Full text of Commercial and Financial Chronicle : November 27, 1947, Vol. 166, No. 4650

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

nov 2 81947;
>\*

ESTABLISHED 1S39

Volume 166

Is

Number 4650

New

Capitalism the

Forces

Cause of Wais?
A

Reply

Professor of Finance and

Vishinsky's
Charges
Mr.

sky's charges that American

cap¬

italism provokes or wants

war.

iest loser in World Wars I and
and

is

businessmen

asserts

prefer

inflationary and defla¬

less

some

distorted, and fall in farm product prices

nations' economic problems

Mr. Andrei Y.

Vishinsky,

Congress

Truman's

European aid and price inflation makes
interesting readHe properly describes
ing.
price inflation as an ominous threat to
American prosperity.
He asks for broad measures and powers to
^
prevent prices 4
on

,

Dep¬

from
r

!
v

pro¬

war

scarce

like grain,

steel,
and
transportation

alism. For this
v
and
other
vituperative assertions, the excited
representative of totalitarian gov¬

has

not

added

iota

an

legal abilities by
repeating this and other ill-man¬
nered and unfounded charges. Mr.

Vishinsky
time

have in mind the
some European
wars

may

when

instigated

were

agents
Greek

such

professional

by

the

Zakharian,

as

provocateur, who

to ration basic elements in cost of

living and in industry and au¬
thority to control wages where

on page

ings.
It is not my task to analyze the
character of this broad anti-infla¬
tion program.
I do wish to raise
two questions about it:

First, In view of its
date

poor record

in

dealing with
(Continued on page

23)

*An
the

address

American

ence,

Havana

to maintain price ceil¬

necessary

to

(Continued

au¬
con¬

trol prices and

al-

was

service,
thority to

Neil H. Jacoby

,,

reputed

goods

by

Dr.

ahead

*

>■

the

upon

per-

solu¬

to

"the Marshall Plan'"

as

the

months

longer term contributions usually referred
are

problems
the

of

United

:

from all appearances in a less

the

of

peace

of

or

While the

the

States. The

to center

ent.

,*.",,}'r

basic economic

more about domestic
prices than about
"rehabilitation." Despite all the calamitous
predictions as to what is likely to happen in the^ wbrld if we
do not act as a sort of
political and financial godfather to
most of
Europe, many politicians seem to sense that the
political dynamite in the situation is chiefly planted in the
domestic price sector.
Opposition to "interim relief" to
Europe in large amounts seems to be more or less non-exist¬
are

foreign relief

world

depends

upon

a

sound,,

strong

Amer-

ica;"-'

Conflicting
influences

are

at work in the

world
as

today,
have

they

been

for

Jesse P. Wolcott

VVV

cen-

turies past.

The basic difference
political
ideologies
springs
writings of Adam Smith

In

from the

Karl

and

Marx.

The

politically fortunate position, the opposition, one suspects,
grows largely out of an uneasy feeling in the breasts of
many
legislators that such an extensive program must inevitably
bring either extensive rationing and price controls or fur¬

Wolcott

before

Club

New

ther very

American

City, Nov. 20, 1947.

substantial increases in the
inflation,
likely of all, both of them.
32)

Jacoby

Finance

..v:>ftv5

early and

What To Do About Prices?
Apparently, the political controversies

sell

to

policies.1 •* '

*

'

•

odity

m

rationing of

-

'

«

As We See dt

on

fn

savings bonds,

country

with

speculation

other

subject of tonight's discussion is timely and exceedingly
important.
The prosperity, perhaps the
safety, of America, the
reconstruction of the devastated
countries, the stabilization of world
currencies and world
economies, are largely, if not wholly, dependent

tion' of

credit,

as

The

manent

of

drives

& mongering
and
imperi¬

his

duction and sound fiscal
.

well

as

be solved by hard work, higher pro-:

can

EDITORIAL

^exchanges,

ing and want¬
ing
war
be¬
sides charging
our

of

use

c o

voking,- caus¬

ernment

requirements, may be granted.
spending and concludes our own

in government

tne

on

prevention

Capital¬
of

rising

further—re¬
straint

accused Amer¬
ican

opening address to the Special Session of

:

uty Foreign
Minister, has
outspokenly

to

reserve

Few in Washington have

at

(Continued

Confer¬

cost of

living,

or, most

(Continued
:;:An

address
of

on page

30)

by Representative
The

York,

Economic

New

York

entirely forgotten what

on page

30)

Chicago, 111., Nov. 19, 1947.

State and

Municipal

Lithographing Go.

R. H. Johnson & Co.
Established

Bonds

1927

INVESTMENT SECURITIES

Hirsch & Co.

64 Wall

Street, New York 5

Members New York Stock Exchange
and other

Exchanges

BOSTON

25 Broad St., New York 4, N.Y.

Troy

HAnover

PHILADELPHIA

Baltimore

2-0600

Chicago
{

Teletype NT 1-210

*

Cleveland

London

Geneva (Representative)

Albany

Syracuse

Dallas

Pittsburgh

OF NEW YORK

Harrisburg

Scranton

Woonsocket

Bond

Dept. Teletype: NY 1-708

*ABC

of INDIA. LIMITED
to the Government in
Kenya Colony and Uganda

Head

Office:

26,

in

Colony

and

India, Burma, Ceylon, Kenya
and Aden and Zanzibar
«•*

any
Common

&

4% %

Paid-Up

Capital
Fund

Reserve

£4,000,000
£2.000,000

Bank

conducts

description
banking and' exchange business
every

.

Trusteeships and Executorships
.

also undertaken




on

,r

-

1899

Members New York Stock
Exchange

CLEVELAND

:

New York
Cincinnati

Chicago

Columbus

C

,

120

Denver

Toledo

HAnover 2-0980

Bond

1-395

Montreal

Toronto

Brokerage

Buffalo

NATIONAL BANK
OF

THE

CITY OF NEW YORK

Portland General
Electric

Company

Broadway, New York 5, N. Y.
Telephone:; REctor 2-8600

...

..

Bell

When Distributed

and Dealers

Analysis

upon

request

request

Reynolds & Co.

(Incorporated)
Established

of

Y.

Bell Teletype NY

for Banks, Brokers
Preferred

OTIS & CO.

£2,300,000
'

The

Conv.

Corporate Securities
*Prospectus

Subscribed Capital

WILLIAM ST., N.

New York

Common Stock

Distributors of Municipal

Bishopsgate,

THE CHASE

Security Dealers Assn.

*Robertshaw-Fnlton Controls

Underwriters and

London, E. C.
Branches

Vending Corp.
Common

;

New York
52

Wilkes-Barre

NATIONAL BANK
Banicerd

Bond Department

HART SMITH & CO.
Members

Buffalo

Williamsport Springfield

•

THE NATIONAL CITY BANK

Teletype: NY 1-635

-

controls, by raising
Advocates reduction

_

against this country,

ism

bank

/

So vie t

,

anchor world to enduring peace.
Attacks President's proposals
for economic controls, but admits further credit

President

of his asinine and base¬

tirades

\ %

Banking and Currency Committee, after review¬
ing "Battle of Ideologies,? asserts it should be our objective to
find golden mean between* extremes of
economic.. philosophies.1;;
Says prune problem is inflation, and stresses importance to world
of dollar stability.
Asserts only sound, solvent, safe America can

reduction in both business and
government spending. Sees infla¬
tionary danger in scale of exports and credit expansion.

II,

tionary adjustments.
In

>

Chairman of House

in wages

normal peacetime years to costly
postwar

U. S. Congressman from Michigan

as well as adjustments
and taxes and credit expansion is required. Holds moder¬
ate recession from
present boom conditions would be helpful in
1948, and urges high taxes and budget surplus as well as

U. S. has been heav¬

out

Copy

By HON. JESSE P. WOLCOTT*

Vice-President, University of Chicago

istration's failure to apply concerted efforts to stabilize
prices, par¬
ticularly in preventing inflationary wage increases and in maintain¬
ing high levels of Federal spending. Says present price structure

Vishin-

a

Our Basic Economic Problems

Commenting on President Truman's proposals to combat inflation,
Dr. Jacoby points out such measures come too
late. Scores Admin¬

By ALEXANDER WILSON

Points

Shaping Business Outlook

Price 30 Cents

By NEIL H. JACOBY*

to Mr.

Mr. Wilson refutes

York, N. Y., Thursday, November 27, 1947

Hardy & Co.
Members New York Stock Exchange
Members New York Curb

Exchange

30 Broad St.
Tel. DIgby 4-7800

New York 4
Tele. NY 1-733

IRA HAUPT & CO.
Members
and

111

New- YorknStock

other

REctor 2-3100
Boston

Exchange

Principal Exchanges

Broadway, N. Y. 6
Teletype NY 1-2708

Telephone:

Enterprise 1820

2

COMMERCIAL

THE

(2158)

CHRONICLE

FINANCIAL

&

Thursday,' November 27, 1947
—.i

,-v

Administration Anti-Inflation Program

Phillips Petroleum Co.
Stock

Common

i

Alabama &

By JOHN W. SNYDER*

&

Secretary of the Treasury

Rights*

AT NET PRICES
Prospectus on request

tries in order to assure that

Corporation

their continued

New York

participation
b

Teletype NY 1-583

e c

ti

our

n g

economy

tion.

things
essential

are

if

wish t6

we

maintain

Bag

world envi¬

a

ronment

Vanderhoef & Robinson
Exchange

Members New York Curb

can

7-4070

Telephone COrtlandt

Teletype NY 1-1548

continue

fall

short

ip

freedom

and

The

of

develop. If we
goal in foreign
aid, our own freedom could be
threatened
by
external
forces;
our

Commcn

and,

meas¬

representatives of the Ad¬

Request

on

Monetary Anti-Inflationary

of

York Stock

York

•

The

President

has

consideration

that

Hudson Hotel

enry

.

'

Com. & Pfd.

t

owe

Scale,

Com. & pfd.

Holding

uron

suggested
given tc

be

the following monetary measures

that

consumer

be

credit control?

restored;

Stock Exchange

Members Baltimore

.120 Broadway, N. Y. 5
WOrth 2-4230

bank credit; (3) legisla¬
provided to preveni
excessive speculation on the com¬

Hell

measures

1-1227

Teletype NY

when

related

modity exchanges; (4) intensifie:
activity in the sale of savings
bonds.
The

last

those

of

item

(Continued

to

the

is

only one
which comes

suggested

Central States Elec. (Va.)

42)

on page

Stock

Common

Hotel Waldorf Astoria

Reiter Foster Oil

Program of Tighter Credit Controls

Exchange

Curb Exchange

120 BROADWAY,

branch offices

our

Detroit int'l Bridge

Members

New

to

arrison Rye Realty

leaders, farmers, and consumers
to hold prices down.
Intensified
efforts will be continued to obtaip
voluntary restraint. Certain pov/ers are necessary, however, to for¬
tify the voluntary efforts.

fljcpONNELL&rO.
New

wires

Direct

tion should be

are

taken

be

eco¬

l

Ala.

con¬

tionary

Measures

can

C., Nov. 25, 1947.

is

(2) some re¬
straint should be placed on infla¬

D.

Prospectus

House

he

has laid special
voluntary actions or
businessmen, labor

on

part

(1)

Secretary Snyder
Banking and
Currency Committee, Washington,
the

the

should

which may be taken

-Statement by

whole

and

NY 1-1557

*

President

emphasis

discuss items two and three.

in the mone¬
of course but a seg¬
ment of the whole program, and
could not, by any means, solve the
problem alone. But such steps as

before

HAnover 2-0700

New Orleans, La.-Birmingham.

ly concerned.

ministration have been invited to

Anti-inflationary

greatly dis¬
price inflation,

our

Sport Exttoatiw

St., New YorK 4, h. Y,

vinced that the Congress is equal¬

to channel scarce goods

tary field

Bought—»Sold—Quoted

structure,

that I will give attention, as

other

Members i/etbYork

25 Broad

is

threatens

nomic

three

It is to the first of these

ures

by the danger of eco¬
collapse at home. We must

avoid both dangers.

which

for the control
to.re¬
pressures;
two,

monetary

threatened
nomic

ThePresident

measures

one,

Steiner. Rouse & Co;

course

helpful in the overall solution.

turbed in regard to

three, measures to deal directly
with specific high prices.

and, if we fall short of our goal
in controlling inflation, we will be

American Water Works

be

measures

inflation;

measures

.

to

of

!

necessary

—

those in other fields will of

The

and Agriculture.
President
outlined

merce

into the most essential uses;

which peace

John W. Snyder

York 5

appear

this morning on one
phase of the anti-inflation pro¬
gram. As you know, testimony in
support of the emergency pro¬
gram for European assistance has
been presented by representatives
of the Departments of State, Com¬

lieve

and

ronment

to

you

types of

a

national envi¬

Common

Bell System

i

these

Class "A"

SI Nassau Street, New

of

of

Both

Savoy Plaza

to

infla¬

further

3/6s, 1956

Cliase

strain

the

Savoy Plaza

before

sub,-

invited

been

It is equally

—:

—

have

I

extended

e

without

j

free nations in the world economy.

as

aid «>

this

that

5
,

BArclay 7-5660

!

Bought—Sold—Quoted

importance that we extend early aid to the Western European coun¬
people will not go hungry and cold this winter and to assure

It is of the utmost

New York Hanseatic
Broadway,

Louisiana Securities

sell government bonds to public; and (3) sizable reduction
in government debt.
Opposes tax reductions at this time and favors re-enaction of price controls. Says
higher interest rates have brought better balances between short and long-term Treasury obligations.
installment buying; (2) a new drive to

on

BOUGHT—SOLD—QUOTED

120

advocates: (1) restoration of controls

Secretary Snyder, supporting President's anti-inflation program,

♦Expire close of business Dec. 3rd.

By MARRINER S. ECCLES*

NEW YORK 5

Tel. REctor, 2-7815

Frank C. Masterson & Co.

Chairman, Board of Governors of Federal Reserve System

Established 1923

Asserting correction of inflationary forces is overdue, Chairman Eccles says physical volume of produc¬

keeping up with growing demands. Lays source of inflation to war financing and postwar
credit expansion and holds as practical matter "we cannot put back elaborate harness of wartime con¬
trols."
Says main reliance now is on fiscal policy and debt reduction, and calls for more authority by
Reserve Board to restrict credit, particularly in matter of fixing bank reserves.
tion is not

QctualTHatkeU Qn
Taylor Wharton Iron &
U. S. Finishing com. &

Steel
pfd.

Electric Bd. & Share Stubs
& Film "A"
Transmission
Hooker
Electrochemical
Title Guaranty & Trust
Northern
New England

Gen'l Aniline

East

Texas

United

Piece

United
Bates

me

very

J

is

.
.

to testify, I take it, as to what might be done in the monetary

more

Laboratories

this

Manufacturing

se¬

be

Commit¬

tee

recognizes

Aetna Standard Eng.

that

Punta Alegre Sugar

many

a^

great
factors

forces

Federal Liq. Corp.

and

Utah Southern Oil

can have only a
mental influence in any

policy

e'tpnie-

credit

action

Warner & Swasey

the
ary

problem

is

concerned,

it

is

Similarly, current national

Definition of Inflation

demand

S.

