 2-3790
lar
load
ity is to be attained, and inflation
move
Walter J. Connolly & Co., Inc.
ledger.:
consumer
are
fanfare
world,:
they weighed anchor
had transferred cargoes of
dollars to. the U. S. side of the
they
writing books
I. F.
trying to sell
hi'ip theirs. Undoubtedly
of financial .stahiU
the harbors of the
when
and
while
experts
two-years'
a
well as other regulatory measures.
stimigold that is becoming
spreading at genera;
more valuable in terms
of goods
tures on
Dollar Shortage Froblem k", ■*'
deep shafts and large
and services; it is the paper cur¬ understanding of the part Amer¬
production
must
plants that are being made with, rencies or the promises of govern¬ ican
play
v
t Many
present-day orders are'
confidence in new enterprises on ments to pay that are becoming- jworld coordination and rehabili¬ based on the expectation that ex¬
tation. ; '
•'
change will be available when
the extensions of the gold-bearing discounted by their unchecked ex¬
No longer is it sufficient to
payment is due. Foreign banks do
pansion.
Under
these
circum¬
say
reefs
of the Rand
and on* the
not hesitate, in such cases, to issue '
stances, the
gold, miner would that the American businessman ir
American Furniture Coi
entered
and
opinion
more
provide the
most
Trading Markets
Traded in Round Lots
Union Com.
ions,
bilateral" trade.
a
ordered
of
and even mul¬
basis to which currencies"
must
eventually be referred, il
some
re-
f 1 uctuat ing
curre n c i e
s,
only
clearly shown by
gold' and immense expendi¬
.
24
is
less
these
than
ized
RR.
Argen¬
supply
refrigerator? and a five-years'
supply of motor vehicles. Argosies
of ships carrying American
goods
tina
the I.O.U.'s of
and
paper
Gold's Future
On the other
inherent
*
;• ■
Maine
■unable to meet the
unprecedented
demand.
As an example,
is
with
whatever may be used to measure
in
Faith
and
own
which
physical hardships
that were so arbitrarily imposed
on them
during the war.
'
our
have
V-..v.;-
monetary obligations
He
People are al¬
ways;' knock-'
ing on. his door,
of
his
V
and
press
and;
and
history of this country when
by the
radio,
less
output
."V
.
temporary
tilateral
over
of
iiiiiiiiiiiiiiiririmiiiiiiiiiiiiiiiiirrnf
;
the
they arc expressed must neces¬
sarily decline, with the result that
level
LYNCHBURG
'111
create
financial
country
the
the
*An
time in the
a
foreign
again normal.
advice
that
practically al'
major governments. As these ex¬
profits tensions of credit increase
without
that formerly prevailed and stillcorresponding increase in wealth
struggling to overcome the special the value -of the' units itr
the
by the persistence
United
been
never
words like
prosperous.
the
There has
countries improved^ before
are
people were more concerned with international affairs.
The man
who never got further than
the baseball scores is now familiar with
the latest score on the
Marshall Plan., He has been saturated with
difficulties of the producers, viz.:'
inflation through the vast increase
mines
bfelow
the
in many
trade risks
ditions
few
an
cepted
gold- in
'
This faith in gold is maintained
and strengthened by the very con¬
but the' relief to be gained
cases,
—the spread between the returns
in paper dollars that must be ac¬
for
conditions
"
newly discovered deposits in the
Orange Free State.
urgency of declining profits, have
to some extent made the decline
The
economic
our<j>———
and prac¬
own
it
•
many
toward
J
/ "A
'
deicfiMfeg" the
values in well
money
ordered economic world-.
'
^
Stresses importance of stable
vy
Raker*
Vjce-Presideut and Treasurer, Westing-house Electric
/'v</>-''
International Co.ly ;■//;///
y'tiJ.
faith in gold's future as value standard, and asserts financial stability
can be fully attained
only by discipline gold standard can provide. Blames New Deal policies and
war for inflationary trends, and points out difficulties* to
gold mining industry due to> fixed gold price\
Urges amending Gold Reserve Act so that gold price can be tested in open market and complete
paper
f
'
expresses
interchangeability of gofd and
Thursday, February 26, 1948'
73
Brokers
Members St. Louis Stock Kxch&nt*
Stock
Exchange
Spokane
Dealers
-
Underwriters
Peyton Building, Spokane
Branches at
"f; Kellogg,
We have found it extremely dif¬
ficult, if not impossible, to interest
people in making any kind of
prophecies for us. So, as best we
can,
we
have had to make-our
own.
a
You
are
not
about
newly-discovered
to learn
financial
Idaho and Yakima, Wn.
.
(Continued
on page
34)-
/•
Volume
167
Number
•
From
4676
;1
;
THE COMMERCIAL
'
.
&
FINANCIAL
CHRONICLE
(903)
7
Economists and the Cultural
Lag
Washington
By
EMERSON
P.
SCHMIDT
'
■
,
Ahead
of the
Chamber of Commerce of the
U.S.A.
Dr. Schmidt attacks
widespread acceptance of "Keynesian Economics" and recalls Lord
Keynes' post¬
humous article, in which Keynes
himself, opposed rejection of classical economic doctrines.
By CARLISLE BARGERON
'
Those
political observers who
"revolt" will not amount to
predicting that the Southern
than a loud noise are over¬
are
anything
more
looking the ^underlying calculations of its leaders.
the
Truman
well
to
Administration is
a
They figure that
dead duck anyway, so they
may as
respond
the
deep
man
popular
feel¬
person
ing
against-
the
so-called
civil
in
the
little
the
thus
gain
not
and
a
a
the,
the
worst.
He
hypocrisy
no
and
even,
.
S^JSiSl-iE1 J.-SKS
as
tical
politicians and enjoying the
popular resentment.
a
E.
Dr.
The New York "Journal Ameri¬
paign
probably have "carried"
Florida, Texas, North Carolina and
In
probably
Georgia.
But
'
Ski
uroo
in
was
A loKorwn
•
for
a
charged that Truman had
period in Kansas City been
member
a
cam¬
of
the
Ku
11 Dei.
lie
Klux
Klan.
Alabama
;
SUll
r.^,/4
and
New
sweating over the popular
opinion beating they/ had been
were
taking,
promptly
sponge
and
themselves
threw
set. out
with
to
1 Pr°gram to bring them to
i
(1) Shortly
Republicans
beginning
which
of
Anyway, tney have
line,
no
incentive
It
is
much
better
The
common
Washington
Chinaman
expression abound
for weeks is that a
beat
can
Truman
probably will.
The
know
so
that is to come.
This
being
situation,
Eastern
the
Demo¬
cratic
leaders, or more particu¬
larly the ADA crowd, towards the
Southerners is unjustified.
The
ADA, made up mostly of men to
•whom
the
New
mode of gracious
bitter
towards
they
Deal
has been
living, is just
these
a
as
Southerners
towards Henry Wal¬
lace. * Just why they couldn't have
gone rtiuus on
guiie along uai the hapoy team is
lectin
as
are
It
In
this
them
not
only
overlooked,
too,
the;
is
or
Roosevelt
any
Not
been
ever
dential
in
his
four
time
has
in
Presi¬
my
a
it
Wilstfn
won
twice,
when the Republicans were
without this vote.
Cleveland
won
twice
course,
Grover
without
it.
.
In
Roosevelt's
single
no
the
accuracy
Southern
elections
would
the
Negroes voted the other
It is my belief that the
Repub¬
licans, notwithstanding their zeal,
aren't going to get so much of
vote
likely
this
to
go
It
year.
to
is
Wallace
th
or
j f
more
because
th
th t
has done nothing since
time, to explain such a com¬
is generally
the- 'case.
Wal¬
as now
be
series
basis
his death,
Washington
in
"If I
were
a
„
(2) In
his
said:' •'
'
find
cal
to remind contem¬
economists that the classi¬
teaching
embodied
some
truths
of
great sig¬
nificance, which we are liable to¬
day to overlook because we asso¬
ciate
them
with
cannot
we
much
other
now
doctrines
accept with¬
-qualification.
There
in
these matters deep under¬
currents at work, natural
forces,
are
one
call
can
them,
invisible hand,
ing
towards
not
were
got
on
for
so,
even
or
which
well
so
better
them
less,
consumption
force
and their relation to economic
tivity.
.
.
shall
ment
on
Unquestionably the
and
the
amounted
to
85%
65%
is
above
And if
outside
of
The
Even
recent
after
revision
tism,
(5)
In
tivity calls for
some
better
economics
for
the
•
new
.•
powerful
a
book, "Are
These Hardships
Necessary?" Roy
lace's
candidacy has no bearing
on the
polls because the question
supposedly being put when Tru-
to
The
Financial
accompanying
from
old
C.
Lyman
non,
has
the
editors'
three
extracts
letters
of
rejec¬
"After
(1)
the
reading
shdrt
of
Oxford
University
thing to be published in.
critical
comment
Keynes
literature,
significance of the
the
to
note
is
the
upon
the
series
of
Commerce.
It
new
however, that
me,
rather
than of
in
the
your
nature
of
carelessness in economic
ment, and I, therefore, do not feel
thinking
by economists and others,
"To put the matter in
states:
the
general terms, I suggest that there
was
body
a
to
used
be
Economy'
stood
known
>a
of
gressions
of
made
'Political
as
under¬
was
sufficiently
; large
people
grievous
that
trans¬
doctrine
without
were
challenge.
have what is known
now
which
well-informed
that
secure
not
doctrine,
and which
by
number
to
of
We
'Eco¬
as
able to
(2)
most
com¬
accept it for publication."
"After
thought
publish
it
constructive
a
good
a
have
we
your
deal
decided
little note.
interesting,
but
of
economic
preconceptions.1
the
•
i
become
asso¬
doubts
our
it rest largely on the fol¬
lowing: first, its extreme brevity
which makes it
little difficult
.a
Even
Political
are
Economy.
doctrine
Changes of
particularly associ¬
are
become,
and
in
certain
a
affairs gives
into
are
all reluctant to publish a state¬
pattern;
our
second,
we
ment attributed to Keynes unless it
can be
verified much more than
have done in this note; third,
you
The
have
body
of
take the place of
and
force
there
is
in terms of
more
quired.
your
I
(3)
the
feel
would
point
being
as
we
stagnation
that
comprehensive
much
a
job
also
is
re¬
that
argue
(3) does not strike
me
effective."
very
"I regret that
we are
unable
to
accept
your
communication
'Economists and the Cultural Lag'.
...
it
I found it very interesting but
is
too
in
fragmentary for accept¬
its present form."
in de¬
is
consequence
no*
of
use
theory, but
ance
it up
that
With Dreyfus &
received
Dreyfus
&
the old doc¬
New
York
consequently
New
York
strong enough to check
nounce
Co.,
50
Co.
Broadway,
City, members of the
Stock
that
Exchange,
Kurt
Strauss
is
an¬
now
associated with their Foreign De¬
partment.
are
matters.
quite
Indeed
that
the
it
we
might
on
in
these
all
its
ceeded for
a
•
have most
public policy.
well
be
argued
should be better off with
old Political
with
sea
This fact may
injurious effects
if
at
PATHE INDUSTRIES, INC.
4% Preferred
Economy which,
shortcomings,
suc¬
$100.00
Callable @ 105
par
long time in retain¬
SAFWAY STEEL PRODUCTS, Inc.
dividend
$156,000
have
mately
3.6
COMMON STOCK
1947
.
:
.
.
Profits $2.88
per
Annual Report Sent
share
on
.
.
.
requirements
times
of
covered
been
Market;
approxi¬
since
issuance.
...
54
—
56
Dividends 90c
Detailed
-
Request!
and
its
description
of
this company
operations available to inter¬
ested dealers
on
request.
W. E. Bell & Co. Adds
to
The
Overturf
has
Financial
been
added
staff of W. E. Bell &
Securities
Chronicle)
NEB. —George
Building.
to
E.
the
Co., Federal
Members:
>
225
EAST
MASON
PHONES—Daly 5392
to
fit
the Government in its aberrations.
«■
For
to
We found
People
iDepartment of Commerce sup¬
plement to July Survey of Cur¬
rent
Business;
Federal
Reserve
Bulletin, Sept., 1947, page 1105.
Rand Tower.
(Special
of
not
about
Annual
Chronict f)
a
smear
1
Holley, Dayton & Ger-
LINCOLN,
am
upon
nor
Department of
seems
I
...
adverse to publishing
no means
good
38,889 sh. outstanding.
v
MINNEAPOLIS, MINN. —Har¬
ciated with
the
(1947) lamenting the irresponsible
no
re-examination
a
of
dogma¬
;
to
ac¬
of
the
data..
trines,
re¬
of
be
may
science
less
Opinion, fairly widely understood,
al¬
product, national income, and
measures
somewhat
the
spair.
gross national
on
with this in mind, has
"Chronicle"
with
furnished
by
and
we
1929.'
(4)
terest and,
tion
public
$16 billion,
above
1941
and
statistical series
by
note enclosed with your letter of
Oct. 23, 1947, I am a little mysti¬
fied why you think of it as some¬
have
lowing for price adjustments the
1947 figure is above those for 1941
and
advanced
reasons
figures will be attacked; perhaps .they are no more accurate
than what we had before.
But if
they encourage a little more cau¬
sense has
become, much more dif¬
ficult. The average well-informed
statesman or person interested in
stagnation
nearly
1929.
the
the
series
new
of
though not confined to,
the work of the late Lord
Keynes.
But, to say the truth, the purport
of
his
teaching has only been
understood by a very small circle
of people. Economics is
thought to
classical
over $12 billion
plant and equip¬
figure
for
1947
new
that
these editors for refusing to pub¬
lish his remarks are of some in¬
tion:
.
ated with,
agriculture, spent
1946
Schmidt, "found it unsuitable for
publication." Dr. Schmidt believes
portant respects from those of old
the
business,
ac¬
the editors of which, to quote Dr.
ing and certainly should be made
again."
in
widely held impres¬
regarding these magnitudes
the
submitted
the facts you present are interest¬
we reject the medicine
from our
systems altogether, we may just
drift on from expedient to
ex¬
pedient and never get really fit
—American
will
re-examina¬
some
"Chronicle"
the
also
material for publication in several
other leading economic journals,
understood to be different in im¬
we
to economic
savings
-
fundamental
a
tion of
personal
informs
had
fa
Dr.
have
niedicine is also at work.
(3) As
and
of
Schmidt
that
he
Relative
—
we
as
and
if
estimates
new
NOTE
commentary,
nomics,' the maxims of which
.
work
need
it
on
near¬
above
have
decades past.
But
long run these expedients
the
will
If
—2.7%
EDITOR'S
the
not
could
many
in
operat¬
equilibrium.
we
the
even
are
and
.
The
permanent
which
3.8%
was
13%, the revised series shows
9.3%.
;
Harrod
myself moved, not for
the first time,
is
the mind of the
average well-informed citizen."
upon
rather
Truman
to
(Special
"revolt."
commentary on
of. these polls that
only a few weeks
showed
ago that Truman would beat any
Republican
except
Eisenhower,
plete reversal
■v/V);
■
;
lated
way.
old
in¬
corresponding
ing its hold
_
a
Nothing has happened,
among
posthumously pub¬
lished article in the June,
1946,
''Economic Journal," Lord Keynes
r
of
one
esult have been different had the
that
said
this effect:
which
Roosevelt had.
rather
admitted
the
election.
split, of
i
of
one
decisive
Woodrow
writer's
they
that
that
expression that the Negro vote is
balance of power in many
States is greatly abused. It was
not the Negro vote that elected
opinion there
•_
•'*
no
way for Truman to win, I With
Holley,
' "
Gallup Polls to the contrary, ■'rv»*ri-^w
and irrespective of Wallace's canU*Yton & Vernon
It
super-
the
a* sions
American economist today
I would not be a Keynesian."
the
the
-
eco-
but
was
didacy
suc¬
Negro vote.
is
AJ he h
undl^stend
never
by which Truman
Republicans are vying
the
once
the
the
of
call
means
and
times.
this,
why shouldn't they make their
strength felt in the party debacle
bitterness
lift
for the
and
:
Southerners
pro¬
Negroes to
^?nt far deeper than the
ficial
for
them to go right along with
it;
indeed, to assert leadership in it.
They have everything to win and
nothing to lose. '
:v..;
it
spiritually, Mrs.
R°°scvelt doing most of the latter,
to seek to quiet the "re¬
or
to
was
try to hold their States in
bellion."
the
that
rights"
the
support Roosevelt. He
I nomically
...
"civil
caused
and
is
ceeded in passing any so-called
anti-lynching or anti-segregation
legislation.
What Roosevelt did
} present
their
troubles.
Truman
overlook
any
that
gram
the
was
not
was
Smith that caused them four years
later to jump early on the Roose-
for
before
Keynes
words to
out
What .both
square
the
bandwagon
theTru-
man fol<L
the
up
may
objective an¬
following five points
the
porary
a^
result is that it would
Itake mo^e than a , civil Tights
"peepul." It
took them several years to do
it,
too, and it was the fear of having to
undergo the same experience with
to
CUCl,
Anyway, the story has been
widely circulated among Negroes
early
organization
the
night, the
regulars in these four States who
now
ReVei
however
York fell
in
velt
10*
V'
when
degree
*
which
the interest of
:i "I
nrnKohlv
to
young
;! ^
;
can" in the 1944 Presidential
would
Schmidt
of crowd behavior
them.. •:'■'.
acter.
I have always believed that had
Smith carried New York State in
the 1928 Presidential election he
accept¬
study
Lord
Truman is.
disposable
revised
4.8%; for 1933 the figure
among
merit setting forth:
aside from the unusual
energy
they sought to do with A1 Smith.
1
yet
they are now showing in this di¬
rection, they are not out of char¬
This is what
P.
alysis
sss*!»a&3ffts but
ass, »s«
everything else, would seek to get
by with giving lip service to the
the
sav¬
ly
c a
economists
were
i
in
on
ance
is
Wallace
handful of votes.
a
Had they any thought that Tru¬
personal
the new; for 1946, instead of
i
candidacy it is
doubtful it would have gotten him
necessity take place.
of
showed
11.1% of
and
the
as
gained uncrit-
of the most hated.
there
vast
ings
nomic analysis
pop¬
program
the
aggregate eco¬
but
one
figure
the
apparatus
of the
large segments of the
series
come,
-
is
now
one
economic
and
was
candidates,
"civilfrights"
old
that
assume
maturity and
over
savings,
seems
defeated
rank
reorgan¬
of
about
His
ization' that
will
of
trend
thing that
only destined to be
ulation,
t
n
the
reverse
one
among
to
in
.
or
worst
more
domin
voice
just
seems
seek
to
certain is that what he did do
atic
headed,
do
against him,
—
we
over-savings
"Keynesian theory has any validity, which is
not conceded, it is significant to
economics,"
the
concepts' note that in ,1929, for example, the
assuming there was
nothing that; Truman
or
could
for
which
party
Dewey, Truman
li-<e>
quidation.
vote
However,
and
e m o c r
or
would
their
anu
whether the
was
interviewed
Sfor Truman
bank¬
ruptcy
D
always led,
Ideas and
statistics have a way of
being preserved in literature, including economic
literature, long after they have lost their relevancy and
validity. The more persistent and
pervasive the concepts and opinions,Ahe longer is the time
lag between their obsolescence
ITaft, etc.
rights
program
Director, Economic Research
Department,
•
Chicago
Stock
ST.
Chicago: State 0933
COMSTOCK & CO.
Exchange
MILWAUKEE
CHICAGO
(2)
Teletype MI 488
231 So. La Salle St.
.
„
Teletype
4, ILL.
Dearborn
CG
955
1501
Thursday, February 26, 1948
CHRONICLE
& FINANCIAL
COMMERCIAL
THE
(904)
8
Safway
Steel
Mason
Dealer-Broker Investment
Utility Securities
Public
to
—Memorandum
Street, New York 5, N. Y.
formed the sub-holding
Southern last year
Southern Company, which took over the entire system
holdings in Alabama Power, Georgia Power, Gulf Power, Mississippi
Power and Savannah River Electric. South Carolina Power will prob¬
White
company,
ably be sold to South Carolina<S>
of
Electric & Gas and merged with
1
-
-----
has
rate
of
lina
to
expects
registration
•
tility
"
estimated
for 1948-49
is
the
$93 000.000
about
at
$56,000,000 in 1948 and $37,000,in 1949).
However, of this
amount only about $45,000,"00 will haVe to be raised before
end
of
Power and
sold
Alabama
securities.
tional
Georgia Power, which
bonds
$10,000,000
?
each
certain dividend re¬
*.
at
equity
vested.
last
year, will need about an equal
amount of cash this year. Hence,
-
money
being
-v;-;
-h. •*..
tiated
Southern Company
have agreed to
stock will be on. a nego¬
basis
since
city of Pensacola. Sales of other
properties will probably be nego¬
granted tiated. Gross revenues from transit
exemption
an
tenstein
&
Wall
99
Company,
Bissell & Meeds,
120
Broadway, New York 5, N. Y.
Cuba Railroad Company—Sum¬
such
investments
after
87c
and
appropriation.
The
the
SEC
to
set
aside
this
amount out of earnings each year
(one-quarter
on
the books of the
parent company and three-quar¬
in the accounts of the sub¬
ters
sidiaries).
The
purpose
of the ap¬
to amortize the
excess
(some $65,000,000) of the
investments in subsidiaries
propriations
($146,000,000)
is
as
favor¬
Manual of St. Louis Bank Stocks
Edition—G.
—1948
Louis
Walker
H.
Co., 15 Broad Street, New York
report
Hewitt-Robins, Incorporated.
England
Company
—
With Osterman & Hutner
Osterman &
way.
the
ation
86-year-old
New
State
Eng¬
& Co.,
company—Raymond
land
148
on
Street, Boston 9, Mass.
Analysis
—
Railroad
the
/
York
Stock
become
associated
1948
12,
Bond
jin
Hickey,
&
Charts —March
New
N. Y.
$2
semi-annual' offer;' send
Folio CF-223—Securities
for
Memorandum—A.
1
M.
Dinner of the
Traders
control
hydraulic
of
ufacturer
Lubetkin &
trial uses—Seligman,
Co.,
Inc.,
Broad Street, New
41
New York
Co.,
61
'Security Traders Association of,
12th Annual Dinner at
New York
Waldorf-Astoria Hotel.
the
and Tennessee
neering,
Chemical.-'1'
&
York
New
Election
Stock Exchange.
1948 (DaHas, Tex.)
Nov. 15-18,
National Security Traders Asso¬
ciation Convention.
>
Business
Product?
iv-"'\
Man's
Co. — Special
Oil
Kingwood
Engi¬
Wellman
Co.,
survey—Peter Morgan & Co., 31
Nassau Street,
New York 5, N. Y
Myer-Bridges
Kidder
Co.
—
Bankers Bond Co., Inc.,
Kentucky.
—
of
Europe,
—paper—250.
Pathe Industries,
Inc.—Detailed
of \company
description
and
its
operations—Comstock & Co., 231
South La Salle Street, Chicago 4.
111.
&
Broadway,
Paralysis
Creeping
,
,
Report
Kentucky
Louisville 2, The—Melchior
Palyi—Henry Regnery
Company,
Hinsdale,
111.
Home Life Building,
CV:,V'v:
■;
Portsmouth Steel Corp.—Data-
Buckley
Brothers,
Also
1240
Walnu'
tion
available is late informa¬
Laboratories,
DuMont
on
and Buffalo
6, N. Y.
the
analyses oi
available are
Also
Foundation
Corp.—Analysis—C. E.
&
at
4, N. Y.
Street, Philadelphia 2, Pa.
B. V. D.
Toronto
Association
Research
Wall Street, New York 5,
Unterberg
v..:
May 10, 1948 (New York City)
equipment for aviation and indus¬
80-
folio of 303 charts—special
Ont.,
(Toronto,
Canada)
Bolt Co.
Motive
Railroad
Kiefer
Steam
—
Power—P.
search Institute, Inc.
Boardman
K.
Locomotive Re¬
—
Publishing
SimmonsCompany,
Street, New York, N. Y.
—cloth—$2.00.
30 Church
in
Al¬
lied Products Institute, 120 South
Technological
Stagnation
Great Britain—Machinery and
La
Salle
Street, Chicago 3, 111.—
paper—250;
,
Lynch
with
the
firm.* He will
specialize in securi¬
ties research.
He was formerly
ment for Abraham
DETROIT
& Co.
Southern Union Gas
EDISON ANNUAL
Available Now
just been mailed to
which
YORK 6, N. Y.
Wire to Chicago
of The Detroit Edison Company has
stockholders. It is an illustrated 32-page
copy
Michigan. If
booklet
activities of the company which
industrial and farm areas of south¬
interested, we shall be glad to send you
you are
of the report. Address 2000
*
'
29 BROADWAY, NEW
.
describes in detail the 1947
eastern
a
Postley & Co.
REPORT
supplies light and power to the great
Portland General Electric
March
Exchange,
that Andrew F.
Southern Production
Direct
Newburger,
—
Electrol, Inc.—Analysis of man¬
the
Street, New York 5, N.Y.
Security
page
developments
industry—Vilas
49 Wall
of
Developments
Dinner at
King Edward Hotel.
Light Corpo¬
15 Broad Street,
Loeb & Co.,
The annual report
Gilbert J.
22nd Annual
the Waldorf Astoria.
April 19, 1948 (New York City)
compared with Manager of the Statistical Depart¬
the underlying book value at date
Tobacco
Elevator.
Power &
Electric
York
Week—Current
Security Dealers As¬
New York
New York City, members oi
New
announce
has
Hutner, 120 Broad¬
5,
a company re¬
American
the
Company, and Otis
De¬
N. Y.
Lynch Now Is
of
York 5,
scriptive analysis of special situ¬
the
(New York City)
March 5, 1948
Annual
New
Twenty-fourth
Benjamin Franklin Hotel. *
N.Y.
ration
Also available is a recent
on
Philadelphia
of
appraisal—Kalb, Voorhis &
ment
St.
1, Mo.
(Philadelphia, Pa.)
1948
27,
Investment Traders Association
sociation
Inc.—Invest¬
&
Locust,
and
Broadway
Co.,
Co.,
Andrew F.
Street, New York 4, N. Y.
25 Broad
view
ably with the national averages.
appro¬
priation in the pro forma 1947
figures amounted to $2,000,000.
Southern
Company
has agreed
with
These figures compare very
and analysis—Stern & Co.,
mary
:;l Also available is
.
It is^ understood that properties in 1947 were about Corp., 141 Milk Street, Boston 9,
negotiations are on a competitive $11,000,000 and from gas $2,184,- Mass.
.•"/ :
basis, however. Groups reported ooo.
formed to work on the deal in¬
The
southern portion
of the
Television — Brochure — E.
W.
clude
First
Boston,
Harriman
Commonwealth & Southern sys¬
Axe & Co., Inc., 730 Fifth Avenue,
Ripley, and Morgan Stanley.
tem shares in the low rate policy
In the calendar year 1947 pro
(500 to
for which the system is noted. New York, N. Y.—$1.00
forma share earnings for South¬ The average electric rate for the public libraries and non-profit in¬
ern Company (based on 10,000.000
four companies in 1947 was 1.27c,
stitutions).
;
*
*
*
;
■ ■ •
shares, the present outstanding and
the
residential
rateF 2.31c.
amount) were $1.07 before the Residential kwh. sales were 1,903.
Allied
Stores
Corporation —
for
Feb.
Annual Mid-Winter Dinner at
by the SEC.
appropriation to general reserve
Field
Investment
In
Annual
Street, New York 5, N. Y.
.
Commonwealth & Southern and
by South¬ dispose of the transportation and
gas properties in the system. Ala¬
ern
Company will probably go
bama Power sold its properties in
principally to those companies.
1947. Gulf Powei is negotiating a
It is probable that sale of the
sale of its gas properties to the
from Rule U-50 has been
"Fortune's" editorial—B. S. Lich-
in¬
the money to be raised
common
assuming Utopia—Frete reprint of
in¬
present on some of
the subsidiaries, but it is probable
that
this situation will be imoroved as a result of the addi¬
sales of
through
1949
additional
the
of
are
strictions
"atal
additional
result
There
"00
National Bank—Circular
Dresser Industries,
vestment in the property.
'
'he
assum¬
appropriation and 70c after the
'appropriation. Of course earnings
con¬
-<~ight be expected to increase as
system's
Southern
will be issued but
$20,000,000 cash.
On
this
basis,, with
12,500,000
shares outstanding
pro forma of
1947 share earnings would be reiuced to 86c before the special
which owns flowage land.)
Total assets of the
^outhern system amount to about
500,000,000
and
revenues
are
around $100 000,000 level.
The
Buffalo Bolt
spiral
in
charts
922
—
book covering
Democratic Capitalism—The Un¬
raise the desired
company
traction program
Charts
bound
are
ing that the new stock was sold
net $8, sale of about 2,500,000
shares
would .be
necessary
to
(Savannah River is a non-,
them.
above
to
among
occur
memoranda
Portsmouth Steel,
on
will
shares
?
'
properties are all interconnected
substantial interchanges of
energy
EVENTS
are
for
based on the
present number of shares. It is
ot clear how many additional
and
electric
COMING
Brothers,
Street, Philadelphia
available
Also
Street, New York 4, N. Y.
,
Southern Company system
The
Walnut
Chase
given
v--;
Co., and DuMont Laboratories.
an¬
per
Buckley
—
2, Pa.
be available each talizations, and volume on virtu¬
reinvestment in plant ally every stock listed on the New
account.
In
studying the new York Stock and Curb Exchanges
tock
and
the
dividend
rate —single copy $10—yearly (six
(when announced) due considera- issues) $50^F. W. Stephens, 15
ion should be given to this fact. William Street, New York 5, N. Y.
However,
the
share
figures
new
■
$2,600,000
in¬
formation—Gordon Graves & Co.,
30 Broad
York
v
Service
Public
Illinois
Data
—
1420
Portfolios—Detailed
Bank
$35 000,000
5, n. y.
—Laird,
amount
Carolina
South
of -the
slowness
Central
Co.
12 complete
offering had been delayed by the
sale..
some
Corpo¬
ration, 52 Wall Street, New
Street,
corporated, 24 Commerce
Newark, N. J.
system earnings are
Thus,
year
pro¬
the
restatement on
Auto Stores, Inc.—Spe¬
s
cial bulletin—First Colony
N. Y.
special deductions years, and showing monthly highs,
totalling about 46c a share, which lows, earnings, dividends, capi¬
South Caro¬
of
excess has
from -plant
ubject to two
for this invest¬
Power stock
ment,
the
use
of
of the sale
ceeds
about
cf
num.
discounts and
commissions. The shares will be
sold in part to the public and in
part to Commonwealth, the latter
probably investing some $5-$10,000,000. However, since Common¬
wealth
pamphlet on leading institu¬
tions—Parker & Weissenborn, In¬
plant
acquisition adjustments
(account 100.5) which is being
amortized "above the line" at the
pro¬
deduction
$20,000,000
after
any
underwriting
contain
counts
to sell sufficient common
(par $5) to obtain about
posed
stock
&
Co., 115 Broadway, New York 6,
tive
original cost basis. Moreover,
the combined subsidiary plant ac¬
and FPC.
Company
~
Service
Public
Co.—Research item—Goodbody
Jersey—Compara¬
New
Northern
Illinois
Central
Companies of
an
approval of the SEC
Southern
resulted
write-offs due to
with some local objections which,
however, may be cleared up by
anticipated
Such
acquisition.
doubtless
This deal has met
that company.
—
-
Banks and Trust
70 Pine
G. A. Saxton & Co., Inc.,
parties the following literature:
send interested
issue
current
in
Utility Stock Guide"—
of "Public
pleased
the firms mentioned will be
It is understood that
&
Inc.—
&
Southwestern Public Service Co.
Recommendations and Literature
Southern Company
Commonwealth
Products,
Co., 225 East
Street, Milwaukee 2, Wis.
Report—Loewi
THE
Second Avenue, Detroit 26, Mich.
-j
DETROIT
EDISON
CO.
J
Volume
167
Number
4676
THE
COMMERCIAL
war,
&
FINANCIAL
designed and built fine,
we
office buildings at
modern
of 70 cents per cubic
By MAX H. FOLEY*
the
•
President, New York Building Congress
:
of
type
same
bricklayer
cost
a
Maintaining there is no indication building costs will come down
near future, Mr. Foley points out these costs have not risen
above level warranted by inflationary conditions and that building
costs cannot be kept in vacuum.
Says backlog of building in New
York alone is $3% billions, and contends building is not priced out
of market. Decries tightening of construction credit, and contends
present price levels are here to stay, but sees need of combating
which
trend
>
increases
has
the
foot. Today
construction
in
brought
material
labor
in
beyond the control of the
builders, just *as higher produc¬
tion costs
in other industries
reflected
in
the
cost
of
are
food,
machines.
appraisers of the mortgage and sale value of property you
enduring interest in present and future building costs.
•„,
As a member of a firm of architects and engineers, whose func¬
tion is to design buildings and advise prospective property owners on
Costs
of Building
is
cost
'
mean
a n
/enduring
raw
same
type
room
cost
of
is
construction,
$2 000.
Before
lajoor.
pay
the
whether
the
lumber
By
for
it
be
camp,
labor
work
a'
total,
cost
performed,
logger
a
I
costs,
in
mill
is
the
struction.
the
worker,
will
expect,
find
bottom
will
have
economic
.our
how
biggest
York
dropped out of
structure.
financial
City.
houses
They
have
dent asked
The
I
was
flattered
compliment, but
"You
tell
our
of
price
what
me
the
by the implied
my answer
other major cost of
us
// ;.
(Continued
on
page
GAS SYSTEM
gives
a
interest
happy
am
be
to
here
night
to¬
to
IN 1947
dis¬
this
cuss
I
5nd
all-
important
problem
Max
with
It
you.
Foley
is
subject
has been mulled
around
ing
over
and
that
From The Annual
by many experts, all hop¬
place themselves in the
to
position of saying "I told
at
a
kicked
you
so"
happens.
But, unfortunately,
wait
until
that
cannot
we
"future
date"
By
standards, 1947 was a highly successful
for the Columbia Gas System. The subsidi¬
ary operating companies delivered more gas to
their customers than ever before. Gas
earnings
reached the highest in history. And more
money
was distributed in dividends than has been
paid
ar¬
rives and calmly judge the trend
in retrospect. We must stake our
business acumen now, and make
ting, but I will tell you what I
think, based on many years of
keeping pretty close tabs
in
the
on
con¬
But while these results
struction market.
There
is
indication
no
ture
of
the
reduce
nation.
over-all
How
struc¬
can
building
when the prices
we
we
costs
must pay for
every component
part of a build¬
ing—materials and labor—remain
at a high level?
Columbia
homes
serves
and
natural
businesses
gas
in
to a
Ohio,
million
In
1947 there
when
the
Virginia and Maryland; and delivers
other
public utilities
turn, sell gas to
m
this
which, in
area
The
.
cost
mercial
of
building
or
storing
com¬
ing
building is relative, and
is
at
a '
peacetime
wages are higher than
the
national
income
reached
in
our
We have heard
the
billion
a
a
more
than
of 231
total
Even with
a
year,
bVi
which
in the
are
were
by
this
an
all time
trillion
high,
to
an
feet, IVi trillion
of
Appalachian
area
and 4
trillion under contract from Southwest fields
un¬
met in part
constantly
of the System increased
estimated
billion
abiding
an
a
1947 sales at
gas reserves
—enough natural
created
gas
and
by
gas
to
supply existing
prospective customers for
many years
to come.
underground; by bring¬
into the System from Texas,
$30,594,411 for production,
cilities in 1947. To
and distribution fa¬
meet
the still
increasing
demand for this clean, convenient low-cost
fuel, the System plans to spend
an
addi¬
tional $111,000,000 in 1948,1949 and 1950.
1946.
over
more
more gas
storage, transmission
billion, the highest
history. This was an in¬
$20
days in December
day, and for the
peaks
Columbia spent
peak,
ever, and
in
1947
$197
of
crease
have
Louisiana, Oklahoma and Kansas.
cannot
be. separated
from
our
general economy. Today, employ¬
ment
serve, we
building 12 liquefied petroleum plants; by
home,
a
development
26
precedented demand
From Other Costs
we
responsibility in bringing
improving service to them.
another 800,000 customers.
Building Costs Not Separated
the facilities of this
of
cubic feet,a gain of 18.5 per cent over 1946.
Tremendous
apartment
of the communities
sense
Columbia delivered
gas to
a
come,
grow.
And because the
gas we furnish has become
a vital force in the economic
development
were
billion cubic feet
to
such
System delivered
vania, New York, Kentucky, Virginia, West
deliver all the gas our
to
More and more gas
from the more than adequate reserves will flow
through Columbia's lines.
achieved, 4he Sys¬
Pennsyl¬
In the months
/
public service will
tem did not
escape the inflation that beset most
business in this country. Costs were higher, ma¬
terials hard to get. And because of
shortages, we,
that
building costs will come down ap¬
preciably in the near future. In
fact, there is no sound, economic
reason why the
public should ex¬
pect building costs to go con¬
trary to the general price
were
unable
wanted.
customers
for many years.
con¬
building and
in turn, were
most
year
win-or-lose decisions today.
I am no expert in
trend-spot-
ditions
Report of
Columbia Gas & Electric Corporation
future date, regardless of
some
what
great deal about
high cost of houses, yet there
to be buyers for
every house
seem
erected.
We
must
remember
that
the
people who grumble ~about
paying $10,000 for a so-called
$5,000<: pre-war house, or those
who
lambast the property owner
as
an
"extortionist"
when
he
raises
the
rent,
are
the
same
people who
are
pay or wages
The
war.
earning double in
compared with pre¬
whole
scale
of
living
costs has moved up and
you can't
expect housing costs
static
under
such
to
inflationary
In 1939, a modern house in the
$25,000
class,
individually
de¬
signed and built, would cost 60
per
$1.25
cubic foot. Today,
of house would
type
same
per
cubic foot.
*An
by Mr. Foley be¬
Society of Residential
Appraisers, New York City, Feb.
19, 1948.
Regular
Total
Consolidated
J
Portion retained by subsidiaries
net
income
J Balance representing
...
$0.60
|
net
$16,665,568
Dividend....
0.15
Total
$0.75
1946
Per Share
Sl.36
Total
1945
Per Share
Total
Per Share
1 $14,678,746
$1.20
$11,955,174
■
$.98
.26
4,986,762
.41
3,417,807
.28
$13,497,745
$1.10
$ 9,691,984
$ .79
$ 8,537,367
$.70
_J,000,000
.16
2,000,000
.16
2,000,000
.16
$11,497,745
$ .94
$ 7,691,984
$ .63
$ 6,537,367
$.54
parent company
income.
j
debentures..........
j Balance available for distribution
1
INCOME
3,167,823
J Portion required for retirement of
Extra
NET
to
Columbia Gas & Electric Corporacommon shareholders or other
J
tion
I
corporate purposes
cost
'
address
the
Per share
OF
1947
I
/// /"
Dividends
SUMMARY
j
j
that
In the late
'30s, low cost hous¬
ing jobs were completed at a cost
of $800 per room.
Today, for the
fore
IN 1947
remain
conditions.
cents
DIVIDENDS PAID
COLUMBIA GAS SYSTEM
The Manufacturers
Light and Heat Company
The Ohio Fuel Gas Company
United Fuel Gas Company
Atlantic Seaboard Corporation
Amere Gas Utilities Company
Virginia Gas Distribution Corporation
Virginia Gas Transmission Corporation
Big Marsh Oil Company
Central Kentucky Natural Gas Company
Binghamton Gas Works
Cumberland and Allegheny Gas Company
Eastern Pipe Line Company
Gettysburg Gas Corporation
Home Gas Company
The Keystone Gas Company, Inc.
Natural Gas Company of West Virginia
The Preston Oil Company
Virginian Gasoline & Oil Company
Union Gasoline & Oil Corporation
was:
going to
clothing and
living items—
in
binding
mutuality
of
us
is
general economy—
food,
trend
costs
New
to tell him what is
me
building costs.
in
in
a
going to happen to building costs.
the day
see
necessary
world¬
wide reputation for
analyzing eco¬
nomic conditions. The Vice-Presi¬
con¬
of
many
desire, to
be
Just the other day, I was talk¬
ing with an officer of one of the
labor
of
will
When that sad day
won't
be
bothered
happen to
biggest item
And
or
that
it
comes,
we
about worrying over
building cost
trends. It will be too
late, as the
*
you
when
9
sharply reduce the pay of the
wage-earner?
for
wages
in¬
terest
the
draws
Labor, or work performed, must
be
paid for, regardless of the
category. When you add up the
Don't forget that
by far the
highest percentage of all building
an
build,
I, too, have an
to
workmen.
Bulk
As
w n e n
who
come
those who dig out
material, .fabricate
it,
distribute it to the point of con¬
struction, and put it together to
erect the building; and,
second,
for the facilities required
by those
clothing, automobiles and washing
Wages,
what to
draftsman
the
further inflation.
have
the building, the
superintendent,
or
cost of raw materials is a
very
low percentage, and the remainder
is consumed first, in salaries and
costs,
^
on
plans for the building.
When
you
analyze
building
costs, you will find that the actual
sharp
and
(905)
construction
costs $1.50 per cubic foot.
These higher building costs re¬
flect
the
postwar
inflationary
\
much in
v
CHRONICLE
24)
1.
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Thursday*; February '26,; 1948
CHRONICLE.
COMMERCIAL & FINANCIAL
•THE
(906)
10.
> v. . •*,..•
completely covered, due
principally, to poor' underwriting
e^pbrience within the: past few
yearsr;Unbroken dividend record
is also below average, while longterm
equity ; growth has been
meager.: ■
' ■]
\ / ;•.
not. been
Exchange
N. Y, Stock
Bank and Insurance Stocks
Meet
Nom. Com. to
meeting of the Nomi¬
Committee of the New
Stock, Exchange will be
By E. A. VAN
An open
nating
York
March
on
p.m.
covered
and
the following question:'. ."In which fire insurance stocks should one equity growth is only moderate.
invest available funds in 1947?"
A request has been received for a V. Group III stocks at current
similar discussion for the year 1948. So here goes.
, \iX\\*.rTr
prices."offer a yield of approxi¬
mately 4% with better than aver¬
As was pointed out last year, a suitable answer to this question
depends On several factors including the objective of the investor. age protection and good long term
equity growth.
The outstanding
Does he desire relatively high dividend yield with secondary pros¬
present may suggest
nominees by letter.
No
stocks is used in the discussion today as was
listed in the following table, together with certain
.'■w.
significant statistical data.
-v.
.
used
/
■
Committee for
W.
ifrcEvoy,
chairman; William D. Dana, sec¬
Annual
Dividend
Price
Div.
Rate
2-18-48
Yield
George J. Leness; Ben¬
jamin F. McGuckin; and John O.
retary;
Middlebrook.
v-
:•
.
Aetna
60
Little of
Frank
Hornblower & Weeks,
CHICAGO, ILL.—John
Davis & Co., and
H.
of
Collins
congratulations
on
the
success
of the Chicago
Stock Brokers Associates annual
banquet
held Feb.
10 - at the
still receiving
are
the Congress
Brickhouse,
ace
of
Room
Casino
Jack
Hotel.
and did a
swell job as a barker for the main
event, "Along The Midway." The
sportcaster, was emcee
was
press
everyone
ket
well represented and
relaxed after the mar¬
explosion.
c-
With Atkinson, Jones Co.
to The
&
Jones
ing...
is
Chronicle)
Financial
PORTLAND ORE.
Percified
now
.
Bruce H.
—
with Atkinson,
Build¬
Co., U. S. Bank
•;
.,,
Falls
American
Hanover
Ins.
Request
Laird, Bissell & Meeds
Members New York
Stock Exchange
it20 BROADWAY, NEW YORK 5, N. Y,
BArclay 7-3500
Bell Teletype—NY
(L. A. Gibbs, Manager
banks,
'•■V 46
21
New
Brunswick
New
Hampshire
2.00
1-1248-49
Trading Dept.)
brokers & dealers only
Baltimore Amer. Ins.
Georgia Home Insurance
3.1
Insurance
Ins.
Homestead Fire Insurance
0.96
77
4.4
1.20
3.5
1.72
72
Providence- Washington-.
1.40
.32 "a
2.00
72 V2
St.
Paul
&
F.
M
AVERAGES
25
1.90
4.4
3.9
51
2.00
qAllen & Company
brokdn
24.0
1.41
80
23.1
1.58
?■: 37 7
29.5
68
-rr:
9.6 7
8-9;,..
6.0
+
•
18.0
;*■
group
,f
24.5%"
•,
gress
*J;'\
—
:5.0%
operating earnings. tUnby accumulated excess ot
dividends relative to 1936 liquidating value;
of
with
of this group of seven
of
will
self-sufficiency
her from
At
was
prevent
flooding world markets.
presided over
and
'
coverage.
corre¬
Treasury
cially
is
is
the 25 aver¬
with a below.V Y' . •
•
substantially below the
■■■"
Yields—Yields
with
us
purchase of surplus
permits and
banks to create addi¬
tional bank 'credit' that can be
encourages
spent as
'money'."
Sell
Bonds March 2
New York State to
,
trade likely to
will be limited
maintain an artifi¬
interest rate on gov¬
to
low
ernment borrowings,
self-sufficiency.,
Chamberlin stated the ex¬
of
tent
banks
important of all, the war¬
requiring the Federal
Reserve banks to buy any gov¬
ernment bonds offered to them by
member
banks must be ended.
This
rule,
while enabling the
of
Mr.
Reserve
rule
spondent and long
in this group
vv
Federal
"Most
by its Presi¬
author
Chamberlin,
of
the
time
dent, H. Gates Lloyd, partner of
Drexel
&
Co.,
William Henr.v
Yields—Divi¬
dend yields in this class are provided by Aetna, Continental, FidelityPhenix, Great American, Hanover, Providence Washington and U. S.
is 1.71 compared with
...
...
.,
in history.
Bond Club
Feb. 18, which
luncheon of the
a
Philadelphia on
in
and Moderately Below Average
Hanover is the only stock
..
practically any type of asset, and
liberation of the captive Federal
Reserve Board, created as the na¬
tion's Supreme Court of Finance,
from the influence of the Federal
Treasury,
the greatest borrower
berlin points out
..
Average dividend coverage
....
by banks;
the 'provision in the
Federal Reserve Act which en¬
ables member banks to discount
William Henry ChamRussian policy
delphia,
Average Yields—More
stocks averages 1.10, which
substantially below the 1.48 average of the 25 stocks. Springfield
the only stock in this group with a ratio close to the average.
of 1.48.
v.
,
Federal debt held
repeal
luncheon in Phila¬
At Bond Club
moderate yields, but well
above the average of 4.3%, are provided by Fire Association, Franklin,
Home, National, New Hampshire, North River, and Springfield. DivL
coverage
set \
Con¬
some
U. S. Russia Trade
mum
ai.
•
excessive sup-
time resident
Russia, expressed the belief
there is little likelihood of any
substantial volume of trade devel¬
Group I: High Yields—Unusually high yields of 5%% and over, oping between the United States
and Russia at any time in the
are provided by Agricultural, American Equitable, Bankers & Ship¬
future, to judge by the present
pers, New Brunswick, and Security. However, the dividend coverage
drift in Soviet economy.
Indica¬
ratio of these four stocks averages below 1.0, viz. 0.80, which intro¬
tions are that Russia is undertake
duces an element of doubt as to the maintenance of the present divi¬
ing to work out a plan of maxi¬
dend rates, as a group, though Agricultural and Security appear rela¬
■
,
to com< T h e
it.
bat
the
market, the average
Group II: Above
by
up y
a
.
pro-
be
gram
Sees Little Volume
a continuation of the down-trend in fire insur¬
consequently it was not-in the cards for investors
to show a capital gain over the year. It will be noted that average
movement of the 25 stocks was a decline of 5.0%, which compares
with a decline of 1.0% for Standard & Poor's weekly index of fire
insurance stocks. However, there were some exceptions to the down¬
ward movement, for the following eight stocks advanced an average
of 4.9%: Bankers & Shippers, Boston, Continental, Fidelity-Phenix,
Hartford, North River, St. Paul, and Springfield.
tively safe.;
that
urged
realistic
only
was
•
.
Mr; Parkinson
2.6
2.0."7;
+
1947 saw
current
1 i c i e s
through o u t
the
n at ion,
0
p
'significant government spending, »now six
statistical factors, in the hope that times the prewar rate excluding
this data may assist dealers and interest,"
Mr. Parkinson warned.
investors to make selections suit¬ "There must also be a reduction
able to their objectives, y :
of at least $5 billions annually in
stock prices,
ance
this
insurance
life
.
—
coverage
parent company net earnings over
Bonus
develop
to our
metals such
chrome," and Russia's purchase
machinery. From other sources
her buying will probably be com
officially announced on an¬
the State of New York
As
other page,
$300,000,000 war bonus
scheduled to reach
on March 2.
Sealed
bids will be opened at 11 a.m.
(EST) on that day by Frank C.
issue
of
as
serial bonds is
of
the
fined to
fee.
tin/rubber, tea and
V.*;
"
cof¬
i!
v
market
Moore,
Comptroller.
State
-The
$30,000,000
Russia's own needs are so great, bonds will mature
and will be for several genera^ yearly from 1949 to 1958, inclu¬
tions, as to remove any possibility sive, with the bonds maturing in
of' her flooding
the' markets of 1958 being subject to prior re¬
the world with her products.;
1 demption, at par, on July 1, 1956,
or
on * any
subsequent interest
;
The
J,
in
the
tween
speaker saw no elements
present relationship be¬
the two countries that, are
payment date.
to
name
an
Bidder is required
interest rate of not
Falls, Hartford, Insurance not susceptible to treatment by more than 4%..V; / ', ;t
Fire & Marine. Except capable diplomacy, and believes
the Marshall Plan and the Truman
in the case of Boston, whose dividend coverage is the average ratio
redemption, out of sinking fund
Doctrine are steps in the right
of 1.48, these stocks all have a high coverage ratio, the average of the direction.
moneys, at their principal amount
•
'
on April 1, 1948.
Payment of the
six being 2.23. Hartford is really in a class by itself, with the lowest
drawn bonds will be made on the
dividend yield of 2.4%, the highest dividend coverage of 3.13 and the
New South
maximum long-term equity growth of 67.7%. However, it should be
redemption date at the principal
office
of
the
fiscal agent, 22
noted that St. Paul Fire & Marine runs it a close second.
Galled for
William St., New York City.
The characteristics of the four groups can be summarized as
City Bank Farmers Trust Co.,
follows:
Average
Average
Average
as fiscal agent, on Feb. 26 notified
No. of
Average Dividend Unbroken
Equity
With Interstate Securities
holders
of Metropolitan Water,
average
found in Boston, Glens
are
.
.
America, Phoenix, and St. Paul
Wales Bds.
Redemption
II
III
York 4
NY 1-1017
53
h
65.4
s
.
-
classification
of dividends by consolidated net
dividend record.
JEleven-year growth, measured
,:,Five-year
I
HAnover 2-2600
-
75
1.48
7
•—
34.1
2.66
7.8
+
14.7
21.1
40
1.20
4.3%
:
—12.6
1.86
5.6
42%
1.40
Security Insurance
Springfield F. & M._
U. S.
Fire
—19.2,,.
8.7
j:
•
•
7.2
:
103
85
Classification
Group
Teletype
—17.0
19
23
4.3%
Carolina Insurance
Telephone
16.9
■7.'75
lion owners of
,
.
.
..
44.7
7 73
0.95
0.62
7
10,;
2.6
—" 1 5
+
v.;v,
Y" " '< '
'
,■
;
ply of money ■; T. I. Parkinson ...
;;
This column does not presume! in our bankto say which fire insurance stocks ing system, he emphasized, is the
are the best and which the worst.
primary source of this inflation.
It merely presents an analysis and
"There must be a reduction in
0.1%:
No Change
2.20
,
"
-
•
v
;I
in
,
2.6
—
3.6
of
.
stocks
-t-15 .5
32.4
12.6
4.4
4.3
„
67.7
7.1
2.8
9.1
—
73 7'
T
■
7-13.6.;,
74 7 •7
'
•'•r*
•■'
—
Co. of North
.
Insurance
Broad Street, New
1.21
1.22
•'•;;
87 v
3.13
4.7 :'
7
14.1
81 ;
; :'/74v
1.74
4.3
7
Group IV: Below Average
30
3.6
2.20
_
,+
18.0
46
average
Gibraltar Fire & Marine
44.0
'89
116
1.00
age
City of New York
•
3.00
River
Fire.
Nat'l Liberty Ins.
New Brunswick Fire
■7;-
Phoenix
North
Group III: Average
Paul Revere Insurance
39
1.20
0.74
1.81
4.0
4.4
dend
For
8.3";:
2.7.7'
2.4
77
97
2.00
1.50
-
NATIONAL BANK
on
28
105
3.00
America
Fire
3.i
+•
.
meeting of the
of the Equitable
Life
Assurance
Society of the
U. S. in New York City on Feb.
annual
board of directors
proportionate
6;i-
+
3.7
"7 25%
—
No.
of
Co.
National
+
39.1
■-74.17.
2.50
.
9.4
27.0
94
5.1
1.20
Fire
Insurance
■;
22
,73
•: 7
.
the
At
drop of 15.5% of
Glens Flails, occasioned by a 30 %
capital? increase and consequent
dilution • in;. October, 1947.
The
average decline of the other fivb
7.0-7
1.78
29'/a
-r
—15.8 '
'•'
0.74
5.1
1.20
^___
-
Hartford
Home
1.20
-
—11.5%;
24.5
—4.8
7,-1.48
42%
1.60
_______
.
3.5
19J/a
1.00
-1
Fire
Glens
•
49
2.50
;
31.2%
-84
74
1.29
0.13
dividend yield of the group is
4.3%; the average dividend coverage by 1946 net operating earn'ngs
is 1.48; the average length of unbroken dividend payments is 68 years;
and the average 11-year equity growth to the end of 1946 is 24.5 %.:,
; In this disscussion the 25 stocks will be classified according to
dividends yields into four groups, as follows:
-'v., 77.%.'
THE CHASE
Telephone:
■f; 55'/4
Great
At
Circular
2.20
The year
,
—*-
(Special
51 %
——
,f
3.9
•
2.00
Association
Franklin
Paul
privileges of Federal Reserve as
y
inflation curbs. • y j
:
.
5.5
■
69
-
2.40
Fidelity-Phenix
Banquet Success
f
7
Insurance—
Continental
16.2
72'/a
4.00
-
Fire
16
1.00
Shippers____
&
Insurance
Boston
Assn.
'"'7
713
2.00
5.8 /•
■>
"
Society
Assurance
<
also reduced government
spending, amortizing of'Federal
Debt and brake on rediscount,
—10.1%
— 6.0
—2.1
%
Group iv /.
— 2.5
-J; The average market decline of
2.5% of the six stocks comprising
Group IV'is distorted by the dis¬
Year 1947
t Growth
fYears
age
V7
urges
fractionally
Group; II
;V .Group III
v;
Pcrform'ce
Equity
•Cover¬ '•*'(
3.9 %
46
3.50
'
'
.
yield,
V'V* Group
Market
Factors—
Asked
$1.60
Insurance
Agricultural Insurance^
American
Equitable-.-.:.
Bankers
Chicago Stock Brokers
•
Dividend Safety
of the
are
STOCKS
INSURANCE
FIRE
25
Harold
Members
1948
year ago, as
a
.
,
The same group of
the
1&49.
more specu¬
high current
yield.
and no member
governnor
moderate
appreciation? ;Or
present nominating com¬
mittee is eligible for election to
the
nominating
committee for
of
'
Group IV are
3 9,
Thomas
I.
Parkinson, its
wide dividend
President, proposed measures for
coverage and excellent long term
curbing current inflation. Stress¬
equity growth.
ing that inflation continues to be
;
The average market perform¬ a so u rc e of
•'-•
,
ance
dur-ng 1947 of the stocks
great; concern •
comprising each group was re¬ to
the
more :
spectively" as ■ follows:
than
73 mil¬
with above-average
prospects for long-term equity growth and market
perhaps he may wish to put his money in some of the
lative and depressed issues which carry exceptionally
for three-
governors
terms; two trustees for the
gratuity fund; and five members
of the nominating committee.
year
„
Influence
Parkinson of Equit- 7
.
able ■!>: Life
past five years,
characteristics
appreciation, or does
pects of long-term equity growth and market
he look for moderate dividend yield combined
are
of the board of gover¬
seven
nors,
filled
be
to
Vacancies
chairman
r-
I.
Thomas
,
be
to
able
which opened with
discussion of insurance stocks'
this column a
in
only " been
during .the
k- *
^
Gf Treasury
yields, though dividends have
tive
appeared
"Chronicle" dated Jan. 2, 1947, there
In the issue of the
for the purpose
1,
v
;
provide attrac¬
Group II stocks
Stocks
This Week—Insurance
Monday,
of re¬
ceiving .suggestions for the* posi¬
tions to be filled at the annual
election to be held on May 10th.
All members and their partners
are
invited to attend; those un¬
3:15
at
held
DEUSEN
Wants Reserve Free
1"'*'
IV
High
_
Stocks
__________
Yields.-7.
Approximate Average Yields-'
Below Average Yields
Above
This,
more
Yield
Average
5
7
7
6
Yield
Coverage
4.1
1.71
63
3.2
2.23
74
40.0
4.6
>
0.80
1.10-
38
88
'
:
I are inherently
other groups, since dividends have
summarization shows that stocks in Group
speculative than those in
Growth
Record
12.1%
13.9
30.'6
6.0%
r
Sewerage
and
Drainage Board,
Australia, 20-
„
'
(Special to The Financial
Chronicie)
C.—William
year
5V2 % sinking fund gold W. Rader is now with Interstate
bonds
due
April 1, 1950, that
Securities Corp., Commercial Bank
$110,000 principal amount of these R,iil8intf
New
South Wales,
bonds have been drawn
by lot for
CHARLOTTE,
N.
Volume 167
Number"4670'
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FINANCIAL
CHRONICLE
(907)
'
s:>
»*>
'
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&
■
<<'»•>."
"iA».V'V-v;>'■*!#' *t
.v.'lu
1
'1
,
THE COMMERCIAL
•
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-J?,#
Vi
.
;
*'
/; 6d
4tc&uc<2tc
cy/Ma- iastco
-<2/£d/
7T6m£tf e¥sS77fC&&CC66rts CJ/l
P
BALANCE
/
,
ADMITTED
December 31, 1947
ASSETS
Cash in Office, Banks and Trust
Companies;
United States Government Bonds
Other Bonds
and Stocks
*
Investments in Associated
Real Estate
.
SHEET
.
.
.
;
.;
>
§ 26,330,163.87
»
.
.
♦
64,539,027.59
,
.
,
.
,
»
:
.
f
,
24,963,562.47
.
.~.:v.:
.
•
59,492,297.55
.
Companies
.
v
.
.*
Agents' Balances, Less Titan 90 Days Due
Reinsurance Recoverable
Paid Losses
on
.
3,984,382.15
9,904,935.42
.
V.
2,796,195.95
.
Other Admitted Assets
-
,v
•.
\r:
;
.
,
.
,
.
.
1,886,092.82
.
'
Total Admitted Assets
-
,
.
,
.
.
."
.
.
.
.
§193,896,657.82
LIABILITIES
^
Reserve for Unearned Premiums
Reserve
for
Losses
Reserve for Taxes
./.
.^.
,
.
,
.
.
,
,
t,
,
^
f
Liabilities Under Contracts with War
Reinsurance
Reserves
Other Liabilities
.
,
.
.
,
»•.
•.
.
.f
Bonds carried
deposited
as
;
.
,
.
.
•
Meyer Company
'
•
■
3,720,000.00
3,718,542.91
,
.
2,746,852.05
§127,214,569.96
$15,000,000,00
...
•
•
•
■
51,682,087,86
.
#
•'
-
to
$193,896,657.82
the basis of the free
r/(e
;r'v,,7'
'
•
Guy Cary
rate
of
exchange.
President, City Investing Co.
Harold V. Smith
;
Committee^
George Gund
President, Cleveland Trust Co.
'
a
IBS0N
Manufacturers
-
Qairmaw^.: f' V
Robert W. Dowlinc
(
P,d
Title Guarantee'& Trust Co.
.
.
.
President,'
george McANENY
Executive
-
Dennis,- Mass.
•
.
Lawyer
ROBERT GpELET
/?<?«/ Estate
Dune Savings Bank <
Edwin a. BaYLES
-
.
«.
Commissioners,
National City Bank of New York
/ l
-
Chairman,
.
.
.
23,904,922.00
<
,v
.
$5,391,045.38 amortized value and cash $50,000.00 in the above statement
required by law. All securities have been valued in accordance with the
requirements
Chairman of the Board,
William L, DeBost
i
.
.
66,682,087.86
Gordon S. Rentschler
Bunker
*
.
.
§ 91,473,696.00
——DiRECTORS'^;;ff:h:^
Lewis L. Clarke
■
.
at
—
Union
.7\,
.
.
•,;,
,
......
.
....
Canadian Assets and Liabilities have been adjusted
The Cord
.
.
of the National Association of Insurance
Charles G. Meyer
.*
<.
;/•
.
Except Capital
?|v|-
NOTES:
,
...
/,
Total
are
,
.
1,650,557.00
,
.
Regards Policyholders ^
as
.
.
vi;-
.......
Surplus
.
.
.
....
,
,
Shipping Administration
Total Liabilities
Capital
Surplus
,u
.
Trust
Harold R. Helm
*
President,
Company
FREDERICK B. ADAMS
•
"
-
Chemical Bank & Trust Co.
cliarles a, LqUGHIN
Chairman of the Board,
Atlantic Coast Line Railroad Co.
.
■
'—
☆
THE HOME
NEW
FIRE
C
YORK
:AUTOMOBILE
v
*
Vice President & General Counsel
■
MARINE
11
12
Thursday, February 26, 1948
CHRONICLE
FINANCIAL
&
THE COMMERCIAL
(908)
The Status of Mortgage
Lending
'
V;.
By FRANK C. RATHJE*
t;_ Jr.;;
<
'
..