Eccles

IntT Detrola
this

St., N. Y. 5
Hanover 2-4850
Bell Teletypes—NY 1-1126 & 1127

and

businesses,

to¬

tion of preventing it, but of mod¬

individuals

erating

gether with State and local gov¬
ernments, as well as the Federal
Government, generally have

mate

At

possible its ulti¬

so far as

ravages.

best,

monetary

credit

and

statement

011

the

Economic

lion

by

Chairman

Report,

Wash¬

ington, D. C., Nov. 25, 1947.

a

New
New
New

York

"Stork
York

Commodity
Chicago

Exchange

Curb

Exchange

Cotton

Exchange

Exchange,

Board

of

Inc.
Trade

Abitibi Row. &

Paper

Brown Co.

and for

And other

Canadian

Exchanges

N. Y. Cotton Exchange Bldg.
NEW

YORK

4, N. Y.

t: V.

.

DETROIT

PITTSBURGH

GENEVA. SWITZERLAND




Telephone BArclay 7-0100

Crane & Hoist
29

60^ dividend November

payable December 10

Troster, Currie & Summers

38)

Light

t '•

Members
New

York

i u

Security Dealers Ass'n

'

Teletype—NY 1-376-377-378

Raytheon Manufacturing Co.
$2.40

Conv. Preferred
■;'* H"
•

1

.

Solar Aircraft

Southern Production

90c

Conv.

Preferred!'

♦Twin Coach
$1.25

K

■'

Company i'
-

Company

[

Conv. Preferred

Common

♦Universal Winding Company
Bought—Sold—Quoted

00c

Conv. Preferred & Common
•Prospectus on request

J-G-White 6 Company
.

N.Y.i

•

'

*

37 WALL

;

Teletype NY 1-672
t

on page

are

Securities

NEW YORK 6,

Teletype NY 1-1610

Shepard Niles

Company

Exchange and Other Principal Exchanges
,

New York 6

Broadway

Common

Department

115 BROADWAY

39

Digby 4-3122

bil¬
times

which

Atlanta Gas
for

Goodbody & Go.
Members N.Y. Stock

CHICAGO

British

York Curb Exchange
Stock Exchange

New

Chicago

housing, for short

stocks,

(Continued

United Kingdom 4 % '90

Department

2V2

about

foreign credits and grants.
loans to

listed

buy

posed of past savings, current in-

Securities

Members

notable exception is

Scophony, Ltd.

New Orleans Cotton Exchange

or

long-term business loans, for
and municipal expenditures,

and

The

purchasing power is com¬

year,

Gaumont-British

Noranda Mines

Mgr.

Asst.

Joseph McManus & Co.

or

all-time high level.

of all kinds, for

Rhodesian Selection

Minn. & Ont. Paper

$223

ily available supply of excessively
easy credit for consumers' goods

supply of goods and services. This
effective

an

about

liquid savings,

prior to the war. It is due to a
record high agricultural income,

state

We Maintain Active Markets, in U. S. FUNDS

Stock

such

high wages of organized labor and
other workers, but not all of them,
and unprecedented business prof¬
its. This is augmented by a read¬

H. Hentz & Co.
Members

of

KANE.

the total for 1940, the highest year

which they are trying to
spend, bidding for an insufficient
money

*A

1850

the overall sup¬

in

Eccles before the Joint Committee
Established

exceeds

the advanced stages of effective demand. We are witness¬
disease. It is no longer a ques¬ ing effective demand today when

ready

billion

MICHAEL HEANEY, Mgr.
WALTER

It is running at a rate of $200

It is the con¬

What is inflation?

is
Vlarriner

1946, individuals
held

businesses

income is at

Poten¬
simple,
or ply of goods and services.
single remedy. tial overall demand always ex¬
What is lacking is
We
are
al¬ ceeds supply.

e a s y,

end of

total.

U. S. Glass Co.

no

At the

confronted.

Kirby Lumber

Hood Chemical

Members N. Y. Security Dealers Assn.

sav¬

than three times the prewar

dition which exists when effective

37 Wall

The

more

and that there

[Wenae<mACompam}

future credit.

or

and

inflation¬

Newmarket Mfg.

Time, Inc.

come,

to make a correct diag¬
nosis of the multiple causes of the
situation with which we are now
necessary

contributed to

Fabrics

Securities

effective ings were largely accumulated
the inevitable treatment of either inflation or during the war years in the form
deflation. In considering what can of currency, bank deposits and
reaction.
be done so far as monetary and government securities.
I
am
sure
will

vere

Boston & Maine R.R.

Lea

Curb and Unlisted

postponed,<S>

the

31/£-47

HAnover 2-9470

Teletype NY 1-1140

inflationary forces, which have already gone so far as to cause
serious maladjustments within the economy.
Correction is overdue. The longer it

Theatre

Artists

Dumont

requested

NEW YORK. 5

WALL ST.

and credit field to deal with

Wks.

Dye

Boston Terminal

You have

York Curb Exchange

Members New
64

>

-

.

INCORPORATED

STREET 4

.

NEW YORK 5

ESTABLISHED 1890

Tel. HAnover 2-9300

Tele. NY 1-1815

>
.

I-

Reynolds & Co.
Members New
120

York Stock Exchange

Broadway, New York 5, N.
Telephone:
Bell

REctor 2-8600
NY 1-635

Teletype:

Y.

Volume

166

Number 4650

THE

COMMERCIAL

INDEX
Articles
Our Basic Economic

Forces
Is

and

News

Shaping Business Outlook—Neil H. Jacoby_______Cover

—Hon. Jphn W. Snyder.....

—John

Mr. Kugel contends that

2

H.

Kugel..;.
Cold?—James J. Quinn

or

6

Essential—Eugene Meyer

"Current Topics in Wall Street^Joacl^im Streseniann-_

__r

Depression in 1948?-^Raymond Rodgers-_____

Forgotton Production"—Henry J. Kaiser...

Probabilities of
The

bonds, does not

This

-V.

.

be

—Roswell

sion

i

16

m

t g a g e

and
purchase

f

corporate
bonds by in¬

John

H.

Kugel

43

surance
*i*

com¬

V

Secretary Harriman Urges Allocation of Steel

10

panies and savings banks produce
the same result.
When their in¬

Gordon Williams Joins Int'l Monetary

10

vestments

outside

securities

are

15

premiums

or

15

ceived,

Fund

August Ihlefeld Says Savings Are Inadequate to Finance

Industry
James E. Day Stresses Importance of Securities Markets

will
17

...

Supervisory Agencies Warn Banks
Precisely!

Credit Expansion..^.

on

mercial banks held 20,334

T9

eligible

Cover

16

Securities

Coming Events in the Investment Field
Recommendations.:

8

News—Carlisle Bargeron..

.*_

7

1

Abopt Banks and Bankers
Observations—A. Wilfred May
Our Reporter on Governments

5

Real

Estate

of

*

Corner

(Walter Whyte Says)

he

48

It

of

nand

38

You

Published

on

Twice

of the
Dominion

Weekly

Other

The

COMMERCIAL

Reg.

|

Patent

S.

Park Place,

25
! •,:

U.

Other
Bank
$25.00

Office

COMPANY, Publishers

New York 8, N. Y.

$25.00

per

per

Note—On
the

REctor 2-9570 to 9576

(.

and

Monthly

DANA

B.

Canada,

Countries,

and

FINANCIAL CHRONICLE

WILLIAM

of

HERBERT D. SEIBERT, Editor & Publisher

rate

$38.00

$42.00

year.

account

postage

of

the

extra.)

—
Monthly,
postage extra.)

fluctuations

in

of

exchange, remittances for for¬
eign subscriptions and advertisements must
be

made

in

New

York

D.

RIGGS,

Business

(ind

135

S.

La

Salle

St.,

Chicago 3, 111.
(Telephone: State 0613);
Drapers' Gardens, London, E. C., Eng¬
land, c/o Edwards & Smith.

Copyright 1947 by William B. Dana
Company
Reentered

25,

York,

increase

accordance

that
up

the

and with

it

But every

knows

¥2%, 1%

as

the de-

or

that

the

even

2%

or

manufacturer from

money which he
business venture he

starts

to

of commercial

J.K.Rice,Jr.&Co.
Established

Broadway

Bell System

rise

as

1942,

N.

Y.,

second-class matter

at

the

under

promising.

^ost is such a

Punta Alegre Sugar
Lea Fabrics

halt.

rates

is

Warren Brothers "C"

tightening supply.

inflations

have

been

Susquehanna Mills

stopped because the convertibility
of all types of money into gold
put

effective brake

an

ation of new money

the

on

cre¬

by credit. To¬

day, when government bonds are
convertible into money and money
is

convertible

not

into

brake, in its absolute
not

let

exist.
the

As

it

interest

is

gold,

this
does

sense,

DUNNES CO.
Members N. Y. Security Dealers
Assn,

25 Broad

impossible to

rate

011

govern¬

federal

obliged

to

rise, indefinitely,
Reserve
Bank
is

support

the

price

of

government bonds at some level.
On the other hand, the demand
for money does not abate with

M. H.

Subscriptions
Possessions.

in

United

Territories

and

Unipn, $35.0Q

money

The

interest
small fraction of the

Dangers of Increased R^tes
011

(3) The Treasury must be
ful

may

to

not

recall the experience
after the first World

BOUGHT

increase

the

are

of
the debt.
As
high
bonds mature they may
refunded
with
short-term

lower

QUOTED

CORPORATION
52 Wall St.

New York 5, N. Y.

which—absolutely—carries

paper

—

FIRST COLON?

charges

coupon

the

than

matur¬

Tel. HA 2-8080

Tele. NY 1-2425

ing bond although—relatively—it
yields

than previously out¬
short-term obligations.
Savings in the absolute carrying
charge may be used to increase
yields on refundings of short-term
paper
slightly.
But the overall
charge must not be increased as
more

standing

this

would

endanger the
deflationary

and the most

the

budget
Bought—Sold—Quoted

weapon

Treasury has:
Reduction
outstanding debt.

the

Hartford
Steam Boiler

of

,

(4)

Reduction

of

the

outstand¬

ing debt decreases the money sup¬
ply directly and immediately. A
mere increase in the interest rate,
which is not the result of
of

the

bill

decline

a

Members New York Stock Exchange
and

money

rate

supply, is

The

from

de¬

of

the

increase

%%

(Continued

not

to

more

on page

other leading

1 WALL ST.

exchanges

NEW YORK 5

Telephone DIgby 4-2S2S

than

22)

interested in offerings of

B. V. D. Corporation

Public National Bank

*Third

Mtge. fco.

Spencer Trask & Co.

Prudence Co.

Members New York Stock Exchange

Members

U.

S.
of

year;

in

& Trust Co.*

PREFERRED STOCKS

Lawyers Title & Guar. Co.

Febru¬

Members




SOLD

care¬

carrying

coupon

be

—

National Debt

flationary.

rate.

Lawyers Mortgage Co.

Newburger, Loeb & Co.

States,
per

lamston, Inc.

the rise of interest rates.

Bond & Mtge. Guar. Co.

post office at New
the Act of March

Subscription Rates

Pan-American

St., New York 4, N. Y.

WHitehall 3-0272—Teletype NY 1-956

securities

the

can

of doing
business that the
question of whether a business is
profitable or not is not decided by

We

CERTIFICATES

N. Y. Title &

0, 1.879.
•:.

Teletype N. Y. 1-714

Haytian Corporation

loans

sudden

a

interest

of

1908

Members N. Y. Security Dealers
Assn.
REctor 2-4500—120

slackens,

even

or

to

comes

Previous

con¬

oost

the

been

although the rate in

increase

Finishing Com. & Pfd.

TITLE COMPANY

I

ary

stop

interest rate will not deter

siders

U. S.

city news, etc.).
Offices:

.

goes

banker
of

a

have

Forging

Haile Mines

Manager

Every Thursday (general news and ad¬
vertising issue) and every Monday (com¬
plete statistical issue — market quotation
records, corporation news, bank clearings,
Other

argued

slackens

it

for

during and

Thursday, November 27, 1947

state

in

We

funds.

WILLIAM DANA SEIBERT, President
WILLIAM

is

merchant

ise

Record

(Foreign

an

borrowing

year.

Record—Monthly,

(Foreign

Earnings

to

year.

Publications

Quotation

year.

per

a

per

that

loan-deposit spiral.

oractical

9.

page

have

rates—in

money

increase
*See article

said

interest

price

5

...

is

It

rate

the result of the

a

lation.

44

Industry

we

with historic precedents—stops in-r

19

Securities Now in Registration
Tomorrow's Markets

The

now

inflation

(2)

12

The State of Trade and

inflation

puts fuel in
Therefore,
of
government

both.

8

Securities

Salesman's

Washington and

stop

46

,

of

insurance companies, etc.,
by mortgages, corporate bonds,
etc., is just as inflationary as the
making of a commercial loan. To

47

Securities

demand

tions,

22

Opr Reporter's Report
Prospective Security Offerings
Public Utility Securities

of

held by savings banks,
Federal savings and loan associa¬

18
—

increase

Moore Drop

bor¬

point the short

some

remains constant

all

building
of tools,

At

increase

inflation.

of

substitution

bonds,

13

News

Securities

the

these

of

e

These

thereby

and

fires

the

14

NSTA. Notes

Railroad

goods
the

41

______

etc.. The
increases the

ncome

11

Indications of Business Activity

in con:

equipment,

8

Dalton....

the

New Jersey Worsted Mills

bonds

that in previous infla¬

steeply and

transaction

engaged in the
industry, manufacturing

rates.

inflations

interest

ment

eople

their

of

slowly but steadily

the

we see

term

they can be sold
higner yielding
a

by

est rate.

for

increase

td

s

10

Canadian

Mutual Funds

and

room

WALL STREET, NEW YORK
Telephone: WHitehall 4-6551

tionary periods commercial loans
f.rst
expanded
constantly
with
only a small increase in the inter¬

not

The effect of such

Stocks....

From Washington Ahead of the

able

Corporate bonds.

43

vs.

make

:o

do

investments for

nstltutions
43

(Editorial)

Investment

bonds

99

to

tightening of the
money supply rather than by a
slackening demand for it. Look¬
ing over the statistical data avail¬

bank

permanent

Business Man's JJookshelf

Einzig—Cripps

Previous

afford a
yield which makes them desirable

Regular Features

Dealer-Broker

The

notes.

and

42

1950.

New Anglo-Swedish Monetary Pact Concluded

Insurance

com¬

millions

38

President of NYSE

as

and

sale

interest

ended

bills, certificates of in¬

debtedness

25

agencies

eligible government bonds

outside of
.

Quitting

Federal

of bank

_.

Frank E. Mullen Forecasts 2,000,000 Television Sets by

and

securities to
funds necessary to make

the

han

Interim Aid for Europe to Be Discussed at IB A Convention.

Bank

institutions

These

the loans.
According to the last
Treasury Bulletin, investors, other

Madden Sees No Int'l Stability Without Exchange

Stabilization

As We See It

increase in demand de¬

an

18

Non-Taxable

Scliram Not

re¬

18

(Comment by Earl Bunting)

World Bank Bonds Held by Non-Residents Ruled

Dean

deposits

sell government

get

17

government
of net

excess

new

posits follows.

Kenton R. Cravens, ABA Spokesman, Opposes Consumer
Credit Control

of

in

the

able

rowings create income just as well
as
loans
by commercial banks,
and are therefore just as infla¬
tionary.

loans

lending
o

17

'I*

rising

depos¬

Building,
r

o

the

Menace—Roger W. Babson

us!

Aeronca Aircraft Com. & Pfd.

-

to investors at

inflation¬

s

ary.

Consumer Credit and Business Trends

Russian

from here?

go

Corporations would be

continue

expan¬
of
com¬

mercial

15

The

avail¬

quickest possible

means

—•

:

its, the

14

—Walter E. Hoadley, Jr

we

tion.

(1) As loans

Truman's Advisers Ignore Basic Economic Truths

Congress and the High Cost of Government
—Rep. Charles A. Halieck

the

War.

funda-

create

The Progress of Economic Reconversion—Edwin G. Nourse.

Where do

might *

good time

situation.

13

Witherspoon

the best

want

you

That

Steadily increasing rates in
Ljberty Bonds did not stop infla¬

12

...

True—but

able price and

market!

the

11

Magill

—William

a

mentals of the

Prospects for Tax Cuts and Inequities in Tax Laws
.

holdings by banks apd
inflationary curb.

to re-examine

10

Outlook for the Railroads—Robert R. Young.

as

the question:

answer

9

_____A

Recession—George Soule

a

rate

9

•Construction Faces New Decisions—Robert W. McChesney..

government bond

Investors have been greatly disturbed by the recent decline in
bonds.
The argument that the decline is the natural
result of the rise of short term
money yields and the yield on corpo¬

7

.

for

TAX SELLING

government

•.>f

Consumer Credit and Business Trends—Vincent Yager

ARE IDEAL

an

individuals

4

Restoration of Europe

''The

deflationary

4

Defense of Dow Theory—Justin F. Barbour

,Qr

Tfnsifin
OBSOLETES

unsettled government bond market may
effects of reduction of the national debt.

Suggests retention of

3

New Money for Oldr—Hot

.Prosperity

offset all

;

Increase in the Velocity of Circulation

New

York

1$ Bread StlNXf
Bell

Teletype

Stock

Members New

25 Broad

135 S. La Salle St.,

Street, New York 4

Tel.: HAnover 2-4300

York Curb Exchange

Chicago 3

Tel.: Andover 469©

Exchange

Teletype—NY 1-5

WllUehall 4-6330
NY

1-2033

'

3

AND COMPANY

By JOHN II. KUGEL

2

Program of Tighter Credit Controls—Marriner S. Eccles____
an

B. S.

President, Kugel, Stone & Co., Inc.

Administration Anti-Inflation Program,

Danger of

(2159)

Velocity of Circulation

.Cover

__

CHRONICLE

Increase in

an

The

Cover

Capitalism the Cause of Wars?—Alexander Wilson.

FINANCIAL

Danger of

Par?

Problems—Rep. Jesse P. Wolcott

&

Albany

-

Boston

-

Glens

Falls

-

Schenectady

-

Worcester

quarter

available

C. E.

on

analysis
request

Unterberg & Co.

Members N. Y. Security Dealers Ass'n

61

Broadway, New York 6, N. Y.

Telephone BOwling Green 9-3565
Teletype NY 1-1666

4 ? (2160)

THE

COMMERCIAL

FINANCIAL

&

CHRONICLE

Thursday, November 27, 1947

Letter to Editor:

New

Money for Old
*

Justin

gests $4 to $10 billion of "hot" money of tax evaders might be recovered as
to launch Marshall Plan and reduce taxes.

;

Coming Currency Change

The

—

A Recoloring

Editor, The Commercial & Financial Chronicle:

Recall?

As

,£■

The proposal of Massachusetts Representative Edith Nourse Rogers to replace our
green and black paper currency with a separate color for each denomination may have more
to jit than meets the eye. At first blush, the sole virtue of the idea would seern. to. be the
greater
o

f

t i

s

guishing

ber

tween

bills.

Without

im¬

4

puting to Mrs.
& Rogers' s u ggestion
other

in design that if
an
open
invitation to counter¬
feiters, who gave the Secret ServLce many a bury day. Uniformity
however, was not the only reason
for the proposed change.
There

any

were

§§

motiva-

j

;

tion, it is still
that

true

pa-

time
James

; with

J.

Quinn

f it implications

importance
to
many
phases of our economic life—not

vast

least

which

of

the

are

rela¬

tively recently developed habits
of conducting personal and com¬

mercial business transactions and

had
size foi

Philippines

the

using

cash

liquid < savings, in

keeping

The

handle.

been

currency

Jab this

r

convenient

smaller
years and had lauded its superi¬
ority,. Since the New Series bill
could fit into • pocketbooks with¬
out
folding, the freedom from
creasing, necessary with the Old
Series, lengthened its life appre¬
ciably.
The smaller, more uni¬
form, but simpler designs, with
their fine engraving, were con¬
siderably harder to counterfeit.
Additionally, substantial econ¬
omies in the cost of paper, ink,

new

the

was more

t
old

per

;

First of all, the new size (6 5/16"

by 211/16")

e n

•rate

pieces

was

a

tself.

vealed

well ahead

it

the

pf
on

distribution

only /the

first,
were

issued

to be

appropriate

one .dollar
and those

copyrighted

1926) of post World War I's boom¬

From

1861

the size

remained

until the late

U.

of

S.

the

paper

same

1920?s,

currency

(7 7/16"

by

During that period,
development
of

SVs").

ous

to

was

tional

(b)
of

our

the

The

deposits, and (e) to
issues—among
many other bases.
The resultant
hodgepodge currency of Jhe 1920's
was a natural outcome of the past
bond,

haphazard approach to the prob¬
lem of
printing and engraving
S. paper currency. While
size did not change during

U.

the
the

period, its appearance,
especially as regards colors and
portraits used, ran the gamut of
the entire spectrum on the one
hand, and included, on the other,
a
wide variety of national and
local heroes immortalized in print.
At one time, there were five sep60-year

changeover

scheduling

an

in¬

was

de¬

the

general rather than

dividual distribution date

months.

many

by
10, 1929,

On July

officials had to
cope with. A wide variety of dif¬
ficulties cropped uo that had no
been anticipated. They ranged all
the
way
from universal public
dismay (especially on the part oi
the
banking fraternity)
at the
Treasury

prospect
business
rencv

having

of

Old

would

Series

and

with

derisive

to

new

two

limit

for

a

the

is

about

remarks

cigar store coupons."

The

forecasting

his

move¬

(2)

competent

successful

a

made

a

of

Dow

late

Robert

transactions

to

as

result

the entire

of

He is correct

in
to
of

as

in

bull

to sub¬

abnormal

and

addition,

In

these

rists

Rhea

this

two

he

points:

bull

overV

(1)

Most

trade

points

the

in

well

advance

of

confirmation; and,
(2) The accumulated profit from
trading on- confirmations is large.
of

statement

those

of

on
confirmation
of
markets, is 4,550%. Put an¬
way, a theoretical invest¬
ment of $1,000 in the Dow Jones
industrial
average
on
June
28,
1897
is
now
worth
$4-3,502.06.

liquidating

bear

cor¬

a

other

poration and two trusts operated

by him and for his benefit.

The

• auclit covered all transactions in
I stocks between Dec. 31, 1928 and
March

These
the

25, 1938.
Dividends were
credited, but commissions and
were

tal

transactions

shares,
ized

a

It

can

reveals

that

were

be

on

No

to¬

was

real¬

$100 of loss."
said

that

this

should

one

starter.

a

time

waste

by

saying that trades cannot be made
on
these
prices.
In the closihg
half hour of the market, a diver¬
sified list of stocks can be bought,
or sold, at closing prices.
Income

involving 601,612

gain of $436.19

for each

intriguing figures for
theory
critics for a

are

Dow

starter, and it is only

charged.

"My findings

cur¬

audit

little,

other than that in
the ten-year period covering the

will offset commissions and all of

the capital gains taxes in the norand I mal to abnormal bull markets. The
,

greatest

percentage

advance

in

the

decline

stock

market—in

the period when the greatest stock

26)

following table shows how these
results

achieved:

were

Just to

emphasize the point that
cumulative gains are small

such

American Hardware
Art Metal Construction

for

CroweiLColiier Pub.
Detroit Harvester

to

Oxford Paper Com. & Pfd.

Bought

-

Sold

-

theorists, I wish to refer

accomplishments

the

in

relation

results

brought out in a
compiled by him. On
page 585. of "Dow Theory Com¬
ment," mailing No. 199, April 6,
1938, Mr. Rhea wrote:

similar table

Quoted

".

Request

on

Dow

Robert Rhea's statement of his

own

Kendall Co.*

*Prospectus

investment funds,

; my own

.

even

^Portsmouth Steel

alter income taxes, have in¬

creased more since 1920 than those

Goodbody &. Co.
Sessions

Members N. Y. Stock

employed in the above theoretical
calculation

Exchange and Other Principal Exchanges

115 Broadway, New York

Cliffs

would

trend

normal

looks

"I have audited the accounts of

bill to

Cinecolor, Inc.

-

the

of the tim e com Detent Dow theo¬

audited,-and

Cluett, Peabody 2nj4% coi».pid.*

Cleveland

with

major

to

&

Mr. May
attempted
use
of some

published.

Bowser Ccm. & Pfd.

Lamson

point:

article

normal bull markets, but incorrect

theory

Rede¬

and printing the 900 million sep-

third

market.

philosophy for Dow

The

Robert Rhea and

rency
change were handled—no
legislation was necessary—the re¬
ported proposal by Representative
Rogers to prepare and submit a

on page

on

(highly

Under date
Over a period of 49 years, the
1938, Mr. Rhea pub¬ accumulated profit of a theoretical
by O. M. fund entering the market on con¬
Williams, C. P. A.:
firmation
of
bull markets,
and

lished

taxes

(Continued

based

of March 25,

normal

1929

funds,

valuation

missing much

practice of having his stock

the audit

with which

the legal aspects of the

these

markets.

Aspects
ease

of

figures, that a mechanical
trading on confirmation of change

mar¬

not

Legal

14

third

show,

Dow

students of the

are

contention' that

market

retirements.

In view of the

to

cluded.

"the

signing the various denominations

5

range from about 100%
about $00%, income not
in¬

to

major

and,

theorists:

complete

year's

writer

liquid),

[Three statements will bear out
my

Secretary of the Treasury A. W.

cur

of

mentation.

hardly have
since the number

one

The

supervision

periods running
years.'
The capital

present

acquire proficiency through con¬
study, research and experi¬

would
year

complete

«*ains

stant

outstanding was, as it
turned
out, about right for all
practical purooses. At any rate,
except for odd stragglers, the out¬
side

profits

funds for

their

prevailing

intimately

ooint:

second

had

certain

ket comparable to successful in¬
dividuals in other professions who

be

of

sizes

has

interested in the

in

Those who

our

Congress on what is essen¬
tially the same matter is puzzling.

during the transition period,

time

answer

intermediate

and

theorists

Series

New

transact

to

to

profits equal to

Rhea

substantial.

were

from

and

probable

ments;

issuance of the new sized currency
in $l-$20 bills was begun.
The

The latter was one

that

much

taxable

Robert

criticisms of
for the benefit

But
are

market

trend

cided upon, and even advanced

the equivalent to

public education
of the gravest

and

too

space

trading
shares re¬

number of

knew that his slock market

May's

theory.

stock

Jrfplecesof the New Series, about
million, was approximately

presented

Mr.

of those who

900

Treasury with the enormous prob¬
lems of manufacturing, printing,

of

Dow

take

much

too

Rhea's

Mr.

times his losses.

knew

of

that

a

in

sulted

4.36

subject, I would like to point out
that (1) Dow theory is a success¬
ful philosophy for Dow theorists
in analyzing and interpreting the

exceeded

Was Put

Change
Through

(a)

money

to gold, (c) to a
both, (d) to na¬

bank

Treasury

How

original

bank notes, which constituted 15%
of all of the currency outstanding),

changeover

accompanied by vari¬

efforts to tie

silver,

Combination

avoidable.

the
the

economic

Country

Without the change
in size of the bills, a new build¬
ing extension and a larger print¬
ing plant would have been un¬
ing economy.

The 1929 Currency Alteration

would

each

had the designing and
progressed
(including
loing : an additional last-minute
job of an unscheduled redesign¬
ing and issuing of new national
however,
printing

both

reviewed.

material,

of

large

a

The
It
and

printing, and especially storing, larger denominations were issued
amounts
of. staggering
propor¬ Were important factors. But more later. No
attempt was made to re¬
tions. Before examining ; the vari¬ decisive than
any of these was the place
at one swoop the entire
ous possibilities, however, it may
50 % ? increase ; that
the1 change amount of Old Series bills. In¬
be
helpful* "perspective wise, in automatically
effected
in
the stead the normal procedure of re¬
gaining an appreciation of the plant capacity of the Bureau of
tiring such Old Series bills as
scope and nature of the task that Engraving & Printing.
The Bu¬ came into the banks during every¬
such an alteration in our currency reau's
building, erected in 1914. day transactions was followed.
would involve, if the events lead¬ hkd not been designed to cope
The 4-6-month period estimated
ing up to the last major change in with the swelling currency de¬ for the transition
period when
Uhited
States "folding
money
mands (jumped 76% from 1917are

in

result

which is enclosed.

well,

So

order.

sustained—the

net

understand
the
copyright
laws
either, for he has reproduced, with
slight modifications, some of our

brought

only over an estimated 12-month
period. The ethers were to follow
in-

an

re¬

of

philosophy of Dow, Hamilton
and Rhea. Apparently he does not

most of the headaches..

At

series

the

scheduling

that

recent

the wisdom and usefulness of

see

of original ex¬

It Was the

pectations.

his

"Observations." It is this: Mr. May
dimply does not understand Dow theory. Mr. May sets up his concep¬
of Dow
theory, and finds*——■■ ■
■■—-————^
many fallacies in it;
He does not market losses
were

com¬

was

in

tion

huge -task in

Nevertheless

peted

bills

to

with

J of1

others.

the

replacem
J of. the

Sjjapies

of variety

type

:

•

the

various

designs for the $5 bill—the

arate

n-

recognized student of the Dow theory, I wish to make
on Mr.
May's conception of Dow theory, as

a

all inclusive comment

<♦>-

ease

-

d i

DowlFheory

Barbour lakes exception to

and

incidental result—enough

or a

F.