President, Chicago City Bank and Trust; Co.
President,
Former
ananimously approved a proposed bill designed to simplify and ex¬
pedite raiiroad capital readjustments. Such legislation has been under
discussion for
As
to
number or years.
a
phase
one
—^"—-—
*
tested
unless
V//
general approval.
he provision to allow companies
airly
Says soundness of government guaranteed mortgages has not yet been
and that mortgage value stability is adversely affected by forced home ownership. Concludes
care
is used by mortgage lenders there is danger housing credit may become motivated by
—
is that they would not now be afThat is fected.
Denver & Rio Grande
there
it
of
r
Association
and housing situation.
antees
Senate
the
Bankers
loan situation arising from Federal mortgage guar¬
Prominent banker reviews changes in mortgage
reorganization legislation is again in the news.
Last
Committee on Interstate and Foreign Commerce
Railroad
week
American
political expediences, without reference to economic stability.
'
•
VV//VC
Today, there are two general types of mortgage lending—conventional mortgages and
Western; St. Louis-San Francisco;
As I see it, the conventional mortgage on single and
New York, New Haven & Hart¬ insured or controlled mortgages.
apt now xn bankruptcy or receiv¬
ership to modify their debt struc¬ ford; and Chicago, Rock Island & multiple housing is passing down the lane with the proverbial horse and buggy. In con¬
tures
• ' ' '
:—8
—■■ ■
■ "r '''—
through voluntary - agree¬ Pacific have already been' reor¬ trast, the inisawyr; |
mort¬
ments
with
bond
holders,
and ganized. St. Louis Southwestern sured
Another factor on the safe side always been the basic problem in
.
1
.
middle 1930's there have been iwo
laws
passed
allowing
such debt readjustments without
,
to the bankruptcy
recourse
from
removed
bank¬
has
ruptcy without reorganization. The
Central of Georgia plan has been
bodying such authority was passed
by the House last year.
Voluntary
debt
readjustment
plans are not new. Since the bank¬
ruptcy wave of the early and
separate
been
Commerce
A bill em¬
to
Interstate
Commission approval.
subject
courts.
to be
consummated within six weeks or
confirmed
•
and
is expected
/l;
so/ ■'
There
few
are
•
v/
■
roads
:V
gages
now
what
bankruptcy that would be in a
position to attempt a voluntary
readjustment
even
within
the
broadest interpretation of ^nv new
these, however, were tem¬ legislation. Conceivably, theoreti¬
Under them such roads cally, the Central Ra.lroad of New
as Baltimore
& Ohio, Boston & Jersey, the Missouri Pacific Sys¬
Maine, Delaware & Hudson, and tem roads, and the Wisconsin Cen-.
Lehigh Valley all arranged for tral might qualify. However, none
extension of bond maturities that of them need new legislation to
safety
nventional
loans
commer
porary.
and
unable to
were
off or give the old stockholders an op¬
due.
In portunity to demonstrate that they
pay
refund when they came
Baltimore & Ohio and
Boston & Maine put a portion of
their annual fixed interest per¬
addition,
still have an equity
in the proper¬
No plan has been formulated
for the Central of New Jersey and
ties.
and Wiscon¬
Missouri Pacific
the
manently on a contingent basis.
Lehigh Valley in its plan merely
postponed a portion of its junior
sin Central proceedings
bond interest.
out
main
The
has
to get any per¬
impossible
been
it
why
reason
legislation allowing vol¬
manent
untary readjustments through in
the past two years has been the
controversy over whether or not
railroads already in bankruptcy
should be allowed to take advan¬
of
tage
it.
claim, that
formulated by
the
On
tl\e reorganizations
I.C.C.
the
under
77
Section
of
Bankruptcy Act unjustifiably
eliminated old stockholders, there
reopened by the
cover
agitation to
Oppo¬
to such a step, which would
returned most of the bank¬
sition
have
these roads as well.
Commission with¬
congressional compulsion. With
this background, it appears likely
that new reorganization legisla¬
tion will be forthcoming this year.
The Next Time—
When
hear
you
"What do I
care
someone say,
how much taxes
those big corporations
them these facts!
the
has been considerable
have been
American
..
i
c
,
on
a
of
today's
lending
"
•
housing units is being
on
in
the
mortgage.
&
Telephone
Tele¬
.
only own from 1 to 5
shares, while 681,900 stockholders
hold less than 100 shares each.
holders
The
in¬
is the type of loan
sured mortgage
which
of the insured
field
controlled
or
is made without reference
to
a
_
_
stockhold¬
regardless of how much back
mterest was still due the bond¬
cipal of the loan
statutory formula and under
The house bill
roads
not
passed last year
debt changes by
in bankruptcy or
only
covered
now
receivership. The proposed Senate
bill would additionally cover stock
recapitalizations.
It is believed
this broadening of the pro¬
visions w'Tl not
encounter any
that
opositlon.
great
bill, however,
Senate
proposed
The
also would
the tax collectors took
$245,654,622 away from A.T. & T.
in 1947. In other words they took
these hundreds of millions from
the
.
.
.
as
people who own this companv
the one-share owners, as well
the five share people, and the
people who
in
received
that
All
people.
100-share
the
the comoany
owned
dividends was $189,-
is
that has wrecked
feature
the
reorgani¬
zation legislation it is indicated
that changed conditions will re¬
duce, if not entirely eliminate, this
earlier attempts to pass
opposition.
main
The
tax
ers
believing
inclusion of
for
to
the $189 million the own¬
on
received in dividends.
This
what
is
the poor,
you
call
not the rich, and
not once but
them
reason
opposition
that
turned around and levied another
soaking
soaking
twice at that.
Isn't it about time our
legislators
in Washington woke up to the
already in bankruptcy will
now be strong is that most of
facts of life . . .. and corrected
roads that could have taken this unfair discrimination against
roads
not
the
advantage of its terms have pro¬
gressed
to
in reorganization
far
plain people of
the
virtues of
thrift and self-reliance?
—JOHN DUTTON
Guaranteed Stocks
(Foregoing facts from
report of American Tel.
Bonds
■m
this country
believe in the old-fashioned
who
annual
Tel.
&
Co.)
.
Special Securities
Edgerton, Wykoff Co. Adds
(Special to
LOS
old S.
The Financial Chronicie)
ANGELES, CALIF.—Har¬
Hughes has been added to
&
the
GUARANTEED tAtttOAP
25 Broad Street
-
STOCKS-BOHDS
New York 4, N. Y.
Telephone BOwling Green 9-6400
Teletype NY 1-1063
,
A
staff of Edgerton, Wykoff
Co.,
-
619
South
Spring
Street,
members of the Los Angeles Stock
Exchange. He was previously
Crowell. Weedon & Co.
with
privilege of determining not only
guaranty.
_
There is little doubt that a bulk
today's mortgage lending at
present terms, ratios, and rates
would not be made by mortgage
of
lenders',assuming the full burden
of the
it
risks involved.
Infact. it
doubtful if government
would
themselves
mists
evolved
the "
but the ratio
the value
that
value
laws
that
of loan to
well.; The Federal
as
have
been
enacted
es¬
tablish maximums of ratio of loan
It
value.
to
is
minimums
lender
be
to
mind that the legal
borne
limitations
but
in
are
maximums.
law requires the
loan the-maximum.
If
in
to
the
he is inclined to lend at ratios less
a
We
are
to realize that the basic
our
present
housing
are two-fold:
first, the
of
causes
shortage
type of mortgage, this debt retire-
erroneous
restrictions imposed by
government during
the war;
slow- On a an(j secondly, the vast expansion
> ™°*Jgage, of- this type, bearing Gf spending power in the hands of
,',*14
-1?lere ' W15 a m.uUr?u the American people.
f}ate of 34 years an(j 6 T2 ?' t?!e | The curtailment of construction
menJ 1S
«
I borrower pays only 8% of his
The curtailment afeartroebm
enough to cover
depreciation as we
We cheerfully forgive that error
because of the war emergency; but
caution is required now, that we
econo¬
have
present ' program,
normal
the
learned
to understand it in years
mct
philosophy that
Wjjen we
look back and view
do not aggravate the consequences
of that mistake by excesses both
people'atany cos^NowJehave the ?o-called "gold bond" type of to building and financing that will
added
legislation relating to
While the veteran '
citizen as well are en-
the
our
veteran.
and
the
titled
to
the 1920>, one is prone tc. won- reward,
The Loan Value Margin
what is, in fact, the difference-between that type of lending
I am not convinced that we are
ai}^A
present much heralded
.
. ..
.
. ,
ran£?e in
FHA 608 ^Pe of mortgage. We serving., tne Pest long-range in"?
tore* of the veteran by financing
bis home purchase by a mortgage
re'cosToTarome^/at'fhy mS
t0,the extent of 100% of his pressimilar
buliror buy The only wyay in 1 treme high ratio of of the value ent purchase price. mortgage in¬
loan to
90%
and the weakness
have the individual holder of
and we have gov-
mortgage
A
corpo¬
which they can
and
sound
do that, is to live
an
aggressive,
within
work
economic structure.
of
then is the
status
mortgage lending today?
What,
our
rate
borrower
are
as
marked
to¬
the
days following the ill-fated "goldday as they proved to be in
bond."
Forced
Ownership
Soundness of Guaranteed Loans
and Mortgage
Stability
soundness
far been
of
The device has thus
employed only in a ris¬
ing market. As nearly as we can
see
the situation which prevails,
there
are
significant points to be
for
and against the
considered
cannot
overlook
the
comment
sured
that
fact
a
large number of buyers are in the
forced ownership class, They re¬
their down-payment as a
premium for occupancy and their
gard
on
a
under Title VI of the FHA
Law is warranted.
To
advocate
a
return
to
the
philosophies of conventioned lend¬
ing as they existed prior to 1920
would be too narrow and to urge
that
government v,In evaluating the stability of
guaranteed mortgages has not yet today's mortgage borrowers, we
The
been tested.
312,852.
sub¬
The
Government
took
away
ject to security holder and I.C.C. $245,654,622.
permission, roads now in bank¬
The owners received $189,312,ruptcy to take advantage of the 852.
voluntary proceedings. While this
And
then
the
Government
allow, within limitations and
retired over
vice of the Federal
elTe
...
is
long period, In the FHA 608
very
Sure that's big
But
and
of
economy by
be
can
the influence and solace of the de¬
ers
lation.
use
the principal; as a result, the prin-
every
consideration in
business—big busi¬ the matter of housing, we must alwavs
bear in mind that we owe
ness
that is owned by hundreds
mem, aouve an
suunu ecunof thousands of good Americans them, above all eise, a sound econ-".(
holders, effectively blocked enact¬ who
are
not
millionaires, just
ment of any reorganization legis¬
plain people like you and me.
rupt roads back to the
authorities,
not so much for amortization of i
judgment and prudence of
the lender.
It is made according
to the
governmental
lending.
mortgage
1933, the lender had the
Prior to
our
than those fixed by the statute,
curbing builders who build only that is his privilege, and no criti¬
for
speculative gain as distin- cism is due him.
Values as well
guished from a normal profit ac- are his province,
cruing to a contractor.
I
Housing, to serve its long-range
On the doubtful side, it can be
purpose, must not only be built on
said that under present long-term a sound
foundation structurally,
lending, the borrower's monthly but it must rest upon a sound
payments are mostly for interest, economic foundation as well.
-
Frank C. Rathje
mortgage
made
available to the prop¬
intelligent
great service to
bulk
the
are
their
properties;
but
Nothing
er
1
industrial
were.it not for.the
,
Co. has 723,374 stockhold¬
207,800 of these stock¬
graph
ers
pay," show
still
are
being made
Both of
they
!
zones.
o
not
controls
and
call
C
real
trols are judiciously used. Such
many
lenders
estate
especially important that
today's mortgage lend¬
ing is in the home ownership
classification, as contrasted to the
multiple-unit building.
There is
definitely less danger of overbuilding in the home construction
field
than
in
the
multiple-unit
field, especially so if Federal con-
into
passed
is
the bulk of
have
made
bankers
in
now
—it
that are
being
we
limit
ourselves
to
the
provisions of Title II of the orig¬
inal FHA Law, with a ratio of
80% of loan to value, with 15
the maturity date, would
be termed reactionary.
Yet, the conventional mortgage
was
the vehicle in vogue when
this great country was built.
Un¬
less we adopt with wisdom and
years as
probably
Unless
market endures for a
made.
sufficient length of time to enable discretion the new ideas in mort¬
On the safe side, we can point these buyers to accumulate a safe gage lending under Federal guar¬
to the fact that virtually all of the equity,
they are apt to be dis¬ anty, the conventional mortgage
urban mortgage debt today is be¬ tinctly unstable borrowers.
This may again be welcomed in a pe¬
especially
true because
the riod of reduced spending power in
ing systematically retired on a is
monthly payment basis.
It has original equity payment required the hands of the public.
';
of a mortgage borrower is now
eliminated the dangers of a total
It would seem that there are
the lowest in all history.,
i*V.v
debt due date.
several possible developments de¬
Finally, on the doubtful side,
In many instances, these mort¬
pending entirely upon our eco¬
we
must recognize the fact that
nomic conditions over the months
gage payments are a lower per¬
real estate mortgages and building
centage of today's gross family in¬
and years ahead.
With a con¬
construction always reach their
come than ever before in our his¬
tinued high level of business acrespective peaks at the time of
tory. The rate of urban construc¬
ticity, the public may be critical
consumer
income.
The of the caution and conservatism
tion in the single-family dwelling highest
high wages
and of the lending agencies. If these
is still below the expanded hous¬ phenomenally
salaries prevailing today cannot
ing demand, and there is almost
lending agencies tighten mortgage
universal belief that it will be a be viewed as characteristic of a
credit, which they now appear to
long time before we are faced new era. There is little reason to be doing, it will be urged in many
with a
situation of oversupply. believe that our economy has hit
places
that
the
government —
Yet, it is to be noted that approxi¬ a plateau from which it will never either, national, state, or local,
mately 850,000 non-farm-dwelling decline again. It is to be realized shall venture into socialized hous¬
units were built in the United that we are working on higher
ing or direct lending, all at the
States during the year 1947.
If ratios than ever before, a fact taxpayer's expense.
This would
which means that even a modest
we continue this rate of building
probably be under legislation sim¬
decline in real estate values and
activity, we may again in the near
ilar
to
the
suggested -Wagnerconsumer incomes can produce a
term years witness a full supply.
Ellender-Taft Bill considered by
wave
of defaults with resultant the lastvtwo sessions of the Con¬
*An address by Mr. Rathje de¬
foreclosures.
o,
gress,^ or under the terms of an
livered at the A.B.A. Anti-Infla¬
—Ratio
of loans to
value
has
(Continued on page 20) v-tion Pilot Meetings. -•
' u
u,**
safety
of
mortgages
now
being
monthly payment as rent.
the present
.
.
.
Volume 167 V Number 4676
COMMERCIAL
THE
other
many
Claims New Construction
been
&
a
FINANCIAL
goods
factor
in
and
this
CHRONICLE
has
accounting
for
Under Prewar Rate
.
greater contribution
maintenance
the comparative position of the in¬
production
dustry.
h
..
..
toward
the
With
of \ high
;
levels
of
entire econ¬
"With the national economy op¬
-
erating at peak levels, it has been
the
to
The
CHICAGO,
"'I'
!—
has
'
Financial
Chronicle)
ILL. —John
become
Shearson,
Hellyer With Merrill
13
Shearson, Hammill
(Special
omy,
for
(909)
.
associated
Hammill
&
Saris
with
Co.,
208
Lynch
Benson; Wigton points out last year's new building volume.■» i a difficult task to draw off the
South La- Salle Street
He was
(Special to The Financial Chronicle)
labor and materials necessary to
was
only-5% of gross national product, compared with
J
CHICAGO, v ILL. — Arthur
B. formerly with A. G. Becker & Co.
bring
out * the
expansion '/'in
: ? in 1939.' Sees return of normal ratio between government and i
building activity," "Mr. Wigton de¬ Hellyer % has become ■« associated In the past he was trading man¬
with Merrill Lynch,
;
•• ■■■
private building.1; '
Pierce, Fen- ager for City National Bank and
/
';Y
' V.-' ;• j clared. ;
C.
-
v
'
.
i:; Despite the increase lit building activity' since the end of the
;
the volume of new construction continues to represent a com-i
paratively small share of the nation's entire productive effort, and
war,'
•considerable
exists
room
'''r.'4.
for
further
expansion of the
t h e®
ate h
m
'
—
'
.
industry to
:
—
gains made by
said,
other
rials and skilled labor.
sectors
of the Ameri¬
can
C.
economy,
Benson
Wigton, presi¬
dent
ton
of
the
shortages of mate-;
"Production
of
than
rate
this
year
value of
tion
to
building mate->
production
of
the
which
.industry
will "raise
the
construction in rela¬
new
the
national prod¬
He emphasized that such an
uct,
sorption
of
ner
&
Beane;
Building. ,; Mr,
Board of Trade
Hellyer has re¬
cently been with the Bills Realty
Company.: Prior thereto he was
with Shields & Co.
Trust
necessitate
more
"the ab¬
of the
(Special
.
Neuberg Bros. & Sloan
the
curities business.
will
make
a
Tracy,
BASIN; MONT.—Neuberg Bros.
nation's
&
and
The Financial
to
ILL.
CHICAGO,
labor, materials, and capital into
industry"
Company of Chicago.
Rodgers & Tracy, Inc. Adds
gross
j increase will
'
rials has generally expanded at a1
slower
opinion
faces another period of expansion
Sloan. Inc., is engaging in
a ser
Inc.,
Street,
has
Stringfellow,
120
—
Chronicle)
Rogers
South
added
Jr.
La
the
staff.
.
o
Corpora t i
11
o n,
engineers and
BRIGGS & STRATTON CORPORATION
contractors, of
ai nf i eld,
New Jersey,
P1
:;
states.
"When
value
Benson
Wigton
of
tion
is
the
value
of
all
the
against
products
all
of
serv¬
ices—what the economists call the
gross national product—it is clear
that construction has not yet re¬
gained its prewar role within the
economy," he said.
"In
1939,
new
construction,
constituted
half
one
value
about
cent
per
of
six
the
and
market
$90,426,000,000 for all
and services produced that
Cash
$1,681,488
11,417
Receivables, less reserve of $10,000
Inventories, priced at lower of cost
year,
totaled
ume
building
new
vol¬
$12,665,000,000, which
constituted
only five per' cent of
the
national
gross
product
of
$232,000,000,000, estimated as o'
the third quarter of 1947.
Anc1
record
the
1930
is
in
marked
Federal
Mr.
Wisconsin
current
assets
went
builders
made
the
to
on
have
tax
CASH SURRENDER VALUE OF LIFE INSURANCE
(face amount of policies
—
nation's
Total
$300,000)
-
of
the
economic
the
INSURANCE
PREMIUMS, ETC.
30,427
$1,657,774
Capital stock—.
PLANT AND EQUIPMENT:
-
$
Buildings and equipment
Machinery and equipment
$
1.9
81,936
2,508,193
158,485
♦
(per accompanying
summary)
....... V.
$3,654,293
depreciation.... 2,063,425
point
point
cent
per
1946
and
to
in
im¬
in
1,590,868
Deduct
Patterns, tools, dies, etc.—at fixed amount
50,000
the
cent
per
struction
PATENTS, TRADE-MARKS, ETC.—at nominal amount.
I
the efforts
undertaken
was
by
SUMMARY
OF
the
end
of
normal
more
been
and
World
or
ratio
GROSS
THE
YEAR
forecasts
He
ENDED
ADMINISTRATIVE
Profit from
17,272,752
....$ 4,502,679
indicating
small rise in public build¬
private
surveys
try is still uncompleted and that
capital budgets of many of our
large companies have made pro¬
vision for substantial new
plant
and equiprrtent outlays this year,"
continued.
that
"In
will
building
of
more
of
have
our
we
can
two-thirds of
represent
activity.
war-enforced
restrictions
rials
1948
almost
work
has
74,673
Profit before provision
for income taxes (after
deducting provision of $128,810 for depreciation)... .$ 4,577,352
pri¬
The
re¬
controls
meant
that
needed
channeled
tion."
compared
with
lag
in. building
other
the economy can be
sections
of
explained, he
*
considered
necessary.
financial
of
its
Net
with
260,000
profit carried to earned surplus.
by
as a part of this
report.
profit for the year 1947 was $2,637,352 or $4.44 per share, as
compared
1946 earnings of $1,870,086 or $3.15
per share, based on the 594,298 shares
outstanding at December 31, 1947.
The increase in net profit of $767,266 reflects
an
increase in profit before income taxes of
$1,397,266, and an increase in pro¬
vision for income taxes of
$630,000.
Cash dividends of $2.50 per share based on
the number of shares now
outstanding, or a total of $1,485,743, were paid during
Net
$ 1,680,000
Wisconsin
condition of the Corporation at December
31, 1947 and tha
operations for the year ended that date are set forth in the
statements.
These financial statements have been examined
Arthur Andersen & Co., and their certificate is included
PROVISION FOR INCOME TAXES:
Federal
i
1,940,000
$ 2,637,352
1947.
NOTE: In
1947 the
Corporation adopted an employee retire¬
plan and trust providing for retirement income
based
on
years of
service and compensation.
The
amount paid under the plan
during the year aggre¬
gated $585,000, of which $410,000 was applicable to
past service credits and represented
approximately
10% of the estimated total past service credits com¬
puted under the plan. The Corporation has the right
to alter or discontinue the
plan at any time without
liability for further payments thereunder.
ment
During the year we have expended on expansion and new equipment
approxi¬
mately $500,000. We also adopted an employee retirement plan. $585,000 was
paid under the plan, — $410,000 of this applicable to past service credits.
The production of automotive hardware and
engines was the highest in our
experience, and we have a very large back-log of orders in both divisions.
If
we
are
able to get materials to meet our schedules
during the coming year,
the production of these items should be even
higher than in 1947.
V.
Respectfully submitted,
,
.
V;C. L. COUGHLIN
:
v--;;
■
President
into
building construc¬
the
CERTIFICATE
balance
PRESIDENT'S REPORT TO STOCKHOLDERS
The
manpower and mate¬
been
of
we
accompanying
^'Authoritative
the
In our opinion,
the accompanying balance sheet and related
summary of
profit present fairly the position of Briggs & Stratton Corporation at December
31, 1947, and the results of its operations for Ihe
year then ended, and are in
conformity with generally accepted accounting principles applied on a basis
consistent with that of the
preceding year.
ARTHUR ANDERSEN & CO.
Milwaukee, Wisconsin
February 3, 1948
results
indicate that the post-war
expan¬
sion program of American indus¬
examined
Delaware
•
OTHER INCOME, LESS MISCELLANEOUS CHARGES.
dustrial fields,
Much
5,943,594
sheet of BRIGGS & STRATTON
CORPORA¬
corporation) as of December 31, 1947, and the summary of
profit for the year then ended, have reviewed the system of internal control and
the accounting procedures of the company and, without
making a detailed audit
of the transactions, have examined or tested
accounting, records of the company
and other supporting evidence, by methods and to the extent we
deemed ap¬
propriate.
Our examination was made in accordance with generally
accepted
auditing standards applicable in the circumstances and included all procedures
(a
which
1947
$21,775,431
EXPENSES
operations
have
TION
DECEMBER 31,
SALES, less returns, allowances and discounts.
cited
—
sorely
—
AUDITORS'
between
ing in 1948 and a considerable ad¬
vance
in
private
work
par¬
ticularly in the housing and in¬
vate
5,713,484
$7,601,368
We
FOR
COST OF SALES, SELLING, AND GENERAL AND
War
private building
established."
government
moval
Less
PROFIT
of
effort," he said.
war
government
new
1,485,743
capital stock and surplus before
deducting treasury stock
$6,013,484
Treasury stock, 5,694 shares, at cost....
69,890
[Brkcs&Stratton]
government in connection
expect
share)
,
in
from
a
per
paid
moved
resulted
a
($2.50
1,722,804
Cash dividends
gross
have
"Since
—
$7,601,368
private builders working for pri¬
vate owners, whereas
during the
war years, practically all new con¬
the
.
2,637,352
$7,199,227
up last year .to
Most of these gains
with
^
....
1944
5.3 per cent.
for the
300,000
constituted
of
4.8
$
.Earned surplus —
Balance December 31, 1946... .$4,561,875
Add — Net profit for the year
~i
987,615
Office furniture and fixtures.*
Less- -Reserve for
without par value
Issued, 599,992 shares, at stated value
(
Land
framework.
low
advanced
and
305,365
142,815
progress
war
'building
new
only
all
1,669,895
liabilities...
CAPITAL STOCK AND SURPLUS:
UNEXPIRED
product because of the concentra¬
tion on production of war goods
he
current
Total
considerable
end
"From
when
only
Treasury notes,
series, at cost including interest
neverthe¬
proving their position within the
has
267,982
.........
Less—United States
...$5,705,321
$1,672,804
Wigton
that
since
II,
$1,707,278
2,926,426
decade."
less
we
504,742
—
$1,975,260
Total
contras'
average of ten
per
cent
existed during the
1921-
which
out
$ 847,667
Provision for income taxes
1,085,990
market
or
payable
liabilities
f
(quoted market price $59,256)..,
(first-in, first-out)
Accounts
Accrued
Marketable securities, at cost
Authorized, 750,000 shares
V. "Last
to
1947
LIABILITIES
year.
this
31,
CURRENT LIABILITIES:
of
goods
DECEMBER
ASSETS
CURRENT ASSETS:
ac¬
cording to
the
Department
of
Commerce, totaled $6,062,000,000
which
—
meas¬
ured
industry plus the value of
SHEET
all
construc¬
new
C.
BALANCE
the
BRIGGS X STRATTON
W orld's
CORPORATION
•
Milwaukee 1, Wisconsin U, S. A.
Largest Builders of 4-Cycle Air-Cooled Gasoline Engines and Automotive Locks and Switches
&
Salic
Walter
to
Wig¬
A b b
-
by
~~~i
'
his
<In
~
A.
firm's
14
FINANCIAL; CHRONICLE
&
THE COMMERCIAL
(910)
^vThursddy; February- 26, 1948
yearis
upon
\>
"Mr. Jones Buys
request from
&
SECURITIES
NATIONAL
CORPORATION
BROADWAY, NEW YORK 5, N. Y.
120
Mutual Fund"
a
the
Jones:
like
"I
to
Mr.
invest
looks
the
Dealer: "Just how much
prepared
of
are you
Jones?"
"O.
Dealer:
K.
$5,000."
Let's
.
^corps
PUTNAM
Dealer:
mission
FUND
on
taxes
A
than
big,"
so
that high." //•'/■/',.
has
As
^
,
% %.
11 Vis %
to
.
boast¬
the size of his ship', "It's
said he, "that the cook
in
travel
a
submarine
to
tr
; v
'!
K
round
the
whenever
rates
commission
lot
fund
into
buys a
an
old
driven from the
by the
seas
1947
out
Put
down ffor
me
$5,000 worth of that fund."
»
.
(Quoted from
ities
and
Research
Russia's
Com¬
Selected Investments
Important" states:
large
look
that
considered by
that
rela¬
Fig¬
themselves
or
relationship
is
wherever
barter
or
"
-OB
'
B
>
Keystone
time of
satis--
a
A
war.
Notes:
"/■
$9
bringing total
to
$40 million.
approximately
invested
of 17% annually over
average
the
15
including
$25,555.00,
amounts to
dividends,
Funda¬
in
Inc.,
Investors,
Cbncian
total increase in
1933 the
Since
years.
in
of
of
owners
industry
far to .establish
Attitude
an
which
income
go
capital for
provide the necessary
industry.
Accumulation
would
added margin
would help to
Monetary Policies
^
^
■.
,
....
:.
1 iKA: Ml
1
,
/•
...
■
4
■
....^
%
;
4
X
V
'
%
V.
■-
\ • •
,-N
■'
.bfac^ts] .Tq take the .view that
:-;pj
ii
1
V
-
safeguards of
is
its
ability
.
Preferred
Stock Fund
stability and the integrity of the
currency.
One of the greatest
firstyby; surplus corporate earn¬
ings and secondly by individual
savings. These savings have come
predominantly out of the, incomes
of " individuals
in
the . higher
,
Finally,
the
time has
come
when Our government should re- y
consider
its
monetary
policies f;
siich' surplus in comes are v le gitiy
//
•mate prey,
'to take
Prospectus upon request>
a
for The tax-gatherers is
.view
short-sighted as
slaughter
that laid the golden
as
thatwhich resulted in the
of. the goose
with
view
a
spend all lib makes plays a con¬
Lord, Abbett & Co.
structive role in otir economy.
is
INCORPORATED.
New York
—
Chicago
<•
—
1
New Orleans
a
aeclaim
should
Los Angeles
It
role which wise statesmanship
and
,
,
cosmic
have
//do-gooders // who
grandiose plaris of promoting,Par-,'.' //
adise on earth.*, InVariably these ''* •
plans rely upon ' the ^expenditure;'
billions of dollars derived in ?
has
come
and
Or currency'. The time
when the government
side-ration to "
gold
ence
encourage.
;;
should give careful con-/
a
our
r.
Which heed not be too Onerous in
SHARES OF CAPITAL STOCK OF
of
revenue
or
in terms of
vulnerability, which is
admittedly acute : in an election
political
The assurance of commun¬
ity property privileges to all and
the elimination of double taxation
year.
(Series B1-B2-BS-B4)
This
PREFERRED STOCKS
will not have until every
we
with
citizen
the
has
money
to his bank and
a stated equiva¬
precious metal. Only then ]
lent in
will
have
we
a
have faith.;- /]/■
three-- conditions
These
tolerant
more
—
a
attitude/,
toward
profits, tax relief at points ;
where
COMMON STOCKS
it
currency,
h
Prospectus from
established 1928
stance
in
of Boston
Massachusetts
to
pear
local investment dealer or
Congress Street
|
will
cumulation Of
/
your
-
may
/a mutual investment
be obtained from
local investment dealer, or
vTw"1*; •/>" '; .1
-
f
,
THE
PARKER
CORPORATION
I.
•
-
i
*.
prospectus from
your
PHILADELPHIA
encourage
capital, and
the
a
•
a£-"
"
sound
v
although they may ap-/ '•••
redound
to' the
in the. .first ifi-*
benefit of industry, -'
fact -promote
that strength
on
'
-1
i;
'
■
the home front which is an abso¬
fund
r
?' '/ '■
investment dealer
or
ONE COURT STREET, BOSTON 8, MASS.
'
sound currency in
which all men may
broader,
(Series K1-K2)
folding
right to go
demand and get
v
./.Prospectus
I
restoration of the f ?
standard;
The mere pres- //
of billions of dollars of gold
in a hole in Kentucky does not/;
government M
constitute]an authentic standard.
this time, could .afford tax relief
in
Keystone Company
'
of
can
not
does
,
private enterprise
to rely upon an
y
honest currency- which > is .free ri
from political tampering and im-.^t>y
murie
tothemanipulations of/?//?
of, credit
;V The ^individual. who
the
promoting
to
.
\
IN
Fund
enlightened attitude toward accu¬
mulations by private individuals.
It is an established fact based on
the most careful studies that the
BONDS
Boston 9,
Si.
bank loan from
its
million,
$10
to
Affiliated
Abbctt's
Lord
has increased
Along the same lines, our gov^
can afford to take a more
'
50
'•'
■
Louis, have compiled a tabulation
showing
taxability
of
Mutual
Fund Dividends paid in 1947.
ernment
M 9F INVtSTMENT COMPANIES §
investing their capital
Tke
,
Taussig, Day & Company of
when
.//
Enlightened
more
terms
your
business
assets including the bank loan Up
defend itself
to
Toward Wealth
INVESTMENT FUNDS
(Series S1-S2-S3-S4)
evidence
in
dividends."]
of
estate, mortgages, or their equiva¬
lent.
Since these captains were
Union
THE L0RDAB8HT GROUP
Funds
v
1947
from
(Continued from page 3),
that, country
Specifically,
i
no
YoUr
war¬
s
Custodian
.
I.
when
pared to the relationship exiltin*
in prior years.
For example, it
"Before long these ship captains
■'
5
r>
Participation
find
can
pat¬
inJ,o the
War
activity, profits and
mental
this
fit
World
much'
$10,000
when
occurrence
an
to indicate that 1948 Will dif¬
now
when the present
appearance
would
management
figures are related to national inj
come- and
national product, anc1
ent
such
on
after
tern
compared with similar figures ir
past; have a distinctly differ^
frequently gone for two or three
'
'
tern
proportions and thdt
suspicions, fears Or
attempts to project a postwar pat¬
•the
CHICAGO
Certificates of
consider the
profits,
ventories
STREET, NEW YORK S, N.Y.
!
em¬
dividends; bank
consumer credit, and in-1
credit,
of
based
fer
stemmed
economists
their failure to
ures/on
'
lOS ANGUIS.
economists
tives rather than absolutes.
began to accumulate considerable
wealth in the form of cash, real
Strength
of Chicago in "These Things
Seemfed
HUGH W:CONG & CO.
48 WALL
writes in
imminent recession
an
of substantial
were
in
Incorpo¬
thinking
in
relatives, has consistently
throughout
the
last
two
that there was no evidence
forecasts
year
of
by
capital of American industry in
the: past has been made possible
The
pany
INCO»»0«AU0
Industrial
banner
these
management
Investors,
to indicate
various statistical figures as
factory profit might be realizfed.
r
ten by Henry Ward Abbot.)
of
are
terms of
year
various kinds 'of merchandise "for
writ¬
bulletin
"The
rated
'dividends. We think that the er;
ror
that
years
has
a
assert
ships
sale
National Secur¬
a
it
be
to
to
so
widely used, and
frequently rhisused.
so
of busines
actually turned
a
much
mean
foy most of the statis¬
withering weed
many
to be
was
not
goes
ployment, production, profits and
of the enemy.
After the
new
stock or eliminates
war, however, hardy and courageone.
Over a period of years these*Boston
ship captains began
savings mount up.
once
more
to
ply the seas.
Ir
•/ Mr. Jones: "You win. It looks many cases, they owned their o\\ n
to me as if mutual funds are a
ships and cargoes. They sailed to
pretty economical
way
to .buy the end$'. of the earth carrying
stocks' after all.
of
judgment
inventory
stating the normal ratio.
expenditure for capital goods
ever before with¬
it
so
"Although, in the
Report:
nual
that
greater than
held
Investors,
say
stating the
to sales and
,
repre¬
follows, in the 22nd An¬
as
Without
such
expenditure is
less than normal. And
William A Parker, President o'
part
of
to
higher than this
by
Equal '47?
Incorporated
much
are
or
blooming idiot.
a
;
greater
Say3
'48 Profits to
■
sented
they bear that
a large part' of
a
rn
out knowing whether the portion
of gross national product
business conducted
turn
can
1
year
does
is
city of Boston.'.'
Love
i
mean
without
It
men
day
manage
that
ratio
Boston Trustees,
Abe Burrows
from
see
In other words, you
Ffedteridk" A. Adams ?o'f Deliver*
save
by letting the man¬
agement of the fund pool your Colo, has recently published a
capital with that of hundreds of Very comprehensive booklet '• on
other investors, thus enabling it to Investment Trusts. The following;
two paragraphs afe excerpts: ' V '
buy in round lots."
Mr.
Jones:
"Why, that's rtfore
"The trustee profession in this
than the "entire 'load.'";
country had its inception: in Bos;
Dealer: "That's right. Further¬
ton, Mass., in the early part of the
more, once you invest in a mutual
19th century. During the War o l
fund, you continue to obtain the 1812,: American; /cpmmericfe
W&S
of
in the
these
as
all the trustee
recession
■,
was
.
seaman
Origin of Boston Trustees
1
benefit
title; and
result of
a
go through the lamb stew
if tho potatoes ar'O dbh'e."
these, .same stocks, for both
buying and selling, amount to less
State St., Boston
50
."
.
merchant
ing about
of
Distributor, Ino.
.
Eventually
this
to
and
poor
Leviathan
"However, commissions
on round lot purchases
Dealer:
tics
"economic
workers,
backward
technology
faulty accounting. City streets are
so bad, an average auto or truck
lasts only 8,000 miles.
13% of your purchase price."
Mr. Jones: "I had no idea com¬
and
Collected.
transportation, inad¬
equate agriculture, lack of skilled
$100 or less is 6%
for buying plus 6% when you sell.
Incliidihg taxes and odd lot fees',
the round
trip-would cost you
request
Vz that of the
be about
1915
culties;
"The; minimum com¬
Stock Exchange trans¬
ran
will
Russia's
not
that
.
potentia l
dropped from 42% to only 25% of
U.
S. capacity."
Russia's diffi¬
actions totaling
missions
.
.
strength
S. in
war
over
Fund
does
began to act fas agents for these
ship captains, and took charge of
collecting rents, interest on loans,
upkeep of property, etc., while the
captain was aWay. For this serv^
ice, they were paid a certain per¬
centage of the income which they
became known
r
1
inventories
or'
.
.
U.
save,
can
Russia's in¬
is likely to be
only about two-fifths that of U. Si
Her production per capital iri
"Even by 1960
1960
what
see
if anything. There
are
approximately 50 issues iri
this fund. So, if you could spread
your
money
evenly, that would
be $100 in each issue.'1
Mr. Jones: "Right."
you
Putnam
I like the
portfolio.,
dustrial
time,
this
at
Mr. Jones: "About
Prospectus upon
^
con-j
veniences offered by your mutual fund as well as the continuing
supervision; but isn't the distribution charge pretty stiff?
I could
save
quite a bit of money through buying the underlying stocks
instead, couldn't I?"
'•
^
Mr.
investment dealer, or from
RESEARCH
HENRY HUNT
By
TRUST FUNDS
Prospectus
the problem
voyage,
a
"
'
r
property
and
business
affairs
might be successfully, cardd for
during their absence. About 1820,
half a dozen or so Boston lawyers
NATIONAL
"V"
on
i -t',-
presented itself of how their
soon
your
/ J-'.;
.
""
4.i; WiA" W
V
2, IPA.
lute
requirement for effective na-
tional defense.
They
are
v,
the coA-,
ditioris that will assure: defense" In •
;
.
depth and an offensive power capable
of discouraging
any
tious aggressor;/,
ambi¬
f/ ? V.
,
*/
/
(911)
Must
that
Inducement For Venture
Venture
we
capital must be induced
to
are
have
to flow
into
corporate
"If proper inventory and
produced
by a
for the dollar, cor¬
falling value
porate profits after taxes in 1947
$5 billion
be
in
$12
the
billion,
the
total
Winthrop H. Smith
$3,500,000,000: represented
and
bonds
notes—in
other words, bor¬
money," Mr. Charles E.
Merrill said in a s.gned foreword,
rowed
only
or
national
addition
a
neighborhood
to
this
income.
there
of
prof.ts.
-"
V-" =?-:
"Anything our Government
If
to
dam the flow of
capital into
business will dam up our future
prosperity.: If we tax away the
incentive to invest, we tax
rection
in,
"^alleled
rather
volume
than
gins.
result of
of
Even
of
high
with
§a?ed in wholesale
and retail trade
1
as
a
of
was
This
government bonds, which is tanta¬
swings
capital, will help to promote
fundamentally desirable shift of
boost
wheat
other
and
in the wages of
of
staple
i
•was
f 1
n
u-
to
abnormal
a
war
distortions,"
Mr. Rukeyser said.
Government policy touched these
speculative markets in three ways.
First, there was the impact on
prices of scarce items of direct
governmental purchases for for¬
eign relief.
Secondly, a narrow¬
ing of speculative participation in
commodity trading resulted from
Federal
portfolios
Government from
of
individuals
checking banks
and
institutional
investors.
tal
policies grow¬
ling out of the
Merryle S. Rukeyser
the
the
$ enced by gove r n me n
a
growing portion of the total debt
commodities
"The
revision
in
interest
short-term
commercial
loans
by banks to their customers have
been creeping out of the cellar of
historically
There is
the
extremely low
no
rate
rates.
to assume that
reason
interest
on
home mort¬
will fail to follow the gen¬
eral pattern.
The incentive of a
gages
higher
rate
will
be
a
that, the
a
con¬
entire
ouf
eco¬
attention
U, S.
Treas¬
like private corporations, had
permitted its "break even" point
ury,
rise in recent years to an un¬
comfortably high level. The econ¬
to
omist said
that the contemplated
high level of government spend¬
ing for the coming fiscal year was
predicated on the assumption of
record-breaking
tax
receipts,
which
in
is
turn
perpetuation
conditional
the
of
the
on
in
factor
to
the
brackets,
on
"Unless
one
on
inflationary
hand,
middle
and
and
of
upper
the other.
and
concerning
until
notions
our
Federal
spending are
revised downward," Mr. Rukeyser
said, "there is a danger of a re¬
sumption of Federal budgetary
deficits when
and
if
business
slides
off
the
shelf of
full
em¬
ployment and full capacity operaation. It would be the part of na¬
tional prudence voluntarily to re¬
duce expenditures in order to hava
margin of safety in the event
temporary curtailment of vol¬
some
of
The present policy is a vast
gamble in national solvency."
Mr. Rukeyser pointed out that
ume.
it
was
terpret
rates
is spreading to all categories of
borrowing and lending. Even rates
on
the fact
rates
characterized by a downward
mount to a
view of
confiscatory personal income tax
readjustment in high grade bond
prices.
The increasing yield on
the
to
boom,
of
in
the
as a whole making little
more than a nickel on every dolr
lar °f sales (and corporations en-
V
price
mar-
corpora-
:
nitude
un-
In the preceding eight years, corporate profits averaged 4:3%. of
sales. Incidentally, with
."
"
business
profit
our
normalcy.
"The
mag-
adjustment for inadequate de¬
preciation charges, the total figure
of corporate profits would
shrink
still further.
:'V- ' .-l
1:
;
"Recent corporate profits, more¬
have been the
away
have been creeping upward.
and
step in the di-
t
over.
future."
tax
we
expanding industrial
an
annual
constituted
also
were
hope for
of
of
[tions
does
the
at
Bank
1
inadequate
The
difficulty ; jn raising new deductions made from
them, corequity capital, new venture capi- porate profits in 1947
averaged,
tal, has been partly the result of in
fact, only 5%% of sales. This
the
injury to confidence brought is far from
being abnormally high,
about
by fears of government
pollcies which
may tend to prevent
either the
earning or the keeping
Loan
p
about 6%
make
stilts,
,
only j
of
To
future.
tax away the incen¬
we
invest,'
shareholders meeting of the Federal
Pittsburgh, Pa., on Feb. 17, Merryle Stanley
Rukeyser expressed the view that the recent readjustment in com¬
modity prices disclosed the extent to which the national economy was
ll.l.
1
walking
on<$>
inflationary by policies of money management,
figure than $17 billion. After an
inventory valuation adjustment of
as estimated
by'the De¬
partment of Commerce, corporate
profits after taxes in 1947 would
the
1 Speaking
Home
much smaller
a
in
If
to
Rnkeysei Views Price Slump
Step Toward Normalcy
depre-
accounts
would emerge as
tive
atmosphere of confidence
an
attractive prospect
for
:
profits
were made to
distortions in cor-
the
perity.
an
and
ciation adjustments
for
dam the flow of capital into busi¬
ness will dam up our future
pros¬
is
nient.
porate
reverse
nomic society is taken."
Mr. Rukeyser called
solidated
of
process
very
"Corporation prosperity and in¬
dividual prosperity are the same.
Anything our Government does to
they will only be invested if there
enter¬
expanding industrial future,, Charles E.
Merrill of Merrill Lynch, Pierce, Fenner & Beane stated in
Annual
Report of this Stock Exchange firm made public on Feb, 24
by
Winthrop
H.Smith.
Managing'
Partner.
not on the hlS'her cost of replace-
allow
the
,of net social savings when
funds, however, can. only be pro¬
vided out of corporate profits and
out; of
individual savings.
And
an
"During
1947
the investment
banking
industry, raised
some
$4,750,000,000 of new money, but
destructive
represents
tion that the Federal Government
can
make to national prosperity.
expand our productive facilities
over
the next few years.'
Such
Directing partner of Merrill Lynch, Pierce, Fenner & Beane in
firm's annual report ascribes difficulty in
raising new venture capi- V
tal to fears of government policies
preventing earning or keeping
of profits. Denies corporate profits are
excessive/;;
;' ^
prise if
the
debt,
war
tion,' he declares, 'should be in¬
vested by industry to improve and
1
Capital: Merrill
must enlarge our indus-11 possible that atmosphere of confidence
capacity., -At least $50 bil- ifidence is the greatest contribu¬
greatest contribu
we
trial
15
misleading
current
try
to
events
to- the
pattern of
subsequent events
1929
in
to
and
the
the
early
difference," Mr,
1930's. ,"A major
Rukeyser said, "lies in the
ance
in¬
according
assur-
.
.
of reasonable balance in the
national economy.
The floor un¬
der agricultural prices set limits
to
which maladjustments will be
permitted to go."
•
;
V;
Whether
the
recent
readjust¬
ment in speculative prices proves
to be durable or merely a
prelim¬
promoting more bonafide savings.
making only about three cents on
inary exploratory effort, it will,
every dollar of sales) we can see recent political attacks on com¬ Real savings grow out of forenevertheless, alter the climate of
our
hope of. an expanding indus- !how mistaken is the popular idea modity speculators.
Thirdly, the bearance on the. part of income
opinion,
trial future," he said.
Mr^ Rukeyser said. 1 It $
| ^hat high living costs are caused factor of high income taxation en¬ earners, who are ready and will¬ will be reflected, he went on, in/
Commenting? on-, the > attacks *>v huge corporate, profits, or that couraged many prosperous farm¬ ing to leave unconsumed part of collective bargaining on
away
.
against
rate
alleged excessive corpoprofits, Mr. Merrill remarked:
'
»twv„
frer.iiAnfSif+aevr
have hppn
alWpd
nrofftc
f I3"
nf
frv Trf
t»*pe.1!! Lf^iSLI>+0:
rppnrri
Bill
B.ut
was
hniionS
rip?
ries,
iU
the
that
national
income,
"
uT
rr
1947
were
not
comparison with
years
They
were
of
good
only
employment,
approximately
SVz% of the national
income,
before
tions
even
certain
were'
necessary deduc¬
made from them.
A
few companies did take
advantage
of
the sellers'
market to boost
prices *nd hence profits, but
they
the exceptions not
"The wholesale
were
the rule.
purchas'ng
;
power of. the dollar is
today only
about 50 cents as compared
w;t.h
the period from 1935
to 1939. Yet
two
great
factors
in
particular
now
make
seem
much
Today
a
dollar
even
dollar
profits
higher than they are.
large part of corporate
profits
represent
merely
profits from the sale of low
inventory., But
when-.goods
cost
are
sold inventories must be
replaced.
It-may cost
a company
twice as
befdre*the war to replace
the*-same volume of inventories
and continue the same
volume of
much
as
physical production
•
or
sales.
*
/ "Another major item that makes
present corporate
earnings,.seem
greater than they are is the "
in?
adequacy of depreciation charges.
A worn out or obsolete
machine
that cost $1,000 ten years
ago may
cost $2,000 to replace
today. Yet
under existing tax laws a
com¬
pany
can
charges
cost
of
deduct
depreciation
based
only on original
plant and equipment and
to hold wheat and other com¬
ers
modities off the market until after
the end of the calendar year 1947,
annually
reported
net
on
deficits
than
profits; and even coras a whole 'showed
norations
]oss
1930 to
number
balance
in
1931.
90%
of
parity, farmers assumed
that there was restricted risk in
holding
"The
modity
on.
of this year declared
'profits
the
the whole
on
levels
incentives
pansion
mote
were
and
markets
in
the
follows
com¬
earlier
also
durable
con¬
in
Congressional
inflation,
and
homes.
really the lia¬
by vast deficit
are
created
by
In
the
central
such
govern¬
circumstances,
have not yet done
so,
to put their
personah and corporate economic
houses in order.
The wise will
not try
to
guess
whether there will
less dramatic readjustment in the
though the liabilities in the hands
be
market for
of citizens are
will put themselves in position to
capital. Interest rates,
long held in the subnormal zone
the
holder
;
legally savings for
of
the
evidences
of
further
economic
storms,
This
1947
announcement
is not
I
offer to sell or a solicitation of an offer to buy these securities.
offering is made only by the Prospectus.
an
The
In view of the
pro¬
of
$10,000,000
the
mercu¬
rial nature of profits, ^ow
know
precisely .what
can
we
^corporate
.
are
necessary today to in¬
The Ohio Public Service
the investment of new caoite
amounts suff;cm^t to provide
the maximum
possible increase in
sure
national productivity and in
and welfare?
In our
First
history high
profits and high wages and full
employment Jiave gone together,
"Because of higher wages and
payrolls, higher costs of
and
Mortgage Bonds, VA% Series due 1978
January 1, 1948
;
higher- costs
Due
January 1,1978
Price 100.75% and accrued interest
replacing
inventories,
Company
wages
Dated
of
replacing
and expanding machin¬
plant, the need of corpo¬
rations for capital is
higher today
ery and
than
ever
been
ties
before.
Yet
they have
meeting increased difficul¬
in finding this capital.". Dur¬
The
Prospectus
may be obtained in any State in which this announcement ts circulated from only such
of the undersigned and other dealers as may lawfully offer these securities in such State.
ing 1947 the investment banking
industry raised some $4,750,000.000
lion
—in
The.
of
new money,
but $3%.-bil¬
represented bonds and notes
othe^ words borrowed
the
injury to confidence brought
about by fears of government
pol¬
icies which mav tend to
prevent
either the
earning or the
of profits.
"Yet
HALSEY, STUART & CO. Inc.
money.
difficulty in raising new
equity capital, new venture capi¬
tal, has been partly the result of
keeping
...
President Truman
;
.
insists
OTIS & CO.
L. F. ROTHSCHILD &. CO.
(INCORPORATED)
WILLIAM
February 20, 1948.
BLAIR & COMPANY
but
survive through any vicissitudes."
1932
above
to
health
atti¬
including
proposals of selective rationing
and price ceilings. "The net effect
with
savings, which
spending
as
and
toward
of the market admonitions," Mr..
savings should * be Rukeyser declared, "will be to en¬
illusory wartime courage all prudent operators who
"Bonafide
contrasted
ment.
as
goods, such
tude
necessary
to furnish
funds for the ex-
business
sustained
economy.'
profits
duction
sumer
wage
rates,
and
of
the
that in
the goods and services currently
produced. Such unconsumed goods
become available as tools of pro¬
bilities
correction
^ an"iand 1933- Yet the President's EcoI nomic Report published on Jan. 14
corporate^profits after
taxes on an overall basis
at all excessive in
past
can hardly .be said to be
a thing as a 'normal' profit
<normal rate' of profit; Over
reported
S?-
compensation
nLimrat7or$mnbihinn^
billion,
In
ca" actually become negative.
There
u
311 annual rate
thTI^ageS an
the total
..and
v:
*W?Sn a
whole period fro$n
??s °f dollars- 1940 more corporations by
+
«?n urat
so
price-fixing- at
the expense of Profits,
nn^ ^fef"!!"such
?v! V+kH
°r a
+
n
linn
would be-cut
by
,
1Q47
ninp
substantially
'
"Profits are the most mercurial having already- established high
e element in our national economy, taxable gains for the year. With
outra- xhey are the one major element government supporting prices at
<on
a
gpom'
theu fcst+.
HIRSCH & CO.
.
THE COMMERCIAL
(912)
18
thorities
J. McKAY
lions
Hyde Park
termination
hostilities the
of
not arise as
there
never
was
commitment
precise
any
either
on
naming areas-of full political and
jconomic freedom,
the example
-et by the Hyde Park declaration
should be exploited to the fullest
tion of the
of
maximum
a
American
North
war
of
degree
production,
could render similar service dur¬
the
ing
even
of
riod
difficult
more
transition
from
pe¬
to
war
peacetime conditions.
this
For
the
between
two
with
countries
this
object in view has proceeded
.constantly
since
the war.
Al¬
these
though
shrouded
been
have
discussions
■
by
high degree
there have
been certain leakages from time
to time that have led to supposi¬
tions that an entirely new U. S.¬
Canadian economic agreement
official
of
would
be
Prime
this
For
and
Canada
to
Minister
this
to
announced.
Truman
dent
a
secrecy,
during the visits of Presi¬
reason
Mackenzie
country it
of
King
fully exoected. that a new "Hyde Park
Agreement" would be announced
with a flourish of trumpets.
Between
two
was
how¬
ever, that have, in this unsettled
world, achieved an almost mirac¬
ulous degree of neighborly un¬
In
some
quarters
here it is felt that the considera¬
of
tion
the
der
for
industrial
basic
re¬
Simi¬
on
restricted
dollars.
•'
oi
result
a
as
Canada's current shortage of
U. S
of
S.
U.
natural
This Issue has been approved
interest
and
will
Bids
and
the
world economy.
decline
tered
sympathy with the
sterling futures regis¬
moderate, recovery
also
staged
a
now
has
market
the
of
section
this
rally
mild
a
It is now felt
golds.
by the
hat
a
as
of winter tourist demands.
Stocks
greater possibilities in
strength of the gold
other world markets and
of the
on
favorable interpretation of
more
posited,
The
has developed
for such issues be¬
rival banking groups
two
tween
since competitive
ity
bidding for util¬
into vogue
financing came
some years back.
The
company
time
of
to
plans
new
to
in
be
a
the
will
added
have
for bids.
/
due
issues
;
authorities
state
New York and
of
Ohio are ex¬
judgment in the
matter of timing their calls
good
the
and
Halsey
on
With John G. Perry & Co.
(Special
to
with John G. Perry
in
the
of
new
and
issues on a given day
to tax the capital
tends
facilities
handling
of
of
the
volving
bids
of
New
is
Co.,
Action
some
sold
100
and
a
D.
Newman
Building.
With
at
Goldman, Sachs Co.
(Special
to
The
Financial
Chronicle)
MASS. —Evelyn
BOSTON,
disposition
Now,
of
was
due
to let things
however,
violent change.
the
au¬
The great depres¬
country to change the par¬
relation
ity of its currency with
broke
By 1939, before the war
out, the world had adjusted
to
itself
an
of
pattern
new
a
a
It was sup¬
ideal pattern.
the
pre¬
vailing parity was in a precarious
If the war had not in¬
the
of
pattern
that
sure
the
in
necessary
I mention this to
1941.
we
illusion
international economic position of
a
country, although some of them
do not
that
E. E. Mathews Co. Adds
to
The
BOSTON,
Arnold
has
Edward
Financial
become
E.
I 53 State Street.
T.
connected
Mathews
of
has already been a
start
anything
stored
& Co.,
so
that
restored in Europe out¬
has been
side of Germany and
Italy^ The
provided to the rest i
that Europe
also be resumed
time, though probably not on
in
the
Some
scale.
prewar
of the
deterioration is inevita¬
wartime
permanei?t in its nature. The
bly
loss
international investments
of
by Europe will
made
element
other
One
probably never be
....
'
:v;-v.'.
good.
I
believe
emphasized. The political
upheavals of war and the political
uncertainties of the
have
riod
pastwar pe¬
direct effect
a
on
the;
international economic position of
many
which
many
by Mr. Gutt before
Harvard University,
Cambridge, Mass., Feb. 13, 1948.
of far-reaching
are
economic significance.
East
great
equally
In the Far
changes
are
taking place, not only in the ter¬
ritories
but
Japanese Empire,
the
of
in the territories of al¬
even
lied countries.
must
We
fect
a
of
-
overlook the ef¬
not
the
of
among
lack
of
heavy burden on the
a
number
of
must be
a
more
vestment
economies
countries.
and
cases
Re¬
devoted to con¬
scale of armaments
these
prevents
some
agreement
the great powers in placing
tinuing
war.
Particularly im¬
countries.
portant are the changes in Ger¬
the Littauer School of Public Ad¬
ministration,
levels,
prewar
about one-half of shipping losses
putting
*An address
and 80%
70%
between
to
their
of
had
rates
-
Merchant fleets have now been re¬
sources
prior to the
great recovery
production and even in trade.
in
really satisfactory
exchange
been achieved
Chronicle)
MASS.—Arnold
pattern
There
will in time be overcome.
Street.
a
factors act on the
these
of
All
rates
exchange
been
have
1940 and
with
adjustments in
further
approaching
with
high
Despite this, in
countries
of
number
make
eral
foreign debts.
curred large
ex¬
Of course, it was
rates.
change
>.
spent -much of their
accumulated;
international
re¬
serves
and wealth and they in¬
induced
sion and its consequences
would
M.
Goldman, Sachs & Co., 75 Fed¬
(Special
that time
throughout the world underwent
position.
provide
millions
rates
exchange
of
structure
the
change controls.
Smith
of
Comptroller,
to the unsettlement marketwise
settle.
Dent
Jukes has been added to the staff
short-term notes.
-
Frank
Ingraham
Chronicle)
which
early submission of bonus ap¬
plications,
FLA.—E.
with
now
&
Financial
The
March
State
From 1930 to 1936
from the past.
tariffs, import restrictions and ex¬
for
millions,
months back, in order to
for
to
MIAMI,
in¬
York,
historical
ported in many instances by
been called for
300
have
The
2.
State
are
vailing conditions but conditions
that have evolved
continuously
tervened
tonus issues
rates
and after the
they
war
of the world will
They reflect not only pre¬
facts.
not
un¬
derwriters in that field.
big
connected
& Co., Equit¬
Frank D. Newman Adds
of cor¬
case
R
able Building.
(Special
as
COLO. —Lloyd
has become
Magneson
bids.
quency
Postwar Exchange
Exchange
;
war
commercial and financial services^
£:: ■- .j;;/ ■■■}*.Difficulties
to gold.
Chronicle)
Financial
The
the
of
course
the
reduced.. In
greatly
were
must be
Such issues naturally
do not occur with the same fre¬
for
times neglect..
ma^ at
Prewar and
group
DENVER,
by accident or pre-
Whether
into
take
must
policy¬
account
the
where
field
scientist
every
-
'
a
exchange rates consti¬
that
the first
Hall &
banks and mu¬
with ' two big
In economics, I ber
by
and
makers
headed by Harris,
Co., Inc. and Drexel & Co.
is believed planning to enter a bid
and, in view of the "natural" size
of the issue there may be others.
third
putting to the
the conclusions of
the scientists.
practical considerations which the
the other,
competition. A
Inc.,
services they had provided to cus- •
tomers in all parts of the world ■
.
hand
Co.
&
Stuart
practical test
theory
occasion, it appears
one
greater
consideration
of
neglected
parts of their
some
)■
this
on
happens
tute
sell
debentures
bids
position to
in
such
often
lieve
business, Morgan Stanley & Co.,
on
bond
But as
them
competition which
that the two stoic rivals for such
bonus
than the scientific problem.
alive the keen
But
The first of the
of
artisans can be
helpful to scientists by urging on
to be sold next month will be that
NY-1-1045
financing:
projected
tenders
week of April.
often
RECTOR 2-7231
empha¬
of the
problem of exchange rates rather
Mountain^ States Telephone
&
Telegraph Co., promises to keep
in
veterans
the
-
,
financial
and
commercial
The
sizing these artisan aspects
and is expected to call for
period for
nicipal
dealers
of a country and to
Perhaps I exaggerate in
-
Competition Still Keen
$25,000,000
up
N. Y.
to
outstand¬
ing 4s due August 1, 1948.
;
porate undertakings, but piling
NEW YORK 5.
refunding
$37,524,500
change
'
government subsidy measures
the
with
in
in
a
result
led
earlier
after
funds
Free
tive.
weakness
ercising
TWO WALL STREET
March 9,
will be de¬
other funds, with
opened
proceeds
economy
arrangement,
INCORPORATED
Gutt
problem
of
agreeing
on
: ,
V
,.
the parity of a currency and the
delicate
problem
of timing a
,
mortgage
up
A. E. AMES & CO.
Camille
for
_
•
The great i
shipping countries lost about half >
of their fleets during the war.
fa¬
miliar, that is
the
practical
of
busy
CANADIAN STOCKS
be
run*
until 1968.
cut off
for six years or more.
up
supply
of
new
corporate
issues up for bids
next month,
March holds promise of being a
CORPORATION
will
and
or
were
channels of trade *
from the normal
and
ple
MUNICIPAL
mately
principal
latent, which
trade as \
countries ;
Europe
Western
of
you
inti¬
not
take
Although there will be an am¬
PROVINCIAL
sometof
first
propaganda
GOVERNMENT
Pa¬
by Southern Pacific Co.» which
twenty years
•
impairs the capacity to
well as to produce.
The
inac¬
and
dull
remained
market
.
CANADIAN BONDS
flation, realized or
exchange rates
with
which
mortgage
will guarantee it as to
the
consequence,
impairment of production. Closely <
related to this is the monetary in- ;
phase of the
problem of
are
open
the
one
and external sections of the bond
internal
the
week
jections raised are of minor im¬
port when compared with the
great issues now at stake. Eco¬
nomic imperfections are the root
causes
of all wars and provide
for
'
war
immediate
its
But
is
:he trustee under Central Pacific's
the
During
Although these/ views ' deserve
sympathetic consideration the ob¬
soil
it.
there
in parity to secure from
it the greatest advantages to the
with this country.
fertile
itself
created new :
inevitably weakened j
the existing pattern of exchange ;
rates.
Of fifst importance is the j
tremendous war destruction and j
The
forces which
the
on
tempt
bonds.
hand these same resources are in¬
collaboration
economic
Central
first
Railway
as
you
I shall not at¬
of
$37,396,000
sue,
cific.
well
time in discussing
letting myself in for a difficult
am
theory of ex¬
change rates.
' f
Railroad Issue Shaping
Holds not all
unrealistic.
are
securing sound exchange rates.
already
know
/Among the new corporate un¬
dertaking which will be up for
bids next month is- a railroad is¬
cooperation.
dispensable to the maintenance of
the American standard of living.
exchange markets
.
can
resources
that
do not
while the other three rule at sub¬
J
practices, and
currency
technical intricacies as exchange rates.
you are, making the study of exchange rates and related
vour
nrnfessional
sneeialtv.