J;

Mr. May's "Observations"
explains Dow Theory philosophy. Holds critics misconstrue
Dow Theory and scores Cowles Commission's
analysis of short¬
comings of theory as based upon unwarranted assumptions. Mr.
May replies regarding use of Barbour's Dow Theory Service Material

Investment counsel strongly favors Representative Rogers' proposal for recall and alteration of currency's
-fcolor scheme.' Asserts this would be temporarily inflationary, but ultimately very deflationary.
Sug-

.

/

•

Defense of

By JAMES J. QUINN
Investment Counsel

\
'
/VI-,-'*.-. f:-!'rY-.'%

,

'•

,;.f

5

or

T>'eobon« BArclay

Iron

105 West Adams St.. Chicago
j

7-0100

Teletype NY 1^572

4%

Motori

Corporation

"All

ef

Dow;
,j

management

my

have

achieved

•

.

of

counts

Foundation Co.

♦special report available

pe¬
•

statement

application

theory:

Convertible Debentures due 1956

my

market results

stock

through- the

Graham-Paige

same

'

{The following is
of

tTexas Eastern Transmission

the

during

riod."

appreciated

ac¬

many

times the comparable appreciation
t prospectus

Wellman

available

Engineering Co.

of

Tennessee Products & Chemical
Analyses on request
120

Ward & Co.
Established

1926

New

<

York

Tele.

REctor

NY

Wires

to




&)

INCORPORATED

if
Security Dealers Association

PHILADELPHIA

&

fund

which

have

I

over

the

been

in

business."

Lubetkm

2-8700

1-1286-7-3

41 Broad Street
Direct

theoretical

in

Broadway, New York 5

Phone:

Members New York
Members

this

years

LOS ANGELES

Co.
'

Security Dealers Association

j ^

The

Dow

Genesis

theory

of

Dow

derives

from Charles H. Dow,

Theory

its

<

name

the founder

and first editor of the "Wall Street

New York 4, N. Y.

Journal,"

whose

observations

of

the movements of the stock mar-

continued

on page

24)

Volume 166

Number 4650

^

.
.

THE

Steel

The

•

•

COMMERCIAL

&

(2161)_

CHRONICLE

FINANCIAL

Cat-loadings

By A. WILFRED MAY

Index

Industry

announces

THE PERILS QF

Failures

barometers

for

the

slight

and

The

past

Employment

indicated

week

output of practically all types of goods
for most products as in past

was

large and orddrs
the increase.
!

very

weeks continued

on

PREDICTION—Stock Market Pitfalls

(Seventh of

...

.

requires r6al wisdom.
?

Apparel manufactures increased somewhat with orders for most
types of clothing very large. Textile production was steady and high
with substantial order backlogs to sustain it.

"You

write off President Truman's demand for

can

the speculators aren't

in

taking it seriously.

thousand that Congress

a

OPA.

And

prices

under

if

even

it

control

There isn't

will approve

should,

just

by

consumer

exercise in pure politics, even

as an

a

new

Administration

the

tacking

on

a

one

chance

pocket-edition
couldn't

here

ceiling

get

and

a

ceiling there."
*

Reviewing the

*

condition

*

*

retail

of

wholesale

trade

it

was

noted that retail volume in the week ended on Wednesday last was
moderately above the level of the preceding week and remained well
in

of

of the corresponding week a year ago.
Seasonal
prevalent and helped to stimulate consumer in¬
terest in holiday merchandise. The buying of gifts increased notice¬
ably and toys attracted considerable interest.
excess

promotions

A

that

were

moderate rise in wholesale volume occurred in the week

the corresponding week

over

and

Retailers purchased large
stocks of most types of merchandise in anticipation of a brisk holiday
season.
The supply of most articles was plentiful and deliveries were
generally prompt.
a

ago.

year

sight

May

OPERATIONS

SCHEDULED

AT

terials,

raw

the

and

rehabilitating equipment, steel ingot output in 1947 will be
34V2% greater than the previous peacetime peak in 1929, 61% greater
than

the prewar

year

of

1939 and about 30%

1940 when the United States

the

Allies,
weekly.

according

to

higher than the year
shipping large amount of metal to
Iron Age," national metal working
1

was

"The

There is every indication that the total steel ingot output this
year

will amount to 85 million net tons,

the all-time high

during the

turned out 89.6 million

war

year

100 to

as

1.

Unfortunately

for

the steel industry, says the magazine, the
tightness in steel supplies this month and ex¬
pected in December is playing into the hands of those who are
attempting to place rigid allocation controls over domestic steel out¬
put.
Currently, pressure for steel deliveries from those consumers
temporary extreme

who

are

unable to keep their own production schedules at
peak

levels
is the strongest since war days. Furthermore, the gray market is far
more
active than the black market was during the war and net
prices are higher.
Conversion

.

activity involving the processing of ingots and semi¬

and finished

goods.

Even

(Continued

,

ATTENTION
i

!t

We have

prepared

on page

in

that

circular

open-market operations of the Federal Reserve System—a new and
hence unrecognized manifestation of unpredictable management.
The

S.

A.

Shaw.

,•

Shillinglaw, Johannes
Elected Vice Pres.

in

market

that

1936-1937

had

started

which concluded the 4V2-yeai
1933, stocks were priced at wide

years

in

That the high prices and active

variance from the economic factors.

of

markets

time

that

were

not

caused

by

a

flight

of capital

its

extent,

was

'

Canadian Pac.

bank

.1

:

1949

caused b.y

the Federal

HART SMITH & CO.
52 WILLIAM ST., N. Y. 5

Bell

HAnover 2-0980

Teletype NY

New York

1-395

Montreal

Toronto

BIDS MADE

Government's aggressive

ON

of money-seeking investment, and its managed
of the ruling interest rate.
Subsequently in the Fall o

deposits

reduction

1937,

V

Rwy* 3l/zh 1951

Canadian Pac. Rwy. 4s,

deficit-financing policies of borrowing and spending, with expansion
of

3%$, 1967

•

into

equities through fear of inflation is shown by the fact tnat bone
prices remained at.their peak level attained since the turn of the
century, and commodity prices had not risen recently. Nor was that
market rise, as it had been in 1929, financed by brokers' loans or
direct bank loans on securities.
Actually that bull market, at least
in

Abitibi Pr. & Paper

when this money-expanding policy was

BONDS

unexpectedly halted,
WITH

the bull market had its demise.
This

uncertain

trols has always,

"extrinsic"

market element

of government

of course, been a wartime concomitant.

con¬

But since

Coupons Missing

have been forced to realize that the imposition of
central management and interferences constitute not only a wartime
but,

our

Day

as

we

possibly now,

crucial factor likely to be imposed whenever

a

executive and legislative branches deem there is an "emergency'

"inflation," international crisis, etc., etc., etc.

1

Gude, Winmill & Co.
Members New

York Stock Exchange

1 Wall St.* New York 5, N. Y.
Dlgby 4-7060

on

"

Market of the Mid-1980s

"Managed"
the

Likewise

Teletype NY 1-955;

International Detrola
the

Southwest Gas Producing

),

LAMBORN & CO., Inc.
99

STEEL INDUSTRY
and

? as

"New

tering the effects of the avalanche (as measured in that early period)
of Federal Reserve credit that was being pumped out through the

DEALERS!

a

registered representa¬
Alasheieff, Frank L*
Childs, Frank J. Daly, Ernest R.
Grauer, Eugene Hodenpyl, Norton
Le
Bourveau
and
F.
Raymond

tives:

management

—because of

35)

partment of the firm's New York
office

for this, which because of its comparatively new
is importance to recognize, is the influence of govern¬

factor, nor even only a component of a mere "armament economy,"

I

the

reason

peak.' Yet practically all of this stringency which has been super¬
imposed" upon a strong normal postwar tight market, "The Iron Age"
adds, has been due to loss of production in the industry this year

fault of steelmakers. Practically all steel firms have been

also : announces
following havetbecqme

; The: company
that

associated with the investment de¬

for purposes of appraising seven years

V-J

no

formerly retail sales
for E. W. Clucas & Co.,

earnings

corporate

finished steel by one or more steel companies is now at an all-time

through

of

Mr. Broad-

Own Firm in Buffalo

and controls. Monetary management began in
Era," transforming the stock market from its
traditional role of barometer to a thermometer resoundingly regis¬
ment

earnest

bull

nothing in the picture now to prevent the 1947 record
from being bettered in 1948. During the next 12 months some new
ingot capacity will be installed and finishing capacity will be ex¬
panded.

was

manager

the

prices.

emergence

figure only 5.1% below
of 1944 when steelmakers

There is

the New York office.
foot

with

manager

divergence from stock market action, graphically

same

a

tons of ingots.

sales

price-earnings ratios in some cases as fantastically high
So then too a correct appraisal of the logical economic

reflected in

One

material shortages and time consumed in repairing

retail

our

semi-finished

showed

BELOW PREVIOUS WEEK'S OUTPUT

Despite

associated

now

as

great bull market of the 1920s, the most violent
BUFFALO, N; Y. — Russell G<
on record, acted wholly without correlation to the concurrent "eco¬
Talbot is engaging in the securi¬
nomic" events of the period.
For example between 1923 and 1929 ties business from offices in
the
the price of stocks shot up by over 300%, whereas the output of non¬
White Building, under the firm
durable consumption goods advanced by only 24% and the volume
name of Talbot Co.
In the past foe
of production of finished goods (Index of the National Bureau of
was
with H. B. Dennison & Co.
Economic Research) rose 28%. And a net decline actually occurred
and Barrett Herrick & Co.
in the Bureau of Labor Statistics' indexes of the prices of raw ma¬

of stock

0.7%

un-

part of their shirts in the perverse stock market.

some

Similarly,

factors proved to be disastrous

STEEL

today's

crucial

the

of

is

Exchange,

that Hibbard E. Broad-

CHICAGO, ILL. —Logan Shil¬
linglaw and Harold W. Johannes
have been appointed Vice Presi-,
science which makes it possible to proceed with precision from an dents of
Shillinglaw, Bolger & Co.*
arbitrary assumption to a foregone conclusion."
120 South La Salle Street, mem¬
bers
of the Chicago
Stock Ex¬
Winning the Contest, Losing the Prize
A specific reason for the abortiveness of predictions about "the change, it is announced by David
L.
Shillinglaw, President.
They
market" is the persistent divergence of its behavior from expecta¬
have
been
associated
with
the
tions warranted by the economic factors—resulting in Tightness in
firm for the past five years and
guessing events, wrongness on the market. This has been perfectly
have been identified with the in¬
demonstrated during the past two years.
The decline in the stock
vestment business in Chicago for
market that began in mid-1946 has not been followed by a discern¬
many years.
«, • *
ible business recession, general corporate earnings decline, or corre¬
sponding behavior of the economic indices.
So speculators acting on
their winning entries in guessing contests 011 the Federal Reserve
Russell G. Talbot Opens
Board's index of industrial activity, national income, etc., would still
Wilfred

A.

have lost

and

over-use

human behavior elements, which are

engineering, construction totalled $100,930,000

rationing and price controls

temptation to

importance of the
incalculable
as
to direction as well as extent.
And all too
often when applied to the market place, "sta¬
tistics are used as that branch of mathematical
lose

Fear of government controls over our national economy spring¬
ing from President Truman's request for such power were expressed
by some segments of business and industry the past week, but ac¬
cording to "Business Week" magazine, in its current editorial com¬
ment, it stated:

the

cause

"4 precedentedly high quantity and quality of statis$ tics; that is, to apply them to phenomena to which
they are not at all appropriate. Too often in lieu
of permitting their confinement to their rightful
function as an instrument, the passion for statis¬
tics leads to coupling them with factors which are
not reducible to statistical measurement, and to

machinery and equip¬
high current output. Some improvement continued
be noted in the production of farm machinery.
!
a

$54,084,000 and public construction, $46,846,000.

important

''whole is

Producers of various types of industrial

amounted to

;

.

of failure in the attempt
to forecast the behavior of the stock market as a
An

foot
firm

investing problems)

French author, has said: "In statistics the Amer^
ican has found a substitute for ideas, enabling him to dispense with
both wisdom, and beauty."
Although this may be exaggeration,
.jt; is quita true that we ara prone to forget that
while statistics are knowledge, their proper use

close to peak levels with'the demand fpr
remaining to be gratified. With respect to raw
materials some manufacturers have reported a noticeable improve¬
ment in the availability of some items.
•
j

the past week, with volume 37% below the previous week but 30%
above the corresponding week a
year
ago.
Private construction

on

Bernard Faye,

held

In the field of civil

series

a

•

skilled workers still

to

of the New York Stock

Auto Production

Business

varied changes in industrial production for the country at large.

reported

'

Hayden, $tone & Co., 455 Broad.
Street, New York City, members

"

J

ment

•

•

Trade

Commodity Price Index
Food Price

and
Business

Broadfodt SajeslMgn
For Hayden, Stone Co.

Production

Electric Output
Retail

State of Trade

5

American Maize Products Co.

WALL

STREET

NEW YORK 5, N. Y.

low-priced stocks of several speculative Steel

Companies

available

for

Retail

Distribution.

Bought—Sold—Quoted

SUGAR

MERCER HICKS & CO.
Members

Nat'l

Association

of ■Securities Dealers,

Inc.

Raw—Refined—Liquid

FREDERIC H. HATCH & CO., INC.
Established

150

BROADWAY, NEW YORK 7, N. Y.

Telephone:

Dlgby 9-4224




Teletype:

NY

1-2812

MEMBERS N.
63 Wall

Y.

SECURITY

Street, New York 5, N. Y.

Exports—Imports—Futures

1888

DEALERS ASSOCIATION

Bell Teletype NY 1-897

Dlgby 4-2727

i

i.

«

THE

(2162)

COMMERCIAL

FINANCIAL

&

CHRONICLE

#•....

Thursday, November 27, 1947

„

_

s

....

ff|

Current
By EUGENE MEYER*
Chairman of the Board, The Washington Post; Former World Bank President

i

European

who

more

menac¬

ing,
day

day

As

a

were
the
questions
which
our
Senators and Representatives and

a

share

-

the

of

and

'

person.

was

restoration

a

economic

of

health and political stability.

What
Me^er

Euclid

in

I

wanted

it

of war and as you waited,
vain, for them to give evidence

to

put my questions di¬
rectly to the men and the groups

at

was

progressive

the

the

deterioration

fault?

financial

situation
in
England,
France, Italy and other Western
European
countries?
Why
had

If

there

the
as

a

These
nomic

were

their economic life not made

more

political

was

Complex:
How was Eu¬
reacting to the daily increas¬

I

wish

I

could

Byllesby & Company

PHILADELPHIA OFFICE

Tele. BS

,

Stock Exchange Bldg. Phila. 2
Teletype

*ftt£hkotise 6-3717

the

ques¬
Un¬

nomic

hemselves to

24 Federal Street, Boston 10

of

fortunately, world problems, eco¬
or
political, do not lend

Warner Company

Telephone

I

which

tions than I could discover.

Nazareth Cement

Walter J. Connol ly & Co., Inc.

that

you

answers

better student

some

Sterling Motor Truck

H. M.

tell

PH

73

128

precise and simple

solutions.

be misunderstood.

RICHMOND,

CLEVELAND

They are, also,
the most significant and meaning¬

VA,

ful facts Tor

understanding of

an

the European problems.

Dealers in

And they
helpful guideposts
to us, in framing our decisions on
plans to assist Europe.
the

are

Drackett

VIRGINIA—WEST VIRGINIA

Harshaw Chemical

NORTH and SOUTH

It

is

most

these

facts

which

I

want

to discuss with you. I

CAROLINA

of

Richardson

them

to

other

neither the facts

MUNICIPAL BONDS

have spoken
groups.
Since

nor

my

conclu¬

sions about them have
—★

—

must, if

F. W.—

—

you

changed, I
permit, speak of them

sunny,

will

er

business

is

going

Union Com.

Union

Bldg.

CLEVELAND

Cent; Bldg.

In 1945 the best

students

would

there

opinion of

economics

of

be

some

that

was

unemploy¬

large

ment in the middle of 1946.

Noth¬

happened.

Since

the

sort

ing

of

the

middle of

1946

business

a

re¬

cession has been widely predicted
We may see a shrinkage

1947.

tor

business

)f

have

far. What we
begun to

There

sectors

between

but such

trial

reces¬

again—was a reshuffling of

ictivitv
ness

so

but

1948
no

rather

or

—

in
and

over

appeared

had

have

is

busi¬

of

change is natural.

a

fixed state of indus¬

no

production which is attained
day and remains stabilized

one

there

from
is

activity

is almost

'947

status

no

Business

quo.

organism

and

doubt

that

number

is

is

there

living

the

There

after*

ever

on

of

Tele. CV 174

System Teletype:

a

brellas manufactured in 1957 will

different

be

from

the

number

forecasting

business

"If

has

difficult and often un¬
satisfactory, the question arises
as
to why there is so much de¬
so

proven

First, I would like to paint a
little
background
of my
own

intelligent people insist on gam¬
bling their reputation every day
on telling
us exactly what is go¬
ing to happen. The explanation is
simple. No matter how hazard¬
ous

made

ST. LOUIS

LOUISVILLE

carried

with

me

a

preconcep¬

guess,

tion, if you will, and I brought it take
intact—indeed, strengthened. life. The

It relates to
affairs.
America

American Turf Ass'n

Stix: & Co.

Consider H. Willett

It

our own

is

has

the

role in world

thought

that
to
the

succeeded

(Continued

on page

20)

Varnish

INVESTMENT

Co.

fore the Advertising Club,
509 olive

m

*An address by Mr. Meyer be¬

SECURITIES

Wash¬

man

a

guess

who

buys

a

No
of

wrong.
The manufacturer who
decides to produce 1,000 television

expects to sell at least 900.

but

if

i

more

competitor

his

brings out

attractive set, he may not

Similarly, the

any.

Thinking

production

size

the
commodity prices are im¬
portant
criteria
in
determining
or

business

the

outlook.

So

in¬

are

numerable other

factors, i. e., the
consumer
expenditures.

of

trend

what

On

what

is

the

spending

is

he

wage

average

his dollar?

spending

On

"extra"

his

dollar, i. e., the dollar he keeps
after buying food, etc., and paying
his rent?
look

Some economic analysts

mainly

the

at statistics such as
Others, and not less

above.

intelligent ones, also look at race
betting statistics, theatre at¬
tendance and similar figures not

track

generally accepted into "economic
society."
It
can
be
observed,

that from time to time
subjects seem to dominate

though,
certain

the field of discussion and, in pro¬

portion to the publicity which
they receive, the outside observer
apt to get the impression that
and the fate of the entire

is

his life

universe depend on

the answer to
problem which only a few
months earlier did not seem to
some

bother

in particular.

anyone

Within

business

past 12 months the
community has worried
the

successively

intensely

and

over

problems as. inventories, la¬
bor relations, inflation, deflation,
and a host of other problems.
Re¬

cently the so-called "world short¬
of dollars" has begun to claim
billing. All these discussions

age

head

course,
based on real
but the interesting fact is

of

are,

causes

the emphasis on

business

that in

problems is apt to shift
continuously and what seems a
certain
vital
most

probleim today may be al¬
completely forgotten tomor¬

row.

The

applies

same

there

now

Right
inter¬

considerable

is

study of the importance

est in the

of

business

to

theory.

and

psychology

cycles with regard to fluctua¬
in business activity.
The

tions

has been explained in a
highly restrained man¬

subject

clear and

by Edward R. Dewey, the co-

ner

continued on page 28)

investor

i

Franklin County

Incorporated

,

Business

deny that the

can

industrial

St. Louis l.Mo,

BANKERS BOND

in

oiie

level of

din¬

jacket expects to be invited to
dinner some time but he may be
ner

sell

ington, D. C., Nov. 18, 1947.

street

"Fashions"

so many

sets

Murphy Chair Company
Reliance

why

has to be
by everyone who wants to
any action in any walk of

the

back

American Air Filter

a

such

manufactured in 1947.

I

Telephone 3-9137

Tele. CI 150

en¬

each other.

on

no

I have used before.
New Role of America

RH 83 & 84

acting

um¬

mand for it and also

RICHMOND, VIRGINIA
Bell

CINCINNATI

Conse¬

the future of

complete set of factors all inter¬

do?"

thinking before I went to Europe.

Field, Richards 8c Co.

—:—

prospects.

we

somewhat in the same terms that

CRAIGIE&CO.

their

and

earner

"What

have?"

sion has

Happily, however, there are to
be seen in Europe certain out¬
standing facts, vivid enough for "a
reading even on the run, clear
enough so their meaning cannot

supposed

again:
"What Weath¬

Streseniunn

Joachim

to

there could be pat

Pittsburgh Rys. Co.

Preferred

call

brought back pat answers to these
questions.
I wish, indeed, that

Empire Southern Gas

Boston & Maine RR.

we

though

ask

wartime

our

Russia?

Empire Steel Co.

B'

of

n.

people come
right
back
Monday and

equally

aggression

ities

weekend

be

to

rope

o

if it

even

was

eco¬

question

—-—1

-

has to rely on experienced advice
as to the intrinsic value of secur¬

deavor to forecast

your

the

questions.

The

Botany Mills

RflyH

Tel. Hubbard 3790

the

Hly, the Great Bear which

American Box Board

[

of

Green¬

day,

;

some

t

rains all Sun-

them

to help themselves?

forecasting' to¬
to assume you are right

quently, his advisors have to

Yet

Americaft

use

a

wind

of

calcula t i

chance—was there* in

to permit

t h

•

like

upset

aided

means

*

quite

have good reasons
is
*««>—-—' '

gust

will—to

a

is

land that may

of

we

Forecasting

business

-

there

always

peoples lost

European

ing

Traded in Rtiiihd Lots

You
but

them, would
be money down the drain ; or

fact,

the

of

BOStON

Prior

weather.

working?
If they
hungry, was it their own

help

of

root

the

habit

were

of

I

field

yourselves, have been

in

~ to
reconnoiter

the

the

morrow's

tomorrow's

from

Had

lation

informed

Forecasting

manufactures?

asking as you watched European
nations struggle out of the deso¬

responsibility,
for producing
a
responsible'
newspaper,
d e c i d e d

Business

in the return to the pre¬
tempo? What had happened
to the pattern of trade that once
^upolied
Western
Eurbpe
with
food
and
Eastern Europe
with
progress

war

which you,

as

with

position to

questions I had in mind
the obvious ones, but no less
important for being obvious. They

citizen,

also

one

best

were

by season.

and

the

The

sea¬

son

in

were

know the facts.

by

and

todky

A

:

wall Street

in

STRESEMANN

"pros" and "cons" df the Business Cycle Theory,
We ate faded with a set of conflicting develop¬
ments which lend to pull the economy in diferent directions.
Cites
as factors: (1) lack of equilibrium in wages
andprices; (2) uncer¬
tainties regarding implementation of Marshall Plan; and (3) impediments in strides of construction industry; Holds present pros¬
perity is not necessarily IrtOre temporary than previous similar
periods, and therefore depressioh seems far away.
writer contends

I am pleased to have the opportunity to pass on to
you some of my observations and re¬
flections about my recent trip to Europe. I went there, I think, with the same questions in my
mind that have been plaguing millions of other Americans who have watched the
troubled,

i., f if iff" fff|W :X,: a

After discussing

Westefn Europe, points out basic economic difficulty
is lack of adequate food and economic incentives. Says America, in role of world leadership, must for¬
mulate a program of foreign assistance. Poirtts out, despite difficulties, substantial steps have been taken
in European recovery, and backs up Truman proposals, even though not "a gilt edge iiivestment."

situation grow

Topics

By JOACHIM

Prominent financier, in reporting on trip through

more

....

1st

Floor, Kentucky Home Life Bldg.
LOUISVILLE 2, KENTUCKY

Long Distance 238-9

Members St. Louis Stock

Coal

Exchange

Corporation

Bell Tele. LS 186
Continued

poration's

PHILADELPHIA

SPOKANE. WASH,

Corporation

or

of

Data on Request

Members New York, Philadelphia
Los Angeles

Quotes call TWX Sp-43

Exchange

1420

of

York Curb Exchange

Walnut Street,

Philadelphia 2

New York

Wire System

from

Std.

10:45

Time:

to

July 1, 1978

between
Philadelphia, New York and Los Angeles

7%

value)

mon

stock

are

V

j$5.95

per

($10

share

earnings
$2.00

on

per

the

for

the

share

com¬

before

preferred.

11:30

Sp-82

BOUGHT

at

—

SOLD

—

APPROXIMATE MARKET

QUOTED

7%

preferred

Common

stock

13%
6%

stock

STANDARD SECURITIES
CORPORATION
Members Standard
of

Brokers

-

Peyton

Stock Exchange

A.C.AUYN«®COMPANY

Spokane

Dealers

-

Building, Spokane
Branches

Incorporated

'

Comstock & Co.

Underwriters
at

CHICAGO
New York
Omaha

Boston

Philadelphia

Kansas

City

Milwaukee

Indianapolis

Minneapolis
Flint

231 So. La Salle St.

Teletype

Kellogg, Idaho and Yakima, Wn.
-

i

.

substantial
1

preferred stock

carries

accumulations

:




for this cor¬

assures

dividends.

1947

Estimated

Floor

other hours.

Los Angelas

Pittsburgh, Pa.
Hagerstown, Md.
N. Y. Telephone—WHitehall 3-7253
Private

Pac.

on

and

Stock Exchanges

Also Member
New

Due

Immediate Execution of Orders

A.M.,

BUCKLEY BROTHERS

par

accumulated

SECURITIES
For

Corporation

Corporation's

NORTHWEST MINING

Gruen Watch
Eastern

demand

coals

earnings.

3%% Revenue Bonds
Portsmouth Steel

record

-•■■■

-

4, ILL.
Dearborn 1501

GG 955
&

m

Volume --166 i. Number 4650

COMMERCIAL

THE

liaaaaaatto aaaaafca

n»ri

i

*1 *• I* * in*

*i i

i

iizu

i

*' *'

f

FINANCIAL

&

CHRONICLE

(2163)

7

tiSj

i

Prosperity

Depression in 1948?
^

or

By RAYMOND RODGERS*
Professor of Banking, New York

Ahead

of the News

University

Dr. Rodgers points to errors in

1947 business soothsaying, and ascribes causes of errors to managed
money, managed public debt and a largely managed economy.
Predicts, however, economic forces will
prevail, and says we face either a business readjustment or a new turn of corkscrew of inflation. Fore¬
sees no depression in 1948 but warns if
inflationary policies persist, day of reckoning is coming.

By CARLISLE BARGERON
Senator Styles Bridges of New Hampshire, who is an internation¬
alist and who, therefore cannot be accused of not
having a broad

Economic developments during 1947 should end all business
soothsaying; never have
prophets been so wrong.
The "best advertised depression" wasn't even a flash in the
—r it just wasn't!
Onward and ever upward the indexes moved, while the economists

mihd and

not being alive to progress and to our having become a
leader, and who indeed, as a result, has enjoyed that friendly
publicity which our intelligentsia gives to such a ripened intellect, is

pan

nevertheless annoying that crowd and it may be that he is by way

viewed

with

m'ore

and

the

world

o

f

receiving

t he

#

same

treatment

Colonel

cost.

sr

a

Lind-

bergh,

Bob

plan

was

same

friendly treat¬
ment

that

as

broad

thinker,

global

under¬

standing
thur

we

berg.
as

the

Carlisle Bargeron

f

o

senate

Appropriations Com¬
mittee, made a trip to Europe this
year and being an
indefatigable
worker

who

parties

with

information.
of

statements

seemed

to

itors

to,

he

lot

of

couple

a

there

over

some

has

awful

made

make

annoyed

he

an

He

cocktail

to

goes

only when

back

came

Paris that

which
which

but

sense

of

Eastern ed¬

our

when

was

he

said

in

certainly wanted to

we

help France but that damnit, the
French

had

described
tune.

It

do

to

themselves.

One

this

Eastern
most

as

was

a

work

some

fact

editor

inoppor¬

the

French

ought to do this, said the editor,
and it would have been all right if
Bridges had made his statement
here.

But

there

in

have

to

the

made

it

over

of French¬

presence

where they might hear it,
presumably, put us in the light of
telling foreigners what to do. In
men,

this

way

play into the hands

we

of the Communists who charge us
with imperialism.
But what is

ize

fools

it in

a way to receive considerable
public attention:

of Heaven is

name

the Administration

insisting

upon

money for the
occupation
relief of Germany while at

cart

This

the

to

to

confronted. We

embarrassing
statesmen

our

being asked
appropriate additional billions
fight the spread of Communism.

In

Germany

the

are

joining with

are

we

Russians, the French and the

British

to

plants

dismantle

which

There

Russia

now

eral agreement

takes.

among

gen¬

public

our

utterers that the economy of Eu¬

is

rope

dependent

the

upon

re-

of

storal

utterly

German industry.
It is
disgusting that this real¬

ization

should

after

the

much

so

determined

a

statesmen

come

late

so

and

cost, and certainly
who

were

of

a

1

bunch

On

mand.

of

been unable

to hide their-

was

fact
be

they have said
irritation, that while it is a

that

German

restored

of opinion was on how long
how much recession to ex¬

and

He must realize,
with

inevitable.

ence

disgust.

industry

and

that

therefore, departed from the

war

pas-

is

a

potential

great

left

In

Sermany

plants

payers

this

words,

are

and

a

part

the-

of
we

letting Russia

that

all

run,

economic

and

his

not

granted

John

miners?