There is nothing I can tell
nroblems
you
ing well-below their issue prices
exploited only with
On the other
be fully
best
stocks
brought out in recent months a
study indicates that of a round
dozen such issues nine are sell¬
Canada's renormous
that
wealth
I know I
Many of
preferred
the
so-
"free"
multiple
with you a problem so full of
quite pronounced.
Among
if adjustment in parities
halt
Attacks
criticism in
instances
some
European
having permitted Western
as
European currencies need devaluation, and asks support as
i:';
therefore that
it will not be long before it is
made clear to popular opinion on
both sides of the border, the par-:
amount importance to both coun¬
tries of a full implementation of
the concepts of this far-reaching
agreement. In essence it is now
clear
called
being offered
are
in
discounts,
that necessary
see
in orderly manner.
contends
inflation.
stantial premiums.
fears
full
at
It is to be hoped
issues
interest.
and wilt
channels
relief
be
not
some
domestic
plans. Fur¬
supplies
Canadian
vital
and
the
into
view
requirements
instances jeopard¬
the other side of the bor¬
have been expressed
concerning the threat to Canadian
sovereignty inherent in a scheme
larly
food
of
relief
European
thermore
Canadian
might in
ize
the
countries,
derstanding, formal treaties and
diplomatic gestures are not essen¬
tial. Having found a working for¬
mula
constituted
by> the
1941
Hyde Park declaration it is both
logical and constructive to ensure
its continuance.
ease
*0
other six
the
agreement will go far
the strain occasioned by
quirements will be able to flow
consultations
reason
greater joint develop¬
ment of North American resources
parities"
Fund is to
promptly and
made
fully effective, it must be accompanied by measures to
is to be
develops
it
issues,
Monetary
are
exports to increase in 1947, but admits
list of fourteen new
a
rates
Defends "initial
than
that
eight of these are now ruling at,
or
above, thfe issue
price at
which they were floated while
bond
which will result from the opera¬
zation
the
Also
moreover,
in
brought out.
Taking
degree.
much towards the smooth mobili¬
been
International
changes
most of the
preferred stocks which have
new
of
task
m
Issues
-
difficulties, holds
Mr. Gutt, in stressing international exchange rate
rates.
Recent
trading
open
Monetary Fund
Chairman of the International
Among recently marketed new
issues a survey shows that new
bonds have fared much better in
and Ottawa,
it was realized that the
arrangement that contributed so
In Washington
side.
By CAMILLE GUTT*
neces¬
the bidders
cases
interest
of
Action
strictly defined by formal^
——
treaty, and it was generally un- seeds of agressor nations. In view
derstood
that
the
agreement jf the unique relationship be¬
tween
this country and Canada
would remain in force only for
the war emergency period.
Since vhich now represent the only re¬
question of formal abrogation did
both
if
later
sold
the
set
additional 75 mil¬
an
be
In
will
never
the
case
can
sary.
Agreement—has not been lost, but it now
operates more obscurely in deeper waters. The ramifications and
implications of this invaluable means of economic collaboration were
anchor—the
similar issue of 200 millions.
a
In this
wartime economic sheet-
Contrary to general belief Canada's great
,
Unsatisfactory Pattern
of Exchange Rates
Two weeks later, on March 16,
the State of Ohio will open bids
for
By WILLIAM
The
position to take
a
of the financing.
care
Canadian Securities
consider
apparently
the market in
1948
Thursday, February 26,
CHRONICLE
FINANCIAL
&
that
from
into in¬
countries
resources
consumption.
In
large overseas expen-
(Continued on page 22)
'
167r* Number'4676
Volume
THE
.
1
COMMERCIAL &
*
FINANCIAL
CHRONICLE
ligations of the government which
it- must.meet.
/ .••••' ■/
•'
.
;
Secy. Snyder holds
1
reductions would be false
any
inconsistent with nation's domestic and international
,
•
V*'
.
"/
*
v '*
,
'*
"■
*'
'
'
.
*
'
'
and
;
responsibilities
!
economy
'■
'
•>,
•
'
•'
Secretary of- Treasury John W. Snyder in a Jefferson-Jackson
Day address at Newark, N. J., on Feb. 19, in addition to extolling
iM accomplishments of the Democratic Administration
during the
last 15 years, struck out against Congressional efforts to
ft
pare down
_
_
.
.........
/;/"v .*••//;: /; P resid
'
'
1
"
■'
•
TVV.
T
r
w.
n'r.
ri
m
u
n's
a
budget for the
fiscal
1949.
year
:/•./.
"
According
to
Sec.
Sny¬
der:
fiscal
"Our
been
have
closely
related
the
nomic
o
field.
is
practice
Snyder
sufficient
level
anced
budget
v
z
"As
-
secure
and
debt reduction.
rmtinni
nationa
rlnvmcf
i"Vio
include
during the
obligation for which
a
Democratic
Congress has al¬
ready
provided
by
legislation.
,and certainly none of us want to
proposed that any of this 'legis¬
be repealed.
"The other two items which
ter
into
are
$5
the
'war
billion for
cost'
tion,
for
for'
aid
development
to
of
"These programs
ities
the
which the
natural
refunds.
tantly,
however,
financial
rivprs
and
conserve
ob-
More
-
cratic
reduction in these pro¬
grams would be false economy.
"The remainder of the budget,
which is left for the
oper¬
government,
ig not relatively large, amounting
as it does to only
5%, or $2.1 bil¬
the
lion. This amount
covers
our
finance
.It
and
includes
Davison,
has
Office.
Treasury activities in
fact,
not
to
jeopardize
been
Loughlin
formed
&
with
Co.,
must
the-counter
securities.
Principals
are
public debt, and keeping the gov¬
Loughlin.
ernment's
merly with Mallory, Adee & Co.
tures
of
books, and the expendi¬
various
other
agencies.
Henry Davison and C. Wallace
and
Mr. Loughlin was for¬
Filor, Bullard & Smyth.
a
for
listed
are
the New York Stock
on
always
;;
be'k
v
Exchange
larly so, with a goyernmenf debt,
largely war-created, of $255 bil¬
iirsfvcbn^
lion.
it;
Under such
only
not
circumstances,
the
financial in¬
tegrity of the government which
•is.pt stake, but the soundness oi
the whole economy. This govern¬
is
v
:,
ment's fiscal policies are irrevoc¬
ably
wrapped,
in
up
financial structure of
'("It
has
been
the
our
entire
country.
estimated
that in
m
tjMg;
/ the current fiscal year which ends
on
next
June 30,
Federal
tures
the
receipts'
will
surplus oi
expends
$7.5 billion.
over
amount
to
However, the Senate Foreign Af¬
fairs Committee has recommended
that $3
billion
of
this amount
)■'
v<*.
,
should be earmarked for
applica¬
on ( the
European
tion
Program.
be
If
of
amount
applied
reduced
been
to
Recovery
done,* the
remaining to
this
is
surplus
the
on
S4.5
debt would
billion.
be
We have
using this surplus,
it
as
ac¬
cumulates, for debt retirement in
the manner in which it would be
most effective, and we shall con¬
■
tinue to do
/
"The
mates
so.
xK
.v
President's
for
the
budget
esti¬
-
fiscal; fyear
show receipts of
194S
$44.5.billion,
ana
a,sair^lus :pf: $44/ bijliph/in 1 tiiat
,
fiscal
year
to
apply
toward
ther reductions in the debt:
fur¬
;f
;.
:
) "On the expenditures, side, the
/President has pared the budget
to "the minimum which -he con¬
siders
try's
consistent
domestic
responsibilities.
!
estimated
1949
either
are
coun¬
,
ip ,the
Seventy-nine
fiscal
the
•international
are
billion
1949.
the
v
.
.("Expenditures,
$39.7
with
and
estimated
fiscal
at
year
percent
oi
/expenditures Z for
war
related—they
reflect the
direct
costs
ol
war, the aftermath of war, or our
efforts to prevent a future
war.
In this
category, we have expen¬
nations} defense whicl
to $11
billion, or 28% ol
ditures for
amount
the'total budget. It would be
pos¬
sible, of course, to, cut this amount
but I do not believe that
the Conegress will want to-take this
at the expense
cuntyt
.TS •'-5« .V
r
■
v
!
1
0}
1 ••'"•.«
,4 '.
.
programs
p%Of;th
/thq/a^ount vyhicl^ yiias'
lermined
as
the/fiscal
Any,
/
thp pecessary ..require-;
year
listing of their securities
They do
so,
June 30, 1949.
mude in timing
"Veterans' 'benefits
on
the
Exchange.
primarily, because of the benefits
amount, to
their
They
represent /
; we
/owe
obligation
tp. • those
or
fall of prices represents
generally.
As
Listing on the Exchange provides a, national
Z■
/, ■/ -'// '
i .;r
market place for the
security/Bids to buy and
offers to sell from all
Uieet in
pn
one
over
the
country
to
purchase the security meets the
soon
means
as
and volume
by
can
place. Through his representative
the Exchange floor, the* investor who
wishes
Listing
means
Listii%g
a
prompt publication of prices.
transaction is completed, price
are
broadcast
Stock
...
across
of the ticker tape.
rneqn&
- :
the nation
"
regtlar disclosure of
tial facts about the
company
company.
lists its securities
Exchange^ it
agrees
to
on
essenr
Before
any
the New York
publish regularly
in^/; essential information about its operations
vestor who wishes to sell meets the
greatest
who/made great personal.>sacri¬
possible number of
purchasers.;
•
l
and financial condition—information which is
^fundamental to
are
not the only
security, by
any
advantages of a listed
They
mee,ns.
are,
however,
sufficient to indicate why, for 155
years, the
New
York
Stock
Exchange has performed
majority trading at that time.
persons
1
openly, by competitive bid¬
ding— and the rise
the will of the
stockholders, and to investors
greatest possible number of sellers—-the
which
determined
Exchange, prices
These
a
on
adjustments;
by Jhpi Congress would not maSerially - change the end ^result for
the. fiscal: year/
'' -:i
\
are
or
is
been :d©7
buyer and seller alike of the
ulations of the New York Stock Exchange, for
-
category, and total $7 billion,
assures
best available price. On the
to
■
for international
also come in this
Listing
have qualified, under Federal laws and the
reg¬
our national sp-
"Expenditures
aid
.
step
Hundreds of America's foremost
corporations
a
at
collecting taxes, administering the
///.;>!'/J/'.
government
Inp.
Broadway, New York City, to
Secretary of the Treasury,
our
our
»ct as dealers and brokers in over-
and
provide
our
offices
bal¬
a
any
budget will be diffi¬
are
Formed in N. Y, City
the Con¬
the Executive
of
under¬
Davison, Loughlin & Co.
that
of
this
we
this
of
efforts to attain world peace."
"Any
cosis
if
matter
17
ouy national defense, ignore
national welfare, or threaten
platform.
ational
in
120
impor-r
they
cuts
cult
well-being
of
the
American people and which have
long been a part of, the Demo¬
gress,
include activ¬
resources.
are
highways,
government must
perform in order to
Our securities
of
)
state
public debt and $2 billion for tax
These
public
harbors, and for atomic energy.
en¬
on
for
assistance, for flood control, for
soil
conservation,
for
reclama¬
category
interest
expenditures
and
a
to
at
revenues
to
+Via
the
programs which contribute to the
health
As
econ¬
ernment,
the/
It is an
resources, and/transportation and
communication.
These programs
To cut- large sums out
gr'oup would be a difficult
taking.
in -: gov-
omy
\
to "maintain
-Pz-ir"
for
-, v
dal welfare, agriculture, natural
functions which the government
is obligated to perform in. con¬
serving our human resources—Tor
Our
purpose
John W.
ficoo
fices
war.
,•
the government's programs
,ipt many broad areas, such as sonance
to
those ; in
c
■■
lation
policies
e
/"
t
en
uIn.analyzing the government's
peacetime
operations,
we
find
that 16%, or $6.2 billion, of the
budget covers expenditures to fi¬
(913)
sound investment decision.
necessary
America.
service for the investors of
,
38
THE COMMERCIAL
(914)
Britain Losing Her
lalsey Stuart Group
Halsey, Stuart & Co., Inc. head¬
ed and underwriting group that
proceeds from the sale of
applied toward
he bonds will be
1948 construction
which is expected to call
company's
le
>rogram
the
•ir
The
expenditure of $14,481,000.
new bonds will be redeem¬
applies generally—it is true in the securities business too. Remember,
in 1945 and 1946 we had & seller's market too—but those days are
siderable
im-
tion, purchase, transmission, dis¬
tribution and sale of electric en¬
Incidental
electric
its
to
appli¬
cooperates in their sale
business the company sells
and
ances
sterling balances.
particularly those holding blocked
countries,
For those who
con¬
company
ergy.
liberality of British Government in furnishing gold to overseas
people say it is?
some
factor of
is an operating
public utility engaged wholly in
the State of Ohio in the produc¬
The
as
LONDON, ENGLAND—The British gold reserve continues to
decline at an alarming rate, in spite of export drive, cuts in imports,
and the use of the remainder of the dollar credit. This is largely due
101.15% to 100%.
rom
quiet
presently complaining that they have never seen conditions more
quiet in the investment business than they are today, this is un¬
doubtedly true. The other day some one got up and made a speech
that salesmen in his line had forgotten how to sell. It was the soft
drink industry I believe.
He told how his salesmen had gone out
on their jobs da.y after day for the past eight years, and all they had
to do was walk around and tell their customers how much mer¬
chandise they were going to allow them.
Now that things have
slowed down and competition has increased, these same salesmen
are so soft they no longer know how to sell.
This same condition
1958 at prices scaled
in
as
are
prices
ranging
from
,04.50% to 100% and through opration of the sinking fund be¬
ginning
business
taking note of Britain's vanishing gold reserve, as-
cribes it not only to the adverse trade balance, but to uncalled for
By JOHN DUTTON
at
able
Dr. Einzig, in
Feb. 20, $10,-
00,000 The Ohio Public Service
Co. First Mortgage Bonds, 3^%
series due Jan. 1, 1978 at 100.75%
..nd accrued interest. The group
von award of the bonds at com■etitive sale on a bid of 100.2599.
Net
1
..
Is
Gold
By PAUL EINZIG
Securities Salesman's Corner
Jffers Ohio P. S. Bonds
ffered to the public
Thursday, February 26, 1948
CHRONICLE
FINANCIAL
&
persistently adverse trade balance, but Britain's generosity in
<S>sharing out
the
bargaining position will be there¬
gold re¬
after incomparably weaker.
serve
among
Even though this
is only too
other
coun¬
to the
tries is also
the
obvious,
a
Government
British
not appear to see it.
does
Tem¬
agreements
funding
porary
are
portance.
concluded, providing for the re¬
over.
Every
lease
do business today—good business—profitable busi
ness.
People are not adverse to discussing investments. If you go to
see them you will find that this is true.
Most salesmen who are not
and
But you can
now
a
ment
lost
is made
involving
down." There is a great deal of truth in this
statement, but that does not mean that good securities are going
down forever.
Most salesmen who think this way are more con¬
cerned about the market action of the securities they have sold to
their customers, than many of the customers are themselves.
of
sell
a
customer it goes
d
of
11
a r
is
ever,
Dr. Paul
over¬
some
Einzif
Govern¬
seas
to believe, how¬
reason
every
that his task in inducing the
creditor Governments to agree to
a sacrifice will be even more dif¬
ficult then than it is now.
But he
s'
of gold
worth
to
postpone the latter ques¬
negotiation of a per¬
manent funding agreement. There
wants to
millions
o
It
Cripps
tion until the
the
cession
many
claims.
Stafford
Sir
that
seems
arrange¬
doing business are the ones who are not trying, or who have
faith in the thing they are selling.
How often have you heard
a remark such as this, "Everything I do is wrong, no matter what I
providing
but not
gold,
for the reduction of the
in
g a
some
of
ment at a time when British es¬ wants to postpone the "day of reck¬
present themselves. sential imports are drastically cur¬ oning," instead of facing here
and now the difficulties involved.
This is an
help your customer tailed for lack of gold. The re¬
This territory is located in north
So far British tentative sugges¬
cipients are mostly members of
central Ohio covering an area of to average a good stock at lower levels—someday you will be able
tions to scale down the sterling
to go back to him and take him out at a profit instead of a loss.
Of the Sterling Area, and the ex¬ balances has met with uncompro¬
approximately 3,100 square miles
course, judgment should be used.
Switch out if conditions warrant. planation of Britain's generosity
and has a population of approxi¬
mising refusals.
The negotiators
Go back, tell your customer that things have changed. Take him out with her gold is that during the
mately 502,000.
/
countries contributed of creditor countries replied that
at a loss and give him something that has more merit. Times change war these
to agree to reductions would be
—some
overpriced securities of two years ago should be disposed towards the British dollar pool.
equivalent to suicide, not only in
of today regardless of losses. But put that money BACK TO WORK Even though there have been no
N. Y. Curb
the political sense: any Minister
agreements with most countries
where there is a chance of recovery. Go after new business. Adver¬
the
restoration of their giving away any sterling claims
tise in your daily paper, use direct mail. See new people. Everybody about
Com.
the British Gov¬ would probably be assassinated
who owns securities is confused. Go in with an offer to help unravel contributions,
The New York Curb Exchange the knots. But you cannot do this if you don't believe in yourself ernment feels morally bound to on his return home. Owing to the
announces
the
appointment of and the future. How many times have you seen markets go down satisfy, within the limits of its lukewarm interest taken in the
Edward A. O'Brien as vice-chair¬ for a year or two? Bear markets are part of living just the same as reduced means, the gold require¬ matter in the British Parliament
and the press, and the almost com¬
man of the
committee on admis¬ bull markets. When can investors buy into the finest corporations at ments of Sterling Area countries.
plete absence of interest on the
sions
of
the
exchange.
Mr. the lowest prices? When can you build the most good will for your¬
The fact that the war-time con¬
O'Brien, who has been a regular self—when prices are high or when they are lower? What if a good tributions of Sterling Area coun¬ part of the British public, British
member of the Curb since 1920
security declines in price after you have sold it to a customer? The tries towards the dollar pool sim¬ negotiators are not in a position
to argue on similar lines against
and a Class A governor for the
thing to do in markets like these is to tell your customer in advance ply represented contributions to
past two years, is also a member of a possible decline, that if the market declines you are going to the common war effort appears to giving away too much. Since they
encounter strong pressure on the
Df the committee on floor transac¬
suggest that he buy MORE.
be overlooked.
Even in the ab¬
tions.
part of the creditor Governments,
No one can pick the bottom of a market, but one thing is sure.
sence of any legal obligation, the
and are subject to practically no
Caspar C. deGersdorff of Harris,
THERE ARE PLENTY OF BARGAINS AROUND TODAY IF YOU British Government is paying out
pressure on
the part of British
Upham & Co., a Class B governor LOOK AT NET QUICK, BOOK VALUE, MANAGEMENT, INDUS¬
its gold in spite of the unwilling¬
of the exchange since 1945, has
opinion, they are inclined to take
TRY, and OUTLOOK, COMPARED WITH MARKET PRICE.
The ness of the recipient Governments the line of least resistance. In¬
been named vice-chairman of the
statistical and research departments can do more to build up sales to consider themselves morally
stead of straining every nerve to
committee on securities. Mr. de¬
today than is generally realized. Five common stocks priced from bound to scale down their war¬
secure favorable agreements, they
Gersdorff is also chairman of the
under 10, under 20, and above, showing fantastic yields in good time sterling claims against Brit¬
committee on arbitration.
employ their skill in defending
industries, with plenty of equity behind them are all that you need. ain. Apparently, moral consider¬
their bad agreements against such
But dig up some good things.
There are plenty of them around. ations only operate in one direc¬ criticisms as
they encounter.
An
There is money around, but it won't venture WITHOUT URGING. tion, without any reciprocity by
Durwood DuBois
That means going back to selling.
Stimulate interest by mail, by those who benefit by their oper¬ Opposition Member of Parliament
was
heard
observing, after an
Nor does the British Gov¬
newspaper advertisements—then telephone, write and GO OUT AND ation.
evasive
reply with
which the
Ohio Citizens Trust
SEE THE PEOPLE. Make the calls and you can do business!
ernment appear to be making any
Chancellor
of
the
Exchequer
Here is a sample of how easy it is if you try. A salesman we noteworthy effort to press Brit¬
TOLEDO, OHIO. — Durwood
foiled an attempt to elicit some
DuBois has been elected a vice- know had been going into an office for several years. He became ain's moral claim for a scaling
appliance dealers and re¬
tailers in the territory it serves.
with
Time
opportunities for averaging
excellent source of business. It will
and again
Exchange
Appointments
V.-P.
oresident
Ohio
of
Trust
Citizens
Ohio
the
Co.
will
and
assume
He will
be in the commercial banking de¬
his
new
duties April 1st.
partment.
Mr. DuBois will
as
vice-president
Harris &
He
is
Stranahan,
of
Co., Inc.
former
a
resign his post
as
of April 1st.
president of the
Toledo Bond Club and served for
two years as
northern
vice-chairman of the
Ohio
of the In¬
group
Association.
vestment Bankers
H. Stern Co. to Admit
86 Years
a
Schafer; NYSE Mem.
in Business
New
stock earnings
Common
over
Herbert E. Stern & Co., 30
per
Pine
Street, members of the New York
Curb Exchange, New York City,
England Company
averaged $4.58
time he called they passed the
securities came up. The recep¬
tionist had quite a few investments. She would ask this salesman a
few questions about some of her holdings. The salesman never tried
to do business with her, possibly because he was doing business with
her employer.
One day he picked up the telephone and told her
that there was a security which he thought she might consider if
she had some extra cash, also that it might be a good means of re¬
covering a loss on one of the items which he knew she held.
He
suggested he was going to send a report on it to her home (instead of
the office). This was a lucky thought as it had a psychological effect
that helped. Several days later the salesman received a telephone
call and a nice order. IN' ORDER TO DO BUSINESS YOU MUST
EXPOSE YOURSELF TO BUSINESS.
friendly with the receptionist. Every
time of day. One day the subject of
on
March 5, will
admit Myron L.
Schafer, member of the New
share
York
feld, Jr.
\
■
PRIMARY TRADING MARKETS
"
•
for
1947
$13.08;
period
earnings $6.32
per
FOR
share.
V
V-V
IN
request
MACKINNIE OIL & DRILLING
COMPANY
St., Boston 9, Mass.
N.
Y.
:
Telephones:
and
Teletype B8 259
:
HAnover 2-7914
WHitehall
3-9030
B. E.
Simpson
Company I
California Building, Denver
Telephone KEystone 3101
^
Cripps
refer to the subject
counterclaims, Sir Stafford
does not even
unless
to
has
he
some
answer
Parliamentary question. Last
time
subject was raised he stated
;hat the time for pressing claims
the
debts
las not arrived yet; he refused to
indicate when, in his opinion, it is
::or
scaling down of war
a
likely to arrive.
■
Yet
time
is
information
ment's
the
about
policy
towards
Govern¬
ster¬
the
ling debt, that if Ministers were
only half as smart in dealing with
foreign Governments as they are
in
side-stepping Parliamentary
questions
they
might
conclude
And
tolerably good agreements.
a
Lobby compared the Government
with
the
who is
his
a
own
proverbial
bad
lawyer
with
knave when dealing
client
and
a
fool
when
dealing with the opponent!
Nor is there any
likelihood of
a
stiffening of the Government's at¬
far from
granting a concession to Britain
would have been mitigated by the
satisfaction over receiving gold or
dollars, even if the amount re¬
ceived had been but a fraction of
the amount of sterling cancelled.
Article 10 of the American Loan
prin¬
down the
of reciprocity in respect of
the cession of dollars and the can¬
ciple
cellation
sterling
creditors
balances.
But
able, and are
still able, to receive gold and dol¬
lars without having to concede
Established IQ29
148 State
war-time balances.
Dalton paid at least
the
Mr.
lip service to the Government's
determination of pressing Britain's
the
Tel. CAP. 0425
of
Agreement lays
COMPANY
KINNEY-COASTAL OIL
special situation mailed
on
J
BROKERS, DEALERS and BANKS
Descriptive analysis of this
While
working titude. The Parliamentary Labor
in favor of a reasonable solution
Party is utterly subservient on
Stock Exchange, to partnership,
of this problem. For in the mean¬
any
issue where working-class
and will thereby acquire member¬
while the Government is giving interests
are
not
directly
in¬
ship on the Exchange. Mr. Schafer away
its bargaining counters volved,
and
the
Conservative
is
retiring from partnership in without receiving anything for
Opposition is hopelessly ineffi¬
W. A. Fine & Co. on Feb. 29. Other
them. Holders of sterling balances cient. When the
Payments Agree¬
partners in Herbert E. Stern &
might have been willing to agree ment with Russia was raised by
Co. are!Herbert E. Stern, Walter
to a scaling down of their claims
the Opposition at a late night sit¬
in return for badly-needed gold
A. Maron, and William I. Rosenting, nearly half of the Labor
or
dollars.
The unpopularity of
Party stayed up to support the
previous 10 years.
Highest annual earnings
down
2, Colorado
:
Bell Teletype DN 157
anything.
reserve
were
And once Britain's gold
has
declined
£300,000,000,; there
more
to,
will
left to give away.
be
say,
no
Britain's
terms,
which
were
far too tech¬
nical for them to understand their
meaning, but only one Conserva¬
tive out of six kept awake to'vote
Government.
While
many countries are
position to argue that if they
against the
negotiators of
in
a
gave way
their Parliaments would
it, if a British nego¬
gain
not stand for
tiator took that line he would
the reputation of having made
the
joke of the year. With its present
majority that knows nothing and
cares
less,
about
international
monetary issues, the Government
can get away with anything.
That
is why the gold reserve
away so
generously.
is given
167
Volume
THE COMMERCIAL
Number 4676
Branch,
CHRONICLE
FINANCIAL
&
elected
was
(915)
Assistant
We Wonder
Cashier of that branch.
"The transfer of Mr.
Smyth to
the Head Office will be made
March
about
or
of Mr.
8.
Rowland
on
"President Truman's request
for an additional
$570,000,000 to go to the corrupt Chiang Kai-shek
Government in China is one more phase, of our
financial and military interven¬
election
The
as
Vice-Presi¬
a
dent of the bank will become ef¬
fective March 1. All other changes
will become effective Feb. 16."
*
*
19
This intervention has
tion there.
*
"A
Four
Harold
John C. Borden was on Feb. 19
elected
member of the Board of
a
Directors of
Bank
the
of
the Manhattan
of
Company
York
New
to
his
succeed
uncle, Ber¬
tram
Borden,
who
1911
in
had succeeded
his father,
M, C. D. Bor¬
den
originally
elected
Di¬
a
rector in 1877.
John
Borden
C.
C.
Bor¬
Presi¬
is
den
John
dent of Borden
S. Miner,
Vice-Presi¬
a
dent of Manufacturers Trust Com¬
already cost the American people
important promotions in
official ranks of Bank of America
four
Nat'l
friendship of several hundred mil¬
lion Chinese people, victims of a
civil war we prolong by our sup¬
port of the dictator Chiang.
Trust
&
Ass'n
Savings
of
of New York has been San Francisco has been announced
placed in charge of the bank's of¬ by L. M. Giannini, President.
pany,
Fifth
at
fice
43rd
and
Avenue
P.
R.
A.
Everard
is
advanced to
Street, following the recent death the position of Assistant to the
of
Elliott Debevoise,
a
former President. He began his career
Vice-President of the Trust Com¬
with
the
bank
as
"The
bookkeeper,
a
it is announced by Harvey and has been Vice-President and
Gibson, President. Mr. Miner Cashier of the institution since
began with the bank as an As¬ 1941. Mr. Everard is being suc¬
as
Vice-President
and
sistant
Secretary
at
the Fifth ceeded
Avenue Office in 1924 and since Cashier by P. C. Read, who has
then has continued at that branch. been Chief Inspector and Auditor
He was appointed a Vice-Presi¬ since 1934. H. A. Leif, heretofore
Chief
dent in 1931. Mr. Miner is a na¬ Assistant
Inspector
in
tive
of
Taunton, Mass,
and a charge of the bank's inspection
and auditing force in Southern
graduate of the Washington, D. C.
College of Law.
During World California, is advanced to succeed
War I he was confidential clerk Mr. Read as Chief Inspector and
D.
■
Boards of Directors of the
The
Federal Reserve Banks of Atlanta,
Dallas, and St. Louis have elected
R.
R.
as
of the
Dallas,
President
Gilbert,
Federal
Bank
Reserve
of
representative of the Federal
a
banks
Reserve
Federal
the
on
Market Committee for the
beginning March 1, 1948 and
have elected W. S. McLarin, Jr.,
Open
year
Pa.
has
effective
Feb.
6.
capital was brought about
through a stock dividend of $100,000, while the further $150,000
addition to the capital of the bank
was
realized through the sale of
creased
Bank
of
Atlanta,
Gilbert
Mr.
Committee in
Gilbert
serve
the
on
absence of Mr.
the
from
alternate
an
as
to
meeting.
Chester
of the Federal
of
St.
Louis, is
a
C. Davis, President
Bank
Reserve
serving
as a
mittee
member of the Com¬
year ending Feb.
the
for
29, 1948.
The Federal Open
Market Com¬
mittee consists of the
of
bers
the
the
of
Federal
five
and
Federal
seven mem¬
of
Board
Reserve
System
of the
banks.
Reserve
One
of
the representatives of the
Federal
Reserve banks is elected by the
Bank
other
of New York.
Federal
11
The
banks
Reserve
divided into four groups,
are
containing
two
each
and
elects
group
sentative
to
each
banks,
three
or
serve
repre¬
a
the
on
Com¬
;-V
annually and take office
1
on
March
of each year.
#
*
of
Directors
Bankers
Trust
Company
of
of New
Craig de Voux
Simpson an Assistant Treasurer, it
was announced on Feb. 23 by S.
Sloan Colt, President. Mr. Simp¬
son
stock'.
John
since 1945 in charge of the munic¬
ipal trading operation. Prior to
that he had been in the Municipal
Bond
Department
Blyth
of
&
Company, Inc. for 12 years.
*
former Presi¬
dent of the New York City Coun¬
cil, was on Feb. 19 elected
a
di¬
rector of Fulton Trust Company of
New York to fill
a
vacancy on
board. Mr. Morris is
the
law
firm
of
the
member of
a
Post,
Morris &
Lovejoy.
!>
of St, Louis, Mo. on Feb. 12.
pany
:.y,
:!:
sji
'
Under date of Jan. 23 a charter
was
issued by
the
Currency
Peebles, and Cashier, Z. H. McKinley. The above
information
was
contained
in
the
Comp¬
troller's bulletin of Feb. 2.
J.
R.
was
celebrated
luncheon
and
Ballroom
Hotel.
on
of the
A
in
14,
the
Waldorf-
birthday
cake
company,
of $95,065,$47
insurance
property
reach
$100,000,000
premiums.
substantial
company's
explained,
the
in
business,
Mr.
Smith
largely the result
in
insurance
cover¬
values,
new
higher property
construction, the high
activity, exten¬
business
of
of
insurance
and
coverage
feel
so
sure
of them, have
any
that he
or
—
"will" in the
if
sense
the term.
uses
wonder whether Mr. Wal¬
we
With Raggio, Reed Co.
With Dean Witter & Co.
to
The
Financial
LOS ANGELES,
Seilset is
J.
&
ter
(Special
SAN
CALIF.—Lloyd
with Dean Wit¬
now
Co.,
Chronicle)
632
Spring
South
James
The
Financial
Chronicle)
CALIF.—
has been
added to the staff of
Raggio, Reed
Co., Russ Building, members of
&
Street.
to
FRANCISCO,
B.
Thompson
the
San
Francisco
Stock
Ex¬
Joins Hannaford! & Talbot change.
(Suecial
SAN
to
The
Financial
FRANCISCO,
W.
Selzer
has
Chronicle)
CALIF
—
With Herrick, Waddell Co.
become af¬
filiated with Hannaford &
519 California Street. He
(Special
for¬
to
The
KANSAS
Talbot,
was
Waddell
merly with Cruttenden & Co. in
H.
Chronicle)
&
more
Los
Financial
Angeles.
\ >
CITY, MO.—Herrick,
Co., Inc., 1012 Balti¬
Avenue, has added
Listrom to their staff.
Lowell
Harris, Upham & Co. Adds J. G. Kinnard & Co. Ad&s
(Special
to
The
Financial
(Special
Chronicle)
to
The
Financial
Chronicle)
SAN
rose
G. W.
Comptroller of the State of New York
to $193,896,658 as of Dec. 31,
last,
from
earlier.
$177,414,558
1947
For
a
there
will sell at his office in the
year
was
Governor Alfred E. Smith State Office
an
at
'
ments
ber banks states that at a
Building
Albany, New York
March 2,1948, at 11 o'clock
Gross income from invest¬
A. M.
(Eastern Standard Time)
from
meeting
of the Board of Directors on Feb.
as
of
the
"C.
dates
indicated
below:
M.
Rowland, an Assistant
Cashier of the bank, was elected
a
Vice-President and was desig¬
nated to have charge of the El
Paso
Branch
President Mac
to
succeed
Vice-
C. Smyth, now in
be
transferred
the
to
Head
Office. W. D.
Waller, now Cashier
Houston
Branch,
was
the
an
Assistant
Cashier
of
the bank and
assigned to the Head
Davis, now Cashier
of the San Antonio Branch, was
Office.
elected
H.
K.
Cashier
of
the
rose
in
1947
to
$5,921,368
$5,406,521 in 1946, but due
principally to the impact of in¬
come
in
taxes net investment income
1947
decreased to $4,514,824
$4,925,340 in 1946.
Aggre¬
gate profit last year from the sale
War Bonus
from
of
securities
called
and
from
-
^
State of New York
redemption was $551,036. compared with $5,851,632 in
1946.
A
/
Dated March 1, 1948
proposed
Home
of
the
merger
ten
fire
into
The
insurance
companies long affiliated with it
was
announced in January.
It is
understood that specific terms of
the merger agreements to be pro¬
posed"""
soon
will
be
(Serial) Bonds
of the
securities
for
mailed
to
stockholders.
Houston
containing 40 candles was cut by Branch. Alfred E. Mundt,, now With John M. Wilmans Co.
(Special to The Financial Chronicle)
E. Chester Gersten, President of Assistant Cashier of the San An¬
SAN
the Bank, who thanked the more tonio, Branch, was elected Cashier
FRANCISCO,
CALIF.—.
than one thousand members of the of that branch. F. C. Magee, now John M. Wilmans Co., Ltd., Russ
staff for their contribution to the Manager of the Loan and Service Building, has added William A.
bank's noteworthy progress.
Department of the San Antonio McKee to their staff.
can
FRANCISCO,
CALIF.—
MINNEAPOLIS, MINN. — Carl
class-,
Douglas Carver is now with Burleson has been added to the
ifications.
Harris, Upham & Co., 232 Mont¬ staff of John G. Kinnard & Co.,
In addition to the record pre¬
Baker Arcade.
gomery Street.
miums
shown, the report dis¬
closed improvement in other im¬
portant aspects of The Home's
operations.
Total admitted assets
The
increases in rates in various
1946.
Reserve
program,
Wall Street and China!
James
gain
aid
—
reflect
to
rate
mark
was
increases
age
to
in
company
the
The
of
first American
Federal
the
*
or many
ceding year's total of $79,726,135.
the
this
can possibly be so misinformed and so incred¬
ibly naive as really to believe his own words about
(Special
of $20,999,805 over the pre¬
is
share Mr. Wal¬
we
of
much
lace
writ¬
premiums for 1947 sim¬
ilarly 'rose to a new high record,
amounting to $100,725,940, an in¬
The Home
of Wall Street interests
frankly that
about
But most of all
Earned
crease
stand to
economy."—Henry A. Wallace.
in which Mr. Wallace
ac¬
to
record
may
penetrate and control large areas of the
doubts
they,
fire-
ten by The Home in 1946.
Bank of Dallas in advices to mem¬
will
Feb.
dance
insurance
a
which
knows what the "will" of the Chinese is
the
were
by
Chairman of the
Parten,
of
Board
1947
underwriting gain, after taxes, of
$176,477 contrasted with an un¬
derwriting loss of $4,236 150 in
❖
:J:
elected
Grand
The
lists the capital as $200,-
000, and the primary organization
is reported as President, E.
B.
Bank and Trust Company of New
Astoria
the Comptroller of
for the Loop Na¬
of Mobile, Ala.
Bank
of
a
vious
group
grant Truman proposes for
wonder how Mr. Wallace
675, net premiums written in 1947
increased $19,709,328 over the pre¬
sions
founding of The Public National
.York
Corre¬
the
of
spondent Banks Department at a
Board Meeting of the MercantileCommerce Bank & Trust Com¬
charge of the El Paso Branch, who
The fortieth anniversary of the
at
Cashier
Assistant
in
is
the
however greatly we
may differ with that gentleman as to the reasons
for skepticism. At the same time we can not help
Reports
attained
of
*
whether to Europe or Asia
the annual report of
the company for the year ended
Dec. 31, 1947, issued for publica¬
tion Feb. 25 by Harold V. Smith,
President.
Aggregating $114,774,-
appointed
was
13, the following changes were
made in the official staff, effective
v.
Newbold Morris,
•
Meikle
H.
Co.
ever
earned
#
*
Department
Bond
Neb. has increased
capital from $300,000 to $400,000 by the sale of $100,000 of new
has been with Bankers Trust
Company's
in
Bank
■
elected
York .has
;
its
charter
Board
*
National
Forks,
Grand
tional
*
The
*
*
First
The
elected
are
of Evanston, 111. has served
the in¬
stitution from $300,000 to $500,000. According to the bulletin of
the Office of the Comptroller of
the Currency the capital was en¬
larged as of Feb. 9.
mittee. The representatives of the
Federal Reserve banks
to
increase the capital of
to
Board of Directors of the Federal
Reserve
stock
new
$200,000 by the
First National Bank & Trust Com¬
of
amount
pany
largest
*
one
new
We must say
Premiums written by The Home
Insurance
in \China
situation
That is the group
Chinese
Record Business
cording
:i:
of
issuance
The
the
Governors
representatives
*
*
China.
who seek to
lace's
Home Insar.
marine
stock.
new
benefit from this
in
headquarters
part the in¬
In
*
"There is indeed
of
Bank
increased its
capital from $150,000 to $400,000
Altoona,
President of the Federal Reserve
to
Leif, with
Los Angeles.
National
First
The
Mr.
*
■
.
the late Franklin D.
$
the
and
inevitable
failure of our present foreign pol¬
icy, of which the Marshall Plan
is a part.
Sending money and
Henry A. Wallace
military supplies to bolster reac¬
tionary governments against the
will of their people serves the cause of reaction and
war, not democracy and peace.
pany,
to
dollars
in
proof
tragic
All
make
their
will
Roosevelt Auditor.
is also a member of the Board of when he was Assistant Secretary headquarters at the San Francisco
Office
of
the
institution.
Directors of Boorum & Pease Co., of the Navy. Mr. Miner is Treas¬ Head
H.
Baumhefner,
heretofore
a
President
of
the
Board
of urer of the Cooperative for Amer¬ C.
Trustees of the Manhattan School ican
Remittances
to
Europe, Assistant Chief Inspector in San
of Musict etc.
Francisco,
advances
to succeed
otherwise known .as CARE.
1
i
Mills, Inc.; he
billions
and maturing
as
follows:
$30,000,000—annually January 1, 1949 to 1958 inclusive.
1958
1956,
maturity only redeemable by State on notice, on July 1,
or any
interest payment date thereafter.
Principal and interest January 1, 1949 and semi-annually there¬
after July 1 and January 1 payable in lawful money of the
United States of America, at the Bank of the Manhattan
Company, New York City.
\
.
Descriptive circular will be mailed upon application to
FRANK C. MOORE, State
Dated. February
24,1948
,
-
Comptroller, Albany 1, N. Y.
'
"
■'
*
V '
#
20
THE COMMERCIAL
(916)
&
FINANCIAL
CHRONICLE
Says Present Crisis Means No War With Russia The Status of
Berle, Jr., former Assistant Secretary of State, told
Mortgage Lending
School
Social Research
Feb. 23 that he did nSot
A. A.
at the
sec
Soviet tJnion
force
can
result of the present crisis.
a
as
-
fear
-•
fourth
.
in-
on
affairs,
Mr.
Berle pointed
policy
of imperialism
not
ceeded
which
Adolph A. Berle, Jr.
actual
under
action
Federal
laws
war, just as the
did when they invaded
Germans
Poland.
"But
surd to say
■.
doubt if
I
with
the Rus¬
even
will
extremists
sian
In Mr. Berle's
take
its
Soviet
this
a
not believe the United States runs
not
great risk in assisting those coun¬
tries which wish to maintain their
"But
-i V.
an
no
use
r
for the inter¬
countries,
various
is
United
example,
States
taining bases
doubt
terranean."
Warns Retailers
In
the
expressing
no
or
•'
'
the
as
the
important
in
ume.
order
to
reluctantly
merchandise
purchase
for. value
.
mer¬
"We
and. on
turnover basis should be the
a
slo¬
gan adhered to.
otherwise two
things will occur;
■
y
.
,
"inventory mark downs
or
losses will undoubtedly occur.
I-
(1) •
(2)
"Sales volume will be re¬
tarded.
useful
retailer
ends
involving
within
consequent
prices, the
Loan
I have
philosophies
the original
Corporation
no
doUbt that
a
and stronger effort to
borrower work out : his
leniency
help the
problem wpuld be a fundamental
philosophy in* its activities.
The
end
result, however, no matter
:
how
long delayed, will and must
in
serves
his
and operates
own
toward
of
be
If
surers.
our
irierchanais-
course
its
opera¬
tions
•
,
ear-
are
marked
.
for
a
One
when due.
met
significant feature
common
to all of Our loans is that th'ey are
earmarked for definite productive
and
purposes;
new
and
record
this
constitutes
a
healthy departure in the
financing.
of international
Our loan
agreements: provide for
the purchase of specific commod¬
ities which the borrowing coun¬
tries
vitally need to get produc¬
going. When the Bank makes
a
contract to grant a loan it sets
up On its books a credit in the
tion
of
the
borrower, and fhe
permitted to draw
credit only to hneet
expenses in connection with proj¬
name
borrower
against
is
this
a specific
country, this does not mean that ects as
they are actually incurred.
spending or sustaining power Withdrawals are made either for
of these
dollars is limited to thai
Actually, the power of
purchasing is diffused ovei
country.
such
a
wide
geographic
reimbursement
of
purchases
for
paid or as
advances or collateral deposits for
purchases not yet completed. In
which the borrower has
area, reaching
countries, in the the case of
reimbursements, the
search for a variety of raw ma¬
borrower
submits copies of
in¬
terials, machinery, and industrial voices
describing the goods pur¬
equipment of all kinds.
chased, evidence of payment, and
into
number of
a
To
date
institution
has
granted loans totaling $497
lion, and it has borrowed
mil¬
evidence of shipment to the bor¬
rower's country.
In the case of
$250
advance
payments,
submits
pro
million.
ternal
our
We have stabilized its in¬
current
operations to the
point, where, for the year ending June 30, 1948 its activities
should result in a surplus suffi¬
cient
absorb
to
all
of
the
deficit
the borrower
forma invoices ' or
copies of orders or contracts, fol¬
lowed
up
on
completion
of
pur¬
chases by final invoices, evidences
of
payment
and
shipment.
In
some
cases
a
collateral
deposit is
created
conventional lending
real estate
on
credit
mortgages and the
be rationalized with
conditions
economic
the
pre¬
*to time, to¬
gether with reasonable foresight
vailing
and
time
from
caution
on
the
that the Bank followed the ultra-
which
conservative
national
course
of
charging
insured against Current earnings the
Federally
of
can
basic
part
of
the
tire
discount and
ing from the
amounting to
result¬
of its bonds
$1,275,000.
It
expense
issue
over
did not choose
en¬
the
to follow
ac¬
cepted method of amortizing this
item
the
over
life
of
the
issues
are
submitted to the Inter¬
All applications
disbursement, together with
suporting documents, are carefully
Bank.
for
checked to see that the merchah¬
dise purchased is eligible as; to
type and is within
the available
category limits.
Further check¬
ing is made to ascertain that the
price is reasonable, that calcula¬
tions are correct, and that the
transaction has not been previ¬
ously reimbursed,
all, the
borrower and
It should further be noted that
alike, and our national
there will be a substantial deduc¬
economy as well, will have reaped
tion from incohie for the "Special
a worthwhile advantage.
J
Reserve Fund" which is set aside
Unless great care is used by the
as
an
added* protection for the
Even
after
these
precautions
tenders in the days ahead, there
Bank's£ outstanding bonds.
This are
"Volume should be satisfactory is a danget that the operation of
taken, the Bank goes a step
Fund amounted to $1,104,000 On
for the year as a whole, but With
further in meeting the Articles of
housing credit as it has been con¬ Dec.
31, 1947 and will of course
a
keener fight toward obtaining ducted
Agreement which provide that it
by the government in re¬ be
materially increased by the shall insure "that the
the satisfactory gross profit mar¬ cent
proceeds- of
years may become an insti¬ end of this fiscal
year.
any loan are used only for the
gins.
On the Other side of the tutional
activity
motivated
by
purposes for which the loan Was
ledger, there is need "for greater political expediency and practiced
Bank's Loan
'control of operating costs for with without
granted." Representatives of the
reference
to
economic
The Bahk's loan policy will con¬
Treasurer's Department have been
rising volume in the past two stability.
Such a venture may
tender,
tender
•
<
years, operating costs have grad¬
ually risen out of proportion to
such increasing volume. Marginal
readily
form
risklesS
expanding installment receivables
even though volume may not be
maintained.
In
instances,
has been' fur¬
nished by bank credit.
Further
expansion on the basis of bank
working
credit
is
many
capital
not
a
sound
basis
should not be considered.
"It
would
appear,
that
and
•
a
coh-
a
period
insured
Federally
that
tion
come
based on the realiza¬
the
from
major
effort must
borrowing
within the
Rene Mako Joins Staff
The
Financial
for
loans
all
countries
have
been
representatives
;
to
made.
ascertain
Chronicle)
LOS ANGELES, CALIF.—Gene
distribution
adequate
to
safeguard the requirements of the
loan agreement.
These represen¬
tatives chrick shipments of goods
thrbugh the various stages to their
ternal
an
businessmen
that the greatest
bank
can
reap
loan
Bank¬
realize
fully
service that any
is to lend in
render
such a way that
Of John B. Dunbar Co.
to
which
These
■
itself, and that each loan whether the borrower has a
sys¬
application Will receive the most tem of control of
imports arid in¬
mort¬ critical
investigation
of ; the
planned use of the funds.
(Special
appointed
nation
ers
nishing retailers will experience
practices of the postwar period.
"We are not of the opinion that
this comhlodity deflation will take
en the aspects of post World War
I.
The advantages of a set-back
<s£ 15-25% in the genteral com¬
modity price level will ultimately
result in lower costs to the re¬
tailer Which should be passed on
to the consumer.' This should oc¬
cur within the next six
months.
In the meantime, over-inventoried
merchandise will be pressing for
into
us
gages.
arid, therefore, all. home fur¬
ing will cease rifter the fextreine
carry
during which we will be totally
divorced from our present affec¬
tion for what has
been termed
"The full or total' effect of the
requirements aggravates the con¬
dition further. We are inclined to passing of Regulation W has not
believe that now that it is evident altogether been felt.
It is uhto all as to what is happening, likely that it will return in any
approach in
the
of
will be
through the period of or¬ made with a commercial bank,
pattefn
liquidation for all parties alike, ganization. This showing is more which in turn makes payment
commendable when it is realized against
prescribed documents
they tenders, borrowers or in¬
conform to the traditional
vol¬
stabilizing the economy when he sales volume has resulted in ho
refuses to pass on to the con¬ increase in profits.
The fling in
sumer over-priced products.
Fur¬ retailing of carefree and indiffer¬
thermore, buying such merchan¬ ent expense expansion is at an
= v
dise in quantity prior to seasonal end.
;:i7
that this
pur¬
governmental agency interests
itself
in
this
field,
a
greater
man-
maintain
a
estate
Owners
enactment.
if
other
which
dollars
the bank lends
tinue to be
-
"The
and
occur
consumer
with
real
program
now
are
in
drop
a
Home
entering a more
of retailing in
chandise which is oVer-price'd Utfd competitive era
which
skill, merchahdise tech¬
lacks quality and appeal" is the
advice given... "Furthermore," the nique and disciplined tactics will
"Bulletin" adds, "anticipatory Buy¬ produce more efficient sind prof¬
itable results than the policy bf
ing in view of probable price
rises, attd lack of qui&htities, Should indifference toward spending dol¬
entirely disappear from the think¬ lars. as freely as they have been
in the past.
ing of the retailer.
Purchasing
may
estate
real
should
reversal
a
incorporated
would
-'V—Vy-..
be
with the full expectation that they
the
operation
tailers
nations.
should
specific purpose within
of
government may carry through a
when^
the distribution system,
to
more
funds
power,
"Retail
retailer,
ex-
tended
specu¬
the
with
realm
the
in
If
fof 1948,
factor in
Law,
in
Against Anticipatory Buying
"The time has now come
building,
cause
Advisory Service Bulletin,", commenting on the
Arthur Fertig & Company warns retailers against
expecting further price rises add urges them to adopt a cautious pol¬
icy with regard to their purchases and inventories.
a
outlook
FHA
financing.
force in the Medi¬
' •>-
the
of
decline
interest in
as
is
It
chasing
Manchuria
and
the United States
credit
E. Fleetwood Dunstan
far
con¬
brigades, or indirectly
through puppet revolutions ex¬
ported
in
packages,
to
seize
have less than
the
that white the
ent
tional
areas,
in
future,
econ¬
Russians
the
constructive
rote
forces of inflation that are appar¬
not
attempt,
directly
through their armies or interna¬
Greece,
our
an
increasingly
mort¬
satisfied,
were
that
within
expected
assume
provided to a professional builder,
opens the door to unconscionable
profits which are now feeding the
would
he
greatest invitation to war in the
world.
Re. is accurately, ?and no
honestly,
so
is
States
to
-L--;—.
logieallj <t>—-—•—
may
b e
•
borne in mind
lative
nor
Fascist.
difficulty
no
United
the
"the
perhaps
can.
world con¬
aggressor is
or
loans; and it
•
speculative
visions
compromise is possible."
no
for
Mr. Berle referred to the Wal¬
as
the
now ready and qualified to undertake
its responsibilities in the field of financing sound reconstruction arid
development projects.
Up to the present it has made an important
contribution to the four nations to which we have made
builder, leaving him to conven¬
financing.
Under the pro¬
co-exist if either is
whether
by trustees, savings institutions and insurance companies.
The International Bank is
tional
cerned," Mr. Berle concluded. "If
body's empire.
campaign
they
sound
a
I would exclude the
can¬
systems
establish
to
structure
gage
aggressor, bent on
the
as
said, but they do not, on that
account, want to sell out to any¬
lace
these
can
"There
power
their
other
Here
politicians
on
either side," Mr. Berle stated that
"mainly they want to be let alone."
They
will
undoubtedly" make
great changes in the social system
of
Clearly
neither
ment
the
alike
operations of the Bank and Urges steps be taken
on
broaden market for its bonds, by making them legal for invest¬
to
omy.
Socialist
its
Communist, capitalist,
in Europe have no confi¬
national
with
co-exist.
quest,
Referring to independent re¬
Which indicate that "the
dence in and
ab¬
'that the United States
system
and the
different kind of Socialism
any
ports
masses
much
free
Union
Vitalizing effect
insurance of
civilians
and
veterans
^
resources
securing its bonds. Says Bank ihsists loans bte
specific projects, and describes means employed to accom¬
plish this objective. Says European Recovery Program will have
right to insure, with tlie limitation
that the premises are, or will be,
owner
occupied, we would do
system, or Western Europe under
risk," he said, "that is why I do
independence."
opinion it is
Federal
the
of
relating to the
A
and lists
mortgages would be highly advan¬
tageous.
If we would extend to
often
new
a
Needs
\
used for
au¬
Simplification
precede a sudden change in
occupation by Russian troops, He. American sentiment. After look¬
added, if a Russian army is used ing for peace without finding it,
to support the irregular armies, historically the United States has
the Soviet Union would be com¬ reached for its guns."
mencing
Guarantees
Simplification
in 1916, and the campaign in 1940,
were
or
the supervising
not only
by
v
thorities but the public as well.
the
off
they 'might not have risked hdd
they foreseen the result. "But in
fact big pacifist campaigns in the
United States—like the campaign
any¬
far, except in
are
to write
United States and to take
thus
areas
Hitler
for
Asserting World Bank has not issued invitations to "come and get
it," Mr. Dunstan outlines operations and policies of the institution
that will warrant confidence
tism
then
and
suc¬
where
every
of
ftarik
Reconstruction and Development
Servicemen's
Readjustment Act, or under the
guise of slum clearance, as our
The same talk, Mr. Berle as¬
serted, encourage first the Kaiser
Soviet
has
•
States."
the
that
out
has
which
the
to
war—\yhich is1 state and local authorities in some
right as far as it goes. Bht areas are now
attempting.
While
this encourages European aggres¬
lending on housing facilities is a
sors—just now the Soviet Union
part of our function, as bankers,
—to push aggression without tak¬
we should and must perform that
ing
into
account
the
United function on a basis of conserva¬
national
er
amendment
By E. FLEETWOOD DUNSTAN*
Director of Marketing, International
12)
all
of
monthly
lectures
hatred
and
American
Speaking in
six
(Continued from page
dot
to
so."
the
Only the
he declared, and "they have more sense
a war,
than
t
;
on
Russia
war with
a
Hie World Bank Problem
a group
for
New
Thursday, February• 26, 1948
the borrower
will
end-use.
\ V
sufficient benefit from the
to assure orderly liquidation Supervision Element in interna¬
of the indebtedness.
By making
tional Lending
,
carefully considered
;
This system established
Bank for the supervision
by the
loans we hope to supply, not the
of feridJohn B. Dunbar & Co., 634 South
'whole effort, but merely the vital use of the. proceeds of loaris is,- as
Spring Street. Mr. Mako was for¬ link
welding the resources and stated above, a nfew element in
the
relations between
interna¬
merly with Bourbeau & Douglass
manpower into a coordinated plan'
tional lenders and borrowers. 'It
and prior thereto was with the
enabling full utilization of the has beeh
briefly reviewed here to
Los Angeles office of Swift, Renke
borrower's
national
advantages. convey to you some idea of the
Mako has become associated with
&
Co.
'
•
•
■'
,
' '
Loans of this nature are
the type
care
with which the Bank is Ad¬
.
its
Responsibilities,
be repaid and are made ministering
both to its members and to the in¬
retailers toward obtaining a sat¬
William Hitdimari Opens
vestors "who have purchased In¬
isfactory and settled, sales volurti'e
*An address by Mr. Dunstan be¬
William C. Ritchman is engag¬
ternational Bank bonds.
based oh more rapid turnover and
fore the luncheon meeting of the
fsle, thus compelling greater con¬ control :of; expenses, would be the ing in a securities business from
It should be rioted in this proc¬
Analysts S o c d e t y, Providence,
cessions on the part of some re¬ wiser policy."
i offices at 90 Wall Street.
ess of checking end-use
that the
R. I., Feb. 18, 1948.
solidatiori
of the
efforts of
most
than
,
can
Volume
167
financial
aspects
Number 4676
Of
each
obligations of the Bank
project
closely
financed by the Bank are
followed.
Money is .not made
available more rapidly than are
required supplies of goods to
be purchased.
During the first
more
others, which is
which
we
tioned.
are
either
to
loan
a
than
frequently ques¬
in disbursing the
Delay
proceeds of
rapidly than
subject about
a
in
necessary documents
funds are paid
out,
which the
is
much
interesting
more
loans made
ized
than
to
annum
the
on
The
1947.
By the
last, this entire
bursed, in the
raw
signed
end
meet the Bank's
obli¬
The present
policy of the
to
charge
per
commission
a
annum"
made
all
on
out
of
loans
capital
or
tirely withdrawn, the
970,000,
first
of
on
materials
May
and
both
:
operations at this early date
serves
come
Of the $12 million
the
total
has
sum
employed,
due
the entire
been
the
to
sum
was
of
thus
fact
far
that
earmarked for
industrial and railroad equipment,
and
some
of it
for
several
ered
The
will
not
be
months
Kingdom
of
deliv¬
million
agreement
Nether¬
7,
in
the
1947.
The
Kingdom of Denmark loan agree¬
signed on Aug. 22, 1947
and was for $40 million.
Up to
the end of January only
$1,960,-
ment was
719 had been disbursed
this
on
ac¬
count, which had been anticipated
because
the
Danes had
sive
program
need
for
is that of
there
haste.
I
am
Their
is not
urgent
other countries,
some
was
inten¬
way.
under
dollars
no
no
as
pecessity
informed,
for
however,
that this program has been accel¬
erated in the last few weeks and
Denmark,
too, now is drawing
upon her balance at a much more
rapid rate.
'.
1
Thus, of the origihal loan com¬
mitments
totaling $497 million,
$340,857,903 has been disbursed.
There* remains
"unused
ment";
fence
million " in
of
commit¬
As
means.
The
spent
not
trade
by
which
any
these
made
possible is - an eco¬
nomic factor in several directions.
The Netherlands Government, for
instance, has done substantial pri¬
mary purchasing in Belgium and
Switzerland.
All
purchases are
in the United States
alone.
In fact, the borrower has
placed upon him no restrictions
not; made
where
to
bought.
his
goods
shall
be
':
Resources Behind Bank's Bonds
Now in order to make loans,
the
major part
of its lending funds by borrowing
from private investors.
A brief
the unusual
surrounding
our
safeguards
bonds will, there¬
fore i
interest you.
In the first place
build
up
which
mature,
expect to
sound loan
provide the
portfolio
means of
obligations as they
without resort to other
a
will
meeting
we
our
safeguarls. Behind the bonds are,
first, the Bank's portfolio of loans,
the principal amount
of which
outstanding at Dec. 31, 1947, was
coun¬
in
those
states
has
approval
where
been
official
given
us
lion
of
savings bank deposits,
one
of
these.
other
states
None
have
of
Since my recent
our
These letters claim that the
"amount of money in circulation"
There is about three times as much
money in circ u 1 a t i 0 n
to -•$>
*
-
day
six
the
legislative
test.
column stating that
high prices are largely a
"supply and demand," I have received
many letters of pro¬
is
was
Turning to the insurance com¬
panies, we find that insurance
companies and fraternal organ¬
izations featuring insurance that
have been authorized by their re¬
factor
79%
Bank
bonds
hold
of
is
in
circulation
or
the
of
buy goods.
which
the
important
investment
center
a
Bill
which
now
goes
if
Ten
Roger
sitting
around
to
ly earned.
men
may be
Babson
the
soundness
Bank's
opera¬
tions.
and ERP
There has been a
great deal of
discussion regarding the effect of
the proposed
European Recovery
Plan on the operations of
the In¬
ternational Bank.
apparent
tion
that
It
has become
economic
wrought by the
disrup¬
last
is
war
far
greater than could have been
foreseen when this Bank was cre¬
ated in 1944.
A far more exten¬
sive
of assistance is
program
bonds
of
International
the
Bank
loans.
is
the
comprised of 46 member
nations.
Thus,
applicants
its
potential
far
exceed
which
countries
form
mittee
of.
But
loan
those
the
16
Com¬
would
have
operations
Bank.
vitalizing effects
of
the
If some of
needs—such
on
International
Europe's critical
investments
mitted
assets
panies
domiciled
for
$1,000.
Life
of
insurance
in
88%.
Iricidently,
in
that
addition
monwealth
has
been
I
to
busy repealing
in
also
some
Officials
of
of
the sound
whole will be
security
of
a
increased, and the
the
loans
Bartk makes to the
which
European
the
area
thereby improved.
:
a
will
serve
base
for
as
an
such
additional equity
as
the Bank
adhered
practice
ing
as
in
to
with
doors
invitation
an
"come
World to
:
With
;
il
to
The
Program of Marketing Bonds
like
to
think
also
you
in
Bank.
we
our
could
I
should
interest
program
broadening the market for
bonds, particularly in Rhode
for
our
With Pacific Co. of Calif.
(Special
LOS
liam
The
to
Chronicle)
Financial
ANGELES, CALIF.—Wil¬
Slinkard has been
J.
the
to
staff
of
Pacific
added
California,
State
may
purchase
Is¬
bill
a
to
I understand that
accomplish this will
be
introduced in your Legislature at
the current session.
It is in the interest of the
its
present
future
tential
bondholders
bondholders
market
for
that
Fusz-Schmelzle Adds
(Special
our
ST.
to
The
Financial
LOUIS,
Chronicle)
MO. —Fusz-
Schmelzle & Co., Boatmen's Bank
Building, members of the St. Louis
and
Chicago
Stock
Exchanges,
have
added
Homer
A.
Heid
of
and
its
by
Joins A. E. Weltner & Co.
po¬
(Special
to
The
KANSAS
W.
&
the
Russian
things in
really interested.
The U. S. Treasury cer¬
tainly has gold enough buried in
Two With Schwabacher Co.
('Special
accom¬
thing in a gradual
paying off government
increasing
other
or
bank
reserves,
the
reasons
shies
Ad¬
from
away
will
SAN
Edward
to
The
Financial
Chronicle)
FRANCISCO,
P.
Boss
CALIF.—
and
Francis
T.
Flint have been added to the staff
York
and
San
Exchanges.
E.
remember
that
during
the
early
part of the
Roosevelt
Administration
when
we
held
more
Francisco
Stock
•
^
G.
gold than
Goldsworthy Opens
to
GRAND
Elmer G.
The
Financial
Chronicle)
JUNCTION,
COL*}.—
Goldsworthy is engaging
in the securities business from of¬
any
other
fices
made
junction, Colorado.
at
South
Redlands,
Grand
Observations
(Continued from page 5)
land's
problem is
Tyson
to
produce
as much per actively employed per¬
pointed out specifically the productivity of
building labor is down 30%; that 25 million tons less coal with the
son
as
same
Sir
in
1938.
It
is
number of workers is
Financial
CITY,
is with
Chronicle)
MO.—Turner
A.
being produced, etc., etc.