This

only

increased

previously

1948,

we

Now,

face

don't

economic

an

laugh

States.

I

am

have

record

on

business

a

that

the

accumulated

strains
rather

serious
nomic

of

stresses

price

our

than wait

until

breakdown

machine.

and

American
further

people

for

statesmen

towards

having
realization,

this

this

must

have

we

of

the

There

is

It

was

rain—an act of God.

But

when

short

we,

that

Europe,

notwithstanding
decide to feed
an act of man¬

corn crop,

is

agement which affects everything
in the country.
Our determina¬
tion

to

rehabilitate the

non-com¬

regard¬

tions

are

on

political ex¬

Domestic

considera¬

is based

brushed aside.

of

will

the

current

We missed
our

a

of

B.

*

Remarks by

express

the

pudiated

right in

Yet,

man.
on,

they

were

However, that is water
say.

over

The German




one

ing last May. We shall have an¬
good opportunity after the

Value

Christmas
buying
is
over.
A
buyers' resistance caused, primar¬
ily, by the inability of many peo¬
ple to nay present prices, may set
in.

Such

force

price

a

development

No

adjustments in

be

many

no

and

a

conceivably

wage-price

could

spiral

bring the

to

moderate

1948

in

1948.

We

are

pleased to

ralph

recession

or

is

now

that

announce

m. bloom

associated with

us

as

Manager of

our

and

as

Assistant in

our

belt

Trading Department

CULBERTS0N, OLSEN & CO.
Investment Securities

Orders

inill

be

executed

by

share

135 South La

Salle Street

CHICAGO 3

the undersigned

the

econ¬

Telephone:

FRANK C.

MOORE & COMPANY

.,

Franklin

Direct

.

Wire.

8200

As I

what we face is either

another

(Continued on page 21)

end.

an

my

is certain: There will

depression

said before,

for

one

Depression in

One thing

would

like

I'd

puppies,

lines, particularly soft goods lines;

cil, School of Retailing, New York
University, New York City, Nov.

Price $3 per

of

preacher."

Professor Rodgers
Advisory Coun¬

of 50 cents per Share)

of it.

church, but if that dog has

your

Capital Stock
(Par

morn¬

the rest

were

parcel and

part of that scheme at the time.
dam, they

long

ate

said, "I am not a member

and

robert k.

pastor-

they

dog

ing—his

house-clean¬

38,000 Shares

still

alization scheme and will tell you
that' he is now a completely re¬

minutes

five

be

Afier the sermon a man came up

other

before Merchants

bitterness

Morgenthau

and

Our enor-

Motors, Incorporated

Baptist

preacher down home, who said he
was sorry his sermon would only

some

practices in business.
good opportunity to

economic

This talk is getting so

long, that I recall the old

per¬

abnormalities

governmental interfer¬
pump-priming, or worse,

and
of

character.

Administration,
which

self-rectification

uneconomic

start

the

sharp

panied b,y large scale unemploy¬
ment
ence

Trading Department

the

These

force is of
proportions, it may

inflationary

break in business activity, accom¬

a

a

our

100

M.

market,

open

a

eco¬

still

now

pay

restoral.

the

known to you.

mately will culminate in a

structure,

mit

20, 1947.

American

statesmen

this

substantial

readjust¬

or

much

Vick & Co.

periodically that they are
preferred by the American
people to run their foreign and

to

also well

If

we

in

foods

other
are

price inflation in the United

action

caused by too little
Likewise, the
short
corn
crop
in the United
States could not be foreseen by
mortal man. It was caused by too

respon¬

still

These

The inflationary effects of the
government's policy of purchasing
enormous quantities of grains and

straddle—

economist's hedge.

report

come

mands of labor.

—

I am on
public record since early 1943 as
saying that we would avoid run¬
an

sible for it should be made to pay
instead of having the
Gallup Poll

domestic affairs.

profits, many of them
have continued
to raise prices,
which further strengthens the de¬
increases in

very

take

rope?

Mr. O'Dono¬

with

In

point:

sharp

profits; yet, notwithstanding

a

Rad-

Company,

was

are

will

pediency.

West Monroe Street.

at

we

Congress,

rain—an act of God.

cliffe have become associated with
A.
C. Allyn and
hue

to

a

a

Or, in the field of food,
could
possibly
the crop failure in Eu¬

economy,

G/

critical

a

to

econ¬

economist

Allyn & Co.

E.

it,

see

money,

along the line, it set in

Financial' Chronicle)

James

I

and,

less of the effects on our domestic

.—■*

coming months. As I said before,
most
corporations
are
already
vulnerable because of increased

or

try

determine which and when.

not

munist peoples of Europe,

Donald

Hell,

must

price inflation spiral in other in¬

Motors, U. S. Steel, Westinghouse, etc. were our war plants;
darned few, in fact, that were not.

ILL.

we

as

expire during the

contracts

their

demands

such

make

will

ers

chance that the Special Session of

what

eral

and

Heaven,

But

Certainly, the union lead¬

wages.

is,

As the boys said in

"It's

war,

Hoboken."

of living

profits are greater than an¬
ticipated, may force corporations
to grant substantial increases in

ever

question

dustries.

Potsdam

.can't get out of
this machin¬

a
non-potential war plant and a
potential one. Even a sausage fac¬
tory is a potential war plant. Gen¬

CHICAGO,

our

nationally

managed

a

settlement

Lewis

costs

the

O'Donohue

$64

"What next?"

inflation.

motion another turn of the wage-

a

to*THS

The

cost

to rise, which, to¬

continued

shorter

foresee

(Special

known.

would

settlement

tax¬

ery.

Bridges,

business boom the world has

the

particular,

tion

thing of which we
We are riding the
crest of the wave of the greatest
one

be certain.

can

read¬

a

gether with the fact that corpora¬

On Crest of Business Boom

that's not

will

vorable

have

that

"man¬

In

There is

hope for

play

L.

being asked to put up
explanation
is that

agreement and

government

still

I

justment, the inflationary devel¬
opments of the last few weeks
cannot be lightly brushed aside.

can

prevail, management
prevent a 1948 general readjust¬
ment
or
mild
recession
in
the
the controlling role in
ment from a sellers' to a buyers*
third quarter of this year.
I still
periods.
To put it
market.
Instead of the cost of
earnestly hope that we can have
more specifically, who could have
living levelling off, we may suffer
a readjustment which will remove
foreseen
the
extraordinarily fa¬
an
inflationary boom which ulti¬

One
is

one

has

away

the

tearing

American

is

managed
public debt,

can

.war

officials in

our

assisting in

are

Managed Economy

While, in the long

the experts.

to

other

a

extent,

forces

No

While

business readjustment or
another turn of the corkscrew of

omy.

plant and what is not.- This must
be

predictions

a

managed

Jie potential war plants and Sen¬
ator Bridges is not in a position
what

only differ¬

these

answer

have

we

what

God.

much sounder basis.

on a

can

stances.

either

The

pledged to destroy Germany's
potential
forever.
Senator

know

all

We Have

3iidges should therefore keep his
.nouth shut about the plants be¬
ing destroyed because they are

to

The

fail?

toralization program, nevertheless
it must be remembered that we
are

did

component

In the short

agers" will do under such circum¬

As

Why

must

of

acts

foretell

pect.

have,

we

in production
period of time,
readjustment would run its
course and the economy would be
living

the

the

homefront, eco¬
nomic factors of supply and de¬
mand were heading for an equi¬

couple of editors of this class have

foresee

one

could

the

ori

constructive and
on
the cost of

a

costs.

The forecasters cannot properly

No

adjustment

an

effect

effect

desirable

be blamed for the failure of their

prognostications.

such

little

it would have

even

were

mand.

war.

factors

be.

can

Two With

be

distor¬

Psychologic

German

to

seems

nomic forces

stresses

e

tions

expert tell the difference between

prqblem with which
are

t h

econ¬

though eco¬
working toward
a
thorough-going adjustment of
prices, costs, and supply and de¬

after

and

bargaining

inevitable,

were

was

needed

industrial- feet.

most

them

is

read¬

justment

getting her

off.

going about dis¬
mantling German plants so Russia
can

upon

1947.

a

collective

our

While

Under such pressure, higher
higher prices, and another
round in
the spiral of inflation

was

in

Such

non-expert, cites
type of plants being dis¬
mantled are glass plants when one
of the greatest needs in
Germany
is glass. I should like to have an

time

same

and thus could not be too serious,

a

Bridges
poses
such
a
librium which would permit mar¬
question as this he is being un¬
realistic and maybe he was never kets to stabilize on a more real¬
istic basis.
The forecasters, and
the
broad-minded, statesmanlikefellow which the Eastern intelli¬ business men alike, were unani¬
mous in agreeing that a recession
gentsia first thought he was.1- A

more.

the

wages,

Clearly,

her

we

that he came back with this poser,
not exactly new, but he has raised

more

omy.

due

When

down

and

justment

Morgenthau

completely

now

her

what

annoying the intel¬
ligentsia about Bridges mostly is

Why in the

aban¬

steel,
iron, coal, bilj railroad equipment,
equipment, and the heavy
machinery industries in general,

V I

plants are still being pointed to a
dismantled, and
carted
off
by readjustment.
Russia who, if she thinks she can Internation a 1
Raymond Rodgers
Keep us from sending billions over recovery
here to head her off, doesn't real¬ promised to reduce the export de¬

end.

no

One such

been

bent

are

iBut

Vanden-

Bridges,

farm

in

the

that

has

back to

Ar¬

Chairman

in

spiead, the

have

alarm.

more

^Senator Bridges comes back and
says the plants are still being dis¬
mantled.
Our
policy
may
be
changed and it is changed to the
extent that we are not now trying
to pastoralize Germany.
Instead,

He-

enjoying

the

business read¬

at:a

doned.

and Burton K.

Wheeler.

They

restored

be

now

formation

La Follette

have

v-t-

must

omy

mous

exports, especially of grains,
sharply
increased the price of
food, the most basic cost element

———

Teletype:

f C. E. de Willers & Co. New York
^aynej Robbins, & Co. Cleveland

CG

035

THE

(2164)

8

"

SUM

COMMERCIAL. & -FINANCIAL? CHRONICLE i■iMiff.r'ii

t

■

i

>

«■)

CHICAGO,
Olsen &

American

&

Power

It is understood that the

Light

that

so

the

Light, sub-holding company in the Electric
operating subsidiaries scat¬
Florida to the Pacific Coast,
of these subsidiaries will have to be disposed of before

some

system

comorm

can

tnt<e>——

to

geographical requirements of the
Utility Holding Company Act.
A

:

holding

a

as

company (Texas Utili¬
ties Company) has, however, been

the

group.

All these plans nave

Florida

later,

Gas

is also being concentrated.
In

1941

American
a

stock

common

the

to

stock.

apparently

preferred

In

cating

new

1943

basis.
held

were

common

a

Montana

the

of

receive

would

the

Pacific Power &
Washington Water Power
The

Coke.

&

Gas

first two of these companies have

been

now

merged

the stock
will prob¬

and

of the merger company

stocks

in

uniform

of certain

subsidiary com¬
panies (the Florida, Kansas Min¬
nesota, Montana and Texas com¬
panies) or in cash. 15% of these
stocks would be sold to the pub¬
lic to establish

market, and the

a

remaining 85% would be offered
to preferred stockholders at the
net price received in the public
offering plus 5% allowance for
underwriters' fees (however, part
of the

latter stock

sold if not taken

would

in

also

be

exchange by

the preferred).

cember

by

under

and

70.5%

29.5% 5 to

year's

committee

a

common

repre¬

stockholders

which all assets would

allocated
1

the

the

to

the

dividends

■'given r. to

percentage basis, or some

be

preferred

(a

common

would

also

Railroad

Also available is

of

stock, and

the SEG

rvent

Special

Situation—Analysis

15-year-old

England com¬
with large dividend accumuation—Raymond & Co., 148 State

pany

the

new

plan

cular

and

even

arrears

the

claim

might

for

cut

be

common

stock

and

down

order to work out some
the

par

in

value for

(which would

probably be "under water" if last
year's
mated

should

plan
on

the

basis

be

on

present

Also

N. Y.

earnings and reduced price-

earnings ratios).

.

Stocks

With

Robbins

D.

hem

Liberty Products Corp.

Crowell-Collier Publishing Co.

Rockwell Manufacturing Co.

Manager

as

of

Sordon

Steel

Casting

Co.—

Nal'l Securities
SEATTLE,
has

Gordon

Co.,

with

Pacific

ties

special report

a

Speedway

Foreign

Inc.,

and

review

Steel

60

outlook—H.

Beaver

Hentz

Street,

&

on

National Bank

oreux

Gordon

H.

ris

Co.

& Trust

Lam-

& Nor-

and

Dagg

In the past he conducted

own

investment

business

in

Seattle.

Co.—Third quarter analysis—C. E

& Co.,
6, N.Y.

Unterberg
Cleveland-Cliffs Iron

in

—Memorandum
of

Paul

&

Public

prior

Harris,

is late informa¬

his

4,

N. Y.

partment

thereto with

Eastern Corp. and Gruen

Watch.

^

and

Buckley Brothers, 1240 Walnut
Street, Philadelphia 2, Pa.

Co.,

York

New

in the trading
d

Cannon Mills Company—Circu¬
on

shington
Corporation

Portsmouth Steel Corp.—Data-

Also available

lar

Wa

& Co., Ill
Broadway, New York 6, N. Y.

General

of

the

a d i n g de¬
partment. He
was
formerly

Haupt

Analysis—Ira

Castings.

a

Ave-

in

tr

Portland General Electric Co—

Co.,

Power

14 2 5

with the First

Corporation—Re¬

view of

&

Corpora-

nue,

Calif.

Borg-Warner

Na¬

Securi¬

Fourth

Enterprises,
Inc.—Descriptive brochure—Hop¬
kins, Harbach & Co., 609 South
Grand Avenue, Los Angeles
14,

Portsmouth Steel.

on

the

tional

t i on,

Broadway,

120

New York 5, N. Y.
Also available is

Corp.

WASH. —Paul
H.
become
associated

Aspinook Corp.—Special Report
&

with

the

Thomas E. King & Co.

ley Heller & Co., 30 Pine Street,
New York 5, N. Y.

—Ward

Belt

associated

or

New York

Street, New York 5, N. Y.

Also available is

randum

a

,-

card memo¬

Utica

Inc.

Company

Mohawk

&

Circular

—

quarter report—Clement
A. Evans & Co., Inc., First Na¬
tional Bank Building, Atlanta, Ga.

Cotton Mills

Mohawk. Valley

Street,Utica 2, N.Y.

3rd

•;.4p-

Nov. BO-Dec. 5, 1941 (Hollywood*

Co., Inc., 238 Geneset

Investing

Circular

—

—

EVEN

Street,

New York 5, N. Y.;. jg •

v

Coca-Cola

Inc.—Memorandum—

Pullman,

A. M. Kidder & Co., 1 Wall

Engineering

Morgan

on

Company.

Broadway.

COMING

Stock

Utility

Guide"—G. A. Saxton & Co., Inc.,
70 Pine

61

issue

current

Public

"The

Company

J

•

Fia.)

,;

Investment Bankers Association
Annual Convention at the

Two With Ed. E. Mathews
Special to The Financial Chronicl*

BOSTON, MASS. — Lionel O.
Coal Corp.—
Comstock & Dansereau and David M. Stanley
La Salle Street, have joined the staff of Edward
EJ Mathews Co., 53 State Street.

Co., 231 South
Chicago 4. 111.

—

Holly¬

wood Beach Hotel.

\

1947 (Seattle, Wash.)
'Bond Traders Club of Seattle

Dec. 2,

County

information

Christmas

Party at

the

Olympic

Hotel, 6 p.m.
Dec. 5,

San

1947 (San Francisco, Calif.)
Francisco Bond Traders

Association Christmas Party and
installation of officers.vv';

Dwight Manufacturing Co.

Buckeye SteeL Castings Co.

now

trading
department and Robert K. Belt
is
assistant ii the same depart¬
ment.
Both were formerly with

Common

Bates Manufacturing Co.

r

circular

is

Bloom

Motorola, Inc.—Analysis—Stan¬

N. J.

Franklin

Trading Positions in:

a

&

Co., 810 Broad Street, Newark 2,

Late

STOCKS

is

Analysis—Adams & Co., 105 West
Adams Street, Chicago 3, 111.

Future—

A

t

INDUSTRIAL

available

Michigan

Three

on

lower

Company-

Myer-Bridges Co.

consum¬

of

Railway

Robert K.

Ralph Bloom

Company—

Co., Inc., 237 South Fifth Street
Louisville 2, Ky.

the

industry and stocks
}f several low-priced speculative
steel companies—Mercer Hicks &
Co., 150 Broadway, New York 7,

part of the call

price would probably be allowed,

be

ican would have been kept alive

Louisville

Metal—Cir¬

Master

The

posed 1946 plan, since under pres¬
no

Lumber

Memorandum—The Bankers Bone

Steel,

tion

it did in the pro¬

as

Products

Street, Chicago 4, 111.

Street, Boston 9, Mass.

American

It appears unlikely that the pre¬
ferred stock will fare as well in

Tennessee

Revised analysis for dealers only
—Comstock & Co, 231 S. La Salic

NeW

fol¬

assigning

and

Long-Bell

oi

are
analyses of
Wellman Engi¬

Co.,

Chemical.

&

packages of securities.

preferred; stock).

Under both the 1946 plans, Amer¬

in

available

neering,

abulaiion of Tublic Utility Bonds.

to

to

rather

value"

value

market

than

seems

now

"investment

low

Also

Foundation

comparative

a

Corp.—

New York.

in
49

developments

any

desirable

less

becoming
blocks

sell

of the

Developments

in

developed. Because
of the decline in the market it is
now

—

Analysis—Seligman, Lubetkin &
Co., 41 Broad Street, New York 4

speculative type common
stock—Kalb, Voorhis & Co., 15
Broad Street, New York 5, N. Y.
Also available is an appraisal of

mdthod

ent conditions

Another plan was filed last De¬

senting the

third

Company

Motors

Graham-Paige

Calif.,

Memorandum—C.

The management of American
filed with the Commis¬ Power &
Light has begun work
sion and hearings were held dur¬
on a new management plan which
ing October-February, after which
may be filed within a few weeks.
interest again lapsed. Under this
It seems probable that this plan
plan the company proposed to re¬ will also use the allocation meth¬
tire the .$6 preferred at 150 and
od. though there is no indication
the $5
preferred at 137 (com¬ as
yet
whether specific stocks
pared with par and arrears of will be allocated as in the Ogle
$143.57" and $136.31, resoectively).
plan, all ; stocks allocated on a

Payment would be made either in

Machine

Gisholt

and 38
&- Co.,

he industry—Vilafs &; Hickey,
Wall Street, New York 5, N. Y.

"bundle."

one

was

stocks

companies

Week—Current

ably be transferred to Washington
Water Power, putting the three

was

In September 1946 a third

taken.

plan

Ralph M.

that

announce

Analysis—Arnhold & S. Bleichroeder, Inc., 30 Broad Street, New
York 4, N. Y.

of

stocks—Northwest¬

Portland

and

a 90hearings

action

no

geles 14,

Electric,

Light,

on

usual

The
but

stock

and

Kansas

holders

Public

ern

old

stock to

common

preferred and
10%

November

Light,

Electric

&

orlhwestern

definite plan was filed allo¬

more

&

common

&

new

stockholders, but without making
definite provision for the com¬
mon

Power

Power.

Power

plan for issuing

insurance

analysis

banksr—Dempsey-Tegeler

series

The north¬

western group, as explained

Light filed

Culbertson,

—

125 South La Salle

210 West Seventh Street, Los An¬

"by the board" and a new
now
seem
to be starting.
in three Texas companies—Dallas
Last week Mr. H. Lane Ogle,
Power
& Light,
Texas Electric adder of both
preferred and com¬
Service and Texas Power & Light;
mon
stocks, proposed the direct
and it is possible that this group
allocation of portfolio holdings as
might
be
retained
under
the follows:
Preferred
stockholders
"grandfather clause," though
it would receive the stocks of the
seems
rather unlikely that
this best subsidiaries—Texas Utilities
be attempted.

Comparative

—

gone

to take over the interests

would

Street,

ILL.

.

Co.,

the following literature:

Insurance and Bank Stock Evaluator
80

for

company

northwestern

subholding
set- up

-»

&

Share System, has interests in
a wide geographical area from

&

tered over

firms mentioned will he pleased

interested parties

send

to

Bond

..iinUiAtfti

ii

Gulbertson, Olsen

Recommendations and Literature

Power

t fivii VrnimitCn!

niii.v.' t,i

i

Bloom and Belt Join!

a

Dealer-Broker Investment

American

Ndvembe£?27,1947

-Thursday,

j|l

When you want

to CIRCULARIZE the Investment

Dec; 15, 1947

(Cincinnati, Ohio)

Cincinnati Stock and Bond Club
Annual
Christmas Party at the
;

Firms in the United States and Canada, Remember Us!

Hotel Sinton.

1879

.

New York

&
Established

f&48

(New Yoi^itSty)
Security Dealers As¬
sociation 22nd Annual Dinner at

March 5,

have

We
for
of

and
This

stencil

metal

a

every

firm

list

mailing department

by

Cities

the

and

daily

revised

is

our

the Waldorf Astoria.

arranged alphabetically by States

within

and

Cities,

in

bank listed in "Security Dealers

and

America"

North

offers

firm

the

you

Nov. 15-18,

names.

1948 (Dallas,STex.)

National Security Traders Association Convention.
,

most

up-to-the-minute service available.

Robbins & Myers
Com. & Pfd.

Our

charge

States

SPECIAL
selected

Pettibone-Mulliken

N.

A.

States

addressing

We

Du Mont Laboratories

All

can

at

a

also

small

complete

addressing

for

Canada)

or

is $5.00
D.

S.
or

LIST

Cities

completed

supply

additional

per

the

(main

$6.00

per

within

list

(United

With E. M. Adams & Go.>

thousand.
only)

offices

(Special

or

thousand.

24

The

Financial

Chp.onicle)

ORE.—Robert S.
Carpenter has been added to the
staff of E. M. Adams & Co., Amer¬

hours.

list on gummed

to

PORTLAND,

roll labels

ican Bank

charge.

Building.

Joins A. M. Kidder Staff

Gilbert J. Postley & Co.
29

BROADWAY,
Direct




NEW YORK 6, N. Y.

Wire to Chicago

Herbert D. Seibert & Co.,
25 Park Place

REctor 2-9570

Inc.

New York 7, N. Y.

(Special

to The Financial

Chronicle)

MIAMI,
FLA. — Richard
E.
Bright has become connected with
A. M. Kidder & Co., Alfred I. du
Pont Building.

.

Volume

166

'Number. 4650

THE

COMMERCIAL

ConsumerCreditand

as

Warns against excessive competition among banks
j and finance companies, and asserts substantial relaxation of credit

We demand

processed

regulations.
part is to say
attitude of credit

something about terms, down payments, and the

Please understand that I

speaking from the problem of^
credit line banks rather thari in interest rates, etc.
that of the many thousands
who themselves engage
in the consumer credit business.
of

banks

There

.

be

may

few die-hards

a

who still feel that instalment sell¬

I need only
point out that the government has
just announced that the new cer¬

tificates,

running for 13 months,
1%%. It was not so long

will pay

that

ago

the

certificates

ing does not, or should not, have
a real
place in our economic sit¬

yielded
%%.
Coupled with this decline
in deposits and increase in loans

uation.

is

that

There

it

does

mand for

not

who

increase

say

the de¬

commodity, but simply

a

advances the
mand

those

are

time

when

the

de¬

becomes
result

cannot

purchasing
rests

effective; that it
in any increase in

That argument
the assumption that the

on

power.

income

of

mains

constant

and

year,
cannot

available

for

tial,

pur¬
na¬

industry, for substan¬

increased credit.

there
not

is

I

doubt

among you that
for
increases
in

one

asked

it

has
the

As

we

of

eliminated.

It

incumbent

therefore

becomes

banks

upon

been

now

and

as

curing inflation;
The
American
people
have
learned that a self-imposed sys¬
tem of systematic
saving enables
them to make headway in their
personal affairs, and that is just
exactly what instalment credit is
—it

forces the

for

money

for

to

he

It has

it

is

purpose

dedicated

him¬

always seemed strange

instalments, whereas it
to purchase
instalment

proper

articles

on

an

other
basis

Certainly

there is a line some¬
where, and undoubtedly there are
things that should not be pur¬
chased

on

instalment

an

obviously, those which
become

or

valueless

basis

Committee,
to

Credit

Possibly

current

premise

terms

and

detail

situation

with

usually free and loans
close

to

part

their

were

in

eyes

off-standard

terms

different cycle, where risks
be less, and it is in such a
that

there

bank

is

credit

a

and

great
a

bank
un¬

very

banks
some

in

low

ratio

ference

Should
the

to capital and deposits, so
possibly greater risks might
be taken. However, I am sure that
you are all familiar with the cur¬

that

rent situation.

about

which

be

not

you

to

covering reporting
leading cities

United

States.

It

is

obvi¬

credit.

The figures
5, 1947, and the
comparable date in 1946. In that
Nov.

period of time total deposits de¬
clined 0.8 of 1%, while loans in¬
creased 20%.

This has resulted in

things,
address

the

say

worry.

14th

including increases

by Mr. Yager be¬
Annual

Finance

American

Conference, Chicago, 111.,
18, 1947.




quired

metal

that

and

McChesney

metallurgical

do.

demand

houses.

more

houses. I

more

getting

We

proud to

am

ask

can

me

not

too

far

off

They
Regulation

of

strongly, for
enough adjectives,
the
great
importance of every
bank and every finance
company,
large and small, sticking to these
terms.

I have had numerous talks
with other banks and with finance

in

recent

weeks

on

subject.
It is obvious that
slight deviation from one of

takes a slight edge its com¬
petitor will take another edge,
pany

and

a

that

vicious

can

entire

snowball

completely

down

is

set

disrupt

payment

and

up

the
time

situation, to the great detriment of
everyone in the industry.
The

Consequences of

Sub-

results'on

are

the

of

departure from what, as I have
been able to find
out, everybody
recognizes as sound, proper terms,

a

on

which

be

made?

substantial profit can

a

I

do

not

mean

to

them

(1)

I

order

of

their

put
impor¬
some

for you.
sure

that

departure

from the terms would have
adverse

eflact

on

a

bank

available to the finance
business,
and that is the life blood of the

business; its inventory.
I have
just recently attended the annual
meeting of the Robert Morris As¬
sociates
there

in

were

California,

at

which

representatives of most

of the

major banks in the country,
and many of the
representatives
attending the Conference are the
men

who

are

concerned

study of finance credit.

(Continued

on

page

with

the

We have

23)

housing either.

after
the
years
ended—one of which

war

controls

government

September, the

Labor

Statistics

starts

at the rate

the

—

means

Bureau

housing
88,000. Com¬

of

as numerous.

rate

a

exceeding 120
hour of
day of the month.

hour for every

an

the day, every
No week-ends off. No
No

comparable

monthly

of

reports

almost

were

holidays.

data

exists

for

house

building rates in
the residential building boom of
the 1920's but September's record
this

time
is

year

record

at

units
was

be

rate

all-

an

that month.

annual

an

to

seems

for

of

This

950,000

year. The previous peak
937,000 in 1925. It now ap¬
that during this year our
a

of

of

some

our

individual free¬

our

could

building

imply

do

better

a

homes,

that

plant

the

job

and

of

store

building,

they

continue
to
advocate
the
medicine for America.
They
would prescribe a lethal dose for
same

a

find

we

record

of

in

the face of

performance

criticism

and

tions

of

acter

have

Attack

and

attack.

continual

Investiga¬

conceivable

every

been

this

char¬

a

strong

As

for

America's

is

issue.

by the circum¬
stances of depression and war, it
it a strategic bridgehead for those
would

told

of
at

alter

slumber

a

construction

doing

business.

We

hand that the

every

are
con¬

struction
the

on

eaten

industry has fallen down
job; that it is too moth-

i.i method

to do the

and organization

job; that it is riveti with

restrictive practices and moncply;
that it has

no

imagination and

no

quarrel with sound,

not

than

take

are

refuge

than

build

these

$1

have

dozen

to

pay

for

eggs and
pound for beef. Conse-">

a

quently,

houses
a

their

demand

for

more

wages is not without provocation.
This tends to raise the whole

level.

It

is

price ->
today to

unrealistic

talk in terms of 40 cent steak
and.
it is totally

unrealistic, too, tof
a
$6,000 house in 1939
$6,000 house today. The'
whole price level has moved
up.
compare

with

a

dominating

taxes.

Present

factor

taxes

in

form

the
tre—

a

Federal;

mately 800%. Today's tax burden,-

at sunrise

up

construction

postwar

reached

high in
500,000,000 and

in

mental

there

volume

endeavor

ployed 1,925,000

of

this

a

$1,-

monu¬

were

em¬

Mark well, too, that the Bureau
of Labor
Statistics, which is the
of

source

these

figures,

reports

further that in September for the
first time since the removal of

non-housing
there

was

volume

tion.

record

controls

of

part of

a very sub-1
selling price-

the

of any
building, including a home.
Tax
revision is
a
fertile field

July

on

ute

to

reduce

the

to

seems

and

have

there

is

reached

there

con¬

considerable

any

non-residential

enterprise

who

building

to

of

build¬

foredoomed

oblivion

once

a

house

cost

rose

as

to

100
141

during the
V-J

on

that

expect¬

that the price will decline.
cost

was

volume of residential
of

the

plateau

a

reasonable

ancy

until

con¬

The important
thing in our in¬
dustry is that the price of houses

Taking the 1940 home

not

of

struction.