And the British Ambassador-designate to Washington himself,
Oliver Franks, celebrated our Washington
Birthday Holiday by
warning that the 16 recipient -nations "must not regard the Marshall
program as an economic cushion on which to rest, but as a stimulus
toward greater productivity and toward internal financial
stability."
Fantasies of the Pound
Likewise
E.
Weltner
Co., Inc., 21 West Tenth Street.
absurd
fallacies
are
being voiced here as well as on
grounds" about the value of Britain's currency. These
were epitomized at a closed
meeting of important personages in New
York City last week when a British spokesman unabashedly and at
length seriously advanced the credo that the pound is under—and
"the
home
not over—valued.
This despite the fact that, consistent with Britain's
gold and dollar loss of £1,023 million (quadruple the previous
year) the Black Market's real valuation of the pound has been $2.50
1947
instead of $4.02, per the Britishers' shortlived attempt to engage in
dollar-convertibility last summer.
As
a
terested
International
of money in circulation,
hot offer people their gold
dollars back again in place of the
papesr dollars which they would
(Special
Mascautauh, 111., to their staff.
Bank,
the
reverse
If Washington is
in
reducing the
the
623
Street, members of
As you know, commercial
banks and insurance companies ih
today?
serious
Company
South Hope
the Los An¬
geles Stock Exchange.
of
of
Robbing Us of Gold
,
land.
this
are
Chronicle)
Financial
He was previously
Union Trust Co.
Exchanges.
International
circula¬
amount
same
Readers
1
with St. Louis
the
true
in
the
amount
wouldn't
Dempsey-Tegeler Co.
(Special
any
gentlemen, as executives
finance, industry and com¬
merce, you have a direct inter¬
est in the policies and program of
they
to
are
MO—Lyra Schroebecome associated with
of
the
why
n'ation, President Roosevelt
der has
Thus,
the
European
Recovery
Program and the Bank's opera¬ Dempsey-Tegeler & Go., 407 North
tions
should
complement
each Eighth Street, members of the
New York and St. Louis Stock
other rather than interfere in
Now,
This i program
ST. LOUIS,
may make for capital equipment.
currency
sound recommendations.
'
-n
commodities,
things which were
We
your aid in having them made
available to all investors in Rhode
of
the ground.
litical
solicit
earnestly
therefore
be
available
entitled
are
tion,
which
ministration
excellent credit rating, and
an
we
bonds
our
and
raising interest rates, and forbid-, of Schwabacher & Co., 600 Mar¬
ding instalment sales, but for po¬ ket Street, members of the New
The
practice.
financial
turn in all
to
us
de¬
safe
turn in?
debt,
the limits estab¬
lished in its charter and the rules
that
land,
deflated.
way
Bank is bound by
sound
in
plish the
the
to
get it."
and
the
at
President Truman could
that
the Bank had not thrown open its
loans
manner.
own
why
which
emphasized
be
done
increased
shelter
all
in
was
amount
people
tepidly as practicable.
should
It
the
really
not
add
to
it
outstanding. As the swapping of
gold dollars for paper money then
Cure
was
gold
Russia, however, does not increase
the amount of food,
clothing and
Naturally
we
are
the
remaining
transactions.
circulation
and other real
conservative lend¬
the
Island.
Assistance furnished Europe on
grant rather than a loan basis
chii-
our
spent, and hence, greately in¬
flated
savings
operating policies of the
and
Bank
to
as
and
in
exchange it for
currency,'this paper money
suggestion of her economists who,
through advance notice, had their
confidence in
such action reflects
not
of
What Russia has recently done
reducing the amount of money
in
International
the
this
was
understand
passing new
Massachusetts
of
of
can "pay up" the
$1,000!
But this
effect prices one penny.
debt
Russia's
its old laws!
Europe
of
carried
Roosevelt forced
paper
does
laws, the Legislature of the Com¬
of
-
gold
United
in the bureau
wives
our
of
much
hundred dollars
States
qualification has
would be raised to
made
been
feel
potentialities
and
entire
com¬
those
where necessary
the productive
program,
the
not used for
was
was
what
posit boxes throughout the coun¬
try.
When, however, President
food, fuel, and raw
materials—are provided under a
as
of
of
as
The
companies and all other these men a hundred dollar bill
insurance
companies he can pass it to the next man,
within the State. Including Massa¬ and the next man to the next
chusetts, the percentage of ad¬ man, and so on; then this one
legal
European I- Cooperation.
Recovery Pro¬ states
as
It
was
it
bad
as
citizens
dren;
the other
domestic
anxious
contemplated under the
Marshall Plan, if wisely
shaped,
gram
they had honest¬
was
pockets for luck and emergency;
European
a
It
drawers
ta¬
a
a
dollars, or a total of
By presenting one of
ne¬
Moreover,
one owes
90%
States then held
hundred
a
cessary than can be undertaken Bank are gratified at the ready
by the Bank, which is not a relief recognition accorded our bonds in
We feel that
agency, and may make only pro¬ state after state.
ductive
are
that
question of
doing today.
circulation.
Insurance
the
prove
ing
ble where each
signature, mak¬
is
of dollars which
is
most
a
who
saying
President Roosevelt then robbed
the American people of billions
Russia
Massachusetts,
for
me
supply and demand.
much
people do not
In
economists
same
razzing
States.
tunities
of
the
now
"inflation"
money
about
with
gold today. Mr.
this on the advice
Roosevelt did
no
coins.
worth
was
compared
ounce
the
insurance companies in the United
Bank
to
per
gold
our
gold
per ounce for
but
makes
of
time
rate
circulation
rowing countries had fair Oppor¬
value
$20.67
———
all
how
of the admitted assets of all
the Governor for
and
that
$35
a
ih
diff erence
spective states to invest in Inter¬
national
is
in
situation,
it
At
This
doubtless
turn
us
ten years
ago.
ses¬
there
as
sions scheduled for this year.
passed
investor
third, the 80% of the subscribed Bank securities be sufficiently
capital stock of the Bank which is broad as to include the great fi¬
subject to "call only to meet the nancial institutions in all of our
largely matter of "supply
of currency does not increase
are
Accuses Roosevelt Administration of rob¬
of gold and contends if Washington is
really serious in
reducing amount of money in circulation, it should offer
people
gold dollars in place of paper dollars. v
bing
try's mutual savings bank deposits
that he will be well
protected un¬
til both the Bank and the
bor¬
savings banks.
1947, aggregated
approximately
$681 million in United States' dol¬
lars and gold (not including the
equivalent of approximately $909
million in other currencies); and,
Babson, maintaining high prices
demand/' points out devaluation
available commodities.
those states not previously
the legislature has just
se¬
marketable
and
legal for in¬
are
vestment by those banks.
Better than 75%
of the
among
sets
and
By ROGER W. BABSON
Mr.
states
acting,
as¬
cash
the
the
$3(30,115,648; second, its liquid
in
where the bonds
in
even
bonds, but new legislation is re¬
quired to extend this privilege to
curities, including demand notes
oh members, which at Dec. 31,
banks
assure
should
faint-hearted
,Bank must obtain the
review of
commercial
recovery
so, it is apparent that the
of
International Bank fi¬
nancing
loans
<$156
balance'
Money and Prices
the
behind
resources
bonds
most
The Bank
the
specified
of Aug.
Such
.;
the
more.
lands has drawn down only about
$83 million of the commitment for
$195
surplus
also
could
relatively short time be¬
quite sizable.
a
Bank's
up
a
re¬
and
Within
equipment.
loan, signed on
$5,692,370 had been disbursed
to Jan.
31, last. Less than half
on
satisfactory basis, the ordinary
of
Luxembourg
Aug. 28, 1947, only
sum of $4,annually to
this figure will in¬
accrue
crease
rapidly as the amount of
outstanding loans expands.
With
January,
purchase
will
the Fund and
had been dis¬
sum
which
is the main cause.
special
borrowed funds.
When the proceeds of the loans
approved to date have been en¬
$250 million
was
in
legal.
For in¬
stance, 90% of total bank deposits
in the United States are held by
are
qualification is necessary. Rhode
Island, with more than $250 mil¬
a
to
is
whether
National, of France.
was
states
of
now
21
this
as
matter of
liquid form in
of' 1%
how
see
are" others.
The agreement
as
per
number
bonds
in
progress
already
has
been
is indicated by the
achieved,
bonds, and there are only seven
states remaining on the list where
Bank
rapidly some of the
by the Bank are util¬
loan by the Bank
to the Credit
the
*
out of
It
so
its
direction
(917)
lie
gations.
or
ery.
as
1V2. %
reserve
to the na¬
ture of the
project, which may re¬
quire many months for
delivery of
necessary equipment or machin¬
9,
of
Material
CHRONICLE
kept in
obtaining
on
years
states,:
FINANCIAL
amount
of the loan
outstanding.
That commission is
required to be
usually is due
slowness
10
operations the Bank is
required to
charge on all loans guaranteed
by
it and on all loans
made by it out
of borrowed funds
a
commission
of not less than
1% and not more
This latter fact is an
explana¬
tion of why some
borrowing na¬
tions draw down the
balances of
loans
and which
at the present time
aggregates $6,610,480,000, of which $2,540 mil¬
lion is the share of
the United
States.
the
their
>&
THE COMMERCIAL
and
to
matter
of
fact, in lieu of pandering to England's self-in¬
objection to France's recent attempt to reform her currency,
the
Socialist-dictated
management
of
sterling with regula¬
tions
forbidding its citizens from trading their pounds for francs
even
the escudos of
structive
step
Portugal, let
encourage
fictions from currency
a
free
valuation!
us
vigorously and
and
realistic
as
market
>■
.
a
finely
to
strip
u
.:
or
con¬
the
£2
consider
could
(Continued from page 16)
ditures must be incurred to carry
out commitments resulting from
the failure to conclude peace. In
/
non-commercial
overseas
expenditure of the U. K. govern¬
1946,
ment amounted to $1.2
billion, in
billion. And we should
not underestimate the internal ef¬
1947 to $1
and economic, in
European countries of the
political
fects,
some
tension between the United States
£md the Soviet
forces
The
and
are
powerful.
During and after
the parities of the cur¬
very
the
the
disturb
world economy have been
war,
rencies
of
countries
some
were
changed with a view to making
them better suited to the radically
altered
conditions within these
countries and in the world.
It
would
these
be
folly
to
that
assume
changes under¬
haphazard
taken to meet immediate and urg¬
pattern
of exchange rates reflecting a new
international economic balance in
ent
needs
can
essarily delayed it appears to me
As
provide
a
involves
this
see,
you
a
point of view on exchange
rates.
It is a practical point of
effectiveness
of an exchange rate in doing its
work.
An exchange rate has two
view looking to the
The first function is to
functions.
enable
country
a
to
the
export
goods which it can spare in order
to secure the means to acquire
which it needs. In
short, the first function of an ex¬
change rate is to let the exports
flow.
The second function of an
the
Union.
that
inal action. If changes are unnec¬
rate.
Fund
imports
exchange rate is to keep the im¬
ports of a country within its ca¬
and to allocate im¬
ports according to the needs of
the community as measured by
pacity to
policy considerations. In
broader
brief,
limit
pay
the second
imports,
it is
possible for the exchange rate
perform this second function in
some countries. They cannot count
not
to
limit im¬
iro
prophetic insight to see that ports to the proper level or to
apportion them among those vari¬
many changes must still be made
goods which the
economy
before a suitable pattern of ex¬ ous
most urgently needs. For example,
change rates is established. The
in a country like the Netherlands,
great task of the Fund is to find
in which the shortage of goods is
some
way to reach this suitable
so
great that rationing is neces¬
pattern of exchange rate.
sary to limit the demand for con¬
sumer
goods
and allocation is
Initial Parities
necessary to limit the demand for
The Fund Agreement provides
investment
goods, it is incon¬
that members must agree with the
ceivable that the exchange rate
Fund on
the initial
parities of could be
expected to bring about
their currencies. In the summer of
an adequate limitation of the de¬
1946 the Fund undertook consid¬
mand for imports. To do this a
eration of this problem. A vast
country might have to depreciate
amount
of data was
collected. the parity of its currency so
Many studies were made. Innu¬ sharply as to offer exceptional
merable discussions were held. I
bargains to its customers in the
would not want to leave with you
sale of its exports. So great a de¬
the impression that all this was
preciation might even affect ad¬
done, so to speak, in the mass. On versely its foreign exchange re¬
the contrary, in every case a de¬
ceipts if its capacity to produce is
tailed investigation was made of still limited.
the present and prospective posi¬
For these reasons it appeared to
a
greatly changed world. It takes
rates
exchange
on
to
will
they
indicate that-the
in
mistake
serious
ments.
To these terms of trade a
would have to
applied to get the nominal ex¬
change rate.
Of course all this
represented an ideal approach to
the problem, based on uncertain
hypotheses and even the unknown
be
future.
-
..C^
The immediate
•a
problem was of
different order. It was concerned
simply with the question of what
effect the parity then prevailing
in each country would have on its
economy
and
its trade within
two. In short, we
on
the next year or
wanted to know whether the pre¬
vailing
its
exchange
rate
would
country in rebuilding
economy and in
securing an
handicap
a
initial par
values
YouWill
find
established.
for nearly
every country in Western Europe
exports
have
increased
more
rapidly than production. At least
until the
were
that
autumn of 1947 the
ini¬
tial
parities do not seem to have
been a handicap to members of
the Fund in expanding their total
I shall have something
regarding the direction of
their exports in connection with
another problem.
exports.
to
say
In the last few
it has
become
countries
begun
more
the
the
months, however,
clear that in
some
initial
parity has
export trade,
to burden
particularly exports toward
dollar
area.
Whether
these
orderly adjustment to its new in¬ developing difficulties are proof
ternational economic position. We' that-an error in judgment was
wanted to know whether the pre¬
made in
vailing
exchange rate would en¬
attain by the
end of the transition period that
values is
able the country to
view
tolerable
balance
of
payments
is
changes
accepting the initial
a
par
matter of opinion. My
if
the
necessary
that
made promptly it will
support the wisdom of our orig
are
tell you
that this was not
opinion of the officials
of the Fund, but it was whole¬
heartedly supported by the best
informed central bank opinion in
the
alone
Changes
Fund will not hesitate to urge on
consideration
member
a
of
the
desirability of a revision of the
parity of its currency.
J
alternative
What
there in
was
accepting the initial pari¬
ties? There are some people who
would have wanted the Fund to
fact to
make
thorough overhaul of ex¬
a
change rates adjusting them to
what
they
regard
as
the real
of the currency, probably
value
something resembling purchasing
parity. Frankly, such a
would have been in prac¬
power
course
tice
the
impossible. In the first place
adjustment of a currency on
basis
of purchasing
power
parity implies that all that is nec¬
essary is 4o restore
the prewar
balance of payments. In fact, most
of our members were faced with
the establishment of a new bal¬
ance
of payments
suited to their
altered international ec o n o m i c
An adjustment on the
basis of purchasing power parity
assumes that the whole problem
in exchange rates is one of infla¬
tion.
In fact,
for many of our
members the inflation problem is
secondary to the real deterioration
position.
in
international
their
economic
position.
What
be
can
the
of
meaning
purchasing power parity in coun¬
tries with rigid price controls and
rationing? Many of our members
are
suffering from latent rather
than realized inflation. Should the
new rate have been based on the
inflation
expected
inflation?
realized
to
seems
me
or
The
on
the
answer
that any purchasing
parity formula, whether of
prices or wage rates, would have
been an ! impossible
basis for. a
tion of each member.
general revision of exchange rates.
the Fund that for the present the
That is not to deny that relative
In this work we had in mind
one
practical test that could be
prices and costs are of major im¬
both the immediate problem and
applied to determine the suitabil¬
portance in considering whether
the ultimate problem. On the ulti¬
ity of an exchange
rate was
mate problem we wanted to know whether it enables a country to an exchange rate will enable a
country to export. Obviously they
what would be the international
export. In testing the initial pari¬
economic position of a country af¬ ties communicated to the Fund —• are, and price and wage data were
given careful weight by the Fund.
ter the transition period, and what
remember, a number of countries
.real exchange rate would then be asked to
I might say in passing that to
postpone the establish¬
suitable for it.
Specifically, we ment of parities — it appeared have compelled a country capable
assumed that the country would that the
of exporting only 30% of its pre¬
proposed parities would
have
war volume to value its currency
completed
reconstruction,: not under
J prevailing
conditions
that the United States would have
seriously handicap exports. That at a parity suited to exports of
good but not booming business does not mean that there was any 100% of its prewar volume would
have forced on that country
conditions, that the United King¬
general expectation that the initial
dom would have restored its bal¬
parities? could be continued in¬ further inflation. If we assume
ance of payments without cutting
definitely. Obviously, the officials relative freedom in bidding for
imports below the 1936-38 level, of the Fund were aware that as international trade goods, then if
and that convertibility of major conditions
of
world
demand Czechoslovakia, for instance, is
currencies would have been re¬
change,
as
latent
inflationary exporting 30% of its prewar vol¬
established,
so
that
countries forces begin to manifest them¬ ume, if the exchange rate for the
would be able to use the proceeds
selves, a parity which was not crown is set at a level that will
■of their exports to every country then
hampering exports might result in a world demand for
to pay for their imports from any
of the prewar volume of
later do so. This was stated very 100%
country. We wanted to know what
clearly in the first annual report exports, and if Czechoslovakia is
real exchange rate under these of the Executive Directors of the unable to produce and export this
assumptions would enable a coun¬ Fund.
volume, the effect will be to bid
try to restore a tolerable balance
Whether the initial parities ac¬ up the prices of these goods in
in its international payments.
By
tually met the expectations of the Czechoslovak crowns to a higher
a real exchange rate I mean sim¬
level than is necessary to make
Fund can be roughly determined
ply the real terms of trade that by seeing how export trade be¬ their export remunerative. But
could restore the balance of pay¬
haved in the year or so since the this would not have brought more
coefficient of prices
when I
making
continuing
the overvaluation Qf their cur¬ London, Ottawa and New York.
rencies. Under such conditions the
members of the Fund are
the
XXX}X!X:/-
present conditions
Under
.
function is to
that
the
one
power
Parity
in
The
policy of the Fund on ini¬
tial parities carried with it as a
corollary the willingness of the
act promptly and favor¬
ably whenever a change in parity
should become necessary because
it threatened the export position
Fund to
of
lying
cause
inflation. ;
But
.
consonant with the real" exchange
VVv.'
by
one
necessary
changes in parity., I
think
I
violate
no
confidence
Pattern of E xchange Rates
The Unsatisfac tory
Thursday, February 26, 1948
CHRONICLE
FINANCIAL
&
THE COMMERCIAL
(918)
difficulty
the
—.
•,
suppose:
country
a
is
not
prepared to deal boldly with the
inflation
problem,
what
then
should the attitude of the Fund
be? While the Fund would deeply
regret the failure of a country to
proceed with strong measures to
halt inflation and while it would
not hesitate to continue to urge on
a member the
necessity for such
should
it
think
I
measures,
not
that account refuse to agree to
on
change in parity. It is one thing
a
that a country which is not
taking steps to put its exchange
to say
policy on a sound and stable basis
country. Again, the first an¬ /Cannot expect help from the Fund.
report of the Executive Di¬ That is reasonable. It is quite
rectors of the
Fund stated that another thing to say that the Fund
of
a
nual
the Fund expected
that changes in
when
the export capacity of countries
had
increased
and
the buyers'
market
was
superseded
by
a
parity would
sellers'
be
market.
necessary
that
before
Even
stage, in individual cases continu¬
ing inflation was expected in time
to undermine the parity of the
currency
in
here
the
too
to act
some
Fund
countries; and
was prepared
This
raises
a
difficult
exports of
flation that affects the
should the
policy of the Fund be? If all that
a
country does is adjust the ex¬
change rate to the inflated level
of prices and costs, it may restore
exports for three months or six
months. But in a relatively short
time the adjustment in parity will
What
country.
absorbed
and
will
inflation
continuing
the
the
make
ex¬
new
change rate unsuitable. A change
in
parity is not an ultimate solu¬
to the export (and produc¬
tion
tion) difficulties faced by such a
country.
If the adjustment in the parity
is to be fully effective it must be
accompanied by measures to halt
That
inflation.
the
be
must
ures
meas¬
means
taken
to
that
see
aggregate demand for consump¬
tion, for investment and for gov¬
ernment
outlay at stable prices
will not be in excess of the ca¬
reduced
be
should
means
covered
be
is
what
by
the
ex¬
change rate which is choking its
trade and preventing the
from
getting
imports
which it desperately needs.
export
country
Free Rates
A number of
members have
our
brought their inflationary dif¬
not
ficulties under control and are not
able
You
have
may
in
criticism
seen
the
permitting
rates.
In
other
course
my
"Econ¬
of the Fund
countries to
of
free
opinion there is no
than
to
permit a
such
their
continue
is another.
the recent
London
the action
of
omist"
maintain
exchange rate. Greece is
such country, Italy
one
in
to attempt to
even
stable
a
system
country in which prices rise at an
annual
50%
of
rate
or
to
more
keep a system of steadily depre¬
ciating rates
The
strictly
system in
speaking,
should
not
system
of
Latin
free
rates
free
American
is not,
rate. It
Italy
a
confused
be
with
in
the
certain
countries
where
prospective importers bid freely
for exchange. The system in Italy
is one of a controlled exchange
market. In
spent
authorities who pay; for such ex¬
It
change the average <jf the inarket
rates that
prevailed during the
preceding 30 days. This is not a
system in which the. exchange
taxes.
that investment should be
limited to those productive needs
that will
a
should
expenditure
and
country
disastrous
a
on
of
continuation
Italy, for example, ex¬
other recipients are
permitted to sell half of their
exchange receipts for whatever
rate they can get from authorized
importers. The other half of their
exchange is sold to the monetary
pacity of the country to produce
plus any import surplus that can
be financed by loans or grants
from abroad. It means that total
government
a
inflict
would
question
that a country
continuing in¬
is suffering from a
be
proposed change
country is not
taking adequate measures to keeo
its currency stable. If the Fund
were to take such an attitude it
object to
in parity because a
promptly.
of timing. Suppose
that
will
act quickly on the out¬
and
porters
community,
and
in¬
should
not
be
fully
say
supplemented by new credit from
the banking system. And it means
that money incomes cannot be in¬
to do
as
of
put
the
vestment
creased
funds
unless
there
is
a
corre¬
sponding increase in output, par¬
ticularly in that part of output
which will be available for con¬
sumption. These are the element
of the anti-inflation measures that
must be taken in conj unction with
the change in parity if it is to be
effective.
Otherwise,
we
shall
have bloated incomes and
chasing short supply in
new spurt of inflation.
only
currency
a
authorities
In
sit back and
can
hope|
that the market is free
it pleases.
the
practice
market is. far
from free. It is true that importers
of
certain types of goods, List A
goods, need no import permit and
are free
to buy as much as they
can
of foreign exchange to pay
for such goods. But importers of
other goods must be licensed and
these
licenses
limited.
are
The
demand for exchange is
restricted,
therefore, by the small number of
commodities
of
relatively little
importance in List A and by the
attitude
of
the
in
authorities
Unfortunately, it is not always
granting import licenses.
>
;v
possible to take such measures
It would be a serious rpistake
exports at that time. In short such promptly. In any democratic state
to assume that under such a sys¬
an
exchange rate, however suit¬ it takes time to put through such
tem the sole problem of the mone¬
able for conditions two or three comprehensive reforms. We have
years
off, would for the time discussed with our members the tary authorities is .to limit; the
being only induce additional in¬ need for just these policies to granting of licenses. Even.the li¬
flation.
make effective a change in parity censing policy becomes more com¬
plex in a country with continuing
These are among the considera¬ that was generally recognized as
inflation. Actually, the monetary
If we have delayed
tions that led the Fund to accept necessary.
authorities must be sure that suf¬
the
initial parities.
It was the three or four months in getting
ficient licenses are issued -ito en¬
judgment of the Fund that the an obviously necessary change in
courage
the bidding up ,of ex¬
accepted parities were then per¬ the parity of one of the major
change rates to a level that wil
forming
reasonably
well
their currencies, it is because political
make exporting remunerative' de¬
prevented such
function of moving export goods disturbances
spite inflated demand at home,: and
and that they were likely to be measures from being taken early
rising domestic costs and prices.
effective for
a
year or
two to in the autumn and it is only re¬
that progress
has been Exchange policy in Italy,^.there¬
come.'Even in the more extreme cently
fore, must see that , demand for
cases of doubt, such as France, it
made in
putting such measures
was
the
prospective
inflation into effect. In my opinion, it is foreign exchange is kept great
enough through List A and throug I
rather than the realized inflation
better
to
wait
three
or
four, import licenses to bring about
that would have had to be the
basis
for "
the view
course
a
change
in parity.
In
of the Fund the proper
was
to continue the exist¬
months
if this
to
before
adjusting a parity
delay is necessary in order
have
the change in
parity
ac¬
■free .exchange
assure
So
the
companied by corrective measures
can
stage the Fund
adequate to deal with the under¬
rary use
trade.
At
such
a
,
adequate
tc
this
feature
of
exchange
system
goes
far
Italian
ing parities until they were shown
to be an obstacle to international
see
rate
proper.level of exports,
as
no
th
I
objection to its tempo¬
under present conditions,
Needless to say, the Fund would
be very happy if conditions in
Italy made it possible to declare a
definitive par value and to keep
the lira at parity without restrict¬
ing export opportunities for Italy.
Under present conditions, with
severe
unemployment,
with
a
large budgetary deficit, and with
political pressure to provide food
subsidies and wage bounties, it is
far better to continue for
time
a
the free exchange system in Italy
than to force a premature parity
of the lira.
We have studied the
Italian situation and
hope that
we
it will improve.
The problem of
be
met
through
emigration
of
Italian
Workers. If part of the burden of
Unemployment could be lifted in
this way, then good harvests, an
adequate inflow of raw material
imports, arid aid from abroad
would make it possible, without
too long delay, to halt the infla¬
tion in Italy.
At such a time the
Fuhd will not be remiss in urg¬
overpopulation
must
ing upon the Italian Government
the desirability of agreeing on a
parity of the lira.
Multiple
I
have
Currencies
mentioned
that
one
of
the functions of the exchange rate
is
limit
to
imports, and I have
present condi¬
tions the exchange rate cannot
perform this function in some
stated
that
under
countries.
Whether
have
I
exchange
heard
rates
doubts
can,
in
the future, perform this
functiopi.
In a number of Latin American
countries
the
system
exchange
before the war involved the
even
of multiple currencies with a
considerable difference between
Use
which
exports
was
presumed
to
be remunerative to the exporters.
This same rate of exchange, or
even
more
a
favorable rate,
may
be available to importers requir¬
ing exchange to purchase
essen¬
tial
goods.
The purchasers of
nonessential and luxury goods are
required t.o pay penalty rates con¬
siderably in excess of the buying
rate.
A penalty rate on imports may
be only another device to collect
taxes from
consumers
of
economists. It is, frankly, a device
for assuring bilateral balance. But
the fact is that the necessity for
yet
bilateral
Europe, even where production
might be devoted to goods ex¬
ported to the United States, rela¬
the
higher import rate. We see
this, for example, in Chile where
without
ports
administrative
requiring
onerous
import
in
control
licensing and without giving large
windfall profits to the fortunate
recipients of import licenses.
What
happens in such Latin
American countries is that a large
inflation of incomes and prices
has made importing more attrac¬
risen as
world market prices for
Costs
tive.
much
as
not
having
particular exports such
and
copper,
there is
no
as
coffee
need to
change the export rate. But meas¬
ures are necessary to restrict ex¬
cessive imports.
And the mone¬
becoming unprofitable
at rates corresponding to
trates,
are
except
free
market
rates
roughly
50%
above the official parity.
And as inflation is brought un¬
der control, penalty rates to re¬
strict
imports no longer remain
recessary. When the inflation ends
the
demand for imports
off. More
particularly, the
demand
sive
tends
will fall
for
luxury
exces¬
imports
to
disappear as inflation
profits decline. The monetary au¬
will
thorities
find
that
the
ex¬
incomes, that at
or more
of the aggre¬
gate' imports are subject to the
penalty
rates,
indicates quite
clearly that we are dealing not
Simply with a tax device but with
a syfetem if or restricting excessive
import) demand through high ex¬
change rates.
In'! my; opinion we shall find
a system of multiple
currencies originating in inflation
tends to disappear once the infla¬
tion is brought under control. In
the later stages of inflation costs
coritinue to rise until they meet
that in time
prices.
Exports become unprofit¬
able at rates of exchange that are
bilateral
assure
for exchange in such a
that the rate is kept close to
the
parity
established
by the
Fund.
Failing such controls it
way
would be normal to expect a pat¬
tern of exchange rates in which
I believe that
cur¬
are
used for tax purposes, will
course
of time disappear.
in the
As a
first condition it is important to
cross-
vertibility and multilateral trade.
When the Fund
the
flation
it
expected that few
was
the
be
I
might
perhaps mention a
technique
commonly
used
in
European trade to secure balance
at
prescribed
exchange
rates
where the relationship of prices
during
The Fund
intended
was
as
a
of
assuring an orderly pat¬
tern of exchange rates even un¬
rates is not equally
be done through cooperative ac¬ satisfactory in both countries. As
tion of member countries in keep-, you
know
some
countries in
ing exchange rates at approxi¬ Europe enter into agreements un¬
der such conditions.
This
is halted it will be found
and exchange
to
was
mately the parities established by
der which total trade in
commodities
and
soon
that
a
on prices
exchange rate is
encourage
exports.
creep up
new
to
necessary
Furthermore, a change in world
demand might reduce the excep¬
tionally high prices received by
some exporters and necessitate an
adjustment
in
local
currency
prices of their products to enable
them to continue to export.
,
It is this combination of events,
halting inflation and
the
sellers'
change in
that offers
a
market,
the most favorable
eliminating
opportunity for
multiple
currencies.
At that time the establishment of
a
parity at the penalty im¬
rate will be helpful. I be¬
new
port
lieve
shall
we
countries will
find
that
some
reach the point
where the elimination of multiple
soon
practices and the estab¬
currency
lishment of
a
uniform parity,
new
adequate both for encouraging
exports and limiting imports, will
be possible.
Disorderly Cross-Rates
There is
tries
whose
volved
currencies
The
But
perhaps not very great.
they can cause serious and
unwarranted
doubt
ing
a
these
in
regarding the
mak¬
at the overvalued
crowns
ter.
ridiculous
rate
of
Italian
for
than
to
$2.60 for
market
be
have
and
a
a
are
an
cross
rate
of
$4
ilar
encourage¬
Englishmen to export to
to import from.; the
United States. \ Furthermore, dis¬
orderly cross rates through com¬
modity arbitrage can deprive a
country of the dollar proceeds of
exports of its own products and
agreements.
solution to this unsatisfac-
The
tory situation of multiple, prices
based on distorted exchange rates
.
.
is
obviously the restoration of a
reasonable
relationship between
prices and exchange rates and the
convertibility of currencies. Until
that is done, I am afraid we shall
drain its limited reserves to pay
for re-export of dollar imports to
other countries.
countries the rates of
pattern of exchange rates among
to depend upon such trade
agreements, domestic price equal¬
ization funds, and quite extensive
state control of export and import
trade
in order to maintain an
exchange that prevail for differ¬
inconvertible currencies. The first
orderly pattern of exchange rates.
special aspect of piultiple currencies which has again
a
become
ent
of
importance
some
since
currencies
not
are
in
con¬
formity with the cross-rate pari¬
ties established by the Fund. In
Italy, in Greece, in some coun¬
tries in the Middle East, and now
in France, where this was done
despite the objection of the Fund,
so-called
free
markets
prevail,
generally for dollars.
In these
countries
the
cross
rates
of
quotations for such currencies
the
dollar
within
and
the
sterling
the
as
not
established by
limits
are
the'Fund.
It is easy
conclusion
realistic
to draw the mistaken
such
exchange
that they represent
from
quotations
valuation
of
a
The
currency.
disorderly
cross
rates that
the normal conseauence of a system of inconvert¬
ible-currencies where cooperative
action of the type represented by
the Fund is not being carried out.
Suppose all currencies are in¬
convertible in the sense that they
cannot be transferred by the ex¬
porters of one country to the im¬
porters of a third country. Then
trade between any pair of coun¬
tries must be balanced bilaterally
except to the extent that one of
the trading partners is willing to
use gold or U. S. dollars to meet
emerge
are
its adverse balance with the other
country.
There
the
I refer to the fact
war.
In this special case what
three
are
is to
an
have
assur¬
orderly
gold and. U. S, dollars to
use
settle
of
means
ing the continuation of
balances
adverse
cur¬
I revert
rencies, at least to the extent that
the monetary authorities are pre¬
to
imports
authorize
an
exports.
over
I
This
the
is
what the United Kingdom does in
most of its trade with the Western
Hemisphere.
The
have the creditor
late
balances
of
is
second
country
the
ports
The
and
to
this
are
the
during the
course
of
a
countries
pean
restrictive
of
trade
between
them,
are
still too high to be
attractive to American importers.
As European\export
capacity in¬
exports attractive to
dollar
mar¬
kets.
There is one possible miscon¬
ception that should be dealt with.
There
be
a feeling on
the
people that if Euro¬
pean exchange rates
and prices
were
properly adjusted the dollar
shortage which these countries
may
part of
are
some
experiencing would be
rected.
I think
for such
a
there is
view.
no
cor¬
basis
The
great
need
for real
in
resources
these countries.
In part, this may
reflection of the phenomenon
Much
reflection of
these
the
countries
economies
than
more
it
is
a
urgency felt by
to restore
their
much
they
quickly
more
capable of doing
with their own output. Extremist
politicians are prepared to prom¬
ise the public increased produc¬
are
tion
and a higher level of con¬
sumption if only the blessings of
to
resources
If
a
a
recon¬
and
by the
has
been
rela¬
we
look at it from the other
find that in the
imports are
considerably below the level that
might reasonably be expected on
mini¬
States
the basis of
mized by accumulating moderate
balances of the currencies of the
economic
we
total
national income and
activity. Starting from
debtor or by utilizing moderate the American position it is clear
balances of the currency of the that United States imports fall
creditor.
Perhaps' such a solution short of what might have been
for assuring an orderly pattern expected on the prewar basis for
of rates among inconvertible cur¬ a number of reasons. First, sources
.
while
maintaining something apaproaching the prewar standard
oi living.
Added to this, there
have
been
failures
the
maintaining
unfortunate
the
and
crop
difficulties
normal
of
supplies
of
fuel.
The dollar shortage in Europe,
therefore, reflects not so much a
failure to export to the United
States in
adequate amount but
a general
shortage of resources to
meet the exceptional demands for
investment, for consumption and
for government.
Of course, if im¬
ports from the United States
made
were
expensive
enough the de¬
mand for such imports would fall
off.
Alternatively,
without
aid
from
the
United
for
mand
such
restricted.
States
the
de¬
imports will
be
I would not
a
crease
to
extent
some
their
ports to the United States.
ex¬
This
would
not solve, to a significant
degree, the present dollar short¬
age.
It might in some cases ag¬
gravate the inflation problem. In
any instance in which a worth¬
while
change
dollar
area
in
exports
to
the
would result from
an
adjustment of parity, the feasibil¬
ity of such a measure should be
considered.
At any
rate, it is not
the present but the future balance
of payments of Europe that must
be
brought
into
equilibrium
through an adjustment of pari¬
ties
as
well
as
other measures.
Conclusions
It will be
helpful to summarize
the many things I have had to say
in preparation for the discussion
which
we
First:
United
be
when
exports.
point of view,
then
time
with the general increase in Euro-
as
approximately the parity
their currencies. Short period
could
a
large in trade with each
other. Exports from Europe to the
dollar area have not kept pace
reasonable balance in their pay¬
of
ex¬
was
ments at
fluctuations
not
increase in exports of Euro¬
pean
permit,
year,
country
tively
involved will agree
between them which will
imports. Rubber and silk are
such imports commodities. Thirdprice levels within Europe, though
deny that
large and general depreciation
of European currencies might in¬
per-*"
at exceptionally
high levels. But the fact that ex¬
ports have increased is not final
proof that these exchange rates
are
satisfactory.
Unfortunately,
best be made ef¬
export and import policy
of
investment
of
use
government
fective if the two countries whose
on an
test
devoted
was
and
struction
practical matter this third
of
maintaining
orderly
currencies
at
done
was
when the
will balance the supply
approximately the parities es¬
tablished by the Fund.
can
practical
European
countries
encourage
cross-rates
that
large part of the output of these
ex¬
at
means
said
have
ports during 1947 rose steadily,
approaching in many instances
and exceeding in some instances
the 1938 volume of exports, and
market
a
the
Western
accumu¬
imports by
the creditor country and to limit
imports and encourage exports by
the debtor country until the de¬
mand for exchange in the free
As
question that
a
mitting the exports of these coun¬
tries to flow.
In
nearly every
currency
third is to limit
I
rates established by
Fund would, on the whole,
meet
of
the debtor country, at least within
moderate limits. This is what hap¬
pens among most of the European
countries wit£i payments
agree¬
ments.
to
now
before.
raised
the exchange
of
excess
Direction'
Exchange Rates and
Of Exports
between
countries with inconvertible
pared
cer¬
tain
Denmark
under its
Actually,
Finland,
counttries with whom it has sim¬
mar¬
and
for Danish but¬
crowns
charge
ment to
Italy
need of the United States for
does a state economy were adopted.
trade Responsible politicians must com¬
agreement, a considerable higher pete with such impossible promises
price for butter than it does Bel¬ by pushing as far as they can re¬
gium, Poland, Russia and other construction and modernization
cur¬
in the
sterling in the American
ket? Such rates
in Danish
more
sterling
export. Second, the
has
brought
important
changes in technology and in the
war
inflation.
tendency to relate the
a
lateral trade with convertible
could
being
are
investment
of
is
exchange rate for the Finnish
mark, Denmark offsets this by
quoting to Finland higher prices
exchange
What
resources
domestic
than
a
Danish
se¬
currency
rencies.
for
rather
be
stability with
convertibility. They dis¬
tort trade relations so they no
longer become suitable for multi¬
curing
more
used
shortage of
dollars in Europe is very
largely
a
reflection of the exceptionally
example, if Denmark buys woodpulp from Finland at inflated
Finnish
prices
converted
into
currency,
difficult the task of
more
detail.
commodities
prices of the export goods to the
prices of the import goods. For
is
future value of
tively
there
Fund Agreement. The immediate
harm done by disorderly crossrates
trade
specified
set out in
is
be either at world prices
(generally dollar prices)
or at
prices stated in the agreement.
When
stated
in the agreement
cooperating to
provisions of the
the
production.
may
in¬
are
not
are
out
carry
imports have not
restored
there may be a need to
adjust either, prices or some ex¬
change rates to make European
Trade Agreements
curren¬
convertible
transition period.
fully
This is true of the Far East; it is
also true of Europe. In the case of
creases
the Fund.
inflation .which
that costs
are
Prifces and Exchange Rates in
established
was
Where cross-rates dif¬
makes
fer considerably from the parities
necessasry the use of penalty rates
to restrict imports. When the in¬ of the Fund it is because the coun¬
halt
they
fer from country to country.
means
reasons
that
inevitably dif¬
rates would almost
Agreement
practical matter multiple
rencies, except where they
arise
not
does
the essential condidition to restoring currency/con¬
Furthermore, the pattern of
imports.
For these
to the
parities established by the Fund.
change rate capable of restricting
as a
balance
the
obligation to maintain
parities established by the
Fund. The necessity for bilateral
balance has its origin in the in¬
convertibility of currencies. The
requirement for maintaining pari¬
ties
simply prescribes the ex¬
change rate at which the bilateral
balancing should take place. The
reason
why the Fund insists on
the maintenance of orderly cross
rates based on these parities is
balance
cross-rates do not conform
seem
the
demand
cies would
.
times'50%
will
as
from
including capital transactions. Of
course, import and export con¬
trols may act on the supply and
rate suitable to exports
will prove in fact to be the ex¬
change
tary authorities have made in¬ The fact is that under present
so-called
free
creasing use of the device of conditions these
charging penalty-rates for ex¬ Quotations are wholly unrealistic.
change to pay for imports of non¬ They are the result of an arbitrary
essential'and luxury goods.- The determination by the monetary
fact 'that' in the category of non¬ authorities to place a value on a
essential
gbods we often find currency in a so-called free mar¬
commodities consumed by people ket through the licensing system.
of Very modest
have is in fact ad hoc convert¬
of the currency of the
deficit country into that of the
creditor country.
Without this
condition, exchange in each coun¬
try will be quoted at such a rate
,
all exports, except copper and ni¬
that in
,
of United States
rencies will
used
simply as a means of collect¬
The high selling
rates for exchange are used rather
as
a
device for restricting im¬
unattractive to
23>
you
end of the
revenue.
(919)
ibility
penalty rates
To induce the con¬
tinued flow of exports there is a
tendency gradually to extend to
exporters the privilege of dispos¬
ing of their exchange proceeds at
imports.
change is sold. But in many cases
multiple currency rates are not
ing
CHRONICLE
too much below the
non-es¬
sential and luxury goods with the
tax collected at the time the ex¬
FINANCIAL
for
.
buying rates and selling rates for
foreign exchange. The typical sys¬
tem of this sort involves a buying
rate for exchange derived from
&
THE COMMERCIAL
Number 4676
Yolume 167
initial
can
The
now
have.
Fund
accepted the
parities communicated by
its
members, with a number of
countries withholding the deter¬
mination of their par values. The
main reason the Fund accepted
these par values is that it was be¬
lieved that they would permit ex¬
ports to flow from these countries
during the first year or two.
Second:
Exchange rates in a
number of countries will have to
(Continued
on page
24)
24
THE
(920)
COMMERCIAL & FINANCIAL, CHRONICLE
Thursday,, February 26, 1948
The
■V;if'
(Continued from
Of
in
the
tell
(Continued from page 23)
changed in the near future
because they are interfering with
the flow of exports. In some in¬
stances a change in parity is over¬
due but has had to be delayed in
be
permit other measures to
order to
be tflkGHi
When
country is suf¬
a
from a progressive infla¬
tion a change in parity will not
be effective in assuring the con¬
fering
The
exports.
of
flow
tinued
policy is to
have the
parity preceded by a
program to stabilize the
proper
in
change
forceful
there is
countries
In
Fourth:
which
in
immediate prospect of
110
rapid inflation under
control
a
fluctuating
exchange
rate can be justified as a means
of permitting exports to flow un¬
til the situation improves. Both
the country and the Fund must
bringing
in'the
a
meantime
seek
means
to
bring the inflation to a halt and to
restore an orderly exchange sys¬
tem.
,
Fifth:
some
catch
the estab¬
parity at ap¬
with prices
up
lishment
of
new
a
future
of .building
quickly caught my meaning,
laughingly admitted that he
tell
me
precisely what
embark
the economic future holds.
on
general
a
adjustment
of parities, either now or later.
The adjustment of a parity to
international
tion
of
country
a
that the Fund
taking
by
economic
can
each
is
posi¬
problem
a
with
best deal
separate
and
The point I want to
is
that
building costs cannot be
and kept in a vacuum
where they will not be subjected
to normal economic forces.
told
•
tained
end
without
on
onerous
international
Fund will be
restric¬
The
trade.
prepared to discuss
with
any
country a change in
parity that may be necessary to
permit its trade to develop. The
Fund will not insist on the empty
shell of exchange stability if this
We
sion of world trade.
The
has
Fund
respon¬
sibility in securing the establish¬
ment of a pattern of exchange
rates which
will permit inter¬
the help
of
intelligent public
an
of
cast
of
some
know it didn'
Some people even went
the limb
Today
with
beset
are
we
an¬
of viewers-with-alarm,
we have priced ourselves
of
market
a
forecast
and
a
drastic reduction in
building costs
before the end of 1948.
If they
predicting calamity each
keep
on
year,
it is possible there will
time when they
a
don't [know
we
Right
just which
now
;'
it will be.
year
come
nghtj but
are
ip view of today's
conditions—with high wages, the
now,
tremendous
unsatisfied
demand
for
the
Fund in reasonable and real¬
quent
with the
exports
adequately
rate of exchange.
encourage
imports
same
Sixth:
The
currencies
of
inconvertibility
in
resulted
has
dis¬
orderly cross-rates in some coun¬
tries
free
so-called
which
in
ex¬
change markets exist. Such dis¬
orderly cross-rates can be over¬
come
through cooperative action
of the type contemplated by the
Fund."
The
establishment < of
,
istic
policies.
Constructive
criti¬
cism cap be very useful ip keeping
the Fund
aware
of its duty and
urging the Fund toward
a
in
positive
policy when it is inclined to let
things slide. It is my hope
just such people
tinue
to
Fund
and'that
watch
as you
the
you
will
that
'con¬
of
work
the
will not hesi¬
building
and
costs
conse¬
lowering of realty values
today's property
is several
on
years away.
this because right here in
Metropolitan New York we have
backlog
of
than $3,750.construction. This,
of
course,
includes heavy con¬
struction as well as light. con¬
a
000,000 in
more
new
struction,
such
houses
Douglas Hartshorne
Executive Consultant
servers
Seventh:
have
area
the dollar
Exports to
been
not
large
as
as
of
ors
of
the
New
New
York,
parity
Finally, in
number
a
wartime
the
of
coun¬
inflation
has
been kept from manifesting itself
in higher prices and costs through
such devices as price and wage
rationing
control,
At
time
some
in
subsidies.
future, it
and
the
will be desirable for countries to
these
abandon
measures
in
Mr.
York
Stock
Ex¬
gen¬
Dalby,
order
executive consult¬
Hartshorne T
served
of
Strategic
Services
for
two
years.
Clare M. Torrey Partner
In Van Alstyne, Noel
Clare M.
to
Torrey
on
March 1 will
give the economy greater free¬ become a partner in Van
Alystyne,
dom in adjusting itself to changed
Noel & Co., 52 Wall Street, New
conditions. Obviously, the restora¬
York City, members of the New
tion of a greater degree of eco¬
York Stock Exchange. Mr. Tor¬
nomic freedom can best be under¬
rey has been a partner in Cohu
taken when current production is
& Torrey, from which he will re¬
adequate to meet current needs. tire on Feb. 29.
At
such
tion
a
of
stage the latent infla¬
the
solidated
past
be
may
con¬
through
permitting a
rise in prices, through extraor¬
dinary
taxes,
or
through
the
blocking of currencies as has al¬
ready been done in a number of
it should in
the
industry, such as
Holden, President &o.f
S.
expansion"
Harry Ellman Rejoins
Cantor, Fitzgerald Co,
which
will
"mean
larger; construction volume;, than
we
retired
Exchange in 1938.
with government war
agencies and was with the office
He
should be considered.
measure
tries
such
currency,
of
Thomas
from the Stock
a
as
future.
near
the F. W. Dodge Corporation. The
ants.
of
building industry
other day he said the country is
headed toward "great economic
exports to the dollar area would
from
adjustment of the
result
the
once
it will be sat¬
Hartshorne, former
Douglas R.
where
in
and
member of the Board of Govern¬
change, has been appointed
increase
isfied
there
really gets going,
eral manager of Blackett &
worthwhile
mand is
the
might reasonably be expected. A
general change in parities is not
justified at this time in order to
meet
the
dollar
shortage;
but
a
think
doing.
are
had
before."
added;
"When
ever
He
I
speak
of
similar
view
by
John
expressed
was
Vice-
Perry,
President of the Turner Construc¬
tion
Company.
needs
and
dustry from
and
noted
for
except
the
conversion
war
that
of
ment:
on
thjs
will be active in the organization's
the plane
Trading Department.
some
cases,
no
change in parity will
doubt,
be
a
neces¬
sary
tq
restore
the
situation
created by the consolidation of
wartime
I-have
necessary
is
no
inflation.
said
to
Thomas K.
about
all
indicate
occasion
to
that
that
be
is
there
complacent
about the present pattern of ex¬
change rates. It is far from sat¬
to
Hear
Finletter, Chairman
Of the Air Policy Commission, will
be guest of honor and speaker at
a luncheon meeting
of the Bond
Club
of New York to
be held
at
The Bankers Club of March 8,
help to¬ T. Jerrold Bryce, Clark, Dodge &
meeting future balance of Co., president of the club, anpayments problems can be derived' nounced.
isfactory.
Considerable
ward
...
.
in
our
population
and one doesn't have tq
long
as
costs of
or
Bond Club of N. Y,
York.-
money
now
New
by
the
Building Congress, the Building
Trades Employers Association and
the
Building
and
Construction
Trades
Council, A. F- of •. L., to
about real stabilization of
bring
*-
;
High
prices
in
and
relation
....
,
.';.V ;
forthright
m,ade at
a
announcement,
time when others were
holding back with
"let's-wait-
a
and-see
attitude," came as a wel¬
impetus to a lagging build¬
ing industry.
Management and
labor, through this pledge of co¬
come
operation, high
ban
a
productivity and-
jurisdictional strikes
on
-
re-
vv.';
,,
This small spotlight of hope and
industry, expressed by
the Cardinal, soon began to spread
its influence and light the wqy tq
broader achievements-. M 9 y 9 f
.
lead in urging the wage stabiliza¬
tion agreement.
As'
result
a
work
on
?,•.».»
"
this
of
intensive
the part of leaders in the
industry—both labor and manage¬
ment—there already is concrete
evidence that building costs are
beginning to firm and stabilize.
But
once
wages
frozen,
are
the
next imperative step is for build¬
ing
material
"manufacturers
and
distributors to get their prices sta¬
bilized.
Without
firm material
prices,
wages
the effect of stabilized
will be minimized.
i; That fold bugaboo—the escala¬
clause—is creeping
tor
material
and
that
contractors,
back into
As
contracts.
we
builders
asking
are
..everything possible be done
eliminate it.
There is another disturbing con-
dition which I would like to bring
to
postwar
our
to your
with
a
•
>
reasonable
will not
it
be
expectation
exceeded
job,is completed,
Great
be¬
attention and solicit your
support in eliminating.
A,'.
\
-
The
ther
from
the
truth.-
industry know it.
'"As Tom Holden
v-r-f-}
We
in
the
kyrQ&ty?--'-'":''''1*'-?
once
said:
"If the American
ployers Association, working with
the
its
been
made
through the Building Trades Em¬
Building Trades Council, tp
negotiate a stabilization agree¬
ment, under which wages, hours
and
working conditions of the
250,000 construction, workers in
Greater New York will be frozen
30
months, or from .Jan.
June 30, 1950.
r
represents
six
in
1,
overcome.
-
in¬
Today,
building trades class¬
program,
a
buildings on substantially
they are now. There is
the Mayor is working with the
unions which have not yet signed
in
an
accomplishments, and, by 'thfe
high
competence
of
its
average:
accomplishment,
they will learn
to
be
proud
of it. They must
somehow be
brought to realize
that
you
cannot have diversity
flexibility without a large
of freedom, and that you
cannot,
have
freedom. without
tolerating a fair degree.of varia¬
tions in competence and in busi¬
ness practices. As I see it,
(the way
to
improve the industry's effi¬
ciency is to liberate it from the
and
measure
months of
bar¬
which seemingly
and
thq stabilization
ing
effort to. bring-' .them .into
"
little
monopolies
and ',the .petty \
restrictive
systems that
forward progress." > ■
impede its
v .7
^
As I summarize my
remarks to
tonight, it seems to me that
given you too definite
a
prophecy as to the trend of
building .costs. In review it/?gems
you
I have not
to add up
to this;;;
^
(i)
I see no prospect for
appreciable reduction in costs
the
Progress has been made in iron?
near
(2}
.
*-T.
an
future.
The building
industry
in~
Metropolitan New York is making
every effort to stabilize costs.:
(3) When costs are substantially
of stabilized, I believe that lending
ing out existing differences and it
appears likely that the stabiliza¬
tion program will be formulated
rather than follow the will-
in
a
short time.
Even if
some
the unions don't
be well adyise4 J"
actually sign the institutions
years."- •.
acpord, it is believed they ".will to cooperate in meeting
thq-tre-'
As I have repeatedly empha¬
negotiate paralleFagreements with
sized, today's building costs are employers incorporating the prin¬ mendous demand for all types of
not out of line with our
buildings.
V '
r' '•
general ciple of stabilization.
''.V -v.;:'"
•
•
people can be.
persuaded to appraise the con¬
struction industry by the best of
has
progress
five-man committee appointed by
of-the-wisp of materially lowered
building costs ip the next few
j
.
Through the influence
and prestige of Mayor O'Dwyer,
who was instrumental in originat¬
concluded; "|f<iOne
a
building and can make,
with it, he should build
V
.
This
construction
institutional build¬
hut
relative,
workers.
s
ings.
to
■
ifications; havp accepted fhe agree¬
ment, covering a majority of the
speculate
the
of long-needed
public has been bombarded
with reckless propaganda which
now
is to stop the rise in prices has pictured the building industry
and get building costs stabilized, as "monopolistic," "archaic", and
even
at today's [level.
That ac¬ refusing to adopt modern methods.
unwarranted
accusations,
complishment alone would be the These
by
misinformed
critics,
greatest
single
contribution
to made
would
have
the
public believe
stimulating a high level of build¬
that v the
industry
deliberately
ing on a sound basis.
We must
bring about a situation wherein a maintains extortion prices and is
builder can give an owner - a cost deliberately retarding production
estimate on a building operation of housing. Nothing could be fur¬
29 of the 40
trend
the Archdiocese
in
50-centv dollar
are
today's
on
;
economy, we may as well accept
the fact that they are here to stay.
The
all-important consideration
Perry
needs
Metropolitan
represented
tq what is going to keep,
enduring decline."" ;••"•
Mr.
in
as
gaining
little likelihood of any substantial
In
condi¬
new
effort being made by the building
surmountable obstacles have been
"Couple this fact with the
change
able.
the
far, I have emphasized that
opinion there is no reason
to expect a substantial decline in
building costs for several years.
More important, I believe, is the
resolved
com¬
tions, reconsideration of the parity
of the currency would be desir¬
With
So
This
to peacetime use
the accumulated
to make
If they continue to sit
long and arduous collective
in¬
demand for buildings and hous¬
ing "is staggering in its immen¬
sity."
He went
overly inflated
are
in my
1948 to
war
unrealistic
conclusion * that
the
,
led
a loan—there won't be
any need
for one in the buijlding industry. ,
for
He pointed put the
building
of
be
as well prepare pow for a rude
awakening, if such cifcumstandes
do materialize, you can rest as¬
sured that we will bq; in the bot¬
tom of a depression and you won't
be able to beg someone to take
fact that America has done very
little
themselves
expectantly on their deposits, an¬
ticipating a return to a prewar
level of building costs, thqy may
fore the
recently
large-
in
York
faith in the
that
of."
lending in¬
finance
maze
come.
a mere
A
which
expended
does
thing
care
be
of New
spohded admirably>v
ferred
have been taken
other
Ho
the
they must be prepared to accept
the major blame if a depression
yond
measurably 4, be¬
catching up with de¬
demands; even that will
probably take another two years.
I do not share the fear, held by
some people that there must be a
depression aftdr deferred demands
an
decline is likely soon, then
a
that
goes
vital to
so
building and housing devel¬
economic expansion I mean some
Harry Ellman has returned to
Cantor, Fitzgerald & Co., Inc., 61
Broadway, New York City, in the
capacity of Vice-President.
He
countries.
scale
based
My views, I believe, are cor¬
roborated by better -qualified ob¬
we
and
stitutions
apartment developments*But the
fa6t remains; the trertiendous de¬
tating the restoration of converti¬
bility of currencies.
tate to let us know what you
credit
on
banks
costs.
of what
cross-rates
the
and
as
of
building industry by
announcing that $25,00.0,000 would
expanding construction market. If
industry
I say
through co¬
operation is important for the
purpose of maintaining confidence
in established parities and facili¬
orderly
strings
and
other crop
Credit1
menacing danger
signals being flashed in our path
today is the tendency to tighten
the
philosophy of. fear.
demonstrated his, faith in the fu¬
the
building coks
Cd$t&increased15%.;
Not Priced Out of Market
out
of
tq
it
to
One
a
duced
limit
Tightening Construction
thinking
pened?
economic defeatism, to aban¬
the
ture
through
hap¬
problems and which will support
to
prepared
job expected of it.
20% drop in building costs
a
before the end of 1947. What
housing as well as consumer
goods—it seems to me sharply re¬
possible
to do the
let
as
opinion which understands these
and
don
opments
on
the penalty rate for
non-essential imports will make
proximately
come
industry is equipped and
to fore¬
far out
so
by
You
1947.
who say
great
a
were
happen.
would have the effect of hurting a
country's economy and the expan¬
of the
public
isolated
domestic
measures to assure that the pari¬
ties they now have can be sus¬
tate to urge on countries
The* idea- of wage; stabilization
'
industry ^nd grew out of a speech made last
firmly
realize - that May at a Building Congress lunch¬
there is no such thing as a return eon
by His Eminence, Cardinal
to the prewar price level, then, Spellman, At that time he
issued
and
then
only, can we move a challenging appeal to all Amer¬
ahead with
clear
thinking and icans to unite in the fight to over-.
elements
ous
the
firm confidence that the building
emphasize
the
calamity
howlers
and *viewerswith-alarm
early
in
1947
that;
there would be a serious break, of
almost depression
force, by the
as
case
it arises. The Fund will not hesi¬
Multiple currency prac¬
national trade to be restored and
tices involving penalty rates on
to grow. To perform this duty the
imports are a reflection of the
Fund must be alert; it must not
difficulty in time of inflation of
restricting imports through the hesitate to speak frankly and to
rate. As inflation
is stand firmly for its ideals. In per¬
exchange
brought under control and costs forming this duty the Fund needs
»
He
ex¬
couldn't
tions
domestic economy.
the
you
and Til
costs."
adjustment of
■
economic structure. Once the vari¬
9)
page
years,
change rates. There is no reason,
however, why the Fund should
the
.
Third:
from the
five
next
v
,
.
,
.
THE
& FINANCIAL CHRONICLE
COMMERCIAL
(921)
credit is and will be
increasingly
tighter and will cost more, unless
Implications of Changing Credit Conditions
_
,
•
*
.
Atmvir
.
(Continued from page 2)
banks would have been out of the
lending business completely long
penditures available to business
i '
from depreciation reserves, in the
before the end of the war, even to
for
the
extent
of
purchasing
i
absence
This
as
the
a
to many of you, in as
it has been customary to
think of the banks of the
country
as
bulging with money all during
In this
the
kind of
borrower
a
situation, had
been
anyone other
than Uncle Sam there would have
been an almost irresistible ten¬
dency
tially.
for
ments
including
rates
to
rise
Government
substan¬
bond
favorable
a
.
,
condition
'
it would
have
of
of
sale
their
government
bond
hold¬
ings to take care of private credit
The
credit
ex¬
.
JL
-
to
—
credit
4i rf 1*^Iat1
tighter
,
that
was
overborrowed
the
as
us
In January of this year the Fed¬
eral Reserve Banks took two ad¬
technical
ditional
steps:
First, in
rediscount rate from
1% to 114%, and second, in the
upping of reserve requirements on
demand deposits in the two cen¬
cities
Reserve
tral
of
York
New
and
Chicago from 20 to 22%.
Federal
Reserve Board is
The
now
asking Congress for legislation to
tended
hold
commercial banks to
all
in
cash
or
short-term
gov¬
.
government
of
its
last Victory Loan
drive, and sim¬
ply used the proceeds of its bor¬
rowings
for
tirement.
immediate
It
debtx re¬
subsequently retired
additional ..debt ' through
surpluses.
The effect of
..
process
concerned
lent to
the
far
as
is
,
budg
such
banks
somewhat
having
bank
the
as
are
equiva¬
retire
charging his account.
The
result
is that loans (or in this case
gov¬
ernment bond holdings)
on
the
asset side go
down, and on the li¬
ability side deposits decrease
respondingly.
:
,
Postwar Increased
LYy
;
cor¬
,
climaxing at
the end
of
1947,
the
was
gradual
unexpected
mounting
de¬
mands
Of
business, individuals
and
agriculture
for
borrowed
funds.
While
out of
ing
the
capital
had in the
they
with
than
work¬
more
they
came
had
ever
history of the country,
nevertheless
themselves
<
corporations
war
the
soon
victims
■<
found
of
con-
stantly rising prices, huge unbal¬
anced
inventories
due
to
short¬
ages, a premature slowing down
of receivables, in many cases re¬
conversion
losses, a spiraling of
costs, and plant renewal and
wage
expansion
requirements.
combination
work
of
these
The
factors
quickly showed
that
at
what
had
been
ance
of working capital was actu¬
ally
take
considered
substantially
care
Added
of these
to
tremendous
credit
this
an
abund¬
inadequate to
contingencies.
demand
increase
outstandings
in
as
a
was
expansion faster than pro¬
duction can be enlarged is infla-,
the
consumer
result of
essence,
consumers
and
through
time
the passage is nar¬
room for foreign
make
selectively as to
with em¬
phasis on production as against
speculation
and
non-productive
to purpose,
and as I have said be¬
fore, rates have increased mate¬
rially. The Federal Reserve Sys¬
tem - began
to use some of its
broad powers to influence bank
purposes,
additional
loans."
This is
a
nat¬
ural
assumption, but fallacious
reasoning. Yes, we did look upon
government bond portfolio as
safeguarding bank liquidity. Even
the longer maturities were looked
upon
as
easily convertible into
cash.
But
the
banks generally
cannot now sell their governments
our
a
this
A contin¬
commodity market
might
well
remove
the
of last year.
terially. It wasn't very long ago
that it required official selling of
long-term_
treasuries
to
keep
prices from rising.; Now, we have
to have official support to keep
them from falling. During the six
weeks'
the
period ended
Federal
Reserve
last Dec.
Banks
term
the
treasury
market.
money
bonds
-This
to
action
of swollen
put
into the banks, making the
are
to
reluctant
liquidity in the face
deposits. All in all, the
simple
truth is, banks cannot
freely make additional loans to¬
day.
The Anti-Inflation Program
ac¬
support
banks
weaken their
24
quired almost $2 billion of longer
volume of business to keep
There is
a
factor in addition to
banks'
make
outright inability to
loans freely that will also
affect
the
credit
situation
today,
and that is the American Bankers
within
Third, put your fi¬
nancial
house in the very best
possible order—contract and con¬
solidate rather than expand.
Do
possible to improve
working
capital
position.
not least, as I have me¬
everything
your
restrictions,
frame
but
I
doubt t very
much if it would have the effect
of
reversing the trend toward
tighter money.
The situation
have
described
particular
then
effect
will
have
the
on
distrib¬
a
of
utors
dicated
before, get yourself in a
mind to expect to pay
of
for the loans you
will need
business, and to
charge more for credit to finance
your sales. And of course, be pre¬
pared for a substantial tightening
more
to
carry on your
heavy machinery and
equipment due to the special fi¬
of terms.
nancial factors
these suggestions.
I have not in¬
tended to indicate any lack of con¬
dustry.
that
peculiar to this in¬
These
factors
first,
are,
sales generally require
onger term credit; that is, financ¬
ing over periods of one year or
your
do
Please
misunderstand
not
fidence in your industry's future.
The present credit situation is not
result
of
lack
does
not
buy at
create
enough funds to
prices. Longer term
new
credit
will
heavier
under
be
than
pressure
infinitely
short-term
credit.
Next, your financing is
done by both banks and finance
companies, and this can give you
little
comfort
companies
the
because
just
are
as
finance
restricted
as
from which they bor¬
.Already they are faced with
ceilings on thd credit available to
them. The balances they are re¬
quired to maintain against their
banks
row.
fixed
lines of credit
have
had
to
be
materially increased, thereby
reducing their cash available for
equipment financing.
And
last
not
least, their interest costs
definitely up.
There is another
though many of the postwar pub¬
lic works programs will be tem¬
porarily shelved, there will be a
sufficient number started or con*,,
tinued
to support a healthy and
profitable sales volume.
May I
assure
you
that
the
country's
credit
system
is still strong—
probably the strongest in its hie*
tory—and that sound credit requirements of business will be
met, particularly if the financial
management of business is alert
and
on
And
its toes.
now
two
or
with respect to what you as cit¬
izens can do to fight inflation. As
bankers
that will help to increase the sup¬
this credit situation to
ply of needed goods. As borrow¬
ers, business and individuals can.
the
is
avoid
significance to you.
increasing tendency to
hold equipment for rental or, put¬
ting
it another way, your cus¬
preference for rental vs.
purchase. A tighter money mar¬
ket might well increase this pref¬
erence
and substantially increase
tomers'
rental
your
it
event,
dealer
business.
would
require
inventories
more
and
such
larger
the
need
dealer credit.
view
situation
In
of
the
present credit
industry is
un¬
your
both certain to
ienced
steadily
heavier
inven¬
tory requirements; these may con¬
tinue
to
increase, and in such
event s the
present
shortage of
credit will certainly be felt. Your
sales
forces
will
have
to
work
loans
home
urge each and every asso¬
ciate,
employee,
neighbor,
and
acquaintance to adopt the follow¬
ing five ways to fight inflation:
some financing
With respect to terms
assuredly
down-payments
are
encourage
ings bonds, thus relieving infla¬
tionary pressure and preserving
today's spending power for future
opportunities. When you go back
BUY only what you need
problems.
and maturities
can
speculative loans or- bor¬
rowings for purposes that will
•increase inflationary demand for
goods.
As individuals all of us
can buy more United States sav¬
doubtedly due for
most
we
BORROW
only
for
now.
essential
purposes.
.
SPEND carefully
—
avoid black
markets.
SAVE
regularly in
count.
V
a
bank
ac¬
■
INVEST regularly in U. S. Sav¬
ings Bonds.
In
doing
service
so
to
munity, and
you
will be doing
yourself,
your
your
a
com¬
country.
N. Y. Stock
Exchange
Weekly Firm Changes
-
The New York Stock
has announced
changes:
Exchange
the following firm
products out to customers
who can pay. In some lines, not¬
ably motor freight equipment, we
:
;
Watling and William
Lerchen, general partners in
Watling, Lerchen & Co., Detroit,
also became limited partners, ef¬
have
seen
fective Jan 1.
used
equipment
harder and harder in due time to
because
of
sales
the
resistance
price
credit
and
declines
shortage
John
than
before
the
expansion of private credit easier
Association's
de¬
mands, including the urgent need
of Veterans, real estate loans ex¬
than
,
W.
G.
portion of the funds for such
dilemma
anti-inflation
Interest of the late Jerome Hill
in
gram
war.
(
satisfy
the
general
To
housing
ex-
the
of
being forced
to
use
new
credit
situation
pro¬
is, in short,
range
for them as far in advance
-
.
suggestion
a
special
have
In
continues to be great, and the
that
your
f
Marshall Plan will require an ad¬
ditional supply.
Moreover, even
special factor
to
may cause
for
ery
business
peculiar
It
a
Moore,
Leonard
&
Lynch,
just as much as a result of good Pittsburgh, ceased on Dec. 31.
which
is
now
being supply.;,
government authorities
\4v-k.Vy-y
.: /y:Cy:';V''
launched in cooperation with the
Some Suggestions
considered desirable.
The climax
government. This is a plan for
W. A. Fine & Co. to Admit
reached
the
In
closing may I venture to
day
before voluntary action on the $art of the
panded tremendously—again on a was
nation's 15,000 banks to avoid ex¬ make some suggestions, first with G. P. De Veau as Partner
terrifically high cost level.
Christmas when the Federal Re¬
W. A. Fine & Co., 1 Wall Street,
cessive or inflationary increases respect to the financial manage¬
serve Banks lowered their support
Drying Up of Capital Markets
in the use of bank credit. By way ment of your businesses in view New York City, will admit George
price for the key Victory 2%s of
During this period there was a
explanation, this program is in of our present credit situation, P. De Veau, members of the Newconsiderable drying up of the new from 101 to 100J/4, and for the lieu of the plan proposed by the and second, as: to what you as York Stock Exchange, to part¬
capital markets and a serious de¬ bank eligible 2V2S from 103 % to Federal Reserve- Board to com¬ citizens can do about inflation. nership on March 1. Mr. De Veau
"With
cline in the price of high-grade
respect to your financial has been active as an individual
101. The Federal Reserve as .well pel banks by new legislation to
securities.
The market for cor¬
management, ma.y I first suggest, floor broker for many years."'
carry the special reserves I men¬
as the Treasury is presently comif you have not already done so,
tioned previously. I do not know
porate
securities became
sated
and as a result, prices went down m'ited to a policy of maintaining how successful this program will that you form a strong financial
Francis X. Griffin Dead
and yields rose.
a par
Capital expend¬
market for long-term gov¬ be, but in any event, it cannot connection as soon as you can and
Francis X. Griffin, who before
use every possible means to build
itures by business have been run¬ ernment bonds, thus
increasing help but result in a further tight¬
and fortify this connection.
Sec¬ his illness was a member of the
ning annual],y between .$20 and member bank reserves—making ening influence on bank credit.
ond, this is the time to budget New York Curb Exchange and a
The broad significance of this
$25.billion .a year. With only a credit easier. Yet, they are in the
your credit needs tightly and ar¬ partner in E. W. Clucas & Co.,
level
.
of
confidence, in
more.
This results in part from
your industry, or any other busi¬
higher prices, particularly when ness. Certainly the need for condepreciation, taken on old prices, struction equipment and machin¬
move
the
budget.
your
without-taking
and
May I cau¬
Last but
substantial losses be reviewed by bankers and fi
It first permitted a free market up to as much as 50 to $100,000 nance companies.
A tight money
in 90-day Treasury bills, raising per $1 million dollars of bonds situation works against long-term
the yield from % of 1% to almost sold. Obviously banks cannot af¬ credit and more and more pres¬
1%.
Rates on other short-term ford such losses just to make ad¬ sure is bound to be exerted on
at¬ larger downpayments and shorter
government
securities,
such
as ditional loans regardless of
The matter of
how
Treasury certificates of indebted¬ tractive interest rates. For all in¬ maturities.
ness,
were
likewise
increased. tents and purposes they might your paper is sold might also be
The next step was to lower the just as well be holding long-term affected to the extent that you are
Federal Reserve Banks' support paper such as term loans. More¬ more and more likely to have re¬
price for long-term governments, over, loans must be kept within course and guarantees required.
For some time you have exper¬
thereby increasing the yield ma¬ a safe ratio to capital and surplus,
credit in the middle
humanly possible.
tion you to budget them to the
absolute minimum and limit your
general
preoccupation
with inflation controls and credit
are
when
to
of
present
but
Anti-inflationary
aid.
more
as
of
decline
gate all at once, and at
a
start
or
uation
get
industries alike are trying to
action renuires standing in line, and easing
Briefly, here is the situation
Commercial banks are no longer the congestion."
Ygu might say—"why all this
eeking loans. They are no longer
hunting ways to employ their tightening of credit — the banks
funds. A loan solely as an invest¬ still have huge government bond
ment has no appeal. It must gen¬ holdings and the Federal Reserve
erally have an account relation¬ Banks are still committed,,to pur¬
ship or other collateral benefits. chase them; therefore, the banks
Banks are screening all loan ap¬ have available ample funds for
the demand for
automobiles, home
appliances, and other goods, all
on
a
substantially higher cost
In
tion.
rowed
Seeking
Longer
Borrowers
risk and
'■■'■YYv
The next step,
beginning at the
end of the war and
/and
No
plications
Demand
for Loans
Banks
production.
Credit
a
„
customer request
his loan by
a
to
sure you gentlemen will read¬
ily understand from what has
happened in your own business;
namely,
the
tremendously
in¬
creased
costs
of
doing business
today.
am
the rate of increase in
the
foresee at this time.
:V
raising the
heralds
sharper and prolonged de¬
depression than any of
cline
purchases
result
a
markets
.
Federal Reserve Proposals
.
pened
in
much
ernment securities up to 25% of
ernment
has been
replaced by
demand deposits and up to 10%
private credit. Their government
during this period were made
addition to
oond portfolios have gone down of time deposits, in
largely,
however, for
patriotic
the
present
reserves
required
and their loan portfolios have in¬
reasons,
and
therefore
it
was
which for most large city banks
creased substantially.
There has
quite simple for the government
are
20% on demand and 6% on
been little change in the banks'
to control the interest
time
fates, par¬ total
(savings)
deposits.
This
deposits, but a tremendous
ticularly when the funds by which
increase
in
loans and a corre¬ would build up combined reserve
the banks were enabled
to pur¬
sponding decline in government requirements to a possible 45%
chase and finance the
purchase of bond
on
demand deposits and 16% on
holdings. Hence, while there
these securities Were
time deposits. The effect of such
deliberately has been
little, if any, change in
created through the Federal
Re¬
the actual amount of bank credit legislation would be to freeze into
serve System.
Y.short-term government bond hold¬
outstandings during the last year,
The second
significant change the switch from government to ings funds that would otherwise
in
this
general
be available to business and in¬
situation
came
private credit is largely respon¬
about not long after the close
dividuals.
The January National
of sible for the
change in bank in¬
the
war .when
the government terest rates. Another factor aside City Bank letter, in discussing in¬
withdrew large balances from its
from monetary and credit consid¬ flation pressures and bank credit
war loan
accounts with the banks erations that has forced
made this interesting observation
us in the
and used these funds for
".
The rate at which credit is
debt re¬
banking business to
raise
the
tirement.
Actually
what
hap¬ price of our product is one that I expanded should be governed by
bank
change presently taking place
the
commodity and security
w
—-"-I*"'
make
fight inflation.
require
invest¬
t.r»
they have to deflate
'
credit—to
requirements.
by the banks to the gov¬
hnup
rvAiimr
every power
W
i
*
obtained through
capital stock.
In short, the demand for credit
from
every
direction has been
much greater than any of us an¬
ticipated, forcing the banks gen¬
erally to sell a substantial portion
the
as
this period.
»
banks for the funds
otherwise
surprise
much
of
i
Qbtaining the balance in the
equity capital market, business
generally has been forced to go to
single
a
additional government bond.
is a fact which may come
•
the
as
died at his home at the age of 56.
.■
26
Thursday, February 26, 1948 V
COMMERCIAL & FINANCIAL CHRONICLE
THE
(922)
of what is
being said today about accomplishing such ends
by retirement of public debt is definitely open to suspicion
either that the authorities do not know what .they are talking
about or else have their tongue in their cheek.
As We See It
(Continued from first page)
be sustained is by firm adherence to a
policy. This policy must rest upon
a
revenue
system that will adequately meet the cost of
government and its necessary functions, and provide funds
to manage, service, and reduce the public debt.
"In planning our fiscal program, it is not a question
of what we should like to have at the moment, nor is it a
such
integrity
can
sound national financial
to
ferent
view to the
a
long term national interest."
money
far,
so
It is true of course that a
good.
cast upon
reads:
them by the
"What
were
level of material welfare
couraging
stabilize
./:• I .v/
The answer to that question, I
,
approach with some misgiving. I
do not want to sound too positive
*
because, within the
.
try?'
in my answer
decisions are going to be made in our I,
leading industries that will set ,
next
The fact is that
the
in
future
make
the
full
as
they have been doing
as
Reserve banks reduce
a
of
use
that is, of
—
the
is
not have the effect claimed for
their
be
making
in
cer-
,
that point.
on
the break in '
that before
prices occurred, the leading
that tend
to
set the
farm
industries
;
.
the whole coun- •
try had just about made up their :.
minds that'they would be forced '*
wage pattern for
to
give
wage
cents an
a
15
least
What the Reserve banks do will without much
questior
The Treasury
at >;
of
increase
in ;
fringe
and,
hour,
certain
that,
to
addit:on
Fiscal
.
comments
feel
I
Government Bond Market
-
pattern.
And no one
just yet what those
will be.
Nevertheless, '
warranted
feel
great
some
sure
decisions
tain
what
upon
wage
I
course,
volume of credit
it, depending
days,
can
the Reserve banks do.
our
60
the
the assumption that such banks
upon
increases in indus- I
round of wage
outstanding on their books. Thus either the cash surplus
operations about which we have been hearing a good
deal or the forthcoming savings bond drive will or will
next sentence.
expanding economy."
an
unless
This sentence
present high
while, at the same time, en¬
very
seek is to
we
it not for the doubt that
not
reserves
portion of these sentences could mean any one of
serious fault with them
market only
would
good
several
things, and perhaps none of them do more at best than
express certain very obvious, rudimentary principles of
fiscal management, but it would be picayunish to find
So
conjure with.
v
prices.
The first and foremost
question is this: Will the break ,?
in farm prices prevent a
third .
retirement of debt held by commercial banks would re¬
duce the money supply and thus tend to tighten up the
circumstances.
with
to
one
of
some
tive nature of this change in farm
The term "retirement of bank-held debt" appears
have become
to
Increases?
now
possible effects of a construc¬
the
lihood is not great that any debt retirement program
engaged in by the Treasury will have the effect claimed
for it.
consider
Let;'us
Of one thing we may be quite certain. That is that
long as the Federal Reserve banks of the country fail
lighten their load of government obligations, the like¬
so
might be desirable and proper under dif¬
Our fiscal decisions must be made
of what
matter
A Third Round of Wage
r
increases.
since
believe
I
in
break
the
Policy—What Is It?
depend upon the Government bond market.
farm prices occurred they have :
is apparently determined that it will continue to have the
been reconsidering thei r dos; tioh
certain that we know how expansion
market rigged in whatever
can be
degree is necessary to enable it and ! doubt very much if they are I
encouraged at the same time that stabilization is
to borrow at ridiculously low rates.
Apparently only if going to give.in, in the collective ;
sought. Stabilization and growth would appear to be rather
bargaining, in anything like the ;
debt retirement puts a good deal of bone into the
spine of liberal way that they assumed :
incompatible — a fact we mention here merely because this
the Government bond market will the
program as outlined would be inevitable as recently r
apparent contradiction runs through so much of .the current
work out.
as three weeks* ago.
politico-economic twaddle. But however all this may be,
I think the third round of wage ;
either a continuation of the current high level of production
In any event the Administration
appears not even
increases has come in for a very ;
and trade or a growing economy would appear to be what
to have a glimmering idea of what a
important re-examination, and al- >
really sound fiscal
almost any of us would desire. The question is whether it
though there will doubtless be I
policy is.
some 'ncrease granted in most in- ;
is a legitimate function of the Government of the United
dustries.
the; increases
will be.
States either to "seek to stabilize" or to "encourage an ex¬
much
le<s than aopeared likely *
We
not very
are
>
Certainly such an idea is quite foreign
enterprise and individual
initiative. Americans prior to the New Deal have always
supposed it to be the duty of the Federal Treasury, along
with Congress, to find the ways and means of financing the
absolutely necessary expenditures of the National Govern¬
ment, gnd of doing so in such a manner as to interfere as
little as may be with the processes and practices of legit¬
Outlook for Business
panding economy."
to the American tradition of free
imate business.
'
doctrine limited the
expenditures" to what it
appears to mean.
The thousand and one outlets for
funds which have been conjured up in recent years,
particularly during the long and dreary regime of
Franklin D. Roosevelt, would never, never have been
allowed as in any sense "necessary" expenditures. But
now we hear a different story.
If the idea of Professor
Hansen that government outlays should be regarded not
so
"absolutely
much
which
as
necessary
necessary
expenditures for certain services
indispensable to organized social and eco¬
elsewhere, but as a means
of stimulating or dampening business activity in such
manner
that the so-called business
forever
—
cycle will be banished
if this notion is
regime it has given
True, of
no
unacceptable to the present
indication of it.
course,
it is that presumably the Hansen "grand
design" would call for substantial, if not drastic curtailment
of expenditures at this time in order to prevent or at least
to minimize what is popularly termed inflation; and true it is,
too, that no such course is being pursued by the Truman
that
boom is
All
But
only the dreamer who is unfamiliar with
tical
politics could
that
the
have for
ever
a
prac¬
moment supposed
contraction
phase of the Hansen idea would
ever be acceptable to the politician about to appear for
reelection.
Other means must be sought — or so the
"practical politician" is
sure
to reason—for preventing
a
boom, if indeed it is good politics for the moment at
least to prevent a
vented
boom,
or
boom.
eliminated is
some
At most, what must be
some
pre¬
of the inconveniences of
a
of the inconveniences which bear heavily
the great rank and file who vote
on
Election Day.
is
kind
this
of
I
that
believe
not
do
farm 'price
break
mediate
business
near-term
or
the
that
im¬
means; an
in
change
the pace
of general business.; r;:v,
Moreover, when the pace does
change, when business does slow
down, it will be due to causes
having nothing to do with this
break
in
shall
farm
other
to
due
prices.
causes,
refer in
A Break
just
a
to which
moment.
I
And
that,
this
about
tions
of
course,
is precisely what is
now
being
to take up and retire a substantial part
excess
supply of "money" brought into
way
enormous
and
in
other
break
the
ques¬
in
farm
prices
Does this break in farm
mark
a
•
real
and
definite
end of the great
the
of
a
mere
inflationary trend
postwar period?
Or is it
flutter; a mere temporary
interruption?
this,
is
the question is,
break in the
real
a
inflationary trend.
We have broken that major trend.
I don't mean by that to imply
that we are likely to go immedi¬
ately into a sharp and violent
decline in prices. But I do insist
that this sky-rocketing, this wild
runaway
type
of
inflationary
movement
in
commodity -prices
has had its great trend broken
by what has happened in the la£t
great postwar
three
weeks.
will
his
I
And
who fails to
in
the
next
believe that
recognize that
12
months
get
fingers very badly burned
in
inventory operations and in
general business and credit
operations.
;:
v
Another
and
closely \ related
question is whether this break is
merely the beginning. Will it be
followed
future
of
the
by
in
a
type
the
relatively
near
spiraling downward
that
everybody
re¬
members in connection with 1920-
being by the faulty methods of financing New Deal and war 1921, and again
1929 to 1932?
outlays. We say straightforward for the reason that much
popular dis¬
One has been in terms of
inflation.
I
think
in connection with
the
periods? Again
is
answer
definitely
to
-I
have
prices-,
break in:
could
If the break in farm prices»
delayed 60 days, the
third round of wage increases on,
ing.
had
been
have
and
exaggerated scale would
an
accomplished fact,
an
been
I
the third round of wage
are
not
certainly would not believe thai
to
be
true.-
But
'•
.
a
paral¬
lel.
I don't say we have had the
absolute low point in each and
every one of these commodities.
The conditions
no.
could not have done anything,
it.
It came early enough
you
about
have
to
influence on
profound
a
The* business
outlook
increases.
the
for
dealing
here with a question that is mucl
broader. Are we going into one of
those tailspins which in the pas!
going;
to depend very largely on how'/
big a wage increase is granted in'
have
the
are
we
brought disaster to the whole
economy? '
v
Definitely, I
no
see
can
to expect that
reason
that will happen in
future.
near
certain
account
most
crop-growing
the world.
If
big
tremely abnormal weather condi¬
tions, of course, these farm prices
will be affected accordingly. But
that
The profits are not there
majority of the industries
to absorb a big increase.
Prices
will have to be advanced.
* '
for the
in othe^
of
raise
make you think for a mo¬
a
big wage- increase-;
be entirely absorbed out of
profits.
have again ex¬
we
as
anyone
will
areas
such
electric equip--
If they grant
increase, they will
prices. Don't let,
wage
to
The
weather,
in this country and
principal
a
thai
Last year
most .abnormal
had
both
industries
leading
steel, automobiles,
merit and the like.
ment
these in farm
important of
this year is
of
part
take
factors
prices is the weather.
we
com¬
unpredictable.
entirely
are
latter
have
Now, any discussion of
modity prices is bound to
into
radio
certain
newspapers
his
attempted. What is needed, of course, is a drastic cutting
away of needless expenditures, and a concomitant abolition
of much of the restrictive legislation placed upon the statute
books of the nation during the New Deal years. Such re¬
duction in expenditures should then be employed in
straightforward
the
on
in those historical
in farm
break
had
prices, the timing was per- >
The
hand
of
Providence I
rot have given better tim-f
feet.
Precipitate Price Break
Are we
heading into another
catastrophic decline in commodity
prices of the type that we had
the
in Postwar Inflationary
There have been in
cussion
No
It will be
Trend
his
What Is Needed
the
any
am
anvone
of
That
take
going to last indefinitely.
saying at the moment
I
that
•
I
one
My answer to
Administration.
"V
that
the next year or two, because
in his right mind would
over
prices.
upon
threatened.
not
mean
are
nomic life and unobtainable
L:;
is
not
Pollyanna view about the outlook
claim
What is more, true American
term
cession
does
we
farm
the right answer to that question
is no. An immediate business re¬
no
If
(Continued from first page).
;
this
before
occurred.
If
prices
are
advanced at this,
stage in the business,
agement
effective
for
make
can
a
few
cycle, man-t
prices
those
months, pos¬
sibly six months, but not a great
deal longer. If there are big wage,
assuming anything like normal o*v
increases and big price increases,
weather,
average
wheat
and
the
prices
of
major
and. of
corn
grains should not again approach
the
high
very
they
that
peak
reached in January.
-
the
there are
certain types of these farm prices
that probably will rebound rather
sliarply, anS when they rebound
it may look to some people as if
On
the
weather
that
other hand, despite
off to another
are
we
Any such inter¬
would .- probably 5 be
spiral.
pretation
wrong.
V
•
The group of commodities that
is most likely to have that re¬
bound is meat prices. Those could
.
rebound
rather
sharply
spring and the summer.'
them
may
even
go
But that is due to
tion of
On the other
in
peculiar condi¬
does
commodities
not
mean
generally
or
that
farm
headed into
the third round of; wage increases.:.
is
more
important
in de¬
is the recent break in
agricultural
prices.
>"„■
What About Buyers'
The
i
-
•,
are.
people who think that we
faced
are
'
Strike?
connection,.; there
this
In
many
with
consumer,
a
buyers] strike.
they say, is going
Anyone who wants to
sit down and listen to the radio
commentators on the news for an
to
quit.
are
major inflation¬
His
*.••"■■■
hold
trend.
far
termining the future outlook than
resumption of
ary
then
much
that comes in the,
part of this year will ; be.
correspondingly
moderate
and;
orderly!-'Everything depends on.
latter
prices generally
a
hand, if the wage
moderate and prices
the adjustment
Some of
to new highs.
are
not changed very
are
the
supply in. the meat indus¬
try. ' That
increases
It
••
.
or
year
uncertainty,
means
runaway
the fourth quarter of this
the first quarter of next
year,
the companies that have,
made those big advances will be
in trouble.;;
II.
...I
then by
evening Would not buy
pschology
back
—
anything.
Wait—-
would be:
force
these
prices"
*
Volume^ 167
down—resist. And
•a
Tney will not
ding;
perfectly natural wonder as to
the
psychology of the
wiietntr
policy, either
consumer
summer
is going to play a very
Vital, role
:fnight
here
whole
:
:
•
our
who
1 realize
perfectly well that
lisicy.
the
psycho¬
curves
logical
what
will
be
is
I do
psychologist.
very strange things happen that
are explained by just saying:
"Oh,
'that
was
psychological."
And
maybe those will ,happen again.
But I
•that
My
I
whether
they
They have
not
about
it.
The
war
they do
out of
it.
reverse
the condition
of
as
right
is
somewhere
middle of next year.
in
nine
that
think
you
Reserve
may
versed—from
sales
of
one
of
—
mood
And
reversed
that
vere
business
decline,
a
the
se¬
autumn of this year;
believe that all of this
trying
in
the
the
for
say'that first of all
in
are
time
field
has
to
such
a
to
have
do
being
industry and
We
They
almost
do
public
the
in such
are
I
that
devalue
French
the
seen
terial
extent.
As
people
get
the
through
money
.
come,
in
the
same
individual items
or
recent
past*.
spend it for
But
one
The
if
they do not
thing, they will
change their habits
and
spend
of this year.
the fourth
same
proportions, on the same
items as they have been in the
1
of
it
ness
currency. -
irt
come
say
does
automobile.
not pass out a lot of inside infor¬
mation^
They do it all of a sud¬
that when the busi-l
readjustment
tion
They do not advise
ahead of time.
They. do
the
den.
to
^
automobile
.
anything
Knowing that,
pound
it
by agri^
come,
about the
I
of this
cars
make
they
say
can
I
would
I
industry
this
mention
that
of bank
issuing
is
another
thing. The spending
continue as long as trie ifi-
not going to be caused
ing loans for speculative purposes,
avoiding loang to carry inventory
where the commodity was over-
the
all
Prlced. wbeIe there was any questlon about the
o£ the loan-
that it can
|
•
•
.
.
In the past 30 days this caution
the part of the banks has been
intensified and for the first time
in American history the voluntary
caution has taken hold, has been
on
aggressive, and has been highly
effective on the part of the banks.
Time and again in the past, there
«
'
'
during the first
comparison.
j gain
over
.•when
you
a
That is
year
a
the
decbne> } Jaelieve
especially
ago,
the end of the year, and
part of next year you
iirst
great
very
as
Wr busi?ess
that general
is bound to feel the
reperj
devalued
not be
I
factors
as
moral suasion in
Which
number
a
influence
the
they
all
build
up
And
to
do
organize
know
where that moral suasion has
amounted
And
of
now
the
Let
it.
now.
us
in; American
make
no
mistake
That has prevented
which
excess
much—until
any
voluntary caution is one
great forces
finance.
about
to
not
of
and
case
has
grown
up
an
in
previous boom in the his¬
every
tory of this country.
is
There
one
I
one
other
phase
Of
this
gered scale, the economy gradu¬
ally develops a certain amount of
of
out¬
I
to
the banking sys¬
tem
grand moment, and then are cor¬
rected simultaneously, you have a
major depression. But if they are
corrected one at a time, on a stag¬
I wish I were.
mentioned
have
have to be corrected.
when
I
pressure.
be understood
want to
,
pretty good
remember That a
cesses
do not
predict¬
will see a decline in these
ing that the pound will be de¬
capital
But I frankly
expendi lures. ■
' valued this year.
When those capital expenditures am not as confident that it will
that by
half of this year will
average not
less than 6% above a
year ago,
and
not
more' than
9%
above.
: They will be within that range of
efforts
been
have
.
•
months
three
about
there began a policy of cau¬
tion in making bank loans, avoid¬
the
be upset by
may
They have been
on this subject.
cautions
Starting
question of price. • I have
some
maneuver
of which I have never yet seen in this country a
cultural prices. What is it
will
going
no knowledge at the present mo¬
major depression when the auto- |
to be caused by then? It is
«come payments continue.
going
ment. All I can do is to talk about mobile industry was holding at a,
to be caused by a decline irv
chpi4
Is National Income
: j;
Going Down? tal expenditures by private busi¬ it in terms of what I think is the very high level.
Another cushioning factor is one
All right.
Then the argument ness. The decline in general bus¬ most logical Course of develop¬
I have already mentioned briefly.
ments.
shifts to another point. W at is iness is going to come when capi
In that respect, I think it is very That is exports.
;
Exports cannot
going to become of the national tal budgets are cut. They have
fold up in a grand style as they
income?
Is the national income not been cut as yet. They have unlikely that the British will de
Be¬
going down in some sharp spiral? not been cut as a result of the lvalue the pound while the Mar- did in 1920 and 1921. Why?
cause the Marshall Plan is a cush¬
i
break in farm" prices.
Or is it going to be
I do' not shall Plan is hanging fire down in
pretty well
believe the break in farm prices Congress.
Until Congress has ion to prevent that.
maintained? Well, I shall give
you
There are other factors of a
voted on the Marshall Plan, and
my
estimates.
These r represent is going to affect the capital pro¬
..cushioning nature.
presumably; approved, of itw
study and analysis, and an at- gram of this year materially.
In every boom there are certain
After the Marshall Plan is in
But by the fourth quarter of
tempt to arrive at a carefully
this year, I expect to see the capi¬ the bag, so to speak, it is conceiv¬ excesses which develop—certain
considered opinion.
of business,
tal expenditures by private bus¬ able that sometime later this year lines
I believe
certain prices
that the national ininess began to fall off and I think or next the pound will be under that go to extremes.
Those ex¬
come payments
for
we are
great over-expansion
ago,
the
sell
a
credit
Well, the real curb that has been
placed on any tendency to overexpansion
of
bank
credit
has
come voluntarily from the bank¬
ers, themselves.
/
any
get the steel
during 1948.
I believe
do that, regardless of
months that
several
faced with
oil
utilities.
can
have to recognize another case
preventing an excess. We have
peopie
the Federal Reserve
reces-|f0r
in
makes
believe
Bank Credit
on
field of banking, I think
and |n 0tfoer parts of the govern-
Strong position
a
feel
not
people
may
Capital Expenditure Factor
Now, I
it
It
quarter.
great help toward
business
readjust¬
j ment shouting from the house tops
ters
psychological uproar is going to
affect the sales curve to any ma¬
r
we
strong
for
not
very
In the
we
the national in¬
they are going to spend the
money.
They may not spend it
:
do
a
moderate.
degenerating into a major depres-: their currency and that has raised sense to talk about a severe re¬
sion; trying to prevent unemploy-| questions about other currencies cession in those areas.
in Europe, particularly about the
ment; from
Now, there are other industries
becoming excessive)
That reversal is going to comei British monetary unit, the pound which have a big backlog of po¬
tential demand.
But it is not going to come
They have not
We have learned that
now,' sterling.
They have not
in the first half of this year, prob¬ governments act by great surprise worn it out yet.
when they change the value of used it up. ' And as an illustra¬
ably not in the first three quar-l
I
be
keeping
the
ment, when it comes, orderly and
to
two industries: the
connection
people's minds in
international
will
easily observe certain big in-
dustries that
Exchange
in the
increases, that
next round of wage
P°sl^n. with respect to they are
demand'
them products that
with international exchange.
to prevent an excess
serves
going
Perhaps today the question that sion-proof. I would mention
is most
are
profit excesses and so
But, even better than cor¬
recting an excess, is preventing,
one.
If the breakNin farm prices
to
like
without
are
Some of
discussion of them.
I would
can
afraid of.
are
International
prevent a business recession from
.summer and
people
these
Some of them
excesses.
on.
major depres-
a
price
or
Curbs
mili¬
excesses
them
Strong Industries Recession Proof
the
in any
are
deliberately
tend
for
to
policy of trying to prevent
in my.
judgment, it will re¬
main the condition throughout the
wage
recession;
I should
briefly,
into any
other
many
been corrected.
economy
will
business
a
enumerate
tary activities of the kind that so
contraction,
from
ourselves
start
factors which
siom
Very
un¬
.
Neither
year.
nor
to
many
re¬
anti-inflation, of trying to hold
boom;
this
Russians
prices, down, Of trying to kill the
now.
some
Russia
Federal
reversed
is
of
degenerating into
almost any time.
there
the
stretch,
the
see
policy
recognize a
our
which will tend to prevent it from
premeditated incident, I think we
shall find no war developing with
Somewhere
months
blue sky
a
unless
But
the
within
fourth quarter of this year to
should
debated
retail
ber
cushion
so
guess, as to the timing of a
of Federal Reserve pol¬
icy
.have been in very close relation¬
ship to the national income. That
is
No¬
it.
are
left in our economy that have not
should
We
number of factors in
of this is the
phase
thinx
Psychologi¬ today that have not existed in
cally, people are worried about previous periods of test and trial
Russia all the time.
Well, I do in this country. There are a num¬
reversal
it.
much
before
believe
I
the
of events when
impressed with the fact
wondered
,
not
second
A
There
in business.
policy is going not know what is going to happen.
rigidly by tne There are problems of the next
political factor. They will, at some few weeks in the Middle East that
point, reverse this policy and it have a great many people dis¬
will be a great turn in'the course turbed.
Something can strike us
people have spent money in pro¬
portion as they have received it.
They have not waited around and
•spend
do
dictated
be
to
since the end of the
am
ever
I
think
not
do
pretend to be a
We have seen some
it
reverse
vember."
very
not
will
sons
any
about
100%, but in the main, and
substantially, it has corrected the
excess in farrti prices.
considerations
Russian situation.
rea¬
'
opinion
have the Marshall Plan in ef¬
27
excess
as
was
fect this year.
say.
They, therefore, for political
give you a number
which, as much
possible, will- indicate a way of
sizing up the coming readjustment
of
we
•
(923)
should like to
breaking
a
"WeT, their policy is deflationary.
business
procession.
for
structure
whole
CHRONICLE
collapse of American exports. Our
exports cannot collapse as long as
during the
year.
responsible
down
tne
reverse
or
now
this
of
Thete are Some people
it
whether
and
the
stop
most
piiccs. But they Will not reverse1
the policy,' That is the important
the part of
on
•the merchants these days there is
FINANCIAL
&
THE COMMERCIAL
4676
Number
question of excesses in our
economy.
In some parts of our
economy
today I do not think
there is any excess. For instance,
do
not
see
that
there
is
any
great balloon in speculative credit
look fof business.
I would like to strength and you do not have a of the type we had in the stock
come to a little closer glimpse of
majot depression.
You still have market in 1929, or in commodities
the pattern for the rest of this readjustments,
but you
do not in 1920. ' There is ho excess ;in
I think; fetdil Sales will
folldw
have major degression.
"
' '
mearts that you cannot continue yeaiv
speculative e t e d i t.
Moreover,
very closely that comparison and
a boohi in.
Which type of cycle are we hav¬ usually when we have had a test
Wc have started out the year
general business of the
that for all types of
stores, retail kind
at the end of a great boom, we
we. have been,
•; stores
I think
having aftier with a high rate of business fqf ing at the present time?
will Iim between
run uaweero^-ana iu~
6%; and'' HvAOA
VM+O f
vrv»s.-«r»^
have had the stock market going
we have many evidences that we
;-9% above a year ago; in the "first
e caPltal expenditures begin1 most of our leading lines of biisito come down.
And the timing of (ness.
siv irinhihe
I think that approximately are getting this one-by-one cor¬ thfough some very Violent nose¬
x six months of this
year.
I do not have any predic¬
that
Let me dives.
his same rate of business Will rection of our excesses.
;C
Federal Reserve Policy
quarter of this: year, A The eausfe prevail during the first six months cite you a couple of illustrations tions to make' about the Sfdtk
'
market, but I do say that when I
We go • from the national in- of any general readjustment !iii of the year.
1 do not feel nearly of what I mean.
look over the whole panorama of
come
question to the financial business es going to be capital ex1- as sure of it in the, third quarter,
Will Cheap Mofiey Contiiiue?
American
business today' and I
It is- not going to be but on balance, I think the chances
side of our economy.' I am hot penditures,
One of the
greatest excesses try to make a list of the excesses,
going to deal with the Federal commodity v prices* not .inventory, are pretty good that the third
not consumer resistance.
; ; vT
; Reserve
quattef will be all right.
The built up in the American Economy I find one segment of our econ¬
policy • at ; any ' great
•v
part of this year that is hard to in recent years was cheap money. omy where there is no excess.
length, because I think that to an
I The International Situation ;
forecast
clearly
is
the
fourth It was carried to a tremendous That is the stock market and the
audience of this size it
might not
Now, of course our economy in quarter.
be
a
1 shall assume that by extreme. In the past nine months use of speculative credit. veryinteresting subject.
this country is tied in with the the fourth
When people-ask me the cause
quarter of this year we have seen a very fundamental
Cushions to Readjustments
whole world.
We are accustomed there will be signs of decline in a correction of cheap money.
of the break in farm
Any¬
prices, I these
These factors are cushions that
days to a great deal of dis¬ few lines of business—signs of a body who has dealings through
say, "first and foremost it is the
cussion of the international pic¬ decline of a nature that will ex¬ the bond market knows that the will help to lessen a readjustment
Federal
Reserve
policy"; -and
ture.
I should like to make two tend over into the first part of shake-down of the bond market in business when it comes.
they look at me with a blank.ex¬
or
three
comments
about that 1040.
has been very real.
I
realize
perfectly ( well that
pression
and
say,
"What
was
that?" Most people do not under¬ phase of the problem.
anybody uses the words
I do not guarantee that we have when
I am talking there about tim¬
ago^ the^ level of sales
,
was
already
,
.
.
OO
.
.
•
.
•
x
v
„
•
v
"readjustment,"
completed the correction of cheap "recession" and
money.
I do not know for sure he is using words that do not
fact,
a
very-vital the United States are being arti¬ is that I think there will not be whether they can hold the govern¬ sound very happy. I do not ex¬
factor in shaping the course of ficially supported, but that arti¬ much doubt in our minds that we ment bond market at par. I would pect
anybody to feel greatly
both prices and the level of bus¬ ficial; support is very effective, have
passed the crest of the boom not want to guarantee it, but cheered up by talking about this
iness.
Therefore,> I shall confine certaihly, for the balance of 1948. when we come into the fourth neither do I want to sound alarm¬ subject. But if you will bear with
my remarks to a very, very few Assuming that the Marshall Plan quarter of this year.
I leave it as one of me, I was asked to come here to¬
But that ist about it.
statements and some very brief goes through' (I think we may does not answer another question: those questions to which nobody night to tell ypu what I think
propositions about this Federal safetly assume that), the level of How severe a business readjust¬ knows the answer.
But I do in¬ about the business outlook. I have
stand
it, do not Want
attention
-'
•
to
it, as
although it is
to pay much
-matter- of
a
.
•
4
.
Reserve policy.
'
exports
•
The Fedbral Reserve policy will
It
I, Will
,
be made "a little milder,
it
will go a little slower.
They will
take six months for The retirC-
ment
of
stead of
$7 billion of debt, indoing it. in three months.
•
of
us deal with the ques¬
exports.
•
The
exports
When is the boom going to
answer to that question
ing;
end?
My
of
commodities
by
•
the
ment must
then contemplate?
sist that what has happened up to
little
we
date
United States this year should be
in the neighborhood of $13 to $14
billion.
It is a very high figure
middle-sized onef or a
and I
dimensions
see
no.
danger of
a
seriqiis
of our exports as long as
Marshall .Plan is hi effect, v
Will
it
sion?
be
a
recession,
that
must
into
the
Change from boom to
That
condition
is
very unlike
existed in
1920
was
a
account
in
be
taken
measuring
a
something
else.
j;". Now,
a
lot
I am not going to give you
of
constitutes
a
very
real
big depres¬ fundamental correction of the
depth and duratiori are cess in this department.
The
lapse
They will try To soften the im-; the one" Which
a Tittle'; bit on business and
when one of the factors which
;;'v pact
of
.
not be abandoned at this time.
.'
First, let
tion
figures
on
this,
but
I
An
even
has
ex¬
greater excess had de¬
Again, I do not say that
corrected the
necessarily
Whether it cheers you
not is not my concern. But,
fairness, and in all honesty,
want to make sure that by just
in all
veloped in the area of farm prices
the recent break in the agri¬
cultural markets has corrected this
excess.
you.
up or
and
it
told
and
I
using these words "recession" and
"readjustment," I have not given
you
a
far
gloomy
more
than I intended.
I
about the outlook,
^
am
picture
not gloomy
although I
(Continued on page 28)
am
28
THE COMMERCIAL
(924)
CHRONICLE
FINANCIAL
&
decline of 52
a
Outlook for The State oi Trade and Industry
-.'•■V-!!
Business
'
"
(Continued from page 5)
ducers.
Since the price of semi-finished steel has been low
with the cost of scrap and
.
pig iron it
(Continued
.
from
27)
page
y
.
'
confident
business
we
.coming
are
into
a
readjustment.,1;.;.d;\;•
,' The reason f speak this way is
^ because I think that this change in
money rates, in the bond market,
in farm prices,
steps
in
represents' the first
return to sanity and
a
common
leading producer would be followed by other steel firms.
What
that
is
means
we
A conservative estimate on the basis of 1947 steel
shipments, *
according to the trade paper, indicates that the above referred to
increases on an annual basis would amount to more than $170
million
the
to
year's.
v
The
shortage of pig
seriously
than
it
has
The politicians of both
parties
have been telling us that we can¬
not solve our problems that
way;
that we have to have new con¬
foundries in the East
were
new powers
given to govern¬
ment agencies.
But, while they
have been talking about
it, the
.
k
natural forces of private
have been doing a
very
industry
important
part
of
the
job
in
the
last
In
cannot
are
about it.
go
cannot
save
; cannot
are
hit
has
the
operating
are
•
high
as
.
foundries
92.5%
one
an
A month ago the indicated rate
operatating rate of 94.4%
This
from
week ago.
firm.
week's
shown
was
a
year
one
Our government
Why?
Because
capitalism.
talistic
sians
system.
politicians
that
I
as
are
capi¬
a
wrong
about
are
going
are
break
we
I think the
just
are
to
Rus¬
the
as
the
forces
make
us
or
not
really
the
ago.
it
would
and
glorious joke
enterprise system that
if this free
have in America should
prove
we
that it
can
survive, after all, with¬
out another major
depression, by
having an orderly and moderate
readjustment
in
its
think that would be
joke
affairs?
a
I
people who want to'pass
new controls and, have us all
run
by.the government.
We
have
mistakes,
We
■
have
within
been
correcting
our excesses, one
been
our
by one.
balance
restoring
price structure,
the
and
week
in the
as
$5,000
ing 89 of the week's total of 107.
was
of
1947
week of
same
week ago,
a
when
but
as
heavy
58
gxoup
last
as
Small failures with liabilities under
$5,000, although small in number
18, increased both from the 13 reported in the previous week and
the 11 occurring last year.
at
Most industry
of
the
wholesale
and
week's
trade groups had
decline
rise
a
concentrated
In
failures with
in
manufacturing
trade.
-
*
V'..
of the old-fashioned
as
that
result
a
we
can
adjustment
of
have
of
somewhere
virtues,
that, I submit
orderly re¬
an
business,
around
quarter of this
the
extending
without having the
major
a
) frankly, that is
to
as
what
fourth
year and
into next year,
props
fall entirely
having
starting
out,
without
depression;
and,
business
over
the
It
was,
Effective March 1, after the re¬
tirement from the firm of Clare
M.
Torrey, the firm
Torrey, 1 Wall
&
FREIGHT
York
York
City,
Street,
members of
Stock
Exchange,
changed to Cohu
New
the
New
will
Investment
nounced
Stein,
a
Roe
Counsel,
below
the
cars,
or
change in firm
&
Farnham.
.
to
.
AUTO
OUTPUT
the
other
and
trucks
curities
business
from
a
offices
at
which
It represented
week
same
in
conducting
in
MARKED
BY
and
industrial
but
increase
an
of
27,208
SUBSTANTIAL
with
in
the
the
shortages in
gas
Detroi";
reflected
of
trucks
in
This compared with
a
the
week's
United
total
comprised
revised
States.
Canadian
75,818
cars
total
of
same
and
assemblies
States
and
83,996 units
week in
1941
•
4,246
units
the
year
a
of
consumer
to
FOOD
PRICE
price movements
INDEX
OFF
FOR
/
in
with
tion
Index,
compiled by Dun
&
Bradstreet,
since Sept. 2, 1947 when it stood at
week
ago to
$6.76
on
The
prices continued to be considerable and
of Easter items
some
areas.
■-
Inc.,
dropped
seven
cents
Marking the lowest leve
$6.71, the latest figure represents
■
■■
holiday stimulated the buying of novelty
with that of a year
increase in the demand for glassware and house¬
hold articles of good quality continued to be sought.
Hardware,
paints and building materials were steadily purchased and consid¬
erable improvement in the supply of some building materials in
cards and gifts and volume compared favorably
There
ago.
some
an
was
was
areas
also
noted.
in
Volume
automobile accessories
mained large.
,;i
growing caution of retailers
wholesale
in
was
volume during
reflected in
a
re¬
1
moderate
the week.
.
1 '
dollar volume of wholesale trade remained somewhat above
the
corresponding week a year ago. Buyers generally
purchasing to current needs. The volume ■ of new
diminished considerably.
The drop in buyer attendance at
level
of
their
confined
of the wholesale centers
weather.
partially attributed to unfavorable
was
*
/
•
'
.
taken: from
the Federal Reserve Board's index for the week ended Feb.'.14,t 1948,
decreased by 3% from the like period of last year. This compared
with an increase of 9% (revised) in the preceding week.iiFor, the
four weeks ended Feb. 14, 1948, sales increased by 4% and]for.- the
year
a
country-wide basis,
to date increased by 5%.
/
gains percentage-wise
department store
in
of
the
on
that
over
trade
last
of
year.
between
as
;
.
Retail trade here in New York the past week
vt
»:
reflected
sharp
'
Estimates placed
20% and 35% above
ber
1947 was cele¬
An advantage was gained this year
fact that Washington's
Birthday in
Saturday.
According
to
the
Federal
Reserve Board's index, department
weekly period to Feb, 14,^1948,
store sales in New York City for the
increased
Feb. 17.
generally attracted favorable atten¬
gabardine coats and suits popular. Organdy blouses and
petticoats were also in large demand. The volume of
jewelry, however, declined somewhat. Men's suits, shirts and pajamas
were steadily purchased, while interest in shoes improved somewhat
cause
Wholesale Food Price
reported in
lace-trimmed
quite irregular in the past week but
general trend continued downward.
Inc.,
generally favorable.
response
high
Bradstreet,
&
Pre-Easter promotions of apparel in¬
stimulating the demand for Spring clothing.
areas
some
Promotions
gains
•
FIFTH
SHOWS MIXED CHANGES
while canned and frozen foods continued to sell well.
Confectionery and bakery products were heavily purchased for the
St. Valentine's Day holiday. The buying of dairy products and fresh
produce showed some increase.
Consumer interest in apparel improved with mild weather
brated
were
Dun
ago,
trade.
the similar week in 1947.
WHOLESALE
■
The demand for cheaper meat cuts, fish and poultry remained
29,093 trucks built
totaled
\
.
United
'
large,
orders
units, "Ward's Automotive
Chicago
slight rise in the dollar volume of consumer buying
favorably with that of the cor¬
a
Department store sales on
and
cars
last
Slight reductions in the prices of some foods stimulated buying
areas and the total dollar volume of food proved steady and
cars
substantia],
«;•
..
output
Canada
and
1
continued to recede
some
some
United "States
.
'
,
prices at New York
shoppers eagerly sought marked-down and bargain items.
V:The
GAINS
last Tuesday, day to day
spot cotton
on
Mild advances in
continued to compare
Resistance
the
industrial
154
i:.
It
The
manufacturing centers the past week production of
past week.
the
a
was
week in 1946.
from $6.83 a
with
decrease of 65.715 cars, or 8.2%
1947,
securities business from offices at
West 70th Street.
interfered
a
1946,
WHOLESALE TRADE
week.
current
in
TO
STRAIGHT WEEK
Julius Brasz in New York
is
DUE
preceding week and 127,740 units in the
Food
Brasz
for all
1.8% below the preceding week because of
conditions
disappearance of
Estimated
59 East Court Street.
Julius
LOWER
Canada the past week amounted to
109,157
Last
se¬
cars, or
improvement.
Remington Corporation
Corporation is engaging in
record
cotton prices last week as
After suffering the first
on
markets.
moderate.
The St. Valentine's Day
corresponding
Report" states.
CORTLAND, N. Y.—Remington
a
FOR LATEST WEEK
in the
-
was
pressure
outside
ui ":S-1
There
decline
an¬
name
SLIGHTLY
3.8% above the
With
have
13,132
weather
railroad operations.
& Co.
CHICAGO, ILL.—Stein & Roe,
which
Loadings for the week ended Feb. 14, 1948, totaled 734,262 cars,
according to the Association of American Railroads. ■ This was
be
Stem, Roe & Farnham
-
very
1948
the result of curtailed receipts.
(
however, 476,262,000 kwh.,
LOADINGS
and
Now
24,
;
:
did quotations of spot big packer hides in the
as
RETAIL AND
BAD WEATHER
of Cohu
name
ended Jan.
•/ 7
.
prices, however, were at a higher level than they were
a year ago.
Sales volume in spot markets touched the second lowest
level in more than 16 months. Trading in country hides and small
packer hides remained slow throughout the week.
Trading in domestic wools in the Boston market was generally
quiet last week, although a fair volume was done in % and V4-blood
wools, needed by manufacturers to piece out orders. Wool tops in
spot markets held firm and futures markets showed moderate de¬
clines.
Wool prices in foreign primary markets continued firm to
stronger, while imports of foreign apparel wools were sustained in
good volume.
>
4
^
high.
or 10%, in excess of the
4,777,740,000 kwh. turned out in the week ended Feb. 22, 1947.
The
Feb. 21, 1948 week was the seventh consecutive week that
production
of electricity exceeded the 5,000,000,000 kwh.
mark, and the 15th
such week in the history of the industry.
adverse
Company
week
.
Current
,
in
distributed by the electric light
3nd power industry for the week ended Feb.
21, 1948 was 5,254,002,000
kwh.,' according to the Edison Electric Institute. This was 130,943,000
kwh. below the previous week and
182,428,000 kwh. less than pro¬
decrease of
To Be Cohu &
less.
The amount of electrical energy
outlook
really is in the United States
the coming year.
futures
creased
in
some
quantities of low-grade cotton for ship¬
Sales of gray cotton cloths continued to lag; prices
failing also rose sharply from the 1947 level in two other
regions, the New England and East North Central, but failures were
still relatively low in these areas, numbering 13 and 11. In five of
the major geographic districts, failures were even less
numerous,
my best judgment
the
week,
last
nesses
time.
.
more
steady.
week
duced
in
market.
and
•
ELECTRIC OUTPUT EDGES LOWER FOR WEEK
and
largest
in grains and the belief that the Army would soon
survey
avoiding rank speculation in se¬
curities and in commodities.
We
have been operating
along lines, of
some
a
its
seven or
the
was
closing days of the week held the week's losses to
responding
continuing at
trade
of
cents per pound. Trade and commission house demand
factor in the late upturn. Buying was stimulated by the re¬
Over one-half the week's failures occurred in two
regions, the
Middle Atlantic States with 32 and the Pacific States with 27. Busi
between different segments of our
entire economy.
We have been
.y)'
IV2
Hides
,
almost twice
were
as
in
break
became
ment to Japan.
remained fairly
1946 when
failing in this size
-
be in the market for sizable
predominated, claim¬
more
or
Businesses
Board
considerable
was
result of the
around
when 47 occurred with losses exceeding $5,000. Twelve of the
large failures during the week had losses of $100,000 or more each.
all
Chicago
markets in the
year ago.
year
the rest of the world and
on
comparable
numerous
a
Sales averaged 51,600,000 bushels daily during the five-day
daily limit-break since October,
corresponding week of 1939.
fell off from 115
the
on
as
the
Failures with liabilities of
pretty good
the
on
fluctuations
only 18 .businesses closed with loss to creditors. Although rising
sharply in recent* weeks, failures continued far below the prewar
level.
Only about one-third as many casualties were reported as
in the
if
grand
a
failed and six times
be
us.
wonder
in
upturn- after having declined
bushel in seven out of 10 trad¬
late
,,,...
covery movement
as
^eek fagoi, substantial
week and the general undertone was
the
eight cents
steady at their recent lows.
While off
numerous
..
a
as compared with 42 million bushels during the previous week,
20,500.000 bushels in the like week a year ago. Lard prices were
and
BUSINESS FAILURES TURN DOWNWARD IN WEEK
as
leader in
...
well below
.•*
.
There
twice
on
the
was
recovered at the close
Now, I do not think there is
anything inevitable about a col¬
operate
.
scored the past
week,
industry
us.
Corn
futures
95.2%,
operating rate is equivalent to 1,687,100 tons
castings as against 1,667,300 tons last week,
month ago and 1,651,900 tons
a
.
finished
prices
were
Heavy market receipts early in the week sent livestock quo¬
tations to the lowest levels in months but most of the losses were
of steel ingots and
.1,716,000 tons
.
Country selling of both cash wheat and corn showed, considerable
expansion as a result of the lower prices. Volume of, trading in grain
.Monday
was
.■
;i»t,
operating rate of steel companies having 94% of
the steel-making capacity of the industry will be 93.6% of capac¬
ity for the week beginning Feb. 23, 1948. This compares with
t
:
Jan. 16.'
on
Following the unprecedented decline which began on March y
4, all grains showed resistance to. downward* pressures? in a the ,
wy:k
closing days of last week.
of this week the
lapse just because
■
postwar peak of 308.82 recorded
months.
:■>
on
]
Feb. 17, as compared with 278.92 a week earlier,, and with 247.05 ,
the corresponding date a year ago.' At the six-month low of 270.60 \
touched on Feb.-13, the index registered a drop, ofvl2,4% from the :
ing days.
more
Jobbing
The American Iron and Steel Institute announced
daily wholesale commodity price index
on
the permissible limit of
prices, steel scrap prices
major consuming district and
/■•,'
■*
)
.
Bradstreet
>>7„
steel
one
&
.
and production
skeleton schedules because of
on
over
Dun
upward in the closing days of last week, aided by an upturn
in grain, cotton and livestock
markets^,The inde?c.:,closed .at. 277.23
slightly from the preceding week's high level, com¬
mercial and industrial failures remained heavy in the week
ending
Feb. 19, reports Dun & Bradstreet, Inc.
Numbering 107, concerns
failing were lower than the 128 occurring last week, but were about
we
'
The
Although
;
-:.<X
midst of the- furore
7.1%, from the recent record high of $7.28
a year ago thp index registered $6.47.
or
At this time
urned
advances
last
as
■
nation's
production.
unchanged in two others.
that
us
matter how
no
Private
us.
save
telling
iron
steel
'
turned slightly softer this week in
few
ourselves
save
major depression,
we
the
while
The Russians
" '
operations
■
'
pig iron shortages.
months.
we
1948
;
trols,
;
if
consumer
cents,
Jan. 28;
on
WHOLESALE COMMODITY PRICE INDEX POINTS UPWARD
v
making important strides toward
: solving
our
problem by natural
i
touched
on
Iron Age." A
summary of these includes tinplate terneplate,
blackplate for can manufacture, alloy steel bar extras, nails, wire
fencing, railroad car axles and; wheels, tie plates, all types of pipe
and tubing,'all types:pbf semi-finished steel.
•
'• ■
■<
are
forces and by private
industry.
'
VThe
in the way we run
in this country.
J
it
•
;
No; secret .has been, made of - the fact that several steel price
increases have been put into effect since the first of the year;-says
sense
affairs
our
compared
obvious that action by the
was
Thursday, February 26, 1948
an
above the
1%
increase of
weeks
date
ended
rose
12%
Feb.
by 5%.
14,
•
same
(revised)
period last year. This compared with
in the preceding week. For the four
1948, sales increased 6% and for the year to
;
•
y
4
•
> •»
..
•
I'
&
FINANCIAL
CHRONICLE
(925)
*
■
VI
land in Central and South Amer¬
■
■
Mail Order
ica.
I failed
The
rel
(Continued from page 4)
had
Punt
ueen
years
in
shifted
lush
tne
in
suffered a severe re¬
Bank
balances
but
verse
up
1947.
cash
from
film
to
inven¬
tory, not more,, films but more
costly inventories. The result of
this
for
wholesale rush to banks
was a
revolving funds to help bank¬
roll
soaring film production.
Also, there has been, quietly, some
selling of theater houses, prob¬
ably as much as $5 million worth
by Paramount to add to work¬
ing capital.
Unquestionably the
•sounder companies—Loew's, sell¬
ing around
paying $1.50;
Twentieth
Century-Fox,
selling
around 19, paying $3; and Para¬
mount, selling around 19 and payin $2—are going to cut dividends.
Unquestionably, Paramount, under
about
a
war
price of
Farm use of petro¬
products is up 100% since
$1.10.
leum
before
the
Last
war.
they
year
management;'idfr John Hertz,
formerly Vice-President of Gen¬
eral Motors, and ' the sponsorship
of Lehman Brothers is the sound¬
Considering that
issue.
have lost
of
price
months ago I do
holder should sell
few
a
not feel that a
them
they should make a
as
now
they
of their
thah 60%
more
bottom, somewhere near the pres¬
ent price. I see no real indication
to say that they have made bot¬
tom that they should be purchased
here, whereas one' year ago I
stated that they should be sold
for a considerable decline, which
they have had. They certainly do
Hazel-Atlas,
for
the canning companies—American
Can
and
Continental
Can—will
rapid
depreciation on
goods actually having a
more
durable
short life because of hard
and
use
used
because of continued obsolescence
of
2,821 000,000 gallons of gas¬
Also, bus and truck use
shows a large increase. Vehicles,
including passenger cars, increased
for the Oils
Outlook
heavy
There is
cnsumption is esti¬
6,700,000 barrels per day
against 4,900,000 in 1946. Con¬
a
would
ness
mated at
dented
as
quickly.
sumption in the rest of the world
rise
will
day
to
5.100,000
barrels
against 2,900 000
as
S. will
The U.
in
per
1946.
able to supply
be
machines, tools and
production
equipment.
continued shortage and
facturing steel.
1956
By
installed
5,000,000 barrels a day of this total
A slump in busi¬
based
the
/cause
demand
This
to
demand
first,
on,
unprece¬
fade
mechanization
rather
has
been
increased
the
of
$8,000,000;
Story,"
years,
The
oil
of
use
has
paralleled
Through
have saved
development
this
we
physical drudgery of olden times
of
both
man
of it more than any
caused
has
Our use
other product
and beast.
the
States
United
to
out-produce any other nation and
thus enjoy the highest standard of
living in the world.
Our oil se¬
curities have long been quoted in
the market.
The two large for¬
tunes in America, the Rockefellers
and
the
Mellons,
have
been
founded on oil. In this connection
disturbing to note that India
- several
large
billionaires
it is
has
today, with our tax rate,
should earn
one
a
million
a year
could only
tain about $3 million.
for
60
years
famicus-
The
in
dissolution
Standard
Oil
Standard
Oil into S.
of Kansas.
re¬
you
1907
of
broke
O.
of
up
Ohio,
California, N. Y. (now
Socony-Vacuum), S. O. of N. J.,
that the
ten
next
years
companies
in the Persian Gulf Field
are
would
be
They
important.
estimated
to
to
able
be
2,500,000 barrels
The industry is
per
are
produce
day in 1956.
Oil, etc. The soStandard Oils have much
called
competition from such well-inte¬
grated companies as Texas, Gulf
Oil (the Mellon company), Phil¬
lips, Continental Oil, . Cities Serv¬
ice, Sinclair, etc. The companies
have diversified
that
business
in
the four branches of the industry
in the midst of
a
duction
above
for
There
does not
to be any
seem
is
now. ' 70%
The cost of re¬
prewar.
Court.
through the Supreme
There
are
than
more
now
and
in
lines
some
tive.
of
fuel
with
large
normal
in
and
over-production
to make any
seem
over¬
production
but the soundest
this
field
unattrac¬
The very nature of its bus¬
iness
in
cost
now
it to have huge booms
causes
times
of
and
war
business
booms, and bad times in times of
depression — particularly
when
railroads
rails,
wages
any
not
are
buying steel
large amount of
dollar output makes
The
etc.
per
change
wage
important
in
In
1947
loans
year
of
for
we
consumed
petroleum
every
man,
582
gal-
products
per
woman
and
child in the U. S., an increase over
1941
of
1946.
.The lower-priced of prod-
25.4%
and
12.3%
over
'
uct
as
related to other fuels is
an
Food
in
of population.
It is not my purpose to
too many statistics but
good
had
good
a
are on a
many
years.
advance
give you
I feel that
plateau for
They have
in the last
but the yield on Standard
Oil of California, Jersey, Socony-
year
Vacuum and Texas—who
own
together
the large concession in Saudi
Arabia—is
there is
with
still
attractive,
Gulf Oil
the
and
Food
companies
problem for
sales
and
with
with
record
have
had
which, together
Dutch
business in the Near East it would
still be
an
There
are
lumbian
United
excellent stock.
5
6
or
basic
years
and
crops
subsidized
dented volume of sales.
still
can
Since
two
companies,
Carbon
Carbon
Co¬
Company
spare
abroad
manufacture
lamp
black,
products of petroleum. They
that
by¬
are
both sound for income and appre¬
ciation. As you know, lamp black
is used
extensively in the manu¬
facture of paints and automobile
tires.
The
v:,v'
1947 was one of the
in the steel industry.
year
has
been
'situation
'
The particular situation
here
is
that
is
favorable
companies have Canadian
production,
where
wages
are
much
lower
increased
our
cheese from
consumption
per capita
ucts in U.
ing is
S. dollars..
of
Americans, like
abroad
,
In
cheese
consumption rises above25 pounds
per capita per year.
In this con¬
have
lessened
their
narrow-profit
operations.
Baking
cakes
bad
—Scott
fluid
1947. Sears
-
Kimberly-Clark/ Union Bag
and
the
their
com¬
panies have plenty of local
petition.
Meat companies
from
control and
prospects
are
com¬
freed
now
the longer-term
unimpressive.
packaged
products
The
panies,
are
including
manufacturers
chewing
gum
American,; Chicle,
we
must
watch
for¬
eign business to judge the imme¬
diate
trend.
It
is
estimated
that
from and should
A
basically
brand
names
do much
strong
Sugar
stocks
situations
The
domestic
important
demand from
industries
as
such
automo¬
biles, oil, railway equipment and
lines of construction is such
many
that
do
in
the
better
steel
than
companies
average
should
for 1948.
The industry is very important
our national life in this
age of
machines.
Part of its troubles
are
inventory
are
again.
Cane
cost
foreign demand would
output this year.
steel
is
of advertising.
years
very easy to grow,
the
feature
established through
directly and indirectly 13 to 15%
of production went abroad in 1947
and abrupt and substantial cur5alter
better.
sugar
is
requiring only
the planting of cane and harvest¬
ing—no
cultivation.
producer
and
largest
company
Sugar.
65%
in Santo
of
The
lowest
the
second
is West Indies
its production is
Domingo, where labor is
much cheaper than in Cuba.
The
Corn
:
Products
Refining
Company, Peniek and Ford have
extremely stable earnings records
and
have
appeal
for
income.
United Fruit imports bananas and
sells
around
both
selling above
average price and
10-year
Please
that
in
I
group
they
allow
do not
are
emphasize
stock
any
to
mean
or
that
say
necessarily suitable
your program of
going
are
to
me
mentioning
to
for"
investment.
receive in
You
the
next
six meetings lectures on
special'
types of businesses and after that
well again
we
with
discuss the subject"*
broader viewpoint.
a
: (
^'-:f ■■
Railroads
;
'
As you
probably know, the his¬
tory of America since the middle
and
Their shares
not
are
con¬
v \
T h
stocks
enjoyed
breaking
equipment
1947 record-
in
earnings.
able
com¬
production in¬
to
favorable
profits under the
war
profit
taxes.
retain
They
their
not the
were
earnings and
The railroads'
retire indebtedness.
are
Two
panies,
J.
I.
Case
and
AllisChalmers, completely recovered
of
retaining
excess
r
agricultural
e
of invested capital
very
for
before the
same as
war
for several reasons.
They are now
retiring debt systematically.' Also,
the
shift of population and the
growth in the West of population,
has
favored
certain
railroads,
terferences, completed reconver¬
those that have long hauls
particu¬
a price which
larly.
Many companies have*
gave them ample earnings. Every¬
bought up and cancelled 30, 40
thing points to 1948 being a year
and 50% of their
of these continued peak
outstanding debt.
earnings.
The government is committeed to One railroad—the Atchison, To¬
sion and established
support farm prices through 1948
and farm income is estimated at
over
over
$21 billions. Of this amount
$1 billion should be spent
farm
on
equipment.
panies
are
future
political4
Deere
Other
com¬
and
Company,
International Harvester, the Oli¬
ver
Corporation. Of course, the
action
pe ka and
look for this
callable
not
dwell
you
will have
industry.
Textile
with
Textile
stocks
had
large
I
will
these
on
as
particular lecture.
Santa
Union
are
Pacific,
Fe, Great Northern,
Pacific, Chesapeake and
Ohio not too bad.
Southern
Tobacco Industry
The tobacco
nature
very
their
more
a
stocks
be
Industry
indebtedness.
any
Best
farm
on
Santa Fe—retired all of
the
prices will greatly affect the out¬
steady
industry, due to the
of
classed
the
as
the
habit, should
a
business.
mates
conservative,
Based
esti¬
on
cigarette
high
industry.
in
the
market
of
any
Cotton and woollen di¬
visions
of
,
the
industry normally
than ample capacity
possess more
and this in turn
petition.
of the
fierce
com¬
companies
this
J.
causes
Some
P.
field are American Wool,
Stevens, Cannon Mills,* M.
Lowenstein, United Merchants
ye&r sold
so
that it
a
large preferred
now
vestment
issue
has to -prove its in¬
qualities
as
a
company
large.
The
patents expire
shortly on Sanforizing, but there
are
other
developments
which
so
turn
may
out
favorably.
companies
rayon
.
appear more
The
For example, the use of
cord in tires, a war devel¬
opment, has grown until more
rayon
than
'25%
of
is
poundage
manner.
-
the
companies'
in
this
consumed
Celanese,
the best of the
I
rayon
believe, is
companies.
Their management is not too good,
but the products are so good they
sell themselves.
in this field
are
Other companies
American Viscose,
Industrial
Rayon,
fruits, runs ships, owns plenty of Worsted, etc.
.
Wyandotte
"
major companies.
While
dividends
present
probably
will be
increased, the group has
long been notable for earnings and
dividend security, traceable to the
tenacity of the habit and the un¬
usually depression-resistant qual¬
ities of the industry.
leaf has
1940,
the
caused
crops
taper off
so
costs
seem
only
a
the
The cost of
than doubled
more
but
two
recent
the
price
that the
raw
since
record
rise
to
material
to be stabilized.
With
drop of 2% at the end of
War
due
cigarettes
to
by
UNRRA and the
try has
shown
the
lesser
the
Red
use
of
Cross,
Army, the indus¬
a
steady
upward
trend for the last 14 years.
The companies and their prod¬
ucts
R.
are:
J.
,
Reynolds:
at¬
tractive.
earnings,
obtainable that is attractive from
the five
Woolen
current
most
companies appear very
moderately priced with a yield
enjoyed record-breaking
earnings and may well be avoided.
Manufacturing, etc.
Beech-Nut, William Wrigley al¬
best years
Cotton is selling at three times
84 million tons
of ingots were ways show better than average
the prewar price and could fall,
Until last
produced as compared to 66 mil¬ market performance.
causing adverse repercussions
lion tons in 1946 and 82 million September they have been oper¬
throughout the textile field.
in 1941 and 56 million in 1937. ating on 60 %. of 1941 sugar sup¬
Cluett, Peabody holds the SanfofProfits of the 14 leading com¬ plies and a shortage of whatever
izing process and has in the last
it
is
they make chewing gum
panies were $394 million com¬
pared to $295 million in 1946, $205
$1.75,
of the last
century is the history
International Paper
(no of the railroads. The
Dutch people
strikes in 25 years), Champion
contributed to a large extent to
Paper, West Virginia Pulp and the
development
of
America's
Paper.
Enlarged capacity
may transcontinental
railroads.
Rail¬
force price cutting and anyone in
roads were the chief
beneficiary
these stocks should keep closely
of the war as
they had a tax base
in
com¬
split four-for-one
was
might be purchased lower if you
favored that type of
security.
' /
The
bread
think
1946, pays
32.
They are
advance from the lows of 1942 to
stocks—Ward's making
a luxury product in
how
I
Paper,
milk
-
depressing prices and
sales
stocks
paper
Paper,
Container
Cor¬
Nation al Container,
poration,
dependence
being
times
the
list of
a
fall in gross sales due
income and during
a
be?
The follow¬
most
per
Example: Argentina.
countries
some
United
strikes the year before,
other peoples, are learning to eat
cheese.
the
in
overcame
is too early
effect will be
2 lbs.
to 7 pounds.
year
than
States, and they sell their prod¬
from bad
when peace is signed.; It is* well
to notice, however, that we have
'/'
1
Steel Stocks,
.
changed.
stocks
we
it
to judge what the
and
Company,
this
paper
the
years
Sears,
Montgomery Warcl
The question is, can1
over
in
jus¬
are
dis¬
large will the
they will be
However, the price,
for example, on
Montgomery Ward
has gone down from a
high of 105
to
50, paid $2 in 1946 and $3 in
future.
construc¬
a
I
substantial.
we
we
shipping everything
upon
11
until
no
Shgll in¬
terests,
own
the
concession
in nection, therefore, Borden's and
Kuwait, where they have discov¬ National Dairy Products are in a
ered the greatest reserve of oil "good position to give better than,;
yet found in the world. Gulf has average market performance.
the largest reserves of any com¬ These companies, by diversifica¬
tion
into numerous by-products
pany in
the world and without
Royal
you
when
and
the period of
Scandi¬
Agricultural Equipment
are
the growth
and
over
maintaining
^
to lower farm
,
in
business
sound.
are
mar¬
that
near
tive attitude toward
Companies
and
new
the world
servative..
feeding of ani¬
mals they have enjoyed unprece¬
important consideration.
Succes¬
sive price advances have brought
crude oil to about $2.50 per bar¬
is
in the
sources
posted.
this business.
tailment of
branch into many divisions of di¬
versified businesses.
navian
con¬
products.
many
increased
oil burners being in¬
stalled each month, not to men¬
tion the dieselization of railroads
120,000
inventories
are actually chemical com¬
panies through sale of such by¬
products as chemicals, coal tar
products, fertilizers, etc.
They
or
of paper
greatest scarcity
the
sudden loss of control over pro¬
duction.
These
laws have
now
sified their business
they
The
that
securities
refining, etc.
million in 1937. Granting that we
have gone a long way to rebuild
much that
distributors
in
sumers' hands
placing plants needed constantly,
capacity/for
ance
The pro¬
capacity
about
$500,000,000 for additional
transportation facilities; the bal¬
proj¬
new
industries.
new
wages
—production, transportation, re¬
fining and retailing—are the best
for investment. They have diver¬
so
ventory
worldwide
billion expansion, half for ad¬
ditional
crude
development and
$4
Penn
South
accumulation
ects for
,
whereas
if
indication of any
of
in¬
no
appreciable
that
a
the civilization of man.
ords there is
rec¬
tified
the
oil securities
,
Oil Industry
production
new
agencies,
many
of
which bought for foreign sources;
for
so
that
losses
Third, large demand by
outlook
million
12
been tested
-
-
Century-Fox—"For¬
ever
Amber," $6,000,000.
This big return from the big
pictures shows that the public is
shopping and that the mediocre
pictures are dying, which did not
apply during 1946 and the war
Twentieth
but
falling
ket pulp with no chance
will receive much from
a
Jolson
In spite of
..
'
dry goods and chain store
companies.
There is no question
they face
would indicate that the
of
order
The normal
Paper Industry
Houses
to discuss last week the
Roebuck
output of tin is two
years away but soda ash for glass
should be in supply sooner.
29
cussed
improve their earnings as the
hampering -shortages
disappear.
industry, the
lowering of manual or hand-operared operations;
secondly, accu¬
mulated
pent-up
demand from
%
Columbia—"The
mail
Paper is literally in short supply
demand
possibility of the oil industry de¬
veloping the difficulties that it
had during the 1930s. ; At that
time pro rating production, the
legal method by which states con¬
trol the output of a well, and not
not belong in a purely conserva¬
yet
tested
hrough
the
courts.
tive portfolio.
1.
1
RKO —"Best
Years > of > Our Also, there had developed an en¬
tirely new, efficient method of
Lives," $11,500,000;
" "/
discovering oil so that there was
Selznick—"Duel in the 1 Sun,'
$10,750,000;
also
maldistribution of pig iron which
has added to the cost of manu¬
last year 2,971,000 over 1946.
The
glass container companies,
Owens-Illinois and
due to tax laws that do not allow
oline.
the
the
est
compared to
as
.V
-
#
THE COMMERCIAL
Number 4676
Volume 167
Camel, Prince
Albert, Brown Mule chewing.
American
gars,
Tobacco:
Corona
ci¬
Lutky Strike, Bull Durham.
Liggett and Myers: Chesterfield
cigarettes.
P. Lorillard: Old Gold.
Philip
Morris:
Philip
Morris
cigarettes.
American Snuff Co. and United
States Tobacco Co. and two others
sound for income.
30
THE COMMERCIAL
(926)
FINANCIAL
&
CHRONICLE
Thursday, February 26, 1948
.\>i > y !V'.
lem is to separate the wheat
from the chaff.
Tomorrow's
meantime production has prac¬
tically reached maximum capacity.
The
heavy
demands
and
the
higher prices do not bring forth
more production. Notwithstanding
(Continued from first page)
Markets
has been de-' developments. These were partly
rided Time and again as somegfeMf
thing degrading, ominous and measures, inflation is inevitable
Speculation
Walter
Whyte
subversive.
even
*
Y
Y
in
because
war
diverted
"
*
*
By WALTER WHYTE
This is not intended to be
be
positions
be
to
re¬
brief for speculation.
r
^
mam-
u
.j
,
tained.
the American system
amount of talking or
producers'
the
materials
of
war,
for producing goods and providing
services which they cannot pur-
and no chase with their incomes. The
legislate shortages of consumer goods, as
important stock market ing will do more than possibly
The
congoods to
and people are paid large amounts
£
.
and
supplying
a
It has
All long been an integral part of
flected in market action.
long
sumers'
are
resources
supplying
from
'
Steel increase yet to
j
week
was
in the
buildirlg up pf
say_
basic ital, the theoretical objective jngs jjejd
the form of liquid
commodity has once more of the investor, is to me secon- assets, i.e., cash balances and govbeen advanced
and the in¬ dary to capital gain.
Obvi- ernmept securities.
The wartime accumulations of
crease
is bound to- be felt ously the factor of safety is'
important fact is that
•
a
billion
$100
Umes
two
or
prewer
•
government
and
securitiesv
half
a
; whne
-amounts,
'-six
are
was
little further growth in the physi¬
cal volume of production during
farmers, wage, earners,
profes¬
sional people and small business¬
1947
men
'
tipues prewar holdings. These as?sets;; are
widely
distributed!
throughout
the
population;,
all
of
the
and
demands,
not
much
pected in 1943,
there
be
can
ex¬
YY'Y-7
,v;
have
shown
especially large
increases. The half of the families,
The
question
that i faces; the
country is in a sense a simple one.
Dp we want to hold down con¬
with
sumption in order to be able to
war
divert
lations.
to
the Check it. I maintain that no ied m ^e accumulation of large
steel prices. investment is worth a hoot if deferred demands. At the same
Whether this increase sticks it isn't a good speculation at time,the excess of incomes that
Hip samp time Roturn nn ran- could not be sperd or ^vested reor not remains to be seen. The tne same time. Keturn on capof the past
increase
in
news
I
Vi
resources
the
for the time
expansion
of
being
productive
medium-size
nearly
most
With
of
ductive
tures
the
maintenance
volume
of
of
a
large
expendi¬
very
government
these
had little
capacity and to assisting wartorn
countries in restoring their pro¬
capacities, not to mention
half of
of
the
the
incomes hold,
liquid assets;!
or no
before the
su.ch accumu¬
growing availability
goods since the end
consumer
of
the
families
consumer * expendi¬
naturally
expanded
rapidly than have consumer
war,
have
more
incomes.
tures for national defense and for
aid to veterans? It is not possible
to satisfy
all of these, existing
were
As
result, personal
during the war
abnormal rate of $35;
year, have declined tq a.
savings,
a
which
•
at the
billion a
,effective demands at once. To at¬ net amount of about $10 billion,'
tempt to do so can only lead to It should be recognized, however,'
taken
the result of rising prices. Although the ques¬ that this volume of net current;
taKen care of bv tnis increase Wd ^ssets^were
oi Dy this increase
waF flpance. They were the direct
in price. In these days of an outgrowth of the large govern- tion is simple, to decide what to cut savings is not small as compared
with prewar standards, either in:
inflationary economy the re- ment expenditures, which had to back r and how to do it is a .very dollar amount or
,
throughout
Jt
our economy.
*
'
With
#
*
v
the
/
market
off
on
a
turn
on
capital is almost de met as much as . possible
long weekend vacation there meaningless It is the increase *hro.uSh taxation and through bor-,
meaningless, it is me increase mowing from the savings of the
was little in the
price action
in the price, even if lt only people,
and the remainder .obto
indicate what the immedi¬
But days
ate trend would be.
before the steel increase
real
Since the break of
concern.
weeks
few
any
cause
a
most stocks
have managed to regain some
of their lost ground. It is quite
ago
probable that much of this re¬
covery was due to short covering. Evidence of this was seen
t
#
in
fact
the
initial
the
that
didn't
gain
to carry over beyond
normal technical, levels.,,
power
%
sjs
In
a
market such
concerted
as
movement
this
in
a
any
direction must have sufficient
ammunition
which to feed
on
itsplf after the initial burst is
Failing to get that
will sink back into a
exhausted.
it
argy
until it get something
again.
else to stir if up
The
course, would
something to be stir¬
ring all the time, particularly
something that would be bull¬
ideal, of
for
be
ish when we're
long, bearish
when we're not. But the mar¬
ket is seldom
accpnimodat'
so
ing.v It represents at all times
the
hopes, fears and beliefs of
millions
of
market
partic¬
Some
ipants.
based
on
of
these
precise
Most of it, however, is built
on
hopes and fears. The prob-
Pacific Coast
onf :
:
.j Pacific Coast Exchanges Y
mat
Stock
Y
York Curt) Exchange (Associate)
San Francisco Stock Exchange
Chicago Board
'■
COrtlandt
.
7-4150
Teletype NY *-928
Private Wires to Principal Offices
San
Francisco
Monterey
—
—
Santa
Oakland
—
Barbara
Sacramento
Fresno
(; Rising prices cannot be relied
upon to bring about a condition
of equilibrium
Moreover,
gross;
sayings are much larger,; because^
withdrawals from past savingsand borrowings, which are de-:ducted tp obtain the figure of net'
savings, are m.uch greater thanin prewar years. In other words,
there could be a. further decline-
^es
-
.
.
.
.
,
YYt %,
__
>
those
of the author only-J
to retire the
Current
'
-—————
Inflationary
LOS
ANGELES, CALIF.—Gor¬
don E. Buckhour has been
Large-Scale Spending
added
and individuals, but
nesses
mostly
are
tenance
is
prevented
.
of
high taxes, but rpore
by allocations and price
.
tures,
BEVERLY
Francis
I.
Financial
HILLS,
Scane has
sociated with
XY'i'.
-
Chronicle)
CALIF.as
Co.
was
volume
of
sharply. - The
current
ex¬
dividuals and businesses have not
CQfvin, Mendenhall .only used rising current income
formerly with Dean
Witter &. Co. and First California
& Co. He
the rapid
postwar
government expendi¬
consumer
and
business
in
spending increased
over-all
become
from the current- flow of
It may
Y
'*■< :
be concluded that indi¬
viduals
are
freely spending amL
investing
not
only
their
cur¬
rent incomes, but also their past
sayings and {he proceeds ^of bor- >'
rowings, but at the same time on
.
balance are still adding to their :
holdings of liquid assets., /Thus they, continue to h&ve
large
amounts
to
spend
and
invest.
There is no reason to conclude;
-
prewar
Offsetting
The
are
effect
in excess of the available supplies
of gogds and services because in¬
restrictions removed;
decline
to
in
generally smaller than in the.
years, but some of them are,
penditures by all groups has been
with Crowell, Weedon &
(Special
serves
war
double estimates for 1940.
income^
that these holdings are becoming L
and that governmental transac¬
more concentrated to any appre¬
tions on balance are exercising an
ciable extent into the hands of a
anti-inflationary influence.
few large owners.
They remain'
Individual- consumers
account
potentially- a highly inflationary
for the bulk of current expendi-.
influence, / _■
/ r
tures for goods and services. Con¬
Business, .which as a group ac- I,
sumer expenditures are now at an
annual rate of about $170 billion cumulated liquid assets during the ».
Buckley Brothers, 530 sharp rise in prices was inevitable
the public clearly
wanted
West Sixth Street.
He was for¬ But
Colvin, Mendenhall
notwithstanding liquida-!
a
billkm of armed;
about
cently almost entirely those held
by the Federal Reserve Banks.
Thus bank deposits and bank re¬
war
were
—
-
of
period inflationary
from ex¬
pressing themselves to some ex¬
tent by the imposition and main¬
the
forces
nected with
Scane With
curities,
forces leave bonds. These' amounts;;
-
being contracted. This
a,-powerful anti-in¬
lass, 510 South Spring Street. He
flationary process, but its effect
largely
was previously with Paine, Webis being offset by other develop¬
controls. At the end of the war
bey, Jaekson & Curtis.
these various restrictive measures ments. It may be said that :alno ii
Y were either removed or reduced though/- governmental
activities
in effectiveness. This action was utilize a, large part of available
With Buckley Bros.
manpower and
resources of the
premature,
because- under the
(Special to The Financial Chronicle)
conditions existing, it was impos¬ Country and thus contribute to in¬
LOS ANGELES, CALIF.-^Btap- sible for demand and supply- to be flationary forces, government re¬
withdrawing
funds
ley W. Wiedrick has become con¬ in balance, and the subsequent ceipts -are
to the staff of Bourbeau & Doug¬
$3 billion to their holdings of se-,
tion
those held by banks and more re¬
In
(Special ;tp The Financial Chronicle)
,
I
public debt—to some
securities held by busi¬
extent
Developments Due to
of Trade
New York 5, N. Y.
14 Wall Street
*.■
incomes.
,
Exchange
New
•;Y
'
*eiT> by buylnS government se,em¬
is
Schwabacher & Co.
Members
to
J^ks. The Federal Reserve Sys-
is
Co.
York
securities
sacrifices.,-
sonal
t&refJe
merly
New
selling
solved without .many
spe-j
_
Securities
Orders Executed
that
Hnllar
thp
the dollar,
are With Bourbeau & Douglass
reasoning.
by
cannot. be
that will end the
inflationary" development
and
supplied
the
commercial maintain
prosperous ^conditions.
important.
banks with needed reserves to They have only led to the de¬
in. the current volume of personal
*
#
*
Y
meet wartime currency demands velopment of a self-generating
saving and a corresponding in¬
and expand their holdings of govspiral. Higher prices means higher
crease in consumer spending, even
A few weeks ago I recom-. ernment securities,
profits and incomes and pressures
without an increase in personal;
mended a list of stocks at
The country's aggregate money for higher wages, which are iheome, ; Y
Yk -v Y--;
granted. Thus, the effects of the
cific prices in the belief that supply, as measured by currency
More
of personal sayings vare:
high prices are broadly distrib¬
these would increase.
inorpasp
Un to
emulation and pnyately-held uted
goipg into capital investment and
tnese Wpuid
UP toi demand, time, and
among farmers, workers, and
savings deless into liquid assets than, during^,
this writing none of these has posits, is ' now <two and a half entrepreneurs, large and small. the war,- which means that they
Spending can, therefore, be fur¬
acted in any manner to make times as large as at the beginning
are being, used
in a manner that»
ther
increased,
with
resulting
j any change in position neces-' °fth^d^fense pr°&ram— about greater pressures j, on available contributes to, rather than works
against, inflationary pressures. In¬
I
s«gg|st that
supplies and
further price
in¬
dividuals are buying more dur-!
all positions be maintained the general public, outside of creases. No particular group is to able
goods and investing more inr
be blamed for this development.
until
other
advice
appears hanks, insurance companies, and
boyring than they did in the im¬
government
agencies,
has
in¬ jHigh prices and high profits and mediate
here. The list follows:
prewar
years,
and are.
creased
its holdings of govern¬ pressures for wage increases are
borrowing more for these and
<
Bought—Stop ment securities to about $90 pil- {he normal manifestations of in¬
other purposes, as welLas draw¬
lion, or seven times as much as in flationary forces in a free enter¬
Amer. Brake Shoe. 38
-39
37
ing upon past savings.;. On thev
June of 1940. These government prise,
competitive price system.
^mer* Chain —J? securities in the hands of the pub¬ Serious distortions in prices and basis of data published by the,
Com¬
lic are practically the equivalent incomes have resulted, but so far Securitiesand > Exchange
mission,
it may
be
estimated
of
profiting
by
inflation
money
because
they
are persons
28
-31
Bethlehem Steel
30
that
individuals
in the aggre.-!
readily convertible into cash. fn have exceeded those suffering by
20
Boeing
21 -22
gate
invested
about
$5 bilRon
sum
total, this stock of purchas¬ *t. Therefore the spiral of rising
28
-30
Briggs
29
in
housing
during
1947
and!
ing power available to buy the prices and incomes has continued.
53
-55
Caterpillar Tractor 54
in the same period increased their •
current output of goods and serv¬
11
-13
Consul Vultee
12
mortgage indebtedness by about
ices amounts to about $260 bil¬ •j Y pnajicw-I Basis of Current
48
-52
Douglas
50
Inflation
'.'YYvYY $4 billion. Consumer borrowing!
lion, compared with a stock of "v'YY
20
-22
Dresser Industries. 21
for other purposes increased by •
about $80 billion in 1940—more i Government finance, which was
12
-14
Lockheed
13
approximately $3 billion.
YY ,•
than
a
threefold
increase.
The largely responsible for the war¬
12
-16
G. L. Martin...... 15
over-all physical volume of pro¬ time process of monetary and in¬ > At the s£me time other individ-.
22
-24
United Aircraft... 2?
duction of goods and services, so come expansion, has been com¬ uals have been increasing their:
far as it can be measured, is prob¬ pletely reversed in its effect dur¬ savings in more liquid forms.
It
More next Thursday.
ably between a third and a half ing the postwar period. The gov¬ is estimated that individuals in- i.
ernment is still spending much creased their deposits in banksr
---Walter Whyte larger than in 1940. Prices on the
and shares in savings
and loan:
average have risen by more than more than in previous peacetime
[The views expressed in this two-thirds. The dollar value of years but is now collecting in cash associations by $4 to $5
billion,:
article do not necessarily at any
the
total
national
productis more than it is paying out by a saved about $6y2 billion in 1947.
time coincide with those of the
nearly two and a half times the margin that is close to $10 billion through increases in Insurance arid
Chronicle. They are presented as
a year. This excess has been used
pension reserves end added over
prewar maximum.
nf
ot
power
enough1^.
have
between tained
ratio
the decline in the purchasing
nnwpr
action wasn't
announced the
anything to
was
the
maintains
relative to per¬
complex.ami difficult probleun It
but have also drawn
on
past
sav-
ings and have borrowed to aug' ment their buying power. In the
.
.
.
war
because
of
an
excess
of
re¬
two and a half times the
maximum^ Individuals also
hold the bulk of the liquid assets
has been paying out more than itr
accumulated;
has
a
year,
These
$160
during
holdings
billion.
currency
and
the
aggregate
balances,;, in
now
Cash
war.
deposits,
ceipts
riod.
over
current disbursements,
received
,
in
Business
the
has
postwar
drawn
pe¬
down-
its. w a r f i m e accumulations of»,
exceed liquid assets and increased its bor-
Volume' 167
-
.rowings. ;:The. excess, of expendijtures reflects larger,scale; capital
expansion, generally deeded;
,
to fill
in wartime deferments and to pro¬
FINANCIAL
&
CHRONICLE
thorities- ?ire. not adequate to deal
through: with this situation. A higher dis¬
have is !to count; rate is not effective when
services, the only effect that: fur-;
ther
the
creation
of
money
banking system
can
increase total demand and there-. banks do not need to borrow. The
productive capacity to meet, by raise prices."-/
vide
COMMERCIAL
THE
Number 4676
/•/",'/""
;
:
that the System has to raise
requirements of member
is
practically exhausted.
power
As our banking system operates,
•expanding postwar demands// The I
present rate of private/domestic! the legal requirement that banks
reserve
investment, including residential; must hold cash reserves in some
"construe t i o n, is exceptionally proportion of their deposits sets
large, being about .13 %
of the a limit on the amount of credit
'gross national product compared which banks can create. The de¬
'with a prewar average of 11%. posits themselves are largely the
"Current expenditures are prob- result of loans and investments.
Finally, the System is not able to
absorb reserves by selling Gov¬
for / replacement
growth and to cover
of the wartime deficiency.
sufficient
,ably
and normal
•
"some
attempt
fTo
make
deficiency
;wartime
such
to
in
inflationary
difficult
to a Congressional
corporations in 1947
expended
about
.$14'^'. "/billion
d'pllars oil plant and equipment,
$7 billion on enlarging their in¬
ventories arid added./roughly $5
receivables.
This aggregate of over $26 billion
was
financed
by approximately
$15 billion of retained profits and
additions to depreciation reserves,
billion of net new capital issues
and
$31/2 billion; of bank
'loans with some increase in other
$4
payables and a small reduction in
assets.,...,';'
liquid
The
„
decrease
■^
;1
liquid
assets,
in
bank deposits and Govern¬
ment securities, of about a billion
i.e.,
,
'
dollars
in contrast to a sharp
was
'
decline of
$6% billions during
) 1946, which, had reflected reduction in tax liabilities. To some ex-
%
the
tent
small
is
decline
The Federal
Reserve 'System was created by
the Congress as a public agency
ability
reserves.
due
to
adjust them to the needs of the
economy. Before the Federal Re¬
serve System, gold and a rigidly
limited note issue privilege were
practically
sources' of
a
banking
only
the
Such
new':rreserves.
'•
;
;
t
•
in
crease
.
bank
from
flexibility
or
.
to
order
tionary-
>
;
inflar
excessive
avoid
of Bank
•
.
the
sell
As
k
(2)
the
war
a
certain
many
possible were
as
•
:
•
J
to
securities
Reserve
from
Sys¬
billion
$16
$90 billion during the war pe¬
riod.
After
tirement
debt
substantial
during
re¬
past/ two
the
these- holdings
billion. "At
years,
about
$70
are
the
now
same
time banks have been able to in¬
crease
their loans.
ment securities
Govern¬
The
purchased were in
effect added to the
previously
isting volume of bank assets.
Credit in
ex¬
Under present conditions banks
can
preceding analysis of cur¬
brings us
the question of the role played
readily sell securities if they
want funds to expand
the
v
demand
for
loans. Since
Government
se¬
.
/
,
banks, not in accordance with the
decision
of
the
Federal
Reserve
authorities. In fact insurance
com¬
finds it necessary to buy them in
ever,
•
a
the
economy
is producing
and
maximum volume of goods
there
in
well* as
is
marked
some
business,
outlook,
home
and
owners
as
con¬
will want to continue to
sumers,
expand their borrowings in order
to
finance.-current
expenditures.
Prospective programs for addi¬
tions to plant and equipment in¬
dicate
a
mands
that
the
level
business
of
<
cannot
de¬
financed
be
sufficient
issuance
amounts
of
through
securities.
new
Demands for real estate loans also
continue
may
This
also
"It
large
not
only to
of
supplies
of
available,
goods become
especially if credit terms are re¬
The abandonment of
laxed.
con¬
credit regulation has been
sumer
followed by some easing bf terms,
which may proceed further under
the pressure of competition among
sellers
of
goods
lending agencies.
among
/ It
and
may
be roughly estimated
continuation of the present
that
of
in
activity,/with
prices,
as
the
If banks
the
are
balance
called upon to lend
needed,
new
money
will be created and further infla¬
ment
where soundly
main¬
production. It is not
to be expected that banks should
stop making loans.
It would be
practically impossible for matur¬
ing loans to be paid off without
some
new
loans being made to
based
lending
is necessary for the
of
tenance
ernment
securities
ily create
curities
reserves
on
the
volume that the
order to
can
also read¬
by selling
in
Federal
Reserve
maintain
an
such
orderly and
duction cannot be
enables the
against
the
Federal
new
someone
increased, only
borrowers to bid
else for
a
limited
supply of goods. It results in ris¬
ing prices and not in increased
output. It adds to the total sup¬
ply of money and continues to be
an
Banks
can
readily obtain funds
to increase their loans. The inflow
of
gold
from
other
which amounted
to about
lion last year and
a
countries,
$3 bil¬
is currently at
rate of about $2 billion a year,
will
supply
permit
or
an
more
enough
reserves
to
expansion of $10 billion
in
bank
credit.
In
addi¬
Reserve
au¬
funds by
curities.
can
obtain additional
selling Government
se¬
in
security
that
occur,
govern¬
would
level,
and
reach
that
a
every¬
thing would then be much better,
with markets as delicately bal¬
Securities
kets
as
contacts
our
indicate
the
and
expe¬
present
mar¬
to
be, I cannot agree with
this opinion or judgment.
With¬
necessary
to restrict the supply of
government bonds undertaken for
reserves.
This would
whatever
aban¬
mean
purpose
(laudable or
otherwise) would be likely to find
donment
by the System of its pol¬
icy of stabilizing the Government
securities market and
the earlier
of
mean
bank
the
securities
securities
contract
other
offset
desired level
some
sell
to
necessary
to
at
would
System
needed to main¬
are
as
reserves
and
the
if
•
reserves
factors
that
or
may
be added to reserves,
that
by the
supply and demand
operate outside of the Fed¬
eral
Reserve
elements
ing
of
System. The result¬
changes
would
cise
in
interest
counted
be
rates
to
upon
ing demand when it is in
of
the
the
excess
available
supply of funds
perhaps en¬
borrowing when the sup¬
savings exceeds the de¬
market
courage
ply
exer¬
influence toward restrict¬
an
of
and
mands of investors.
././I
;
banks
and
volves
a
other
transactions
almost
Large-scale
eral
and
Reserve
tions
ties
investors
tremendous
are
every
of
day.
continuous Fed¬
open
market opera¬
essential
for
the main¬
orderly and stable
an
for
in¬
volume
Government
securi¬
and
of the
'bottomless
market'
on
first
day support was with¬
drawn.
A rapid descent in prices
going far beyond any question of
the government's credit (which is
high) or relative interest rates
would be most likely. Uncertainty
This
reserves.
that
almost
an
return to
a
policy of regulating the
supply
are
a necessary adjunct
Treasury program for man¬
aging the huge public debt. The
System has been
buying securities amounting to
hundreds of millions of dollars a
week and purchases and sales in
a single day often exceed a hun¬
Federal Reserve
would
almost surely persist for a
considerable time after such
de¬
a
velopment, the government's nec¬
essary refunding operations would
be made very difficult and private
security
would be seri¬
such circum¬
markets
affected.
ously
In
there could easily be a
flight of 'cash' out of both mar¬
stances,
kets, and price changes
to make
as
impossible
what
to
so erratic
financing almost
new
for
contemplate.
Federal
all
in
debt of
sorts
I
do
like
a
$250 billion,
over
forms
of
with
not
In the face of
of holders,
sorts
time,
some
ramifications
held
and with
by all
high
high
employment
in which there are al¬
a
consumption
economy,
ready severe stresses and strains,
we
ican't
treat
the
government
security market as we might a
$50 million issue of XYZ corpora¬
tion.
I
and
not
am
believer in
a
government
more
certainly, but this is
more
controls,
control
one
which' I would not want to try to
let go, voluntarily, under present
circumstances."
Modest
—The
Use
.
of
second
Existing Powers
possible line of
tion in the present
ac¬
situation is for
the System authorities to exercise
such
modest' restraints as they
with
can
existing
and
powers
the limits of their respon¬
within
sibility for maintaining an orderly
and stable government bond mar¬
ket.
Policies have
this
toward
end.
been
directed
Interest
rates
short-term government securi¬
on
ties
have
and
this
been
permitted
to
rise
has, for the present at
any rate, effectively stopped the
of
selling
short-term
dred millions.
The Federal Re¬ practice
serve
System is the only agency government securities to the Fed¬
with the power and resources suf-. eral Reserve and purchasing longIt may also have
ficient to provide the support that term securities.
encouraged banks and others to
this vast market requires.
It is sometimes suggested that
complete abarfdonment of market
support is unnecessary but that
a
gradual decline in bond prices and'
rise
in
interest
permitted.
inflationary factor.
tion, banks
Instruments of regulation avail¬
to
be
declines
securities
out
our
support, under present
conditions,. almost any
sale
of
rates
Some
direction have
ever, as
fective.
interest
bond
be
can
Would
rates,
any
be
this
moderate
sufficiently ef¬
small
a
with
prices of
below par,
in
question, how¬
to whether
movement
might
moves
already been taken.
One has to face the
one
a
or
rise
in
decline
in
two points
stop banks from selling
securities if they wanted funds to
make
loans?
bring about
interest
stable market.
able
should
expansion in the total volume of
bank credit, especially when pro¬
se¬
market
It
borrowers,
mar¬
encompassed within
sell securities where
endeavor to
market
/ Bank
be
'natural'
Federal Reserve System to stop
buying Government securities and
tenance of
tion will thus be financed.
security
government
prices would
may
lend, but will they lend it, or
will they increase their expendi¬
tures and thus drive up prices?
of New
modest program and that only
much
to
statement
recent
Reserve Bank
moderate
in
durable
the
could
rates would be determined
increased
as
durable
level with¬
own
our
Limiting the discussion of antiinflationary measures, to the field
of credit, there are various lines
of action that may be followed.
further
the
per¬
ket
purchase of exist¬
ing homes at higher prices. Con¬
sumer credit will no doubt expand
construction but also
new
finance
to
that
be
might still be argued, I sup¬
that abandoning our support
pose,
en¬
safety
Government
should
York:
and
Permit
view
the
to
market
from
Federal
rapidity of
will
confi¬
govern¬
by Allan Sproul, President of the
particularly
of banks
other financial institutions.
the
if
stability of
respect
bond
quote
such as the
gold inflow. It would mean that
prices of Government bonds and
therefore, the
level
of
interest
finance
be created at the initiative of the
panies and other holders of Gov¬
a
Unless
change
other
mechanism for allowing
obtain newly-created
money, as well as to put to use
money that has been saved..
As
long as production can - be ex¬
tally
borrowers to
/
pansion.
recognized, however, that over-all
panded on an economically sound
basis,, this
creation of money
through the banking system is
useful and desirable. When, how-
;
ex¬
curities is limited, it is
im¬
portant part in postwar inflation¬
ary developments. Our commercial banking system is fundamen-
re¬
the bulk of any sales
the
Bank credit has played an
V
unwanted
an
on
demand for
Federal
.
■
bring
rise
The
likely that
will be pur¬
chased by the
Federal Reserve
flationary pressures are due to an System.
This results in an in¬
excess of over-all expenditures by
crease
in bank reserves, /on the
the various groups in the economy basis of which the banking system
over
the
available
supplies of can expand loans to more than six
goods and services. The fact that times the amount of reserves orig¬
there is an excess is due in part to
inally created. This, it should be
ability to draw on past savings recognized, is a situation that is
and in part to an expansion in entirely new in monetary history.
borrowing..
It means that new reserves can
,
will
level
ment
banking system.
It has
been pointed out that existing in¬
,
that restraint in credit expansion
decline.
danger
pur¬
reserves
support
from
the
Federal
Reserve System, I should like to
disastrous, because credit liquida¬
the
more
out
a further
One of the principal difficulties
result in the
of following this line of action is
as $20 billion
that in view of the present great
tem by buying securities in the
of borrowing by businesses, farm¬
market supplied commercial banks ers and individuals •during 1948. magnitude of the public debt there
can
be no
orderly Government
with
funds
needed
to
buy the Of this amount not much more
without active
additional Government securities. than half might be obtained from security market
Federal Reserve participation. The
As a result commercial banks ex¬
financial institutions other than
normal shifting of funds among
panded their holdings of Govern¬ banks. Individuals will have funds
The
by
perhaps
contraction of the total
some
banks.
rent inflationary forces
to
and
expan¬
volume of bank credit. The danger
remainder had to be purchased by
'//:" Inflation '■*>
...
no
be
which
to
than
created
the
mitted to find its
tain
were.
war.
V
Role
with
credit
bank
sold to nonbank investors but the
being more than offset by the effeet
of business
and consumer
The
own correctives. The
danger,
however, is that the longer the
spiral of inflation continues, the
more
severe
the subsequent and
inevitable collapse is likely to be.
A downturn following a period of
expanding loans to businesses and
raise
•
amount of securities to finance the
level of expenditures
borrowing.
sion in
with
even
the
their
can
be
in
With
development of
would buy only such Government
Government had to
may
ef¬
fect of the Government surplus is
.
the
to
is also questionable whether busi¬
ness
will be willing or able to
During
once
that
said that the anti-inflationary
\
lead
•/// /'v>:
'
v
The Reserve System has
encing the availability of bank re¬
serves are not so effective as they
Business
borrowing heavily. It may be
is
later
have
ment bond prices was maintained.
fields.
many
may sooner or
would
these advances may be made;
and capital investment.
v,
in
out of funds available to them. It
avail¬
able three techniques of regulate
ing the supply of reserves: (1)
making loans to member banks
and varying the rate of interest,
i.e., the rediscount rate, at which
;
"many of them are drawing upon
past savings and are also borrowhigh
be adopted
may
Inflationary forces
would
thai;
measures
deflationary developr
or
ments.
/ ing considerably in order to maina
many
rience
forces.
." tain
dence
are
anced
Government, although
spending heavily, is nevertheless
saving by drawing funds from the
public and paying off debt. Con¬
sumers are saving on balance but
ary
There
would
31
in prices
amounts
In this event
sibility that has been suggested
by a number of people is for the
is of particular significance
the standpoint of inflation¬
omy
chase.
Prices to Decline.—The first pos¬
be
drawn from this analysis of the
current financial position of the
three broad groups in the econ¬
conclusion
The
VS
to present a comprehensive
program
for stopping inflation.
paper
declines
large
System
than the effects of continued
the same in both years.
Y
continue
sell
cession is much less to be feared
suffi¬
capacity for
expansion and often resulted in
serious; monetary panics of cat¬
astrophic
nature.:- The
Federal
Reserve System was organized to
remedy* this situation and was
given power to create additional,
bank reserves.:,; At the same time
it:. was given responsibility for
regulating the; supply of reserves
to the needs of the economy in
the inwas
about
loans
to
the
this
of
-
further
of
would
cient
in 1946 and
1947 than
i in
of inflation.
It is
possible,
in
view
of
the
large holdings of bank
deposits
and
other
liquid
as¬
sets, for an inflationary spiral
tion
Check
mechanism did not provide
the fact that many of the corpo¬ buying or selling Government se¬
rations holding large amounts of curities or certain
types of bills in
liquid assets do not' lieed addi¬ the open market;; and (3) adjust¬
tional funds, but it no doubt also
ing the level of member bank re¬
reflects the need by corporations serve
requirements within statu¬
for larger workiag balances. Cortory limitation.
porate borrowings through new
Because
of wartime develop¬
security issues were much larger
ments, these techniques for influ¬
y
•
of
to administer such limitations and
com-
committee,
'
under
purpose
tion will accelerate the
.Harriman
'
credit
expansion of bank
present conditions
the
not
ward
spiral
theoretically
piled by the Department of Com.merce and presented by Secretary
to their trade
Continued
,
is
country by limitation on the avail¬
.
billion
Inflation
It
period
to information
According
over
commercial
of
Under
Demand
Continued
:
com¬
' Control
volume
total
Credit
Bank
.
buyers.
no
to"
individuals
subsequent readjustment.
the
.
banking.
of
are
Done
would contribute to a further up¬
intensify
pressures,
heart
where there
market
a
Be
bank credit is accomplished in this
a
the boom and make more
mercial
the
the
are
in
securities
ernment
Can
Inflationary Credit Expansion?
all the
up
this would add to current
as
Reserves
banks
What
<927)
of
a
rates
Or, would it simply
similar rise in other
and
a
continuation
lending?
A danger of attempt¬
ing such a policy is that holders
of government bonds in anticipa¬
available
invest
funds
in
short-
term
government securities rather
than
seek
other
As
ments."
Reserve
reduce
loans
or
invest¬
result, the Federal
System has been able to
some
of its holdings of
a
Treasury bills and certificates and
thereby absorb availabe reserves.
The
for
has
cash surpus.
now
its
effective
most
reducing
reserves
the
For several months
the Treasury has used all of
available surplus
curities
held by
Banks.
serve
only
instrument
deposits and
Treasury
bank
been
are
to retire
se¬
Federal Re¬
In this
manner
not
deposits withdrawn from
commercial
serves
the
are
reduction
banks
but
bank
re¬
eliminated through the
of the
(Continued
total
amount
on page
32)
of
32
Thursday,; February 26,' 1948
(928)
Inflation and Bank Credit
credit.
It is true
the reserves absorbed have
to a considerable extent re¬
Bank
Reserve
that
been
Federal Reserve pur¬
by
placed
securities sold by banks
chases of
restraint
of
cise
(Continued from page 31)
individual
by
banks in making loans.
The bank
supervisory agencies have issued
statement urging "that banks
a
curtail all loans
uals
businesses for specula¬
to
or
either to individ¬
tion in real
estate, commodities or
securities.
They
should guard
positions, but the fact that banks
against the over-extension of con¬
have been forced to sell securities
needing to maintain their reserve
puts them under
pressure
and discourages
seeking new loans.-
for this purpose
some
their
particularly
heavy at present. During the first
quarter of this year the Treasury
is obtaining a surplus of something
like $5 or $6 billion of cash re¬
ceipts in excess of disbursements.
These pressures are
These funds reduce
bank deposits
since most of them go direcently into the Reserve Banks,
and,
reduce bank reserves.
using a large part
of this surplus to retire maturing
bills and certificates held by the
also
'they
The Treasury is
Banks
Reserve
Federal
and
thus
sumer
their
maintain
reserve
which
-securities
will
be
of currency and
flow
return
use
It is also being
of excess reserves.
considerably alleviated by largescale sales of government secur¬
the
of
situatipn which
During the second
quarter of this year the Treasury
is likely to be paying out a billion
'and a half to $2 billion more than
it will be receiving.
This will
draw funds from the Treasury de¬
posits with Federal Reserve Banks
and return them to the reserves of
commercial banks. These reserves
could
absorbed if the Federal
be
System were able to sell
Reserve
Summary
,
inflation
further
of
will continue to be
loans.
bank
for
mand
there
growing de¬
a
Banks
are
contraction, potential inflationary
of
c r e
Under any
available to banks
by voluntary action
the part of the banks, the indi¬
ply of
reserves
on
vidual
or
limitations could be effected only
what loans
refused.
made and what are
are
The
problem
simpler for
be
may
by
than
disastrous
more
if the end
necessary
would
were
be
somewhat
standards- to
of
sort
some
them in their loan
the
be
may
customary ones relating to credit
individual
the
of
standing
bor¬
The banks may decide to
rower.
exercise
greater
selectivity
in
making loans.
Such a course is
highly desirable from many stand¬
points; it would reduce somewhat
the total volume of loans being
made and would also leave banks
in
the
upon
willingness
of
buy government' securi¬
rather than to make loans
to
ties
with the additional funds they
will
have available.
During the last half of the year
the Treasury will probably have
if
little,
cash
any,
should there be
a
strong position in case of an
eventual
business
recession.
If,
reduction in tax
"rates there will be no surplus and
perhaps some deficit. The System
will, therefore, have little ammu¬
nition with which to offset a gold
inflow or otherwise prevent con¬
demand for good
high quality is great
of
loans
requirements .of
mercial
high
liquidity.
of
degree
If
a
bank finds that in order to
expand
its loans it has to reduce its liquid
assets below some desired level,
of
this
recommended
Board
serve
President
of
cash assets
short-term gov¬
or
The grant of au¬
banks.
thority
com¬
ernment securities would
nature
desirable
has
been
by the Federal Re¬
the
Con¬
to Congress and
has
suggested
to
that it give careful consider¬
ation to the Board's proposal.
In
gress
not
credits do
,
the
in
banks with bond
on
their
books
case
also
of
need
above
to
(Special
LOS
The
V. Y
Staff
Jaeger
J.
Spring Street.
.
(Special
to
&
has
be¬
connected with E. F. Hutton
Company,
Street.
623
South
those
current
A
third set of
standards which
Spring
Frajon Trading Co. Formed
Francis
J.
Falvey
has
formed
Trading Co. with of¬
Frajon
William
62
Street, New
at
York
City to engage in a Securi¬
by
two decades but this has been oc-
Don. S.
suggesting that they be permitted
to
hold
short-term
government
increase in cash
and government securities. To the
Board
pill
endeavored
somewhat for
securities
to sweeten the
the
banks
The
ratios
companied by
an
ties business.
expan¬
ing in
offices
part of the government securities
there would
be little change in this particular
ratio and thus it would not be a
reserves.
pur¬
which
war,
they purchased during the
but
disposing
order
to
to prevent them-from
of such securities in
obtain
reserves
ther expansion in
for fur¬
bank credit.
Restraint by Banks—The fourth
possible line of action is the exer- j
extent
that
further
loan
a
securities,
expansion.
The
more
significant ratio is that of
capital to risk assets, excluding
cash and all government securi¬
ties.
That
ratio rose from be¬
check
on
York
Farrington is engag¬
securities business from
tween 15 and 20% in
the 1920's to
1775
at
Broadway,
New
City.
New York
City member banks, for the week ended Feb. 18, re¬
ported an increase in their holdings of government securities, with
a
maturity of more than five years, for the first time since Nov. 5,
1947.
Although it could not be definitely substantiated, reports
.
.
which
.
are
making the rounds of the financial district indicate tfiat
were made principally in the taxable 2l/\s due
commitments
these
1956/59 and the 2V2S due Sept. 15, 1967/72.
SYRACUSE, N.
Y.—Antoinette
engaging in
a
securities
business from offices at 220 Breakspear
.
.
The partially exempts
among
SENTIMENT
IMPROVED
Apparently the less timid holders of the longer taxable eligibles
have been encouraged by the market action of these issues, since it
has resulted in many of these bonds being withdrawn, that were
about to be sold.
At the present time, it would probably not take
.
.
.
from the market itself to bring fairly siz¬
taxable eligible bonds, especially from
the smaller commercial banks which do not relish the decrease in
too much encouragement
into
commitments
able
that
income
goes
to have,
there
the
with holdings of short-term Treasury issues.
The over-liquid
position that
some
evidently will not be carried too long, because even now
been some rather substantial switches from shorts
middle, and longer-term taxables, as well as the
into
partially
Confidence seems to he gradually creeping back
into the money markets although it is still too early to forecast
the end of uncertainties that would result in a quickening of the
exempts.
.
.
.
demand for the longer
Y.
maturities of the eligible Treasuries.
.
Yy
STATE ISSUE
The coming issue
<
.
.
YrAy
of New York State bonds, due from one to 10
of
to be competing with the intermediate maturities
appears
years,
.
.
.
commercial banks appear
have
yield
bonds, since it is reported that the tax-free
on
the
obligations, particularly in the middle brackets, will be quite
attractive.
This has brought minor selling into comparable ma¬
turities of Treasuries, which have given some ground. . . .
State
.
.
WORLD BANK BONDS
World Bank bonds have had
better tone, with indications that
a
part of the weakly held issues have been taken over by
institutional owners that have bought them for income. ... Com¬
mercial banks have been buyers in good sized amounts of the 214s
These
banks have been purchasers of the 3s.
institutions,
according
information
to
.
.
.
that
is
being
Bank bonds
Smaller,
commercial banks, especially
the out-of-town ones, are also
buyers of these bonds, with the 3s being more favored than the
passed out in the "Street," believe that the World
are much more attractive than AAA corporate bonds.
.
.
.
ERP
.'.V ;: Yy
", yy/.''"
1
proposal to apply $3,000,000,000 of this year's Treasury sur¬
The
plus/toward defraying the cost of European Relief, need not result
in an ease in the money markets.
Government surpluses must
come out of taxes, and it is the collection of these taxes that tightens
the money markets. ... Individual deposits are transferred to the
.
Road.
.
government and if they are kept with Federal, have a very restricting
effect upon the money markets. ... If these funds are used to retire
Federal-held debt, they eliminate bank deposits and reserve bal¬
..
...
.
Under
the
proposal
yy •••■•';; y.;.Y>Y *
of
Senator
Milliken,
••
y.
.
••.;:Y JY
$3,000,000,000
of
government surplus would be used to finance the Marshall Plan
and these funds would not be available for redemption of debt
owned by the Central Banks.
However, if they should be:
.
.
"special fund" with Federal until used, it would
markets tight. ... As the monies were used,
deposits would return to the member banks, and this would
deposited in
these
C. Brisk is
.
the issues taken on, with the 2%% due 1955/60
and the 2%% due 1960/65, reportedly the most important purchases
made in this classification by these banks. ...
also
were
a
still keep the money
A. C. Brisk Opens
loan
doubt supply needed
HOLDINGS INCREASED
.
ernment
no
issues in order to keep the market orderly
Farrington in N. Y.
Donald S.
sion is offset by a decrease in gov¬
as
limits because the authorities would
narrow
ances,
pose
of this particular proposal is
to permit banks to retain a large
money
2%s... Y
'>
fices
banks
to
allowed
be
buoyant market should develop in longer eligible
a
TAXES AND
the
not
YYyYY '' Y',YY:Y;;-V. Y Yy
y
.
market prices.
will
Treasuries
the not to distant future, as is believed in some quarters
CALIF.—
Jr.,
of
;>..Y
*
taxables,
of the
markets, it would most likely be pretty well contained within
If
in
100.....
while savings
Chronicle)
Financial
Hanson,
B.
George
come
The
ANGELES,
.
..
the greater
With E. F. Hutton & Co.
LOS
.
of supporting the market by
pressure
maturities
distant
more
break
.
CALIF.—Ru¬
has joined the
s*aff of First California Company,
510 South
longer taxable
sufficient to not
the au¬
thorities, but also to move quotations up to levels that could
bring in more buying, since the opinion seems to be spreading
that the powers that be are not fooling when they state that the
relieve the
only
the taxable
ANGELES,
dolph
the
conse¬
Chronicle)
Financial
for
market
Although demand for the taxable bank issues of longer ma¬
v
N.
disastrous
without
uation
.
.
.
that of the partially exempts.
as
the sit¬
correct
might
.
turities has not been too sizable yet, it has been
uninvested
downturn
.
.
.
eligible bonds is almost as
There is, however, this dif¬
ference, that the monetary authorities have sizable positions in the
former obligations which will be used td keep quotations stable if
an important upturn should eventually develop in these securities;. . •
chin
unsatisfied demands and
savings,
an
early
stantial
among
MARKET
The
be liqui¬
to
be
portfolios valued
at
a
might watch would be the
of bank capital to assets.
The ratio of capital to total assets
has declined sharply in the past
requesting additional authority to
increase reserve requirements, the
THIN
dated, then the recession can be
limited. In view of the still sub¬
Another set of standards which
might be adopted by banks would
relate to the maintenance of a
will
there is
If
banks.
enough there could still be over-; quences. :*Y;Y
all credit expansion under such a
policy. This expansion would add
Joins First California
to inflationary pressures.
then it may decide to restrict fur¬
inflationary credit expan¬
ther loan expansion. This would
sion.
>YYY>.
be sound policy for banks which
Increase
in
Reserve
Require¬ have had
rapid increases in de¬
ments—The third possible line of
posits and wish to be in a position
action is to obtain from Congress to meet
large withdrawals. Main¬
additional
authority to increase tenance of a substantial amount
reserve
expansion
now
.
large volume of credit to be liqui¬
dated at declining prices, the de¬
cline
will
be
accentuated.
If
tinued
the
for the
and
the
however,
and
surplus
a
credit
Further
augment the difficulties of the
subsequent inevitable adjustment
both for the economy as a whole
some
time income is improved by
same
to be less fear
.
reached
by some other means.
guide
policies.
standards
These
banker
a
long' eligible
their
oversold
that
repurchasing
.
supply of available reserves" short
abandoning support of the gov¬
abandoning support of the
government bond market.
This
would probably have results far
bank will have to decide
general
positions,
the operation. A .> There ap- '
institutional buyers; that prices of
government bonds will break "pegged levels" and this has resulted
in minor commitments being made in the more distant maturities of
the bank eligible obligations.
Dealers as well as traders are com¬
ing into the market for the bank issues, believing that a turn can
be made in these securities.
Liquidation also has slowed some¬
what in the tap bonds.
\ '
of
restraint, ernment bond market. Under ex¬
isting powers, however, definitive
d i t
institutions
of these bonds in' order to"
restore the balance between their holdings of shorts and longs. . . V
by
limiting the sup¬
certain
with
Treasury
selling some of their large
self-restraint by banks is a con¬ holdings of government securities
to the Federal Reserve System.
structive step in the right direc¬
All existing powers are being
tion.
To the extent that banks
refrain from expanding their loans used by the Federal Reserve and
or
are
able to bring about some Treasury authorities to limit the
to encourage
Bankers Association
government securities in the mar¬
depend
kets
fairly steady tone continues in the government securities mar¬
pears
.
ket, but its ability to do this will
banks
A
At the
might give banks some concern.
The Board
has
proposed
to
Congress the
ities by insurance companies and when he has no funds to lend and
other investors. In the absence of knows he will have trouble liqui¬ grant of additional powers that
would
permit the adoption
of
other buyers these securities are dating some other asset in order
somewhat more restrictive poli¬
purchased by the Federal Reserve to expand loans than is the case
cies without completely abandon¬
System.
.YY./;- ; YYjyy'.Y when he has a large volume of
ing support of government bonds.
Continued
use
of this instru¬ government securities, any part of
In any event, and particularly in
ment depends upon the existence which he can readily sell to ac¬
the absence of effective general
of surplus in the Federal Govern¬ quire another asset which is more
restrictions, ' responsibility
rests
ment budget.
For seasonal rea¬ profitable or otherwise desirable. with individual banks as to fur¬
The latter is the position of most
sons, even when there is a
sur¬
ther credit expansion and the na¬
banks today.
If they do exercise
plus in the total budget, most of
ture of loans that will be granted
it comes in the first quarter of the restraint they will have to set up
or refused.
calendar year.
By JOHN T. CHIPPENDALE, JR.
now
'
in
imports,
This is a
1920's.
Governments
on
member
level
the
to
down
all
for
further increase in
will bring the ratio
obtaining
additional funds
maintain adequate capital in rela¬
through the gold inflow or they
tion to risk assets.''
Y;.YY.f Yyl can readily create reserves as a
The program of the American basis for further credit expansion
banks, however, is offset by many
gold
strongly
urged "directors to see that their
banks follow these
policies and
whether it be by
including
assets
back
event
also
authorities
These
largely bought by the Federal Re¬
serve
System.
This pressure on
factors,
risk
is
and
years,
21%
Any
as
measure
Banks,
r
to
banks.
Reporter
sharply in
In summary, it may be said that
possible extension of
continuation* of the current infla¬
existing condi¬
tions should be confined to financ¬ tionary spiral can be facilitated
by
further expansion
in bank
ing
that
will
help
production
loans or might be checked by re¬
rather than merely increase con¬
straint on bank lending.
In the
sumer demand."
far
Iment
not
are
market.
two
past
close
declined
bank credit under
forces will be reduced.
the
the
has
It
credit and should not relax
paid back into
in order to
positions,
will find it necessary to liquidate
la considerable amount of governthe funds
1946.
the terms of instalment financing.
As
Our
around 25% or more from 1934 to
j
ease
the
The
money
markets.
...
collection of taxes by the Treasury is, however,
the defla-
of the program, whether the funds be used for debt
retirement or the Marshall Plan.
Also it could be that by the
tionary
part
.
time the Treasury
.
.
surplus would be used for European Relief, some
easing in the money markets might be desirable.
.
Volume 167
Number
4676
THE COMMERCIAL
FINANCIAL
&
CHRONICLE
(929)
33
Indications of Current Business Activity
The following statistical tabulations cover
production and other figures for the latest week or month available (dates
shown in first column are either for the week or month ended on that date,
or, in cases of quotations, are as of that
date) :
'•
AMERICAN
IRON
STEEL
AND
Indicated steel operations
Equivalent
(percent of capacity)
to—
PETROLEUM
to
runs
Gas
oil
and
1,687,100
(bbls. of 42 gallons each)
Feb. 14
(bbls.)
average
oil
output
(-bbls.)
(bbls.)
5,347,175
5,332,575
5,326,137
4,757,650
Feb. 14
—
5,378,000
5,348,000
5,344,000
4,738,000
15,429,000
•15,476,000
16,236,000
2,508,000
2,468,000
2,489,000
13,976,000
2,293,000
7,694,000
7,870,000
7,496,000
output
unfinished
(bbls.)
and
Residual
9,154,000
8,880,000
oil
$118,384,000
$93,488,000
$1,261
*$1,352
$966
1,106
*1,176
839
899
*962
666
510
*555
300
276
*285
275
130
*133
159
89
93
69
57
*59
47
13
15
BOARD
—
FEDERAL
of
gasoline
(bbls.)
at
8,792,000,
/
Total
OF
fuel
(bbls.)
of
(bbls.)
at
AMERICAN
—
Private
Residential
building (nonfarm)
Nonresidential building (nonfarm)
Industrial
105,100,000
98,751,000
101,039,000
10,408,000
11,119,000
12,975,000
12,833,000
Farm
construction
36,195,000
38,538,000
44,432,000
42,275,000
Public
utilities
100
107
81
50,038,000
50,257,000
51,601,000
45,656,000
construction
207
*214
173
39
other
Public
tary
ENGINEERING
NEWS
'
,7 '?,.
747,394
811,286
799,977
668,783
690,251
686,349
All
Sewer
OF
$133,534,000
$118,949,000
$98,463,000
42,912,000
45,643,000
30,751,000
14,892,000
68,319,000
67,823,000
71,722,000
65,215,000
51,126,000
26,741,000
Residential
All
SALES
40,171,000
15,714,000
Nonresidential
11,027,000
11,230,000
11,350,000
13,080,000
12,350,000
1,038.000
1,170,000
1,210,000
970,000
134,900
*131,200
124,800
140,500
•
Retail
238
240
STREET,
IRON
AGE
AND
INDUSTRIAL)—DUN
5,436,430
4,777,740
Retail
BRAD-
&
107
128
COAL
Feb. 17
3.23940c
I Feb. 17
$40.37
$40.17
Feb. 17
$40.08
$40.50
*3.19411c
*3.19411c
2.87255c
$40.08
$30.15
$41.83
$33.75
V
-
Electrolytic
(E.
A
M.
J.
Btraits tin
(New
Lead
York)
'New
(St.
St.
'
,
21.200c
Feb. 18
21.200c
•
21.200c
Govt.
PRICES
DAILY
15.000c
15.000c
14.800c
14.800c
14.800c
12.800c
12.000c
12.000c
10.500c
10.500c
;
21.525c
■
13.000c
.
Bonds
1.342,000
1,674,000
820,000
455,000
575,000
711,000
and
OF
1,232,000
582,000
$25,499,000
$15,193,000
54,980,000
55,368,000
58,970,000
4,921,000
4,863,000
5,155,000
MINES)—
lignite
tons)—
(net
...
tons)—Month
(net
(net
tons)—Month
of
Jan
-100.70
100.72
100.69
Feb. 24
Total
OF
millions
600,000
Group
111.25
110.88
110.70
THE
of
as
117.40
116,41
116.02
115.82
122.09
I;'
$13,368
Govt.
sale
YIELD
-
114.46
114.27
120.22
109.97
109.97
117.20
DEPT.
103.47
103.64
110.7C
105.52
105.34
105.17
112.37
112.56
118.40
115.24
114.85
114.85
121.04
;
i
2.45
Feb. 24
Aaa
3.10
Feb. 24
i
,
Group
Utilities Group
Durable
2.83
Hourly
All
2.85
2.86
2.55
2.91
2.93
2.94
2.64
3.15
3.17
3.17
2.79
3.52
3.54
3.53
3.13
3.42
3.43
3.44
3.01
3.01
3.04
2.89
2.91
r
•
3.03
/
Feb. 24
—
407.1
406.2
MOODY'S
200
BY
ASSOCIATION—WHOLESALE
Feb. 14
Banks
Cotton
235.5
231.5
242.0
300.5
286.6
260.8
279.9
238.8
Copp'er
L___ Feb. 14
300.6
318.3
337.8
313.2
256.4
238.3
Grains
.
Livestock
Fuels
Feb. 14
Miscellaneous
commodities
*
Feb. 14
«■
?
v
220.8
102.2
materials
."—Feb.
216.0
158.5
,
180.7
220.2
}R2.2
3
233.2
*155.1
155.3
137.7
137.9
136.7
*142.9
*142.9
133.6
137.2
137.2
134.5
220.7
226.6
Orders
received
Production
193.8
215.5
Stocks
loa.o
CEMENT
Unfilled
orders
PAINT
OIL,
(tons)
end
SOFTWOOD
222.730
162,359
169,624
183,376
177,884
193,150
178,458
___Feb. 14
101
100
104
(tons)
102
Feb. 14
450,393
477,216
431,880
589,544
AND
.Feb. 20
146.9
147.3
147.4
151.2
at
DRUG
INDEX—1920-36
REPORTER
(M
and
All
S.
DEPT.
LABOR—15)20=100:
Farm
Feb. 14
.
Feb. 14
<.
leather
and
Textile products
Fuel
and
Building
allied
168.9
177.9
181.2
196.2
198.0
201.4
173.6
147.0
145.7
Feb. 14
135.5
131.6
131.4
130.0
Feb. 14
154.8
154.2
153.2
138.4
Feb. 14
192.0
192.1
191.1
172.8
Feb. 14
134.0
134.3
140.8
128.3
Feb. 14
137.7
137.7
136.9
122.6
123.0
OF
commodities
160.9
;
.<■
98.6
Feb. 14
Semi-manufactured
I
Manufactured
articles
.Feb. 14
products
commodities
other
than
All
commodities
other
than farm
"Revised
figure.
farm
•.
products
173.4
182.3
186.0
,
16,410,000
19,840,000
17,721,000
5,659,000
*7,921,000
7,298,000
90%
—
OF
U.
S.
December:
149,999
%-in.
equivalent)
at
of
*26.802
55,329
168,553
$696,391,000
$121,000
$275,000,000
$275,000,000
256,573,665
256,899,845
259,776,476
76,948,338
IN
*62,488
*217,815
81,409
269,9)9
$256,650,614
$256,981,254
$260,046,395
848,532
854,280
9J5.136
$255,802,082
$256,126,974
$259,131,259
$19,197,918
$18,873,026
$15,868,740
DI¬
SECURITIES
January:
*
$200,000
—
______
STATUTORY
31
•40,340
64,453
213,523
__
Jan.
129,727
$275,000,000
TRANSACTIONS
GUARANTEED
of
121,816
*148,494
21,199
__
TION—As
*144,637
159,959
A.—Month
GOVT.
81%
COM¬
DEBT
(000's
LIMITA¬
Total
at
face
any
amount
one
156.6
157.1
141.7
that
may
be
omitted):
outstanding
time—_—
Outstanding—
Total
public debtGuaranteed obligations not
gross
owned
Treasury
Total
by
the
:
gross
anleed
public
debt
and
guar-
obligations —__—'
outstanding public debt obli¬
not subject
to
debt
limitation—__
154.3
155.6'
154.5
156.7
Feb. 14
2—
products and foods
S.
gations
Feb. 14
All
17,319,000
20,562,000
(bbls.)
:
MARKET
AND
Deduct—Other
^
materials
MINES) —
(DEPT.
of
ft.,
sq.
sales
,
Raw
18,300,000
OF
ft. ,%-in. equivalent)——
consumption
(M
sq.
ft.,
month
U.
110.0
l4
products—
Special groups—
1,020
123.0
120.2
1
:
Housefurnishings goods
Miscellaneous
201.5
Feb. 14
materials...^
metal
and
143.1
195.5
146.7
_
products
materials.
Chemicals
;
165.5
Feb. 14
products
—,
and lighting
Metal
173.3
163.8
..Feb. 14
.
Hides
180.9
Feb. 14
products
159.7
37,291
1,393
sq.
Net purchases
Foods
j
(M
of
end
?
commodities
777
38,612
1
equivalent)-.
RECT
OF
92,706
619
1,205
Consumption of logs (M ft., log scale)—.
Log scale (M ft., log scale) at. Nov. 30
Net
WHOLESALE PRICES—U.
38,229
92,119
33,617
'
1
PLYWOOD
TREASURY
PRICE
AVERAGE^ 100
40,532
602
(bbls.)—
month)
MERCE)—Month
Stocks
158.637
Feb. 14
4.5
34.683
:
of
Production
"
.Feb. 14
3.3
5.4
81,803
pounds)
(BUREAU
(bbls.)
(at
(%-in.
activity
.3.4
•
November:
Capacity used
ASSOCIATION:
(tons)
Percentage of
of
pounds)
of
6.6
Month of October:.'
124.3
214.7
4.2
COM¬
pounds)
of pounds).
(thousands of pounds)
Shipments
NATIONAL PAPERBOARD
OF
(thousands
Production
125.5
142.9
Feb. 14
'
■
*233.4
155.1
Feb. 14
combined
groups
233.5
Feb. 14
materials
of
of
(thousands
die
(DEPT.
Month
(thousands
Shipments from mills
I
14
4.6
4.7
5.5
—
CASTINGS
(thousands
PORTLAND
215.?
4.4
6.5
5.5
.3.4
(200)
Lead
154.5
217.3
5.3
6.5
5.4
•_
Zinc
239.9
178.4
,
Aluminum
210.1
Feb. 14
drtigs
machinery
All
323.4
266.8
Feb. 14
and
Fertilizers
Farm
282.6
252.1
V
220.8
173.4
211.7
*
'
*1,183
OF
Jan.:
4.6
Magnesium
Feb. 14
*
of
___
MERCE)—Shipments
229.9
245.1
218.1
YIELD
*1,347,
5.6
AVERAGE
STOCKS—Month
(10)
Feb. 14
244.6
*$1,268
1,355
1,193
(125)
yield
Feb. 14
oils
40.8
*40.1
SI,277
.
(15)
Feb. 14
and
products
*40.5
40.8
—-___
(25)
NON-FERROUS
Poods
*47.47
41.5
:
goods
(25)
Average
GROUPS—1985-89=1 (Hi:
*54.99
41.1
—
____
WEIGHTED
Industrials
COMMOD¬
__
goods
COMMON
Railroads
408.3
*$51.31
48.67
manufacturing
Insurance
FERTILIZER
INDEX
$52.51
goods
Non-durable
2.60
449.0
S.
December:
Earnings—
Utilities
INDEX
2,262
56.17
goods
Durable
.
2.73
2.91
of
goods
Non-durable
2.78
Feb. 24
COMMODITY
3,054
.2,677
2,697.
.
ESTIMATE —U.
LABOR—Month
manufacturing
3.13
—Feb. 24
Industrials Group
2,418
HOURS-
manufacturing
2.21
Feb. 24
,
1,0)4
3,177
3,303
v-
3,598
—
AND
AVERAGE
OF
Durable
2.45
Feb. 24
Baa
_L_
Non-durable goods
Hours—
2.45
Feb. 24
:
Railroad
All
3.12
.
Feb. 24
A
WEEKLY
112.9?-
112.93
Feb. 24
Aa
—_i
'—
544
1,453
3,309
Earnings—
Wf;
*
^
J——
EARNINGS
103.80
AVERAGES:
Bonds
loans
accounts
FACTORY
All
DAILY
Average corporate
Fertilizer
$10,166
1,099
31:
credit—
Single-payment loans
110.34
Feb. 24
;
.
Building
$12,945
FEDERAL
1,684
114.85
Feb. 24
Group
BOND
Chemicals
583,374
short-term
December
Automobile
104.33
Feb. 24
—_
Utilities
Fats
603,063
BOARD
credit
consumer
Instalment
Feb. 24
Industrials Group
Parm
*
1,159
OUTSTANDING
SYSTEM—Estimated
in
Charge
*•
Feb. 24
_
Feb. 24
ITY
$11,020,000
$12,965,000
GOVERNORS
Feb. 24
NATIONAL
$20,937,000
967,000
1
Instalment
_
MOODY'S
203
1,908,000
liabilities—
CREDIT
credit
94.000c
.
AVERAGES:
A
Public
317
15
1,705,000
J._
anthracite
RESERVE
'94.000c
15.000c
Feb. 18
at.
Baa
S.
17
356
.
2,837,000
•»
-
(BUREAU
coke
70.000c
21.'425c
94.000c
Feb. 18
at
Aa
U.
76
26
23
$6,892,000
:
January
20.450c
21.600c
Feb. 18
corporate
MOODY'S
27
'
23
—_
■
January
OF
Feb. 24
Public
67
33
123
29
,
number___.
__
coal
of
19.400c
Feb. 18
at
at
Aaa
Railroad
112
43
153
—
Other
S.
55
40
.
;
'
service
OUTPUT
Beehive
Feb. 18
Louis)
MOODY'S BOND
U.
60
60
108
,
liabilities
CONSUMER
York)
Louis)
(East
Average
32
55
—
liabilities
Pennsylvania
QUOTATIONS):
refinery at
Export reiinery at
Zinc
*56
copper—
Domestic
Lead
11
127
BRADSTREET
liabilities
Month
of
PRICES
&
January.
number
Bituminous
'
;
20
15
58
109
Total
(per lb.)
1
liabilities
PRICES:
Pig iron (per gross ton)
Scrap steel (per gross ton)
METAL
(nonfarm)
number
number
Commercial
—Feb. 19
COMPOSITE
of
service
Construction
1NC.__
Finished steel
5,384,945
*36
*176
50
number
Wholesale
5,254,002
21
15
Manufacturing liabilities
Feb. 21
12
37
28
'
246
232
INSTITUTE:
(in 000 kwh.)
(COMMERCIAL
building
number
Commercial
.Feb. 14
*17
*60
•
34
(nonfarm)
FAILURES—DUN
INC.—Month
Wholesale
28
50
Manufacturing
RESERVE
__
33
-
155
—
Farm
Feb. 14
AVERAGE—100—_
development
building
10,955,000
Total
ELECTRIC
and
33,185,000
Feb. 14
INDEX—FEDERAL
15
28
repairs
32,030,000
BUSINESS
(tons)
(tons)
*54
55
—•
public
building
Construction
STORE
SYSTEM—1935-81)
FAILURES
other
Minor
facilities
;
Conservation
$88,555,000
MINES):
lignite
(tons)
Electric output
naval
water
Feb. 19
BUREAU
and
Beehive coke
EDISON
and
Feb. 14
(U.. S.
*4
*54
mili¬
(except
facilities)
other
Military and
Highways
>
Feb. 19
anthracite
10
Industrial
669,847
4
building
56
56
734,262
Feb. 19
i_—
.
building
naval
Feb. 14
Feb. 19
Pennsylvania
DEPARTMENT
j
107,763,000
Feb. 19
coal
V
construction
Feb. 14
municipal
OUTPUT
millions):
construction
Nonresidential
Federal
Bituminous
(in
OF
construction
New
RAILROADS:
CONSTRUCTION,
Total U. S. construction
Private construction
Public construction
COAL
January
DEPT.
Feb. 14
at
-
and
S.
Feb. 14
oil
^
State
thousands)—.
Feb. 14
ENGINEERING
RECORD:
(in
SYSTEM—
Feb. 14
Revenue freight loaded (number of
cars)
Revenue freight rec'd from connections
(number of cars)
CIVIL
GOVERNORS
RESERVE
January
Residential
ASSOCIATION
OF
CONSTRUCTION—U.
8,386,000
•——Feb. 14
at
distillate
fuel
$105,190,000
THE
5,253,000
Feb. 14
refineries, at bulk terminals, in transit and in pipe lines—
oil
Ago
DEBITS
Month
1,651,900
1,716,000
Feb. 14
fuel
Year
Month
AH
BANK
LABOR—Month
Stocks at
oil
94.4
95.2
1,667,300
Previous
Ago
Ago
BUILDING
fuel
Gas
Latest
Month
Commercial
Feb. 29
(bbls.)
(bbls.)
distillate
Kerosine
Year
Month
92.5
Feb. 14
stills—daily
and
Week
OF
(net tons)
Residual
Finished
Previous
93.6
INSTITUTE:
Crude oil output—daily average
Crude
Gasoline output
Kerosine output
Feb. 29
■-
Bteel ingots and castings produced
AMERICAN
Latest
Week
INSTITUTE:
154.9
156.7
157.5
137.6
Feb. 14
147.5
147.8
147.4
128.1
'
157.6
Grand
total
outstanding
—
139.1
..Balance face amount of obligations issu¬
able
*Revised
under
figure.
above
authority
—
34
(930)
COMMERCIAL
THE
FINANCIAL'CHRONICLE
&
points
Credit Problems in Foreign Trade
(Continued from page 6)
regarding
mumbo-jumbo.
We simply get as
much information as we
can; we
add
it
and
up
with
then
we
season
it
suitable
precautions.
The
only intangibles in this concoction
the
are
precautions, because they
drawn
are
and
from
the
resourcefulness
experience
of
our
own
We gather our information from
most
varied sources, but the
constant
received
and
from
people who
world.
spotted around the
few
years
brought all these
for
ago
we
to the U. S.
men
conference.
a
our
timely is that
own
treasury
our
are
A
to
purpose
policies
new
.
Basically, it was
reorient them on
and
plans
of
the
company, but many other benefits
developed from this get-together.
We
in New
miliar
actions
on
the field
the
the
our
quite fa¬
were
effects
of
world
market;
were
our men in
familiar with
more
beginnings
the
or
York,
with
achievement
It is true that such
of
actions,
causes.
By exchanging our
bridge these
differences, in our thinking.
In¬
cidentally, with today's problem
being more one of getting paid for
we were
able to
less
legislation
and
outright
confiscation.
But
that moderate
capital investments,
conditions, have
under
it
is
also
true
favorable
often
expanded
operations
mation is obvious.
for
It is necessary
management
today
to
have
not alone for the present
but for six months ahead and six
months after that.
needed there is
answers
are
ally
time
a
Much
And when the
element
usu¬
involved.
of the information
col¬
we
same
country for
month letter of
would
only
letter
of
permit
credit.
customer
a
As
it
12-month
a
far
as
our
concerned, it was
simple arithmetic. We
willing to take
vance
18-
was
matter of
were
an
credit but that
payment
small ad¬
a
the
on
letter
of
credit or,
If
we
kind
going
are
investment
to
of worthwhile
build
any
barometer to
give us the latest reading on our
potential of risk we must keep
information
our
rate
and
there
claims
on
up-to-date.
are
few
a
accu¬
Essentially,
classes
different
of claims possible in most
foreign
trade transactions.
are
There
the
claims of banks which have loan¬
ed dollars against gold. These are
fairly good because the banks will
collect whether
paid.
the
or
not
Then there
International
the
are
loans
claims of
Bank
and
the
Export-Import Bank.
be
rated as having
country
a
sell
borrow dollars
can
sufficient goods to pay.
or
The
a
seller may
know that
any
Each
our
that
forecasters
life
will
not
are
simpler as they go along.
day they are faced with a
holds the clue to another, and they
must follow every lead. The only
tween
element
various
that
could
countries
sold
credits.
on
available
were
arrived.
losses
had
But
the
goods
delays and
Long
heavy
resulted.
secured
drawing
If
the
exporter
in cash before
25%
sight
a
dollars
no
when
goods
draft
he
might
goods and sell without loss.
This
action, on the other hand, might
greatly disappoint the user or the
importer who might also be sub¬
ject to heavy losses. Cases still
where
refunded.
goods
frozeh
are
They cannot be
at
re¬
They cannot be deliv¬
until
dollars
available.
are
It is apparent that more adequate
financing might have insured de¬
livery.
\
If you must take chances
today,
charge for the chances you take.
Credit on foreign work is directly
allotted to prices and often has
admitted
an
value.
have shipped
Some traders
non-essential goods
make
and
po¬
trouble
tential investors stands in the way.
Private capital is timid, looking
of
for
days
zil for
gov¬
a
of
that
assurances
default
ernments,
position
are
as
the
foreign
over;
a
old
rule,
are
not
in
to
give any such as¬
surances. When money is invested
a
abroad
in
construction
of
plants
for assembly, partial manufacture
or
complete processing, the ulti¬
mate
is
reached
in
foreign trade
be conducted
the
on
principles: (1) the
proposal; (2) the pro¬
payment, and
(3)
the
planned
gressive
well-executed order, which is re¬
ally a product of the first two. A
thoughtful
and even
expensive
proposal generates confidence and
makes it easier to
payment
secure
nese
and
risk
controls.
financing
one
20%
a
of passing
Chi¬
The estimated cost
refrigerator in Bra¬
is 25%. Certainly
year
reduction
for
cash
would
be in order in this case.
As
becomes
tighter in
more pressure for
goods
is
exerted
abroad, such tendencies will prob¬
ably increase. For example, it is
the
money
U.
money
now
S.
and
and
difficult to borrow
on
receiv¬
to
the
other.
at definite
times during the con¬
Progressive payments, even
if limited
to
a
down
payment,
prevent
duplication
of * orders.
Argentina recognizes this by im¬
posing a penalty of 20% if an im¬
port license is not used. The down
right
are
individual
the
are
to
do.
the result
never
investigation.
accumulation
So
They
of trial
and
the considered opinions of
many
who are engaged in all
phases of exporting and import¬
ing.
error,
to
lines.
can
of
today's trading problems
they follow general
varied
In other words, I think we
perceive
few
a
in the investigation
countries
that
causes
necessary
exporter's
position is weak.
might be done by having
money put in escrow payable on
warehouse
receipts or shipping
documents. The deposit of money
This
is
also
incentive
an
newal.
toward
re¬
Under most conditions, an
better
system
is
to
secure
money
tive of these plans
is to have dol¬
New York earmarked
lars in
for
coming invoices.
As things are
today
little provision is being
made for
gations.
payment of future1 obli¬
,
_
?;
•,
*
,,,
t
countries where
In
still
produce
form of
sight drafts
dollar- payments a
protection
be secured
be borrowed
at reasonable rates. This provides
exchange protection and secures
can
if local currency can
the
assistance
collection.
of
a
local
in
bank
this involves
made with a U. S.
supplier will
guarantee reimbursement for the
currency of some foreign country
which has been advanced to the
Briefly,
contract being
to
which
the
buyer.
)
Import Risks
'
j Summing up these risks of ex¬
porting it must be admitted that
while they are considerable, those
involved in importing are even
greater. The trader who is selling
abroad is at least dealing with
goods of known quality, selling
of the
some
are
creating universai
But I don't want any
criticism.
recent
a
America
I
tion
f
.
trip
,
to
Latin
how
of
given,
was
illustra¬
an
trading conditions
not only differ from country
may
to country but also within a coun¬
try itself. In Brazil, I found dol¬
lar exchange to be plentiful in
Bahia
district
Brazil with
a
because
ship¬
30%;
This has created additional
dollar
exchange under control oi
the
Bank
early to
in
the
but it
is still much too
predicj^n improvement
connection
with
would
tend
export
to
make
trade
him
sympathetic toward his client in
the event that he does export.
There
are
enough
common
It is
of
cover
paid
have
marched
far
development.
to add incre¬
necessary
22%, 8% and 25% to
retirement, social service,
holidays and paid Sundays
costs
law
the
Social
of
total of 55%.
—a
even
express
costs.
industrial
now
ments
is
Another booster
the so-called 10-year
provides that after 10
which
alarming»
those yet to reach that
among
en¬
viable status but
who, neverthe¬
less, receive handsome bonuses if
they are discharged. A recent la¬
bor ruling forced one concern to'
a
commission
salesman
a
minimum of $200 per month even
pay
though he had
goods to s^ll.
no
*
?
It is difficult to describe
the;
Brazilian exchange situation in a
few words except that the coun¬
specific
example
why trading conditions are so
of
un¬
settled is presented by the indus¬
trial
evolutions taking place in
countries
such
Argentina and
Brazil. Both countries are chang¬
ing
from
low-cost
agricultural
communities to high-cost indus¬
trial
communities.
A
rapid in¬
in
crease
the
cost
living
is
labor
countries.
Many
markets
of
both
of
the
problems
in
products have been made non¬
competitive with American prod¬
ucts due to high profits of recent
years,
City of Sao Paulo, which has
always been a big producer of
foreign exchange through ship¬
ments of coffee and cotton, is rap¬
idly industrializing because of the
growing inadequacy of Brazilian
exports to balance imports. Evi¬
dence of this industrial growth is
contained in figures of the Sao
Paulo Light Company which show
hours
kilowatt
have
almost
quadrupled within the past 10
years.
Aided by low-cost power
and exceptional demand, indus¬
plants
enormous
are enabled to make
profits.
Gross profits
have often been in
but
this
excess
undoubtedly
of 100%
is
being
scaled down by increases in wages
and other costs.
In
view
of
care
of most
receipts not resulting from
sale
of
goods.
naturally, drains
This
market,
regular
off the
market.
Within
country
every
in
conditions
are
or
the
sets
of conditions which either
those
I*
which
have
cause
trade
parallel
described or
just
the
barriers
of
type
same
and
restrictions.
as
causing
trial
the
world there
Another
that
takes
dollar
generaFaollar situation in
Brazil.
The
which
ahead
laws
in
good chance of
is
sample; he hopes the contract will
be executed and, incidentally, he
hopes that his own customer has
not changed his mind too much
while the goods are in transit.
Importing is a business that needs
to be tied firmly- at both ends.
But, even then, trouble can break
out in
the middle, because the
importer always has a storage
problem in trying to balance his
sales contracts and purchase con¬
tracts.
Furthermore, in order to
coax foreign production, he often
accepts contracts out of accord
with
the
credit
stability of a
supplier or a country. This takes
lots of cash and, in many cases,
leaves the importer at the mercy
of the seller. It is easy to see that
the average importer has a latent
security
of
not
difference
reached"
But
sight
on
no
way of controlling quality
dealing with a number of
hopes instead of facts. He hopes
that goods will be according to
figures do
real
had
hour.
try is trying to overcome a mod-*
drafts, while ern crisis with outmoded methods.
payment
of even No.
1
class Like most of the
world, Brazil is
essential goods, in southern Brazil
having trouble finding dollars. But;
could be unduly delayed.
it has the added
difficulty of find-'
Goods imported by Argentina
ing enough cruzeiros with which*
must not only be landed but also
to purchase scarce dollars.
Many
cleared
through. customs before banks have been ingenious in se¬
exchange is available. Sometimes curing foreign
exchange by bid¬
a
lapse of several months takes ding up rates
many points. Other place.
In Brazil, on the other banks with a good
supply, of dol¬
hand, payment would be due on lars have been flooded with re¬
sight draft before the goods were quests for collection from U. S.
passed by customs. Incidentally, banks.
The bank in Brazil that
dollar
shortages
in
Brazil
are
has money today may be in ar-!
causing long delays in payment.. rears two
days from now when
Recent rulings make it obligatory
the news of its fortunate position
that 75% of export bills be solo
gets into circulation/ Additionally,
to the Bank of Brazil as against
there is a well-organized outside
the previous practice of selling
market which
collection
and
con¬
are
Paulo
slow-down of production not
only
among
10-year
men
but
also
During
has
which
Sao
years, employment is permanent.
This has resulted in an
as
usually subject
to interpretation under U. S. law.
The trader who imports is buying
with
insufficient protection;
he
under well-understood
tracts
in
to 60 cents an
these
construed
plus the added cost of man¬
ufacture.
However, the shortage
of exchange is acting as a regula¬
tory valve on U. S. imports and
profitable business can still be
done by high-cost local factories.
them
50
uncertainty.
of the examples I relate to be mis¬
ern
more
advance payments when
secure
the
priority.
it is
ernment, transportation and in¬
dustry in general. When I visited
Brazil
^
While
are
ments of cocoa had been good.
But exchange in southern Brazil
was
quite scarce.
Non-essential
goods could be shipped to north¬
course,
dominating
cost of gov¬
Rates
of
it
by making continuance of other
payments more probable, and by
Of
the
are
complex are the problems of to¬
day's trading that the solutions
expects
the
assuring that the order is serious
Labor costs
factor governing the
nearest
world
the renewal of the letter of credit,
and deserving of
ing. In a very short period defla-.
tion, inflation and now inflation¬
ary influences have been felt.
three years ago labor was
getting about 17 cents an hour.
During my recent visit, labor was
getting at least 40 cents an hour.
tract.
payment gives added protection ih
Such
meetings would
give U. S. foreign trade the liv¬
ing quality it needs, to do the job
three
of
bank
of American
to^,Brazil on sight draft, after
adding 5 to 10%. (In view of new
their jobs easier
aj the moment regulations, this might have been
would be the full-fledged entry of a mistake.)
On the other hand,
private capital into the global pic¬ Shanghai
importers have
been
ture.
Private
capital could do given 5 to 10% reductions in U.S.
much in stabilizing the interna¬ prices if payments is made F.A.S.
tional economic structure. Unfor- New York, instead of C.I.F. Shang¬
tunately, lack of confidence be¬ hai, the difference being in the
single
can
basis
a
get
full set of vital issues which may
breed
equally vital issues.
One
business
dollars- worth
ered
I
of orders. I think a
issued for hundreds of millions of
turned until all cash payments are
convinced
the processing
healthy export
and
by giving a bond that
goods will be delivered according
to contract.
The common .objec¬
'foreign ports.
Stabilizer
securing
even
gets what is left after the
of prior claims, and
that elusive illegal claim drawn
off by the black market.
Unless
such phases are carefully watched
ters
Capital As International
many
seller
exist
Private
as
settlement
themselves to the loss of in¬
effective business which only clut¬
the books and affects the
judgment.
have
conditions.
original
tom
up
risks
the
the
have been able to bring back his
the job.
on
Where
before the entrance of unfavorable
amortize
lacking that, a 50% pay¬
This brings out
another important point to
re¬
member in doing business abroad
on the basis of today's conditions.
It is necessary that traders accus¬
ment
Principles of Safe Export Business
in
exporting and import¬
interest traders_ of both
in joining together
for a discussion of mutual prob¬
lems. Each can learn much from
ing
classifications
the
moratorium.
a
breeding places as they have in
foreign trade today it is wise to
live with a set of rules regarding
suddenly find that he
lect is analyzed by our forecasters
is depending on what his market
who have the job of
delving into is exporting. Obviously, no trader
this daily mass of facts and com¬ would
knowingly accept terms
ing up with enough pieces to contingent. on his customer ex¬
chart tendencies.
Not long ago porting enough to
pay.
This is
one of our forecasters
supplied me too much like taking payment in
with the information that a cer¬ kind
and, figuratively at least,
tain country had lost $300 million
puts the exporter in the importing
in
exchange holdings during a business.
period of 12 months. The same
Export Delays and Losses
day one of our credit men ex¬
plained that we were negotiating
In 1946 and 1947 licenses were
with the
conditions
countries
affluent
amount to
and
•
answers
is finding it
cessive
These may
No. 1 pri¬
ority. They have guarantees by
high government institutions on
local currency, and the highest
goods rather than of selling them,
guarantees on the ex¬
we
never
hesitate to move our possible
treasury men around and place change of local currency into dol¬
lars.
It is believed that private
them in position where
big sales
firms having these same guaran¬
are in the
offing. One of our men
tees are likewise No. 1 in priority.
was
recently put in charge of a
Claims against merchandise where
sales project abroad.
money is deposited should be pre¬
ferred. However, common drafts
Need for Collecting Information
are
subordinate to prior claims.
The need for
collecting infor¬ The seller gets paid if and when
ideas
of Brazil
tures have suffered ghastly losses
due to wars, bad management, ex¬
are
these
The Government
ables in Mexico.
difficult to
borrow even in its own country to
cover
its 20% annual deficit. In
ven¬
resulted in dividends sufficient to
treasury people.
many and
possible
and risk.
Thursday, February 26, 1948
Seeing how basic
of
these
are
countries,
look
we
into
the
the problems
far can
how
future
with
an
expectancy of change for the bet¬
ter?
v"■'■.
The
information
best
moment indicates
ing
systems
and
the
the
concessions
exchange will become
ed
at
that the licens¬
more
of
adapt¬
of each country
of 1948. At least we
will be more certain of the ele¬
to
needs
by the end
ments
we
are
dealing with by
time, which will help us to
that
plan our selling more construc¬
tively. Some countries will con¬
tinue
to
cepting
metal
raw
prohibit everything ex¬
certain foods and drugs,
supplies,
equipment
and
materials—particularly cotton
its
and
derivatives—all
essential
are
economies.
to
their
of
which
internal
Others will encourage
the
importation of essential parts
for making products in local fac¬
tories. Still others, with sufficient
exchange, will buy luxury goods.
Many countries today recognize
that restrictions
on
such items as
radios, for example, may well be
doing more harm than good. Such
restrictions
who
one
tion.
have
the reach
yond
might find the possession of
incentive toward produc¬
an
)
From present
such
put radios be-:
of the workman
indications money
rapid expan¬
sion, it is not surprising that the
will continue to flow for aid, loan
first
or
business
took
place
recession
in
Sao
in
Paulo.
Brazil
This
happened in the early part of 1947
industrial
production de¬
when
clined
due
stantial
to
lack
of
sales.
price reductions
investment, which should be
to
export and import
trade. However, it should not be
beneficial
the
responsibility
of
traders
to
Sub¬
finance this renaissance any more
ef¬
than it would be their job to con¬
were
fected and another upward swing
was started which is still continu¬
duct
a
lend-lease program.
Trad-
Volume-167
Number 4676
THE COMMERCIAL
&
FINANCIAL" CHRONICLE
(931)
wise
credit policy
and. promoting!
orderly marketing. In these ways '
the
purchasing company or coun-1
try will be reminded of its- cash I
position in the most positive terms.
Too
many
countries have been
forced into stern if not
1
™
should, at least give us- a better should continually
remind us that
chance of grasping: the real meah- in order to export
successfully
ing or-our proolems. They should today we must have
vision, we
give-us the patience to investigate must have
persistence—and we
causes as well a6 effects; And
they must have cash!
Montgomery Ward
buying
of
what
on
Whether
Plan
as
their
,<
..
.
,
on
Stocks
Reserves for
Marshall
abroad
will
offer
ments for
trading when U. S. dol¬
rolling. in. Aid to Eu¬
incidentally, will also aid
situation in
American countries.
Latin
this
loose
through
the
arteries
starts
money
world's
must
we
At the end of
rneny
When
ernment
flowing
not
the
over-encourage our customers
into loose credit
thinking which
them
get
habits.
bad
Future
Not
future
couraging.
and
government
bonds
as
control
is
$16
of
Plants,
dis¬
estimated
billion
foreign
Less
the
This
is
Plants,
citizens -and
opening
market.
up
Cash
'
"
''■
net_._—_—
'V
■t
goods will continue to create
laws favorable to trade.' As an
'
'c
*/:'
-j.-.
-
*
note that Peru has
just passed laws offering new in¬
vestors exemption from taxation
for 20 years. This action will en¬
we
large the
of export
area
Net
business
exchange
of
values
tion
with
goods
will
force
of the
Brettom Woods
46
ments.
.
f
of
currencies
exports
and
this will
have
to
and
are
able
to
clear
Common
ton
one
of
three times
it eost before the
of
the
share)
at
hurdles
take
more
capacity.
.scarcityof
war.
steel
new
as
much
••;7»K'.r:: f
place
;•
At the end
187.365
$
715,882
360,281
360,281"
t$ 172,916
$
t$19.86
U.
than
S.
$9
Steel's
billion
to
present
$54
$69
13.78
3.62
year
ending Jan. 31, 1948.
Wilson
&
Company
liquid assets, a serious decline in
selling today their value would
obviously re¬
with
a
duce the liquidity.
However, most
price of $5% in 1938; the
liquidity companies with such
inventory
of this company has
improved by risks are
thoroughly aware of this
$21 %
$14
are
compared
share since then.
per
Here
fact
and
have
made
price is
1938
of
a
The "bears"
kinds
ties, i.e., in this
inventories
cases,, they carry this
of their inventories at about
frequently point to
the great risks involved
for
panies of this kind
the
quarter
high
same
of commodi¬
of meat.
case,
are
com¬
included
in
of
of
part
one-
today's prices. At the
they have built up
time,
large
reserves
against that part of
their inventories to which "Lifo"
As
the
is not
applicable.
Oct. 29,'38
at
1938
below' tba
over
$5
has
earnings
share.
per
end
written
of
1946.
down
its
and
time
it
funded
completely paid off its
of $41 million and
holdings of cash and
debt
its
bonds
government
lion- to
$131
from
million
has
$28,137
35.705 *
;
Liquidity Improvement from 1938 to
dollars
its
per
com-
combination of
very
,
t$20,884
;
fDeficit.
(in
..
This
railroad
has
$21.55
16V2
built
Fe
its
up
Related to the
com¬
shares, the liquidity has im¬
proved
by
$76
6.82
/
liquid assets from $37 million
in 1938 to $126 million in
1946; at
the same
time, it has reduced its
funded debt from $325 million to
$229 million.
$33,654
■
$51/4
t.94
net
1938.
;;
.
"...
$48,154
24,500
$11.17
i
Atchison, Topeka & Santa
mon
•
t$ 10.38
share)
per
14,441
:v
Earnings Per Share.
net
Anaconda's liquidity
1946
62,595
24,265..
$11,440
32,324
share)
$17 mil¬
and
improved by $24V2
$ 8,966
Assets.
Net Liquid Assets Avail, for
Common Shs.
Net Liquid Assets Available
(in $ per
liquid'assets from $38 million to
$180 million.
$36,838
11,962
90,732
3,181
Net Liquid Assets Available for Pfd.
Shares
Preferred Shares (at par)
Price
;
44,672
Today's
last year's
until the
Liquid
Bonds, etc.
26,756
$40,333
Government Bonds.
Net
$63,594
17,524
(net)
and
Nov. I,'47
$57,857-
Current Liabilities
7.28
•
$1.10.
few dollars
with
estimated
raised
However, in the balance
all
again, the stock is today
actuallyi preparations. The big meat pack¬
cheaper than in 1938 when the ers
apply the "Lifo" method to a
company's operations resulted in large
part of their inventories and
a
loss of almost $1 per share.
have,, therefore, a considerable
whereas those of 1947 resulted
in cushion against
price declines. In
profits of $6.82 per share.
some
713/4
plants from $426 mil¬
lion to $350 million; at the same
ingot
*est. $8-$9
51.00
Total Current Assets._
set aside for property
amounted to
year
Anaconda;
re¬
62.00
Earnings Per Share
Cash
'.".v.
:■?
rnorc share:between 1933- and
1946
approaches, J It ducing 25 million- tons
annually,
well indicate- a com- etc.x'
(hn&probabVy, considerably More
.*■''*.. -•
"r
-y4,' -.plete reshuffling of our thinking,
Anaconda. Copper
/ //i; since, then) but the shares sell
;We might even return to the basic T'Ati
th^ end;
1938^ Anacondai today: below their price at the
-principle off our friend Dale Car- shares sold at $35;
earnings in that end of 1938.v
" V
:
.negie
and start /out to
make
friends and influence people. Cer¬
-(000 Onn'tted)»
Year Ended Dec. 31—
tainly, it seems that we should not
1937
1939
1946
only support but also take a more Mines, etc.
$290,153 t
$290,230
$2ou,a02
-.active interest in foreign; tradfe Plants, (gross):
1_
! 289,344
291,625
316,934
Reserve for
advisory bodies.
'
Depreciation, Deplet'n
148,389
155,157
227,612
If the State Department con¬
Plants (net).
tinues to be the dominating in;
$140,954
$136,467
$ 89,321
.fluenee in matters of international Cash and Government Bonds.
13,691
16*732
130,982
Total Current Assets.
.trade
perhaps we should make
; ;; 99,859
93,980' ■'
224,009
our
organization's more available
Current Liabilities
for consultation; make more trips
$ 20,074
$ 15,038
$ 43,484
-to Washington ourselves for the
mutual exchange of ideas.- And, Net Liquid Assets
79,784
78,942
180,525
if universities continue to be the Funded Debt
47,589
40,686
source
of supply for State and
Net Liquid Assets Available
Commerce
for
Department ; career
a"
could
$11.86
$32%
$40.85
$60.71
»
■
share)
Price
*For
$48.86
(in
Plants, etc.
355,601
.
mines
Undoubtedly : there are
19370?
-ways of operating successfully irt The plants include, of
course, suck
such a market,. ItL might involve "minor items" as coal
mines pro-t
;
common
Price
Recent
1947
Reserves for Depreciation,
Depletion
From
as
sheet of 1946, all plants and
equip¬
were
valued at a total of
$827 million .(as
•>.
compared with
many $1,410 million at the end of
.
$
8.01
ment
■j-s.tiuctions;
dollars per
1938 to
—(000 Omitted)—
Share
today's costs, it would therefore
licensing, financ¬
ing, rising dollar prices, and the
jumping user price, created by the
but ,; re-
81,197
—
1946, "Big Steel" had an ingot
capacity of almost 30 million tons;
of export-import
everything
242,835
360,281
...
of
At
effect
the
$
fDeficit.
install
capacity,
subsidize
s
325,560
797,079
from 1938-
brief glance at the valuation
plants yields interesting results.
It "requires more than
$300 today
agree-
imports;
$
243,713
t$13.49
A
fol¬
to
curtail
79.261
826,873
*701,368
1,122,639
in
of
sanc-
may
Available
per common
per
addition.
a
France
$
431,077-
"'Including $168,000,000 government bonds
facilitating payment for such goods
'as
•
countries
example
devalue
least
-
Other
the
(in $
Earnings
'
low
Assets
Price of Common Shares
exchange.
without the
or
Liquid
international
an
1946
$37
Liquidity Improvement from
Plants
readjustment of foreign exchange
-
-
dollar
for
$317,770
—
Liquid Assets Available for
Liquidity Improvement
metals,, oil and agri¬
cultural products, which will
pro¬
need
$193,033
20,155
per
Common Share
by
Dollars Per Common- Share
U. S. of
additional
$
f $ 117,446
Net
only through the ap¬
plication of investment money to
industrial
machinery
but
also
through * increased shipments to
The
—
337,925
(at par)____
and vulnerable level
Preferred Shares (at $100)
in Peru not
vide
117,331
363,403
120,571
3
the
v*
•
Net
of
$2,568,247
1,741,374
138,145
510,338
; ■
Net; Liquid: Assets; Available for
Preferred Shares
—
example,
1938
$2,344,316
1,177,797
$
$ 68,174
at_ about
$1,166,519
—.
,.31
'
'
at
as
30,259
406,100
Assets..
Wilson shares
480,737
.
$
....
/'
price
85,958
Government Bonds—__
"■}
same
$ 30,690
18,515
153,230
Liquid Assets Avail, for Common Shs.
Liquid Assets Available in Dollars
selling today at
$1,410,432
_______
Liquid'- Assets.
'
are
1937
Bonds; Mortgages, etc.
of
the
the
$2,558,672
1,148,239
Total Current Liabilities—
V
Net
need
$ 35,984
Net
improved by $61
end of 1938.
.
and
liquidity
37,541
27,675
"A" Stock
share between 1938 and 1946,
almost
corn-
the
has
$ 69,944
22,412
Bonds...
Assets.:.....
and
-(000 Omitted)-
Total Current Assets
new
world's
The
a
eu
shares,
Steel
but the shares
Depletion, Depreciation-.
that
under
governments;Further, the
danger of the U. S. exhausting its
resources
is
shaping a national
policy of importing vital- mate¬
•
S.
per
1946, "Big Steel" had
than $701 million in cash
Year Ended Dec. 31-^
Discouraging
their
dollar
U.
of
end
less
no
credit
looks far from
It;
are
rials;
common
■>.
.
The
there
into
gov¬
amounted
were
Jul. 31,'47
58,397
213,188
20,155
Net Liquid
little above
to $138
balanced out by
funded debt of $243 million. At
a
to
can
However, to-'after deducting funded debt
a
1938, cash and
bonds
million and
commercial'
remember
$
Depreciation, Depletion, etc.____
Current
35
—(000 Omitted)—
Current Liabilities
pared Wxth a funded debt of only
$81
million.
Net
liquid assess,
preferred shares at par, showed a
the level prevailing at the end of
i deficit of $173 million in
1938;
1938, although U. S. Steel had lost' in
1946,
the
same
calculation
$3.78 per share in 1938 whereas it showed an excess of
liquid assets
earned $11.66 per snare m iu4<.
of $356 million.
Related to the
lars start
rope,
the exchange
production
industry had improved
to £3% of capacity.
ctay's price is only
induce¬
more
$69, after the
rate of the
or a compromise
plan known
Marshall-Taft Plan, countries
a
-
...
(Continued from page 2)
to
ered
a
Total
Cheaper Than Piewar
commitments
_•••
have;
we
j*;
_______
Plants (net)
Cash and Government
the basis of what
ledgers showed
their cash positions to be., instead
were.
Coi
Jan. 31 '38
Plants, etc.
panicky
measures as a result of
&
per
share
since
Today's price is about $87'
as
cmnpared with a price of $41 at
the end of 1938. Here
again, the
shares
are
considerably
cheaper
1938, if one
improvement
in
liquidity achieved: since then. Yet
than
the end
at
considers
the
of
~
Atchison earned $17.11
per share
in 1947 against 83
cents in 1938.
A similar analysis of
other rail¬
roads would show still more amaz¬
ing figures.
-
—(000 Omitted)—
Year Ended Dec; 31—
Cash and Government Bonds
Total
Current
1938
,
1946
'
$ 30,174
59,806
$135,931
212,054
$ 22,374
Assets;
$ 86,087
•
Total Current Liabiltiies...
..
...
_.
Net Liquid
Bonds
Preferred
Assets
37,431
•
men?
offering these young
opportunities to learn
and
our
our
men
business
all-
You know
better than-1
you
as
a
ills
well
cure-
of
the
as,
or
do, that there is
no
All
jsueh cure.
hope to do
risks-by an intel¬
ligent and profound estimation of
our market from day to day;, re¬
treating here, advancing there. To
our three C's of credit—character,
capacity and capital—we might
add three
not
and
Shares
Assets
$ 32,195
_
$ 38,256
$3.66
$4.41
in
Dollars Per Common Share..
more
C's—caution,
cooperation.
solve
our
Earnings
Liquidity Improvement from
1937
to 1946 (in $ per common
sh.)
Price
Earnings
per
i, .'
?'
t
can¬
If these do
problems
they
to 1946
share)
$76.16
$411/4
Share.____-_
r
Conclusions
What
are
Let
the conclusions to be
from' the
13.52
foregoing?
One
fact stands out:
today's buyers
value for their
money
get
in
us
conclude with
a
few data
.illustrating the present situation
of our economy as
1937-38.
The
good
.$35 1/8
*40 %.
many stocks. With regard to earn¬
tion
1.10
2.75
ings?.
compared with
Federal
Reserve
and averaged
3.62
only
as
year
*98
.83
Share
$24,47
$29 VZ
124,172
(in
"''Recent price, $87.
$20.81
*Price at present, $31.
Montgomery Ward
Per
$180,525
Available
we can
is. minimize our
dor
Liquid
dollars per
1938
Price
drawn
intention to give
for the
trading
'world.'
Net
problems?
this talk it has been far from
•
my
Common
what is wrong with the idea
of first
Liquidity Improvement from
229,131
124,172
_______
125,966
325,447
Shares
ending
Jan.
assets
now
31,. 1938.
Net
stocks discount not
moderate decline of profits
many
a
it would
but
occur
in
a
Board Index of industrial produc¬
was
at 87
in
December, 1937
89 during 1938; in
1947, it stood at 191.
production
was
down
to
December,
"recession" i Steel
they actually discount a com¬ 25.3% of capacity in December,
plete eclipse of profits as it could 1937 and averaged 40% in
ap¬
1938;
has improved
$49 • per
common
by about $12' per proximately
happen' affiy-in a severe depres¬ today, the steel industry works
share;" they are almost equal to
share between Jan.
sion; with regard to assets, many practically at full capacity and is
31, 1938 and
today's
price
of
the
common
ileading stocks sell to day far be¬ unable to
July 31, 1947.; Today's price is shares;
satisfy the demand. Na¬
Today's buyer of shares low the prices of 1937-38 consider¬
approximately $18 above the price pays,
tional income payments were at
therefore, next to nothing ing the improvement in
of Jan. 31, 1938. Last
liquidity
year's" earn¬ for the plants and the
a level of $205 billion in Novem¬
highly effi¬ achieved since then.
The mere
ings are estimated at $8-$9 as cient
organization with its enor^ fear
of a depression has depressed ber,. 1947, against $66 billion in
compared with $3.62 earned in the mous
earning power.
stocks to depression levels.
1938.
Montgomery
Ward's
liquidity
liquid
amount
to
36
THE
(932)
is done at present.
as
governments,
black us, and the problem of dollars and
(Continued from page 6)
markets result, and the recent de¬ gold would be of only academic
hand, the protection
that this
interest.
Of course, such a se¬
preciation of the ruble—or virtual
gives to the owner of a gold mine confiscation of the
savings of the quence doesn't make any sense
is seriously reduced by the arbi¬
workers
who
had
trusted
the whatever, but this road was fol¬
trary restrictions on freedom to
lowed once before and we seem
promise of the' government to
hold or use the gold that are im¬
honor their paper—indicates that again to be setting out on it.
posed by most governmentsin the Russians themselves cannot
Prerequisites of Well-Ordered
their efforts to vconceal the in¬
World
disregard these * principles with
**';•
evitable results of excessive ex¬
immunity.
'/•;•*/?.:. :y;
A much better
totalitarian
Progress of Inflation
V
■5
•
From the beginning of the New
Deal
the
The
price of $35
an
increase in paper
far
seems
in
The
almost without precedent
economic
serious
history.
promise to price selected may well have been
too high at the time, but by 1939
pay.
And then on top of these
serious burdens created by the the excesses of the New Deal had
so .depreciated
the dollar that I
naive policies of the
Roosevelt
am
inclined to think that most
administration, the war had to be
of us would have preferred to re¬
financed
by still more extreme
ceive an ounce of gold in place
promises in bonds and currency,
made far more difficult to fulfill of 35 paper dollars if we had been
by the appalling losses of the given the privilege.
behind
great
though
economic
of
of
measure
some
order
requires
con¬
a
claims
in
result
that
must
further
still
eventually
be
met in some way or
This
even
another.
of disasters—for
sequence
.victorious
a
is
war
inher¬
disaster when its cost to
the victors is so great—was neces¬
sarily financed with
credit—or
with promises. No gold standard
as
simple as that which was so
ently
a
-effective
in
instrument
an
well-ordered
world
the
prior to 1914
could survive such extremes. With
of
demands
urgent
far beyond amounts
a
magnitude
that could be
of
bankers
omists in prewar years.
or
;
econ¬
larly difficult times for those en¬
gaged in gold mining, and yet at
the same time they make
gold
to be the only form
Surely
economic
would
be
Gold is
a
one
very
of the most stable of
commodities,
The
ments.
tied-to gold
desirable thing.
as
well
as
available
of
ele¬
stock
is
more
than could be pur¬
35
It
exist.
now
seems
futile to
ex¬
pect that future generations will
tolerate the taxation that would
be
them to
reduce
to
necessary
deposits
for
established
be
by
some
undoubtedly be
a
most beneficial
With this accomplished, the
of the. various ; cur¬
rencies of the world to gold and
the dollar would be a relatively
adjustment
way
tions
that
easy
of correcting the frac¬
be
one
'
theans of
tion—of
oP
the
effective
most
checking further infla¬
holding
the dollar from
becoming weaker, provided
strict
discipline .of gold at
the
the
higher
price
of
gold
would
no
influence domestic
prices in
dollars than did the increase from
more
any
gold only
A course of disastrous events,
is maintained by which one in a cynical frame of
avoiding the creation of extreme mind might anticipate with some
obligations. The commitments and logical justification, could well be
promises that have been made are as follows: (1) Further provision
already excessive in terms of gold of large credits to Europe, thereby
priced at $35 per ounce. If credits providing a mechanism for pay¬
are
still further extended, with ment for the heavy excess of ex¬
can
if
be fixed in terms of
its
integrity
is of any
s
in a
(Continued from first page)
ciency,
it involves
held strictly to some
thoughtfully
determined limit.
present, we
ourselves
lucky.
the
than
worse
consider
could
hardships of inflation are not
be minimized and it is recog¬
The
to
they are.iparticularly
most thrifty mem¬
that
nized
unfair
the
to
community.
the
of
bers
in
of the
But,
view
of the extravagances
New
Deal, the losses of the war,
and
the
of the
expect that the
repaid in the units
responsibilities
peace, can anyone
debts will be
which
in
they
government
paper
is a
thing from paying for
"Financing"
a war or
extravagances
different
The
them.
incurred?
were
with
is
settlement
merely
In one form or other
destruction and wastes must
postponed.
the
still be
T
\
paid for.
Amend
Gold
Reserve
immediate
An
Act!
procedure
that
permit gold to become ef¬
again as a basis of refer¬
not only for the dollar but
fective
for the paper currency
our
of the rest
world would be to amend
of the
existing,acts
of
to
such service.
under
tion
gold again in circulation
conditions, its rela¬
the current paper dollar
these
to
should
eventually become clear,
sufficient stability perhaps
to permit gold coins in
dollars to be again issued at a
and
attained
petitive markets must be sought as
a means for controlling inflation.
It
difficult for
is
general
and remain on
advance
level
to under¬
me
prices in
how
stand
for
continued
any
can
higher
period,
a
there is more money com¬
unless
ing into the market for the pur¬
chase
of goods than there are
is
That
market
the
entering
goods
sale.
only
the
for
by
way
general/can be
maintained on an ad¬
vanced level. By that broad state¬
ment, I do not mean to imply that
prices of particular commodities
in short supply, or in the presence
which
prices
in
bid up and
demand, will not ad¬
But if
of unusual
the
the time being.
for
vance
prices
of
number
a
of com-
moditifes do advance for such spe¬
cial reasons, and
increase
stantial
there is no sub¬
in the available
would
prices,
and
they did business with each other
prices mutually satisfactory to
the parties to the transaction, but
higher than the prices prescribed
at
edict or regula¬
judgment, such legis¬
by governmental
In
tion.
my
control inflation.
lation would not
Even if I
not be
a
in error in this con¬
am
certain that it would
control of inflation within
am
democracy. On
the contrary, such a program of
concept of
our
a
overall over-abundance
of money
the market relative
the quantity of goods entering
coming into
to
that
market
the
have
can
we
a
growth of the phenomenon kpown
as
inflation: This, I should say,
is a fundamental consideration iii
any
serious study of
inflation/1*
This may strike some of you as
reducing the problem to too simple
a structure. However, if this analy¬
sis be true, it is important., Our
controls would be investigation of inflation then can
destructive of individual liberty be focused on locating the circum¬
under the established American stances under which substantially
governmental
system.
:
dollars
more
Competitive
Free
Markets
Voluntary and competitive mar¬
contribute substantially to
the attainment of economic jus¬
kets
national progress, and indi¬
vidual liberty.
The existence of
such markets enables the value of
each man's services or goods to
leads
receives
his goods
the value com¬
or
services
than
petitively established by the mar¬
ket.
Those
who
perform
the
greater
or
receive
the
results
more
more
valuable service
reward. This
larger
encouragement to the
efficient to expand
their
in
■.
•
|
|
I
Purchasing!
»
of
which I regard
important. Per¬
haps its nature can best be shown
economic law,
as
also simple and
some
figures of
States Steel Corp.;
citing
United
for
to match
consideration
an
by
exchange
to
v
the!
to
Power '
.
This
evaluated
restricted market, no man
goods
/
v.
Production Generates
be
constantly' and competitively
by those having a use
therefor. In such a free and un¬
do
than
them.
tice,
in
coming
are
.
market
more
With
the destruction of beneficial, com¬
purport to money supply, then the buyers of
these particular commodities have
maybe also
less money left over with- which
wages, at some arbitrary ceilings,
to buy other things which they
determined not by the competi¬
desire.
As
a
consequenqe,
the
tion of the market place, but rather
prices of these other things will
by bureacratic direction. To my
decline, thus soon averaging out
mind, this would be a superficial
for the most part the price situa-r
and ineffective approach.
Under
tion as a whole. It seems, to me
such
a
procedure,
individuals
that it is only when there is an
would be fined or imprisoned if
which
law
a
freeze
regulations:
(1) to permit citizens to own gold
and buy and sell it in the domes¬
tic and foreign markets and (2)
to authorize the Treasury not only
to continue to buy all gold of¬
cover
frequently proposed
deai with inflation is to pass
the way most
clusion, I
would
ence
prices, though not necessarily
advance.
Accordingly,
uniform
a
inflation of the dollar is
If the
no
and
,
_
well as the guardians
Something other than
as
of progress.
political considera¬
tions. Nevertheless the search for
a solution constitutes the primary
challenge to us. i I fear that the
as
,
make it im¬
government or $20.67 to $35 per ounce in 1934.
company
or
individual abruptly But it would be an admission of
to bring about a significant change the weakness of the dollar, and of fered
at $35 per ounce, but to
ia
output.
Consequently,
gold the present degree of inflation, return all gold currently received
and this probably is too much to from domestic mines to the own¬
possesses a strength and a resist¬
ance to manipulation that no pa¬
expect the government, or the ers in suitable coins, with gold
content stated, but not value in
per currency without its backing Treasury, or the dominant bank¬
has ever had.
Even
the dollar ing authorities to face.
,
• ;
dollars, with a proper charge to
possible
which
for
transactions
paper
but
concealed
Jn the iong run
benefit to us, we could
settlement in goods would be ex¬ certainly preserve a dollar backed
pected as they became available, openly by gold, prevent inflation
from reaching an. excessive degree
such a policy with regard to gold
and provide a sound base of refwould in my judgment be most erence for the currencies of the
; ' v'v'
helpful in promoting and holding world.
specific
.
could
other means of pay¬
no
ment for exports
dollars—and any significant degree. Outright decisions to be made are not now
made to issue repudiation at least of domestic clear to many people. Then too,
debts is unlikely except
as the
it is difficult to prophesy
with
such coins, stamped $35 and legal¬
result
of
national
catastrophes, complete accuracy what may be
ly
exchangeable \ only for this
it has been approached the outcome of such affirmative
amount of currency or its equiva¬ though
even
in victorious nations, as a action as is taken.
The psycho¬
lent in goods, they would go out
Frenchman whose insurance pol¬
logical consequences thereof are
of circulation, as might be ex¬
pected under Gresham's law.
It icy dates from 1914 undoubtedly not subject to exact advance
realizes. A third mechanism is in¬ measurement.
would be most interesting to know
flation, if prevented from going
at
what
I have.a distinct impression that
price per ounce gold
to the extreme that is indistin¬
would circulate freely with
to¬
people in general think of infla¬
guishable from confiscation and if tion as a widespread rise in wages
day's paper dollar. If such a price
chased for
proper
taining the metal from the small
amounts distributed through well-
to
if the attempt were
not excessive for its price agreed upon was accepted
function. The annual in¬ completely and honestly. The new
crement is substantial but not dis¬ price would merely be recognition
proportionate to the yearly in¬ of the degree of inflation (or de¬
crease in the world's wealth.
And preciation) of the paper dollar
its scarcity and the cost' of ob¬ that has already taken place.
A
large,
limited
credits
fpp ; imports;;and,? a' realiza¬
tion that
world,
are
dollar
a
further
A well-ordered
tion of the dollar.
are
solemnly agreed
in which
likely to be upon in today's official exchange
rates.
preserved. Faced with this rather
If an increase in the price of
paradoxical
situation,
the
gold
producers must indulge in some gold in paper dollars resulted
hard thinking about their imme¬ irom such tree interchange, as. I
diate future. ■
i.
\ . feel confident it would, such ac¬
tion would not in itself be infla¬
Stability of Gold '
' 1 V- tionary. On the contrary, it would
seem
monetary values
with
acceptance of some
of inflation or deprecia¬
measure
an
command
a
.
need
the
require
step.
v
Such conditions create particu¬
>
aid
might be tolerated by future gen¬
erations will probably in the end
ounce of gold—which
coined would be about the
opinion,
United States at
the
into
flow
economics, and European disturbing rate. With a common
restricted to
the; minimum sense; recognition % of ri our great
the burden of debt to a level that
practical and empirical means, the
met by taxation, government debts stabilization of the dollar at that
reached a peak that would surely level with complete interchangeliave seemed fantastic to even the ability of gold and paper'would
most liberal
rea¬
would again
however, may brought on the existing trouble¬
not be possible of achievement as some condition, and to repudiate
long as the financial systems of and reverse so far as practical
past inflationary influences.
What the prevailing price would practically all nations are domi¬
nated by debts and obligations of
This latter task is the more dif¬
be, if we had a free coinage today,
is difficult to say.
In my own such overwhelming magnitude as ficult and serious one, especially
of
inevitably
budget,
iri great excess, gold
be the, only means of
making payment and would again
with exports
that humanitarian relief required,
again and to reduce
nomic world
balanced
a
however, even; these steps
be futile, for as long a3
unbalanced
trade remains grossly
sonable
To achieve a well-ordered eco¬
expenditures at al¬ when
comparable levels which will size of the old $20 piece—would
tinuation
most
the
conflict.
And now, even
the fighting is over, the
restoration
bilization would have been taken.
for gressed toward a stable economic
world, with well-balanced multi¬
lateral trade, without barriers of
tariffs, subsidies or premiums.
ounce
war
outstripped the growth 'of
tangible real assets of the -nation
that were, in final analysis the
security
would
other
obligations that this would imply,
a long step toward monetary sta¬
With
monetary
v':
' ;.'i
Without removal of tariff bar¬
riers,
further expan¬
on
tolerable
a
stability.
sion of debts, currency and
gold was set in 1934 by a group
of lighthearted and excited exper¬
obligations
imenters in/a cavalier way that
of the
the outbreak
to
inflation at
of
the restrictions
concerned, however—gold miners
included—would be one that pro¬
1
Fixing the Price of Gold
If this were
intention
firm
holding the price of gold at the
agreed-upon level and accepting
for all
program
tensions of their credit.
the
with
done
Gold Versus Inflation
.
Thursday; February 26,, ,1948
COMMERCIAL & FINANCIAL CHRONICLE
which
I
familiar.
am
,
the
with
In the year
1946, that company produced and
sale goods andr serv¬
ices for which customers, paid .'ap¬
,
offered for
proximately $1V2
beginning
States
cash
very
Steel
and
billion.
At the
the
year, 'Unitedhad $232 millipnin
of
at
close
Th's; means
the
to
end
the
that
of
same
about
the year |
amount/
a$
marijt
out of bal¬ ports over imports for a time with price which would keep them in
services.
Others, influenced by dollars were paid out by United
ance, the discrepancy may become our own money; (2) maintenance circulation.
the possibility of a better return, States Steel in that year as wer&
of tariff barriers or other restric¬
so
great that the present gold
If some degree of inflation is
received. These expenditures wer^
are attracted to a similar activity.
price will be as unrealistic as the tions that would prevent repay¬ unavoidable, as I am afraid it is,
Progress is thus promoted in a incurred as employment, costs, a$
ment of credits or foreign loans in
prices of commodities in certain
it must be held at some tolerable
democratic way for the good of payments for purchased goods and
foreign currencies at the so-called goods; (3) exhaustion of credits level if it is not to become the
the community.
Those who are services (including new equipt
and
drastic decline of exports,
official rates of exchange.
most
painful of the unpleasant not
properly serving the commu¬ ment). as taxes, as interest on in-?
leading
(4)
to depression
and alternatives. This could most de¬
A government which abuses its
debtedness, and as dividends. The
probably an increase in the price cisively be accomplished by re¬ nity's interest will eventually be
funds so paid out became spend-?
power to create debts and to issue
Dressed out of the market through
of gold in a desperate effort to
defining the dollar in terms of
able
money
in
the
hands of
paper money can no more hold
preserve
our
foreign
markets gold, with provision of the right | loss of customers and thus directed
.gold to a fixed price in its depre¬
toward
some
other
enterprise those in receipt thereof for the
(i. e., selling our goods for a rela¬ to exchange the currency for gold
ciating currency than can it main¬
purchase of such goods and serv->
tively smaller quantity of gold at the stated rate. It would in¬ , which may yield a greater benefit
tain the fiction of fixed prices for
ices as they wanted. In short, by
than at present). By that time the volve
selling gold at the fixed j to the public; Competitive mar¬
foods and other essentials. as its
kets, are the guarantors of effi¬ the very act of producing prod4
paper weakens.
Even under the next war would probably be upon price and not merely buying it
a
national budget still
Volume 167
nets for
" Number
THE COMMERCIAL
4676
sale, United States Steel would
&
FINANCIAL
CHRONICLE
to such a contriv¬ ture of interest to us ,in looking
Counterfeiter,
with
his for the real cause of inflation is
printing press, is able to provide that it is entirely possible for
required tp buy what it produced. himself with currency (supposing people to come into' the possession
released dollar purchasing power
to others equivalent to the dollars
If
he
amount
in
ance.
should
we
take
business
all
units throughout the country and
add
believe
we
would
with
which
to
markets
without
having
concurrently provided equivalent
goods and services to be sold in
I
out with
come
undetected)
enter
their financial figures,
up
is
those
kind and another generates in it¬
self enough purchasing power to
markets.
were
definite conclusion that the pro¬
duction of commodities of one
a
suffic'ently
If
of
and
their
numerous
and successful in
illegal efforts, we would experi¬
ence
that disruption of balance
deposits and
Borrowing from
bank consists of
ise to
trading
for another.
pay
promises
rower
pay
The bor¬
the bank
a
which
unlike those
equivalent flow of goods into the
today
markets..' Limitation
briefly
contrivances
for
amounts
of
enabling
money
there
ing the market will be subjected
to
enter
the
occasion
realistic
the
•
feel
confident, that counterfeiting
The
coin
and
of
to
in¬
the
credit
a
upon
which
money
bills consists of
currency
carried in
pockets, plus deposits in banks
our
I
agree,
thought
consideration
situation.
the
Supply
should
probably have had
give
use to pay our
we
Artificially Increasing Money
Everyone
to
:
fluence of money and
serv¬
ices for sale in the markets.
disruption.
Most of you
market, that is, money over and
aboye that derived from the proc¬
ess of production which simulta¬
neously provides goods and
that
to
additional
subject to check.
posits
Industries, Inc., New York
pay
into
come
be used
can
as
than
verse
re¬
bank
means
supply without
tion of such
credit
results.
credit
increase
an
not have
has
the
or
under
more
is that
me
we
to do
lenge
more
than
the
nature
of
task that is
and
to all of us, if my
law,
Treasury Departments Exercise of
needed
is
a
broader
such discretion
sion of the fundamental
inflation.
the
over
I
should
like
to
Now
Cameron
Aero
in
Engine
that
point out that
For
should
ple
monopolies,
exces-
like,
to seek to convince
I
peo¬
our
wartime
of
controls
over
A
non-political
realistic ap-
and
proach to the problem along states-
con¬
manship lines is essential.
causes
have such an
can
rounding
the
of
<
j
our
inflation
controlled
forces
of
effort to
a
is
If we
j
j
-
atmosphere sur¬
difficulty, it is
that
peo¬
understand
to
about
cor¬
comprehen¬
inflationary
present
talk
sition
What is
thing, our
one
come
long. Politi-'
expedient
ple of the virtues of the re-impo-;
presented
analysis be
democracy.
past 15 years.
too
chal¬ production, distribution and prices, j
a
has, however, been
for
may seem more
sive corporate profits and the
diagnose
the
in
absence
cally it
and
rect, and if inflation is to be
its
the necessary
further ex¬
take
prevent
our
momentum
up
Bonds
trolled
by
do
Government
the
notable
of
reasons,
Sufficient time is not available
preven¬
and
to
to
of
wholly within the discretion of the
Board
courage
money and credit
They may, for political
shrink away from the
possible psychological effects of
stopping, or at least stopping too
abruptly, what has been gaining
can oc¬
Federal
Reserve
and
tension
price inflation than
Holdings
This
money
present
squarely
extraor¬
actually been experienced
Bank
concurrent and
a
po¬
any
party will have the
measures
to now.
expansion of bank
an
lies,
in
i3
Presidential
year of
a
;
,
wisdom to face this problem
and
of
in less than ten years, the sur¬
cur
prising thing to
of securities by the
expansion of commer¬
an
litical
country has been multiplied
an
'
<most
me
supply.
sales
banks,
cial
the
by
supply
productive
elections, the leaders of
currency print¬
money
of
'
worries
whether in
not
are
extension
What
processes
dinary monetary inflation
of paying off loans
process
by
or
offset
are
by
three-fold. When such
New
money.
of a
the
press,
the
existence
deposits
may
also
be
created
through the sale of bonds to banks.
When more deposits are thus cre¬
ated
ing
on
cope
my
with
judgment*
capable of being
within
the
-
framework
democracy.
Registration
INDICATES ADDITIONS SINCE
—-
Oct. 30 filed
to
thus
which
The special fea¬
•
American
while
the bank
demand
through writing up its deposit lia¬
bility to the borrower. New de¬
Securities
All
future;
promises
Thus
sum.
in economic effect
in
be
the
to
such
one prom¬
money
loans is needed.
without goods simultaneously be¬
ing produced for market to match
commercial
a
of
means
when
and
Effect of Bank Borrowing
a
multiplying the
supply by main¬
taining or augmenting their great
holdings
of.
government
bonds
banks,
additional $79 billion of money
credit
have
been
created
an
in
whatever
as
nation's
ment bonds to commercial
equivalent value.
between goods going to market
equivalent additional purchasing and money entering the market,
power is simultaneously released which we know as inflation. Per¬
and any net surplus of money en¬ haps from the simple economics
tering the market is not signifi¬ of such an exaggerated assumption
cantly reduced. So increased pro¬ of widespread counterfeiting, we
duction, beneficial though it may can get one additional key in our
be, does not appear to be the cure search for the root cause of in¬
for inflation.
Furthermore, pro¬ flation. It might be phrased this
duction in this country is now way: Whenever people as a whole
are
enabled to get money with
virtually at full capacity. ,/
The existence of such an eco¬ which to buy things
^ other
than
nomic law narrows the search for through concurrent and competi-.
the cause of inflation; By such a tive sale- of goods and services,
process of elimination, I believe then the balance between goods
the root will be found more to lie going to market and money enter¬
may
outside of
currency
37
will not be halted if our
banking
institutions continue to be utilized
banks. Since that time, and largely
by reason of the sale of govern¬
concurrently
goods or services
merchandizing
1939 the United States had
ap¬
proximately $33 billion in demand
without
money
counterfeiters
diligent
Clear the markets at the given price
level. If more goods are produced,
of
(933)
PREVIOUS
(2/27)
Corp.
ISSUE
Electro
/
Refractories
&
Alloys
Corp.,
Buffalo#
100,000 shares ($1 par) common (name to
be changed to American Steel &
Pump Corp.) Under¬
Dec. 29 (letter of notification) 101,000 shares of common
stock (par $1), of which 85,000 shares will be sold to
Feb.
writer—Herrick, Waddell & Co., New York.
Price by
Proceeds—To pay off indebtedness incurred
the
stock (no par).
•
as
lin
*
in the acquisition of the capital stock of A. D.
will be issued to American Die
amendment.
Lawrenceburg, Ind.
American
Cook, Inc.,
f:"
Broadcasting Co.,
Inc.,
New
York
Feb.
13, filed 250,000 shares common ($1 par) at
posed maximum offering price of $12.50 per share.
derwriters—None.
Company
Proceeds—For
corporate
pro¬
Un¬
purposes.
has plans to spend about $5,325,000 for
in New York, Los Angeles, Chicago
now
television facilities
San Francisco and Detroit.
with which the
persons
Shares will be sold to "the
had network affiliation
agreements at Jan. 31, 1948, and to such other persons
as may be selected from time to time
by the company."
Atlantic
Coast
company
Fisheries
Feb. 2 filed
$556,500 4 %%
lateral
convertible
par)
trust
Co.,
and
166,950
stock.
Uric&rwriter
Offering — The'bonds- are
—
stockholders at the rate of
shares of
common
Mass.;
general mortgage
&mds
common
Buffalo.
Boston,
and
shares
Doolittle
col¬
($1
&
Co.,
offered to*
being
$1,500 of bonds for each 1,000
stock held.
The stock will be reserved
against conversion of the bonds. Unsubscribed bonds
will be publicly offered by underwriter.
Proceeds —
General corporate purposes.
•
1
■
-
Barbarol
Co., Indianapolis, Ind.
(letter of notification) 5,000 shares of preferred
stock ($50 par). Price, par. No underwriting. For work¬
ing capital.
Feb. 17
Bardwell
&
Feb. 9 (letter of
McAUster, Inc., Burbank, Calif.
notification) 29,500 shares
of 6%
cumu¬
lative convertible stock ($10 par) and 88,500 shares com¬
mon stock ($1 par) issuable upon conversion of
preferred
stock.
Underwriters — John B. Dunbar & Co., Los
Angeles.
Proceeds—$100,000 for
balance for construction and
to be added" to the
ment.
r'
working capital with
development of new items
company's line of photographic equip¬
cumulative pfd. stock ($25 par).
For working capital and
:""v
tion.
Price—Par.
No under¬
expenses of organiza¬
■
■
9
(letter of notification)/ 7,400 shares of common
Price—$15 a share.. Underwriter—HamLunt, Buffalo. Offering—Stockholders of record
Feb. 13 given rights to subscribe at rate of l/12th of one
&
for
warrant
Additional
each
share
working
held.
Rights
expire
Feb.- 27,
capital.
Keppler & Co., Inc. and Henry P. Rosenfeld & Co., New
York. To provide
•
operating funds, etc.
Eversharp, Inc.,
Chicago
(letter of notification) 10,000 shares ($1 par)
stock. Price—$10 per share. No underwriting.
To be sold by Martin L. Straus II, New York City, Presi;
Feb.
•
Cleveland
Feb.
(Ohio)
Co-operative Stove Co.
(letter of notification) 21,278 shares ($9 par)
stock. Price—$13.50 each. Underwriters—Pres-
16
common
cott & Co. and First Cleveland Corp., both of Cleveland.
For
working capital.
•
Columbia
Corp.
(3/23)
Bidders—Morgan Stanley & Co.; The First
Corp.; Halsey, Stuart & Co. Inc. Proceeds—To
finance
a construction
program. Bids—Company plans to
invite bids to be opened March 23.
•
Commercial
Benefit Insurance Co.,
Phoenix, Ariz.
Feb. 16 (letter of notification) $100,000 of capital stock,
to be issued each holder of
conversion and foundation
a
life insurance policy as his
1947 policy dividend, unless
Any proceeds from sales will be
placed in surplus. No underwriting.
he chooses cash instead.
'
Commercial
Finance
Co., Mount Rainier, Md.
Jan. 16 (letter of notification) $68,000 of 6% debenture
bonds.
Underwriter—Emory S. Warren & Co., Wash-
ington, D. C.
•
Consolidated
Title Corp., Washington, D. C.
(letter of, notification) 7,089 shares of Class B
common stock
($1 par). Price—$15 each. No underwrit¬
ing. To pay indebtedness and for corporate purposes.
Feb.
.
dent of the company.
•
Industries, Inc., Detroit
:
(letter of notification) 300,000 shares
18
Price—Par.
Co., Detroit.
•
f
Federal
common.
Probable
Boston
16
common
Feb.
Gas & Electric
Feb. 20 filed $45,000,000 of debentures, due 1973. Uncfer-writers—To be determined under competitive bidding.
Underwriter—C.
($1 par)
McDonald &
G.
Hacienda
Feb.
18
common
/
For working capital.
Manana Hotels, Inc., Denver
(letter of notification) 10,000 shares
stock.
Price—$5.
No underwriting.
u
.
($1 par)
To build
hotel.
•
Industrial
Credit Co., Cleveland, Ohio
(letter of notification) 11,180 shares of Class A
common stock, to be exchanged for preferred and partfcipating cumulative preference shares on the basis of
10 common for each preferred and five common for each
participating share.
:,
Feb.
16
International
Asbestos
Co.,
Ltd.,
Sherbrooke#
J
■
"(l
f
Quebec
Jan.
30
filed
($1 par) common stock.
Frechette, Hartford, Conn., is the
Price
—$1 each.
Proceeds—To construct milling plant and
purchase equipment.
1,500,000 shares
Underwriter—Paul E.
U. S. authorized agent and principal underwriter.
17
Crampton Manufacturing Co.
Repertory
Association, Inc., Boston
19 (letter of notification) 2,000 shares of 6% non-
writing.
Co. for invest¬
Tool
■
Boston
Feb.
&
ment in return for cancelling $15,000 open account for
machine tools. Price—$2 per share. Underwriters—R. A.
(
#
public; 8,500 shares will be issued to underwriters
underwriting consideration and 7,500 shares
additional
New York
(3/1-5)
Feb. 5 filed $600,000 first mortgage
5JA% sinking fund
bonds, due 1966, with warrants to purchase 60,000 shares
($1 par) common stock. Underwriter—P. W. Brooks &
Co., Inc., New York. Proceeds—To retire secured in¬
Interstate
Feb.
5
Power
Co., Dubuque,
la.
(3/1-5)
filed
$20,000,000 first mortgage bonds, due 1978;
$5,000,000 sinking fund debentures, due 1968, and 1,500,000 shares ($3.50 par) common stock. Underwriter —
Smith, Barney & Co., New York. Price and interest
rates by amendment. Proceeds—To permit consumma¬
of the company's reorganization plan.
v
tion
(Continued
debtedness, finance inventories and supplement working
capital.
on
page
38)
WM
•
!' Corporate and Public Financing
Dallas
(Texas)
Power & Light Co., Dallas
68,250 shares of common stock and $4,000,000
25-year sinking fund debentures, due 1973. Underwriting
Feb. 20 filed
—Debentures to be offered
ders:
and
will
stockholders
The
held.
FIRST BOSTON
on
Boston
;
;
New York
Pittsburgh
.Chicago and other cities
V^- v; \ :
,
basis
Price—Common
Construction
program.
Domestic
CORPORATION.
competitively.
Probable bid¬
Halsey, Stuart & Co. Inc.; The First Boston Corp.,
Blyth & Co., Inc. (jointly). Offering—Debentures
be offered publicly.
Stock will be offered present
Dec. 29
filed
of
one
new
share
for
stock, $60 a share.
Business—Utility.
each
four
Underwriters—None.
Chicago
($1 par) Class A Common.
Offering—To
be
offered
to
em¬
ployees, executives and management personnel. Price—
$3.49 a share.
Proceeds
Company did not state how
proceeds will be used.
:
..
—
.
1865
York
Proceeds—
Credit Corp.,
150,000 shares
CO
deJ
Eoutv
.
RROtCSRfv|
ind fiosto"
DEALERS
\ro^
ckG°
Chv
(A.
UNDERWRITERS
HH
III
38
THE COMMERCIAL
(934)
&
FINANCIAL
CHRONICLE
Nalley's Inc., Tacoma, Wash.
shares
Common
Wisconsin Power & Eight Co.___
March
March
*
New York
Bonds, Debs., Common
Bonds
...Preferred
.Common
Wilson-Jones
16, 1948
Debentures
filed
determined
Oklahoma
Gas
Electric
&
Pacific
Jan.
;
stock.
Price—Par.
Long Beach, Calif.
com- ;
loans
and
to
property extensions
utility
•
reimburse
and
Feb. 18
(letter of notification) 1,000 shares of 7%
•
-non-
preferred stock (par $10). Price—$10
No underwriting.
Working capital..
•
per
Gas Co., Detroit, Mich.
Feb, 18 filed $7,000,000 first mortgage ibands, due 1969.
Underwriters—To be determined by competitive bidding.
Probable Bidders-^-Halsey, Stuart & Co. Inc.; Lehman
Brothers; Dillon, Read & Co. Inc.; Glore, Forgan & Co.;
White, Weld & Co. Proceeds — Construction program.
Minnesota Power & Light Co., Duluth
Feb, 3 filed 100.000 shares (no par) common stock.
Proceeds—Toward
struction program.
cf
to
common
preferred
Un¬
Price—By amend¬
financing a $6,000,000 con¬
Expected in March.
Mississippi Shipping Co., New Orleans, La.
Feb. 18 (letter of notification) 4,500 shares of common
stock, owned by Theodore Brent, President of the com¬
pany. To be sold from time to time during the next year
for not
more,
than $100,000. No underwriting.
capital
ta'Shake* Inc., Bloomington, III.
participating preferred
stock,
($1
par)
and
160,000
(50c par) common stock, of which 40,000 will be
sold and the remainder reserved for conversion.
writer—White & Co., St. Louis, Mo.
Under¬
Price—$8 for the
preferred stock
is
being offered
the Belt
and
$2.50 for the common. This stock
stockholders who are members of
by
family.
Terminal
•
Refrigerating & Warehousing Corp.*
Washington,. D. C.
Feb.
17 filed $700,000 4% 10-year first
mortgage bonds
due-1958. Underwriter—Alex. Brown & :Sons. Baltimore..
Price—Par. Proceeds—To retire $635,000 of
-share.
4V2%
bonds
mortgage
operators.
due
April
1,
1948.
first
Business—Market
Expected early in March.
Texas
Electric
Fort
can
be
authorized
be converted.
No
but .unissued
Service
Co.,'
>
.
Worth,
Underwriting—To
until
underwriting.
For
•
Pioneer
Arms
Co., San Francisco
notification) J. Barth & Co., San Francisco, which plans to organize Pioneer Arms, will issue
1,000 shares ($100 par) preferred and 1,000 shares ($1
Feb. 18 (letter of
,
.
par)
Co.
common.
$1,500 in
Proceeds will be iused fto pay J. Barth &
for patent investigation and legal
-
work.
t
Playboy Motor Car Corp*, Tonawanda, N. Y. ?
(lc par)V Price—
Feb. 13 filed 20 000,000 shares common
share.
Not
.
1
•;
than 100,000 shares will be of¬
fered to employees and officers at 87% cents per share.
per
more
filed
Co.
of
199?627 shares
New
Hampshire
(3/10)
one
Public
j
under
$100
of
by Stone & Webster Securi¬
Offering—Debentures to be offered
stockholders rof record
debentures for
each
25
March
at rate of
15
shares held.
Hrice
of
Feb.
5
/
Petroleum
,
•
Corp.
l
filed
150,000 shares <$100 par) cumulative con¬
preferred stock.-Under writer—Merrill, Lynch, ;
Pierce, Fenner & Beane, New York. Price and interest
rate
to be filed by amendment. Proceeds—To purchase
75% interest in the capital stock of Devonian Oil Co., the
other 25%
Service Co.
of Oklahoma, Tulsa, *Okla.
$10,000,000 first mortgage bonds, series B.
Underwriters—To be determined by competi¬
Inc.;
coffered
vertible
share for each
tive bidding. Probable bidders:
Halsey, Stuart & Co.
'be
debentures, 100; Proceeds—To pay for construction ex¬
penditures, including $11,000,000 of bank notes issued to
Warren
being acquired by Gulf Oil Corp.
withdrawn.
30 filed
due 1978.
Corp., Boston.
.common
finance construction.
3% shares held. New Eng¬
land Public Service Co. will waive its
rights to subscribe
to
141,101 shares.
Price—By amendment. ProceedsConstruction program and retire short-term'loans.
Jan.
Underwriters—Bonds -to
tures will be underwritten
($10 par)
common stock.
Underwriters—Kidder, Peabody & Co., and Blyth & CoM
Inc., New York. Offering—To be offered present holders
at rate of
'
filed
competitive bidding. Probable bidders: Stone -& Websteir
Securities Corp.; The First Boston
Corp.; Glotfe, Forgan
&.Co„ and W. C. Langley & Co. (jointly); Halsey., Stuart
& Co. Inc.; White, Weld &
Co.; Merrill Lynch, Pierce
Fenner & Beane, and BaLlgarten & Co.,( .jointly j. ^Deben¬
to
•
17
due. 1963.:
ties
Underwriter—Teilier & Co., New York. Proceeds—For
capital equipment and working funds. Business—Company will manufacture small ^car in $1*000 price class.
6
Electric &
Power Co., Richmond, Va.
$10,000,000 .first and refunding -mortgage bonds due 1978, and $11,753,800 convertible debentures
Feb.
Nov. 20 filed $6,500,000 of first mortgage bonds, due 1967.
Underwriters—Kuhn, Loeb & Co.; A. G. Becker & Co.,.
Inc. and Hemphill, Noyes & Co. Price by amendment
Proceeds — To refund outstanding first mortgage bonds.
Temporarily deferred. V.
,$1
including construction.
Virginia
Pittsburgh Steel Co.
,
be determined by competitive bid¬
ding.
Probable bidders include: Halsey, Stuart & Co.
Inc.; the First Boston Corp. and Blyth & Co., Iqe. (joint¬
ly); Kidder, Peabody & Co., Merrill Lynch, Pierce,
Fenner & Beane, R. W. Pressprich & Co. and
Equitable
Securities Corp.
(jointly); Smith, Barney & .Co. and
Union Securities Corp.
^(jointly); White, Weld. & Co.;
Harriman Ripley & Co.
Proceeds—For -corporate pur¬
poses,
expenses
^
•.
stock.
common
Price—By amend-'
funds.
Business—
shares
working capital.
Feb.
derwriter—Kidder, Peabody & Co.
Proceeds—Additional
:Steak
Teltgrapn
per
par)
Feb. 2 filed 40,000 shares of 50c cumulative convertible
will
/ Public Service
Business—Utility.
ment.
shares
-
Michigan Consolidated
Price—^$5.25
'
Detroit, Mich.%
'
A
Manufacturing Co., Verona, N.J.
convertible
share.
—
Chicago.
construction
finance
(
Insurance.
Drugs,
Blosser,
Proceeds—To
Petersham
of
expense
&
Beane.
•
struction program. Business — Utility.
Expected about
Industrial Research-Corp., Spring-V
March 29.
field, Mass.
Feb. 19 ^letter^of notification) -3,500 ..shares ($25 par) ' •
Utah Power & .Light Co., Salt Lake
City
•
Feb. 19 filed $3,000,000 first mortgage
preferred stock, to :be sold at par; .2,-700 shares (no par)
bonds, Sue 1973,
common to be issued to
original incorporators, and 3,500 - and $3,000,000 of sinking fund debentures; due 1973.
•
the
Business
ment.
Rights expire
construction program.
&
&
Underwriter—The First Boston
Corp.
10 held.
Telephone
$7,000,000 30-year first mortgage bonds, t
Underwriting—To be determined at competi- :
>
j/
company.
Metro Tool .&
treasury for
parent, American
Expected about March 16.
;
Texas (3/29)
Feb. 20 filed $5,000,000 first mortgage
bonds, due 1978,
and $5,000,000
of sinking fund debentures,y due 1973.
Underwriters—To be determined by competitive
Julien Collins & Co. Offering—To be offered initially
bidding.
to stockholders on basis of one new share for either one ; Probable Bidders—Halsey, Stuart & Co. Inc.; The First
Boston Corp.; Harriman, Ripley &
share of ilk% cumulative preferred stock or -one share
Co.; Blyth & Co., Inc., of 4^4% cumulative second preferred stock.
Kidder, 'Peabody & Co., and 'Smith, Barney & Co.
Price by
amendment.
(jointly); Glore, Forgan & Co., and W. C. Langley &c .
Proceeds—To redeem all outstanding pre¬
Co. (jointly); White, Weld &
ferred with
the
balance
to
be
Co.; Hemphill, Noyes & >'
applied to •' working
Co., and Drexel & Co. (jointly). Proceeds—Finance con¬
capital.
"
improvements.
to
facilities.
filed
5
($10
to
Co., St. Louis, Mo. (3/4)
Feb. 13, filed 10O;0OO shares of preferred. Underwriters
—Kidder, Peabody & Co.; G. H. Walker .& Co., and
Co.
Feb. 12 filed $8,000,000 first and refunding mortgage
bonds, due March 1, 1978. Underwriters—To be deter¬
mined through competitive bidding.
Probable bidders:
Halsey, Stuart & Co, Inc.; Lehman Brothers and Blyth
& Co., Inc. (jointly); the First Boston Corp.; Harriman,
Ripley & Co.; Glore, Forgan & Co. and W. ,C. Langley ,&
Co. and Equitable Securities Corp. (jointly); Kidder, Pea¬
body & Co. Proceeds—To pay $2,450,000 of short-term
ta
new
bidding. ■ Probable bidders: Halsey, Stuart & Co.
Inc., Lehman Brothers and Lazard Freres &€o. (jointly);
White, Weld & Co. and Kidder, Peabody & Co. (jointly);
Blyth & Co., Inc. and Stone & Webster Securities Corp. t
(jointly); Glore, Forgan & Co. and W. C. Langley &. Co. (jointly); Harriman, Ripley & Co.; Merrill Lynch, Pierce,
Pet Milk
—
J
par
Kan., and the $332,500 balance will be iused for working
capital and expansion of business: retail drug stores.
Kinder Peabody & Co. (jointly); Kuhn Loeb & Co. and
Lehman Brothers (jointly); Salomon Bros. & Hutzler.
Proceeds
Approximately $5,500,000 will be added to
company's general cash .funds on the basis of unfunded
property additions, and the balance will be used for
bank
>
& Electric Co.
Standard Accident Insurance
Co.,
Feb. -19 filed 140,750 shares
be used to reimburse company *
for funds used to purchase McFarland Drug
Co., Topeka,
tive bidding.
Probable bidders: Halsey, Stuart & Co.
Inc.; Blyth & Co., Inc.; W. C. Langley & Co., the First
( jointly) ; Shields
& Co., White Weld & Co. (jointly); Harriman, Ripley
&
Co.; Merrill Lynch, Pierce, Fenner & Beane and
Electric
J
Proceeds—To reimburse company's trees-'
•
stock.
stock of record Feb. 27
common
share for each
one
Proceeds—$140,000
Boston Corp. and Glore, Forgan & Go.
;
& Beane.
Fenner
13 filed
Straus
i
Underwriter—Fewel & Co.,
Gas and
a1
.
$10,000,000 first mortgage bonds, series C,r
Underwriters—Names
to
be
determined
1978.
program.
inc., Kansas City, Mo. (3/9)
Jan. 27 filed 100,000 shares of preferential cumulative
35c
participating stock
($4.50 par).
Underwriter-
Louisiana Power & Light Co., New Orleans, La.
(Ky.)
Offering—To be offered at
outstanding
Parkview
Feb. 12, filed $10,000,000 first mortgage bonds, due 1978.
Underwriters—Names to be determined through competi¬
Louisville
'
:
& Telegraph Co.
$75*000,000 30-year -debentures, due March
1, 1978. Underwriters—Names to be determined by com¬
Co.
For accounts payable.
construction purposes.
'
■
tive
Business—Utility.
Proceeds—To finance
advances
Club, Inc., Puente, Calif.
(letter of notification) 1,480 shares ($100 par)
19
'
17 filed
series B.
petitive bidding. Probable bidders: Morgan Stanley &
Co., and Halsey, Stuart & Co. Inc. Proceeds—To reim¬
burse treasury for eosts of extensions, additions and im¬
provements to telephone plant and repay outstanding
La Vida Trout
common
operate
Diego Gas & Electric Co.
for expenditures and for purchase of
Pacific Telephone
Feb.
Co., St. Louis, Mo.
Feb. 4 filed $6,084,000 15-year convertible sinking fund
debentures. Underwriters—Lehman Brothers, Goldman,
Sachs ,& Co., and The First Boston Corp. Offering—To
be offered initially to common stockholders of record
Feb. 24 on basis of $100 of debentures for each 40 shares
held. Unsubscribed publicly by underwriters.
Price—
By amendment. Proceeds—Payment of outstanding3lk%
Feb.
and
'
Southwestern Gas
stock,
Electric, San Francisco
686,953 .shares-($25 par) .common
at the rate of
April 9.
Laclede Gas Light
•
build
ury
and
Underwriting—none.
Co., Inc., Emporia, Kans.
Dec. 3 (letter of notification) 3,157 shares ($95 par)
preferred. Price—$95 a share. Undewriter—Kenneth Van
Sickle, Inc., Emporia. For additional working capital.
•
Gas
filed
29
holders of
Kansas Soya Products
•
To
ner
Co.* Oklahoma City,
(Underwriters—:To be determined under
toward construction program.
through
competitive
bidding. Probable bidders: Halsey, Stuart & Co. Inc.; the
First Boston Corp., and Rlyth & Co., Inc. ((jointly); Mer¬
rill Lynch, Pierce, Fenner & Beane; Lehman Brothers,
Bear, Stearns & Co., and Stern Bros. & Co. (jointly);
.Shields & Co., and E. H. Rollins & Sons (jointly); Kid¬
der, Peabody & Co.
Proceeds — For construction and
other corporate purposes.
installment notes.
underwriting.
through competitive bidding. Probable bidders include:
Halsey, Stuart ,& Co. Inc ; Blyth & Co., Inc.; Harriman.
Ripley & Co.; Kidder, Peabody & Co., and Dean Witter
shares held. Rights expire
bidding. Probable Bidders—The First Boston
Corp.; Smith, Barney & Co. and Harriman, Ripley & Co.
•.(jointly); Merrill Lynch, Pierce, Fenner & Beane; Leh¬
man Brothers; Blyth & Co., Inc. Proceeds—To be
applied
$5,000,000 first mortgage honds due 1978.
be
No
Nov,
.($100 par).
Kansas Gas & Electric Co.,'Wichita,. Kan.
11
Pa.
'(letter of notification) 500 shares of common
(par $100) and 500 shares of preferred ($100 par)
San
Feb.
indebtedness.
Feb. 20 filed 65,000 shares of cumulative -preferred
Bonds and Debs.
(Continued from page 37)
Underwriters—To
use.
Enterprises," incTTMcKees Pocks,
17
due
petitive
v
are
Price—Par.
Oklahoma
•
Feb.
Of the total,.
to be sold to six buyers and the remainder,
bowling alley.
•
initial
an
Price—$1-00.
& Co. (jointly); The First Boston
Corp,; Salomon Bros &■
Hutzler; Lehman Brothers; Merrill. Lynch, Pierce, Fen-,
29, 1948
Texas Electric & Service Co._
Feb.
each.
'•
•
Common
23, 1948
Electric Corp
*.
-
[Downs Racing Association* Inc.*
Berlin, Md.
Nov. 28 filed 34,900 shares <$10 par) common.
No un¬
derwriting.3 Price — .$10 a share.
Proceeds—To build
trotting and pacing .race track near Ocean City. Md
19, 1948
Co.
March
common
Rox
stock
Ocean
March
~
share for each six
■one
Bonds
Columbia Gas &
)•
mon
March 1. Proceeds—To pay off
(State of)
March
-
1,456 units
of $100
will be held for future
stockholders. Off ering—Offered for subscription by com¬
stockholders of record Feb. 2 at $20 on the basis of
11, 1948
Chesapeake & Ohio Ry., Noon (EST)__Eq. Tr. Ctfs.
March
net .asset value
100,000 ..'shares of the registrant's .icommon stock, has
agreed to purchase all shares not subscribed for by other
March
Ohio
Rittenhouse Fund, Philadelphia, Pa.
Feb. 18, filed 20,000
participating units, with
Airlines, Inc., Boston, Mass. v
83,333 shares (no par) $1 cumulative con¬
vertible preferred.
Underwriter—Atlas Corp., owner of
1948
; •
•
Dec. 24 filed
————Bonds
Public Service Co. of N. H
v
Co. bank notes, and for expansion
purposes.
Co., Seattle, and Pennaluna &
For developing mining claims.
Co., Wallace, Idaho.
..Preferred Stock
March 10,
behalf of
Northeast
9, 1948
(EST)
Drugs, Inc
on
writers—H. M. Herrin &
Central Pacific Ry, Noon
Parkview
(25*000
Mining Co., Spokane, Wash.
Jan. 28 (letter 3of notification) 100*000 shares of non¬
assessable capital stock. Price—32 cents each. Under¬
1948
——
March
publicly offered
Nevada-Stewart
(EST)—
a.m.
March 4,
Pet Milk Co
}
2, 1948
(State of) 11
be
to
are
Nalley, Chair¬
man); .20*000 shares will be offered to (employees, execu¬
tives and directors and 35,367 shares are to be issued in
acquisition of all publicly held stock or partnership in¬
terests in certain subsidiary and affiliated companies.
;
Bonds
.—
man
Co. and Lee
company and 38,785 for account of Marcus
—.Bonds
1, 1948
Crampton Mfg. Co
Interstate Power Co.,.—.
and White, Weld & Co.
(jointly); HarriJ
Ripley & Co., Blyth & Co., Inc., Central RepublicHigginson-Corp. (jointly); Glore, Forgan &
Co., the First Boston Corp., Salomon Bros. & Hutzler.
Proceeds—Prepayment of $1,700*000 of bank notes due
April 20 and $1,375,000 of Oklahoma Power and Water1'
$1.25),
Underwriters—Walston,;Hoffman & Goodwin and Hart-'
ley, Rogers & Co., San' Francisco. Offering—63,785
February 27, 1948
Cameron Aero Engine Corp..,—
Shields & Co.
Jan. 15 filed 119,152 shares of common stock (par
NEW ISSUE CALENDAR
Thursday, February 26, 1948
•
.
West
Penn
.
.
Power
Feb. 20 filed $20,000,000
.
Issue to be
,
Co,, New York City
Series M first mortgage bonds
.Volume 167
due
March
'stock
4676
THE COMMERCIAL
1, 1978; 50,000 shares of Series B preferred
($100
par), and
stock.
common
competitive
&
Number
Co. Inc.
about
2,000,000
Underwriters—To
be
shares
(no
determined
Co. Inc.
•
expenses.
Business—Utility.
•
Wilson-Jones Co.
Feb.
(3/19)
32,937 shares of common stock (par $10).
Underwriters—None. Offering—To be offered for sub¬
scription by stockholders of record March 19 in ratio of
•
pire
on
sets of other companies.
Business—Printing house.
Wisconsin Power & Light Co.
Dec.
'
29
filed
$3,000,000
t
(2/27)
lirst moxtgage bonds
($100 par) 4.80% cumulative
Offering expected at 102.46.
to
holders
of
record
Feb.
Stock will be
of
16
18
of¬
•
preferred
Rights will expire Mar. 1.
stock at $100, per share
(flat).
Proceeds—To pay bank indebtedness and for construc¬
March 8
tion costs.
in series.
.'S-v/"•
;
.
10,000
y'r-
•
creating
on
an
bidders:
•
Feb.
•
Central Pacific Ry.
Bids for the purchase of
issuance of
one
terms still to be determined. Common
stock will be offered to
present common stockholders in
of
$37,396,000 first mortgage bonds,
DIVIDEND NOTICES
Established,
small,
firm
would
be interested in
with
well
excellent
known
f
Street
securing
un¬
clientele
partner
a
with Street contacts and moderate
capital:
Replies absolutely confidential. Box K 225,
Financial Chronicle, 25 Park Place, New
York
8, N. Y.
475
'
\
of
Fifth
this
Company,
stockholders
March
on
of
Avenue,
New
York
17,
dividend
of
SEVENTY-FIVE
has
been
declared
on
the
share
of
payable
record
15,
at
close
The stock transfer
will not be closed.
books
Directors
of ^International
Harvester
/
.
GERARD J. EGER, Secretary.
Two
HELP
Rector
LIGHT
Street, New York, N. Y.
WANTED
ferred
Trader Wanted
assist
to
ing.
in
executing orders,
Must
and
have
Street
some
experience,
clientele.
commission.
Replies
in
Financial
York 8,
for
some
man
to
dividend
a
Preferred
1948,
D.
of
10,
for
payment
record
at
Pre¬
$1.25
of
American
were
25,
the
of
Stock
Company
March
ness
on
$5
stockholders
trad¬
and.
per
declared
confidence.
1,
1948,
close
of
able
on
March
5,
N.
at
the
close
1948
business
of
A.
S.
February 27, 1948.
CHEROUNY, Secretary
61
Corporation
Johns-Man ville
m
Corporation
February 24, 1948
Allied Chemical &
Dye Corporation
lias declared quarterly dividend
No. 108
of One Dollar and
Fifty Cents
One
Dollar
Stock
Common
closed
for
the
of 35<f per share
able March 10,
March
a
dividend/
the Common Stock pay¬
1948 to holders of record
on
N.
A.
share
per
Y.,
February
New Connection
Desired
and
close of business March
liaison
record
proven
of
Capable
etc.
19,
Box
M
Board
of
Directors
has
declared
of
on
Stock
1,
close
H.
BUCKSTAFF, Treasurer..
The Board of Directors has declared
Company's
day
share
first
interim dividend
for
1948,
on
per
share and
capital
stock,
divi¬
a
an
share
per
addi-
on
payable
the
March
close of business
February 27, 1948.
RICHARD
T.
FLEMING, Secretary.
the
outstanding Common Stock, payable March 13.
1948, to stockholders of, record at the close of
business on February 24, 1948.
L. duP.
cents
15, 1948, to stockholders of record at the
and &llM a share on the outstanding Preferred
Stock—$3.50 Series, both payable April 24,
1948, to stockholders of record at the close of
business on April 9, 1948; also $2.00 a share,
the
50
T) tional dividend of 50c
UNHLSSCl CORPORATION
COPELAND, Secretary
Tennessee
Corporation
1
A dividend of 30c
per
share has
payable March 24,
heen declared,
1948, to stockholders of record at
the close of business March
4, 1948.
61 Broadway
New York 6, N. Y.
February 17, 1948.
Power & Light
Commercial Solvents
J. B. McGEE
Treasurer.
Corporation
DIVIDEND
ARKANSAS WESTERN
half cents
Common Stock
Board
of
Gas
Directors
of
(371/s$
stock
common
The
thirty-seven and
per
day been declared
Dividend Notice
Western
payable
Arkansas
Company has declared
holders of
March
15,
common
1948.
stock
Checks
will
of
be
from the First National Bank of
on or about March
31, 1948.
NOTICE
NOTICE
'
a dividend of
/ GAS COMPANY
its
a
on
this
March
on
March 3,
to¬
Corporation,
31,
stockholders of record
business
share has-
1948,
at the
to
close,of
1948.
A. R.
-
i'a-
f
■«
declared
a
share
the
a
on
dividend
Preferred
$7
•
*•
$1.50
UNITED CAS
per
Preferred Stock and
$6
Stock
of
this
on
SHREVEPORT.
the
holders of record
March 10,
at
the close of busi¬
Dividend Notice
1948.
H.
F.
February 25, 194S
The Board
Sanders,
declared
Treasurer.
(25f)
February 25, 1948.
Chicago
LOUISIANA
Corpora-
tion, payable April 1, 1948, to stock'
ness
Secretary.
of
dividend of $1.75 per share
BERGEN,
record
mailed
'•
:
The Board of Directors has this day
the outstanding
on
of
\
one-
a
per
of
Directors has this date
dividend of twenty-five cents
share
on
the Common Stock
of
the Corporation, payable
April 1,
1948, to stockholders of record at the
L. L. BAXTER, President
close of business
on
March
RAIL-
10, 1948,
J. H. Miracle,
February 25, 1948
ROAD COMPANY
;
dividend
a
March
N.
this
HACKNEY, Treasurer
quarterly dividend of twenty cents (20c)
per share,
payable March 31, 1948, to
VALLEY
check
dend of
5, 1948.
compensation to start.
MIDLAND
States
meeting held
a
(ll/4%)
the
of
the Company, payable
by
1948, to stockholders of record
as
of the
of business February 20,
1948,
for
the
quarter
ending February 29,
1948.
Preferred
regular quarterly dividends of $1.12
a
the outstanding Preferred Stock—$4.50 Series
Corporation
220, Commercial & Fi¬
FINANCIAL
cent
per
DIVIDEND No. 53
more
nancial
Chronicle,
25 , Park
Place, New York 8, N. Y.
one-quarter
POWER
Northern
19*8.
Electric
accomplish¬
important than amount of im¬
mediate
and
of
Wilmington, Delaware: February 16, 194S
The
to
of
Opportunity;
of
Company (Wisconsin), at
February 17, 1948, declared
on
one
& Company
the
with
man
taking full
charge or installing trading de¬
partment, building dealer busi¬
ness,
at
W.C.KING, Secretary
by well-known trader
dealer
ment.
stockholders of record
STATES
(WISCONSIN)
Directors
Treasurer.
the Common Stock of the
on
Company, payable March 20, 1948,
of
payment
SIMPSON,
($1.50)
common
NORTHERN
of
TEXAS GULF SULPHUR COMPANY
1, 1948.
ROGER
OF
Board
NOTICES
Power
E. I. du Pont de Nemours
as
'/ffl
DIVIDEND
PAODUCTl
The Board of Directors declared
Broadway, New York
of
The
on
JACK, Secretary and Treasurer.
Allied Chemical fit
Dye
York,
$35,000,-
Y.
pay¬
to stockholders of record
31,
busi¬
W 226,
Chronicle, 25 Park Place, New
WANTED
York
the
OFFICE
COMPANY
121
DIVIDEND
on
be
not
cash
J OH MS-MAN VIILC
N. Y.
SITUATION
New
will
Co.
dividend.
New
February 20, 1948.
distribution of twenty-five cents (25c)
a
share
and
a
special
cash
distribution
of
fifty
cents
(50c)
a
share
have
today
been
declared by Kennecott Copper
Corporation,
A
1948.
W.
personality,
Salary plus
Box
on
April
the
Opportunity and cooperation.
strict
Broadway,
DIVIDENDS
share
per
Light
&
February
••.
$1.50
($6)
the
on
Power
''.■.
Live Unlisted House has opening
of
Stock
share
<
With Street Clientele
*
dividend
NO.
Company
J.
KENNECOTT COPPER CORPORATION
120
PREFERRED STOCK
A
v,
COMPANY
Gas
DIVIDEND
has been
declared
payable
at
the Treasurer's Office, No. 165
Broadway, New
York
6, N. Y. on Monday, March 22,
1948,
to stockholders of record at three o'clock P. M.
on
Monday, March 1, 1948.
The stock transfer
this
&
Natural
25-year bonds and $12,000,000 15-year debentures in
future. Probable bidders include Blyth &.Co. Inc.
and Kidder, Peabody & Co.
(jointly); Halsey, Stuart &
Co. Inc.; The First Boston Corp.
QUARTERLY
($1.00) per share
books
POWER
bids for the
open
000
a
this
will
near
DIVIDEND
Company declared a quarterly dividend of ondollar ($1.00) per share on the
common
stock
payable April 15, 1948, to all holders of record
at the close of business on March
15, 1948.
HERVEY J. OSBORN, Secretary.
AMERICAN
Southern
SOUTHERN PACIFIC COMPANY
1
,
Ohio
Feb. 10 reported company contemplates sale of
ten
COMPANY
The
Probable
$200,000,000-Veterans' Bonus bonds due 1949-1963.
DIVIDEND NOTICES
a
$12,600,000
(3/16)
State of
INTERNATIONAL HARVESTER
Y.
capital stock
lv
1948,
to
of business
April
the
N.
CENTS
1948.
the Company
each
the
16
DIVIDEND NOTICES
INTERNATIONAL SALT COMPANY
.
:
A
but
listed
;
for
•
shares held.
The record date-for the
common stock
subscription rights
is expected to be on or
about March-30.
Part of pro¬
ceeds from the sale will be used
to repay short-term bank
(3/9)
Partnership
Opportunity Available
share
new
Ohio, State of
sale of
on
ratio
not
his office
Florida
the
shares
underwriter.
New
•
plans issue of preferred and
Kuhn, Loeb & Co. as underwriters.
of
manager
The
On March
18 rumored company
'Class A with
be
York, State of (3/2)
Comptroller of the State of New York will sell at
at Albany, N. Y., March
2, at 11 a.m. (EST),
$300,000,000 War Bonus (serial) bonds due 1949-1958.
issuable
underwriters
Number
will
Peabody &
Co.; Kuhn, Loeb & Co., and Blyth & Co., Inc.
(jointly).
Power Corp. /
directors approved a
financing program calling
a series of
40,000 preferred and 110,000
common
shares.
The new preferred is to be sold to
,
plans to offer stock for
Stuart & Co. Inc.; Salomon Bros. &
Hutzler; Harriman Ripley & Co., and Lehman Brothers
(jointly); The First Boston Corp.; Kidder,
for
Botany Worsted Mills
Co.
Halsey,
Feb. 19
Prospective Offerings
&
•
issue of
preferred stock (par $100),
Proceeds for corporate purposes.
it
stockholders.
Allen
New York Central RR.
Feb. 24 reported
company plans sale of about
equipment trust certificates early in March.
Ry.
of
by
/
announced
company
subscription
•
stockholders will vote
19
announced.
Brewing Co.
shares
Co.;
Kaiser-Frazer Corp.
Feb.
company
Columbia
in market at early
financing. Probable bidders: Mor¬
Halsey, Stuart & Co. Inc.; Glore,
new
Stanley &
Forgan & Co.
applied to ICC for authority to issue
equipment trust certificates.
Probable bid¬
ders: Halsey, Stuart & Co.
Inc.; Salomon Bros. & Hutz¬
ler; Harris, Hall & Co. (inc.).
4*/2%
some
gan
plans
company
Illinois Bell Telephone Co.
24 reported
company may be
date with
$1,800,000
Underwriter—Bonds awarded to Halsey,
Stuart & Co. Inc. on Feb. 25 on bid of 102.01 for 3Vs %
coupon.
reported
Chicago, Indianapolis & Louisville
Feb.
preferred stock.
fered
24
•
30-year
Series B, and 30,000 shares
•
Feb.
Hutzler; Harris, Hall & Co. (Inc.); The First Boston
Corp.; Harriman, Ripley & Co.; Kidder, Peabody & Co.;
Blyth & Co., Inc.; Kuhn, Loeb & Co.
ceeds—Plant additions and purchase of securities and as,
underwriters.
issuance of $7,260,000
15-year equipment trust certificates, series E.
Probable
bidders:
Halsey, Stuart & Co. Inc.; Salomon Bros. &
eight shares held. Rights will ex¬
before April 30. Price—$12 per share. Pro¬
or
Hotelevision, Inc.
24 reported
registration expected at early date of
160,000 class A shares, with
Cantor, Fitzgerald & Co. as
Feb.
Chicago Burlington & Quincy RR.
Feb.
one new share for each
,
•
(EST) March
Inc., and Lehman Brothers (jointly); Harris, Hall & Co.
(Inc.); The First Boston Corp.; R. L. Day & Co.
25 filed
for
rent year.
(3/11)
equipment trust
certificates maturing annually from March
15, 1949 to
March 15, 1958. Probable bidders:
Halsey, Stuart & Co.
Inc.; Salomon Bros. & Hutzler; Harriman, Ripley & Co.
*
39
construction. The balance, together
with corporate
funds, will be applied to financing the
$6,000,000 construction program scheduled for the cur¬
.
Chesapeake & Ohio Ry.
The company will receive bids
up to noon
11 for the sale of $4,750,000 of serial
with details to be filed by amendment. Proceeds—To be
applied toward the payment of $4,000,000 of bank loans
construction
'
(935)
loans incurred
Probable
bidding. Probable Bidders—Halsey, Stuart
(bonds only); W. C. Langley & Co. and The
toward
CHRONICLE
1, 1968, will be received up to'noon
(EST) March 9 at Room 2117, 165 Broadway, New York.
bidders: Kuhn, Loeb &
Co.; Halsey, Stuart &
par)
under
(jointly); Lehman Brothers; Kidder,
Peabody & Co.; Smith Barney & Co. (preferred only).
Common stock will be offered under a subscription
plan,
and
FINANCIAL
series B„ due Feb.
First Boston Corp.
-
&
Secretary
Interest Payable April 1, 1948 and October 1, 1948
i
;
;
ADJUSTMENT
MORTGAGE
"B"
\
:
'■
on
SERIES
BONDS
SOUTHERN
"A"
The
AND
•.•-*;
*
■
.
"•
The
Board
determined
i year
'
the
and
,
i
;
Philadelphia, Pa. <
February 19, 1948
Directors
have
ascertained,
declared from earnings of the
December 31, 1947, 4% interest on
Adjustment
Mortgage Series
"A"
Bonds
2% interest on. the Adjustment Mortgage
"B"
Bonds,
2%
payable
April
1,
coupons
surrendered:
Series
"A" Bonds—Coupon No. 9—April
1948—$20. on $1,000. and $10. on
$500.
Bonds; Coupon No. 10—October
i, 1948—$20. on $1,000;. and $10. on
1,
$500.
I
•
Series
Bonds.
"B" Bonds—Couoon No.
1, 1948—$20.
$500. Bonds.
on
IVAN
$1,000.
C.
SECRETARY
CALIFORNIA
EDISON
COMPANY
FUNDAMENTAL
Cor¬
31, 1948,
The
of
share and
(15c)
per
privilege
(without
payable
record
of
Board
Directors
twenty-five
an
extra
par
March
15,
1,
L.
February
17,
tax,
value)
March
record
declared
(25c)
ness
a
per cent
the capital stock
of
the
to
share
on
its
at
stockholders of
the
close
of
busi¬
March 10, 1948.
Secretary
/
February 19, 1948
Corporation,
stockholders
to
Baltimore 3, Md.
Wisconsin
on
1948
per
M. C. Roop,
per
dividend of fifteen cents
share, less 2.75
dividend
has
cents
quar¬
capital stock, payable March
84th DIVIDEND
9—April
and $10.r on
FLITCRAFT.
($.25)
cents
CORPORATION
dividend
a
terly dividend of Twenty-five
BRICCS & STRATTON
1948
On
and
after
the
interest
payment
dates
given, the Fidelity-Philadelphia Trust Company,
Philadelphia,
Pa.,
will
pay
the
following
for
of
Preferred
payable October 1, 1948 on the Adjustment Mortgage Series "A" Bonds, and
payable April 1, 1948 on the Adjustment Mort¬
gage Series "B" Bonds, as provided in Section
4
of the Supplemental Indenture dated Apri.
1, 1943.
"
Directors
poration has declared
2%
amounts
of
The Davison Chemical
of
ended
Series
and
and
Board
'
-
G.
INVESTORS
thorized the payment
of the fol¬
lowing quarterly dividends:
yiyi cents per share on Orig¬
inal Preferred Stock, payable
March 31, 1948, to stockhold¬
ers of record on March
5, 1948.
27 cents per share on Cumu¬
lative Preferred Stock, 4.32%
Series, payable on March 31,
The
Directors
THE
DAVISON
CHEMICAL CORPORATION
of
Fundamental
vestors, Inc. have declared
dividend of
on
the
$.14
per
o
In-
r
quarterly
f
share—payable I'
Corporation's
capital
stock
March 15, 1948, to holders of record
at
the
close
of
business
on
March
.
1, 1948.
1948, to stockholders of record
on
March 5, 1948.
HUGH W, LONG
o. v. SHOWERS
REGNER, Secretary
IH c•
au¬
of
1948.
1948
Dividends
The Board of Directors has
A CO* INCORPORATE©
Secretary
1
•inc-
February 20, 1948
TREASURER.
48
WALL
STREET,
NEW YORK
5,
N. Y.
40
THE COMMERCIAL
(936)
CHRONICLE
FINANCIAL
&
Thursday, February 26, 1948
on
•
•
nominal
The
BUSINESS BUZZ
•
this
of
,
•come
they
say,
is
trapped.
The
suddenness
with
which almost everybody has come
to assume that the President is.
to be whipped, is a little'
breath taking. It all started with
the Bronx by-election. Then all of
a sudden it occurred to everybody
going
whatever
that
Palestine
happens
question,
the
on
Mr.
Truman
gets it in the political neck. And
a
sudden, too, the southern
Democratic revolt is finally rec¬
of
ognized for what it is—something
menacing to the President's re¬
election.
' >
■
It
is
*
*
*
\
asserted
being
the
that
shows that
Mr. Truman can't forget about
by-election
Bronx
follow
Palestine. He has got to
climbed
want
would
it,
required
it were,
as
at
011
would
the turn-about.
reasonable saga¬
city has been found who ex¬
pects Mr. Truman to drop the
civil rights issue. If he dropped
the dotted line. And they
and
cities
of
southerners
the
it,
required
York of
advocates of
flation.
all
who
those
are
power
get
Truman's opponent.
it
not exist unless
will
said,
is
if it is enforced,
And
enforced.
American
boys will
receiving
end
at
murders
-and
in
the
on
assorted
of
murders
bushes*
be
am¬
night,
the
high
noon
from both Arab and Jewish ex-
s
'
This will
tremists in Palestine.
4
popularity for the
not make for
President who sends the troops
there.
;
,
.
It is beside the
point that most
Republican
aspirants
Presidency are playing
the
York
New
man.' These
President.
vote
boys
None
as
Mr.
to
have
the
it is
follow.
be done
Whatever partition of Palestine is
as an international issue — what¬
induced
it
ever
will
do to this country's
may
'
y
could
things
Many
happen.
Many things will happen, before
Let's
then.
that Harry
suppose
the
stall
to
decides
Palestine settlement. This could
if the
to
another
around
hang
say>
months.
for
Brit¬
"never!"
But
position
in relation to Russia —
killing of American troops
after
the
British pound are likely to take
will
be
hot
a
domestic
issue.
At
all,
Attlee
Mr.
buffeting
some
Truman. Then Russia
is
cide
the
head
much shaking of
poor Harry's
un¬
over
that
estate
boys
is
There
the
kind
same
of
"damned if you do, damned if you
outlook
don't"
the
on
southern
*"; v.,'
•
s|!
■
S):
be
way
the
to
Mr.
southern
climb
Truman
Then
completely
"civil rights"
program
off
his
designed
to catch the colored vote in the
populous
northern
states.
It
The
in
the
military
foreign-made
to play
What
the
grab.
Harry would have
■
could
would
revolt
confusion
can't
•••;
One
end
might de¬
But it just might happen.
now.
gency
.'V/
Mr.
for
it won't happen, that
and
won't fight
say
Russia
siderable
revolt.
V
the
U. S. A. looked ripe for a good
real
happy choice.
the
and
but
least that is what everybody here
saying, with
Bronx
commodity
together
politicos
'■
price
be that the
not so impor¬
was
and
fall—taken
indicate is
going to
and
that the
have to
Indiana Gas & Chemical
H. & B. Amer. Mach.
;
against swivel-chairs. '
Let's get away from
our
desks
Pitts. Steel
Pfd. &
and
out
St., Philadelphia 9, Pa.
Clear thru—Montgomery, Scott & Co.
New
it
was
legal
reserve
for married
only
male employees. A source
may
HG of
L had better slip off the shelves,
even
if the steel price rise did
give a little fillip.
•
•
^
•
-
}•
;
•
J -'S.•
one
headline issues will be small. The
to
with
a
headline
the tax
issues
foreign
are
aid,
In
of
the
is
up
time to say
worse
the
standpoint
than
is
pregnant
married,
Securities
of
author
the
.
,
;
grave" idea of the British.
"
"7"
:|s
ff
*
ing trick of earmarking $3 billion
of
the
current year's Treasury
surplus for next year's foreign aid
expenditures, many of the boys
pregnancy and confinement. Gov¬
ernment employees already have
gem may
.
26
days annual leave with pay.
They also haVe 15 days sick leave
with pay. Most of them use their
figured
on
leave
is
the basis of only five
per
week, excluding
days of paid leave,
woman,
draw
a
a
a
total of
year's
101
government
counting holidays,
salary
,
months of work.
for
hopes
got their
M. S.Wien&Co.
target.
This
ESTABLISHED
Members
40
N.
Y. Security
1919
Dealers Ass'n
H.A. 2-8780
Exchange PI., N. Y. 5
Teletype N. Y. 1-1397
$4 bil¬
agreed as the final
bookkeeping strate-
lion generally
raise the amount of the
Trading Markets:
Ralston Steel Car
prospective tax reduction from $4
billion to $4.5 or $4,750
billion
not more—and even by
this little
bit
if
only
$2
with
billion.
more.
tax
a
sure-fire
reduction
Don't count
The strategem was
—
looks
everything
hunky-dory for.
plus
sur¬
Oregon Portland Cement
Riverside Cement A & B
Spokane Portland Cement
of over
on
much
designed
LERNER & CO.
Investment
could
almost
seven
actment
veto.
entirely
of
the
to guarantee
en¬
tax
the
;
cut
y
over
10 Post Office
Securities
Square, Boston 9, Mass.
Telephone Hubbard
Teletype BS 69
1990
/•»'.
Teletype—NY 1-971
Firm Trading
Markets
FOREIGN SECURITIES
/
New Issues
for a larger
up
tax reduction bill than the
HAnover 2-0050
Common
Domestic & Foreign
North Dakota
this
proposal
politics, a number
getting a ride.
One of these provides 60 addi¬
tional days of leave with pay to
any "married female employee"
of
the
Federal
government for
of proposals are
Government
Rails
Following the clever bookkeep¬
Washington's "silly season"
leave.
Old Reorganization
which, within its sphere, would
provide for a slightly longer range
of social security than the "cradle
cut, and the budget.
of pre-election
sick
pegged indefinitely.
from
testified,
Senator Langer of
fresh line, it is
that what Con¬
gress does between now and ad¬
journment on
all but the big
comes
be
employee.
period ahead
of re-appraisal. And
unless the Truman Administration
now
ury-FR Board, why rates should
subcom¬
Labor
economic
the
that
-S •'
,■
but it wants to know from Treas-
be extended to unmarried
was
pegged
Congress is not yet
ready to act to remove the pegs,
female employees. Their plight,
it
of
question
fe¬
would be. In any case the
Senate
the
will give the
thorough going
close
mittee indicated that the benefit
to
the
on
a
Empire Steel Corp.
Susquehanna Mills
All Issues
contacting!
Herbert H. Blizzard & Co.
123 South Broad
Foundry
At
annum.
constituency. It may be that for¬
eign aid is not the hot stuff the
thought it
South Shore Oil & Dev.
"There-ought-to-be-a-law"
per
preg¬
one
bill would provide
the
boon
to
Truman Administration
the
all
leave
present
this
limited
be
nancy
may
holidays. So with
revolt
DOWN WITH
:
would
Board
interest rates,
This privilege, under the bill,
y
in this particular Bronx
even
working days
by-election
are
emer¬
jj)
southern
—
make a
political
con¬
with.
ft ■ '
ff
the
a
SWIVEL RIGHTS
:
Palestine issue
tant
to
their
British could be
several
here
ishers
of
merchandise. It
must be
November.
before
time
Truman
that
$
!]!
counting Truman out,
good idea to realize it is
a
long
valuation
So the immediate
.
$
Before
he has the biggest seat in the Exchange!"
say
appraisers
some
fresh
J#
program.
tion, Will be the gentleman whom
the country will hold responsible
mess
hire
by
plastering them with blame for
the high cost of living. Then, too,
the
Republicans
were
just
so
dumb they probably never would
catch on in time that the country
was 85% behind Truman's foreign
a
the
over
"They
it.
8-ball
the
behind
licans
home,
go
time
same
Reserve
,
unhappy
job
of
ordering
the
troops to move. Whoever is Presi¬
dent,
should the U. S. follow
through with its backing of parti¬
for
for
gone
the
at
smart
The
Congress was Republican, and the
Congress would reject the Truman
program. So Truman really was
pretty clever. He put the Repub¬
yet
has
pretty
a
that no Congress —
or Republican—would
point
dared
Tru¬
not
them
was
Democratic
for
the
aid
as hard for
are
of
the
Harry
and
mad
proposal is put forward, Congress
boy. He proposed an overall antiinflation program. It was beside
the other hand, partition,
On
that
a
to regulate bank holding
When the boosted
only
was
who
proposal, and also for
predicted by hi? friends.
a * couple of months
quite different. The boys
knew it all then were saying
current
ago
backing
Administration
get
companies, then Mr. Eccles will
all, the appraisal
And in a close elec¬
tion that might mean that New
York
State would
go
to' Mr.
partition.
in¬
bill granting the Reserve Board
One
After
combat
to
.
for this
down.
reserves.
Should Marriner S. Eccles fail
to
neck.
all
Within these
permit,
could
permit, lower
advisable
deemed
Washington chatter about whose
chances are all up and whose are
the heavy vote in New
reserve
granted, this authority would
used gradually, in steps of a
couple
of
percent
a
time,
if
Mr.
settlement,
then Henry Wallace will gather
partition
central
26%).
30%
20%)
be
gathers the impression that
there is too much volatility to the
the
at
(versus
If
it in the political
Truman gets
present),
reserves.
the Board
maxima
are
another,
or
way
25% be
"country" banks
at
(versus
and would
of Mr. Truman.
re-election
one
re¬
to
up
proposal would provide maximum
ahead with their rebel¬
lion against the national Demo¬
cratic
leadership
and
against
So
place
secondary
cities
35%
Joint
In
This has to be OK'd by Mr. Mc¬
going
the
the
Cabe—also by the Treasury. This
it, he would be sure to lose the
colored vote. But if he doesn't
drop
14%
reserve
want to quote
Nobody
for
(versus
to
support partition. If he doesn't
provide the force needed to en¬
force
reserves
southerners
The
off.
had
he
know
southerners
legal
program
new
a
be proposed that
will
it
serve,
the
let
to
Truman
Mr.
for
enough, however,
not be
will
before
of the abandoned
would
Re¬
Board
Committee.
Economic
troops
furnish
and
throiigh
with
up
with
Federal
the
month
next
^
the
of
Board,
serve
O.K.
is
McCabe, Chairman-
B.
designate
could tune in on a little of the conversation at luncheon
tables and in the galleries of Congress these days, you would learn
that they have got poor old Harry's political goose. He's a goner. He
can't be re-elected. A Republican is sure to get the Presidency this
If you
Truman,
the banking
"
it
case
Thomas
Harry
and
system.
In
faH.
to
to
maintain pressure on
And You
-
from the Nation's Capital
cautiously
debt
year
bank-held
reduce
A
of
$3 billion of 1948 fiscal sur¬
plus in no way affects the credit
control picture. The government
will still use the large cash sur¬
plus
Behind the-Scene Interpretations
aside
setting
this
York &
Philadelphia
CARL MARKS & CO. INC.
LEWIS & STOEHR
FOREIGN SECURITIES
Incorporated
QDFPT R T
Established 1926
80 Broad St.
New York 4
Telephone: DIgby 4-0985-6-7-8
50 Broad Street
,
Hill, Thompson & Co., Inc.
Markets
New York 4, N. Y.
AFFILIATE: CARL MARKS & CO. Inc. CHICAGO
and Situations
120 Broadway,
Tel. REctor 2-2020
for Dealers
New York 5
Tele. NY 1-2660
@FedFRASER