1

construc¬

contrib¬

can

cost

substantial rise in the

was

struction

stantial

commercial

a

of

It

therefore, represents

wherein government

men.

when

war, standing at 141
Day. In the year following
went off, the cost

controls

moved up to 181. In the
past year
index has moved to 187. This

the

indicates

figures

a

of

plateau.
the

the restraint of government
decree
was
removed from the construc¬
tion

process of

These

Federal

are

Housing

Administration.

industry?

around but

They

tearing

note

dom

in

of

disaster.

that

in

(1947)

this

the

non-residential

$945,000,000
for

by

corners

It

is

pre¬

worthy

home
of

by

building

all

private
a

different

a

year

the

than

ago when we
onus

of

months. This means a real
saving
in cost. One reason for
this is the

ductivity at the building site both'

construction expenditures. What

picture

a year
ago it took 11 months
complete a house. Today, the
completion time is less than five

very

resi¬

far exceeds

so

47%

that

of free¬

construction

and

to the leveling off
housing costs is the fact

of

year

value

dential construction

Contributing

of

dark

in small bits their

up

accounts

still

are

they must be amusing

themselves

American

our

will

comparative haven other
observe that the men who

a-doing. Witness that in Sep¬

tember

of

political

a

comparison

this

taxes only has increased
approxi¬

projected

as

by
We

in

stating that so are
high. Very high.

beef

and

industry, it is

dictions

vulnerable

by

Higher

mendous
burden in
comparison,
with those prior to World War II.
The per capita burden for

industry into

that intrudes upon the
day's work.

emotional pattern and it has been
Made

con- :

struction

initiated. Unfor¬

tunately, housing is set in

the

higher cost of building is that of

home
Criticism

that while

industry
is
building
an
astounding rate, the

heavy sedative of Socialism
surely has lulled the British con¬

ing got under way. Where are
those of little faith in the freedom

Yet

true

and

eggs

A

The

that;

price of these houses is
high. We
could, with good grace, excuse

healthy individual.

volume

of

is

prise. Many of these who hold to
this belief
have
embraced
and
admired
the
socialistic
experi¬

industry will have started 825,000
houses and will have completed
approximately 800,000.
Bases

It

struction

75 cents

These
are
a
tenacious lot, for in the face of the
dismal
failure
of
the
British
socialized experiment in

on

said

'

around

of 'Britain.

dead"

Why Prices Are High

than could free
competitive enter¬

ments

be

more

houses.
critics

pears

that

of

met here with

government

regula-

pronounced

labor man¬
agement because the flow of ma¬
terial is more
consistent and be¬

cause it is
developing its "knowhow"; labor because it is shaking
out its wartime
incompetents and
is awakening to its
responsibilities

under the free

competitive enter¬
prise system. Another factor is the

ingress of

highly-competent,

(Continued

no

increase in pro¬

of management and

on

am-

page 29)

discipline.

constructive

very

credit

very

two

We have
am

some

construction
industry
is
now
building houses at a record-mak¬
ing pace.

way

consequences

of

spent struggling with unreal¬

who

Standard Terms

What|

show

to

years

Within

terms

might not in itself be
unsound, but it must also be per¬
fectly obvious that if one com¬

Hundreds

Note well that it has NOT taken

of

I cannot stress too

I do not possess

houses.

thousands of them.

pletions

words

a

score?

con¬

ourselves

State
Robt. W.

I

like

us

hand!

houses at

is

can

For

and

These

industrial

istic

the

on

dom.

industrial
spine; the best

shooting

of

the

pur

three

critics

our

tion weighing oh
Need

foundation of

for

of

more

was

approximately three r
that metal's manv use-:

personal | freedom inherent in the
American system of competitive
enterprise which is the economic

fill

steer to be raised and

a

critics too often suggest that
they
are
persons of little faith in the

re¬

to

the need

familiar with

terms, somebody

of

of

Nov.

May I

but merely to detail

are

fore

here.

in

their

*An

that I do not need

so

these

secure

many

Special

your

tance,

ously in these centers that the
major portion of your companies
as

Ameri¬

figures from the Federal

member banks in 95

of the

standard

Bank

Reserve

are

about them when I finish.

of

loans

I have

of

a

of

terval

That

might
cycle

excess

deeds

years—the in-

houses

some

my

were

might well be that

would

the

by

them

that

down-

by

Three

do.

of

songs

the

industry are not criti¬
cism; they are merely smears. The

agriculture,

that the two recommended sched¬

companies

reference to

some

credit, because if credit
it

with

you

I

for

years

criticism.

There

try,

as

human

rection.
that
But

is

there

all

other

endeavors, that need
Criticism

needed.

please

critics piay

may

.'.meeting

is

It
we

a

is

welcomed.

ask

that

of

Industrial Off. BIdg.
6's

1947

—

Bonds

&

our

Lexington Ave. & 42nd St.

(Chanin Bldg.)
All

Amott, Baker & Co.
INCORPORATED

c/d's

cor¬

stimulas

something other than

*An address

at

in

are

ACTIVE MARKETS

are

things in the construction indus¬

Wholesaler and Retailer
of
Investment Securities
Our

_

the

Construction

Advisory Council of the Chamber
nf Commerce of the United

States,
Washington, D. C., Nov. 19, 1947.

SIEGEL & CO.
39 Broadway, N. Y. 6

Teletype

NY

stocks, title

Department

Boston

company

and

participation certificates.

150 BROADWAY

DIgby 4-2370
1-1942

Trading

specializes in real estate bonds
and

issues

bank

by Mr. McChesney

*

It requires

struction

scientific

ules parallel each other so closely
that there is not enough of a dif¬

out

Situation

should

I

about

payments with

low

few

a

that

sure

recommended

the

Bank

the

define

and

adopted by the

as

the

wear

before

payments have been completed.

remarks

am

this,

W.

right to purchase a
piano or some other

aided

real

steel.

scratchy records of

Some of the attacks

food; the
best
nature,

Bankers Association and those

can

are

on

not

should

familiar

all

or

I

terms

a

house

things
is

has

or

save

that certain individuals feel

me

that

article

some

which

self.

individual to

all

for

reasons

first—I

re¬

national income

our

prime need

need

more

yesteryears?

for

fi¬

companies to hold the line
to keep terms sound, to avoid vi¬

to keep down ex¬ many
pansion by other means than re¬ Hunk
ducing national income, I have them.
duction in

fill

to

is

endeavoring

the method of

needed

few

theme

report to you today that America

has

years,

cious competition, and to keep the
picture
wholesome.
There
are

advocate

interval

e

can

imately three

—

the

about

six

S.J

at

'i*>-S>-

*

W, which has been in effect foi

keep purchasing power high, even
though there are contra-currents

anyone

food. It takes
approx
We demand

more

years—

We

nance

heard

t h

Regulation W

all aware, Regulation

are

tional income is not
constant, and
that every effort is being bent to

hot

Three

genius
Elimination

building houses

now

steak for the table.

as

forms.

our

lines of credit in the last year.

to

We know that

power.

very

the finance

re¬

year

therefore, there
increase in the

any

fund

chasing

from

that

be

general

community

every

considerable demand on
the part of all industry, not alone
a

tul

a

am

from

McCHESNEY*^

to design a steel-making plant, build it and get more steel in

years

The subject assigned to me is to be a
part of a panel on "Con¬
sumer Credit and Business
Trends," and my particular

line banks in view of the current situation.

By ROBERT W.

record-breaking pace, Mr. McChesney refutes
criticisms and attacks. Warns
attacks are smears of politicians and Socialists. Ascribes high building
costs in part to taxes, and says
prices are now %n a plateau," and cost of construction is
becoming
stabilized. Lays difficulties to inadequate and
insufficiently skilled workers,wand recommends a
policy
for stabilizing and
expanding building industry.

laid down by American Bankers

terms would induce further government

91

(2165).

Policy, Construction Advisory Council of the Chamber
of Commerce of U.

on

Asserting construction industry is

Stressing value of instalment credit as thrift device, Chicago
banker holds it is the responsibility! of banks and finance
companies

sound credit terms

CHRONICLE

:

Vice-President, Harris Trust and Savings Bank, Chicago, 111.

; to adhere to
Association.

FINANCIAL

Chairman, Committee

By VINCENT YAGER*

•

•

Construction Faces New Decisions

Business Trends
:

&

NEW YORK 7, N. Y.

Philadelphia

Thursday/! November 27, 1947

COMMERCIAL ■"& FINANCIAL < CHRONICLE

THE

(2166)

10

a

Hank and Insurance Stocks
This Week

==

Bank Stocks

—

in the banking situation, some
favorable and others not, which will bear careful watching and con¬
sideration. The postwar declines in bank deposits and earning assets
apparently ended early this year, for a moderate upturn in both items
was
recorded in the second and<$
new
high, thus continuing their
third quarters statements of lead¬
practically unbroken rise since
ing New York City banks.
the unpegging of the; %% rate
Total loans and investments of
last July.
Yields on other gov¬
New York Federal Reserve mem¬
-There

are

number of trends

a

ernment securities have also been

receding to their

ber banks, after

postwar lows in the

spring months moving

15,- 1952-1950,

Sept.

of

2s

the

in

An; example is found

up.

have since expanded
substantially; this is also true of
member banks in 94
(formerly

whifch recently sold to

101) leading cities outside of New
York. The most pronounced gain

has also been a moderate

of this year,

cultural
and

which have been
vigorously» for some
now
stand at all-time

28, 1947Nov. 22, 1947—

July

of interest rates is

powers

and enactment of1 other Truman

time Pearl

Board

three 2%

Appearing, on Nov. 26, in sup¬
port of President Truman's antiinflationary proposals before the

Harbor."

Today, if the fearless voice of F. H. LaGuardia could be heard
at this hour, he undoubtedly would give you a searching size-up of
the special session of Congress and President Truman's message of
the week. I don't profess to tell you what he might say.
But
I
do
^ <8>—
live well.
Other countries have
know the spir¬

for the
being

i.e. New York

Chicago. Yet, strangely, the
Board has failed thus far to re¬

and

quire the legal maximum of 26%
Chicago, while

in New York and

power.

both
New
York
and
Chicago banks
have been fully invested, for their
"excess reserves," as reported by
the Federal Reserves, have been
scraping along the zero line of
For

the
a

of

number

a

chart

years

1943;

March,

since

On

country-wide basis "all member

banks"

have

around

one

averaging

been

billion

the

dollars,

right

prob¬

day's

of goods

tribution

affect the op-

*

and

tion

port, W. Ave¬

Secretary of

Your

"Say,
way

f

called "The

•:

more

Little Flower"

to

day

his
he asked me to answer
believed were trying to

on

program;

those

we

Congress is in emer^

Now that

session,

gency

be sure

can

you

speak

that F. H. LaGuardia would

against those who are muffing
chance really to solve the

out

the

criminal shortages.

yes,

have failed to

of his critics

most

and

Truman

President

Both

sell America short.

critical

from

put enough stress on making an
immediate frontal attack against

the

The

prices.
crisis

high

of

causes

President

proposes

*A

broadcast

radio

Kaiser

Radio

over

•

by

Mr.

Station

WJZ,

pro¬

a

gram,

The President/it's

again

note,

Nov. 23, 1947.

(Continued

important to

into

pried

on page

/scarce

allocation

NEW JERSEY

posite
side
equation
There

and

of

the

inflationary

SECURITIES

which

would

thing of
is

a

to

seem

authorities

inclined

to

J. S. Rippel & Co.

Members New York Stock Exchange
120 BROADWAY,

Established

Mr.

tial
purposes
to production
of
needed
freight cars
and
farm

equipment.
Commerce

The

(L. A.

such

MArket

controls

City

higher

and

of

sug¬

to

requirements,

look at the relation of earning as¬

drastic, and

banks.

therefore,

con¬

sets to deposits as

Earning
Earning

Deposits
(000,000)
Manhattan

of
of

New

Bankers
Central
Chase

WHOLESALE MARKETS IN

Harriman told the Joint Commit¬
that

tee

power

to

fix

prices

on

goods snipped out of the country
enable the Government to

would
curb

profiteering in exports. "For¬
eign purchasers are often willing
to pay prices substantially above
the domestic price of scarce mate¬
rials," ne remarked, and main¬
tained that export" sales at exces¬
sive prices were draining goods
away from domestic use and caus¬
ing
domestic
prices
to
move
higher.
It was also causing, he
said, a rapid depletion of the dol¬
lar exchange, thus increasing tl|ie
cost of foreign aid and threaten¬
ing the foreign trade interests of
United

the

States.

Commerce

The

plained

controls

that

Secretary ex¬
did not expect

he

that

the

over

allocation

of steel and other materials would
be

fully exercised

as

they are

as

over

tin. "Controls should be lim¬

ited

in

character

and

applicable

to scarce commodities," he
said, adding: "Adequate authority
only

limits

these

within

will

be

re¬

quested to order set-asides and to
issue priorities, to issue limitation
materials."

to allocate scarce
the

cooperation of indus¬

try in fixing allocations and con¬

trols, Mr. Harriman expressed the
belief

that

it

will

not

exercise the

sary

to

"for

more

than

be

new

few

a

neces¬

powers

purposes,

leaving the vast majority of busi¬
transactions

ness

free

from

con¬

trol."

Gordon Williams With

Irving

INCORPORATED

NEW YORK 5:

67

WHITEHALL 3-0782

Wall Street

SAN FRANCISCO 4

BOSTON 9

CHICAGO 4

LOS ANGELES 14

10 Post Office Square

231 S. LaSalle Street

210 West 7th Street

HUBbard 0650

FRAnklin 7535

Michigan 2837

YUkon 6-2332

BS-297

CG-105

LA-1086

SF-573

PRIVATE WIRE SYSTEM CONNECTING:

LOS

NEW YORK, BOSTON,

'

Building

CHICAGO,

FRANCISCO
Portland, Enterprise 7003

ANGELES,

Enterprise 6011

j

Russ

SAN

Detroit, Enterprise 6066

$281

The

%

Deposits

237

75.2

24.8

108

34.2

83.3

11.7

331

23.8

1,161

81.6

18.4

393

27.6

4,542

3,696

81.4

18.6

1,193

26.3

-

1,195

1,000

83.7

16.3

310

25.9

612

78.2

21.8

213

27.2

103.0

148,

23.6

2,325

93.9

~~6.1

523

21.3

1,030

_

645

2,475

-

888

36.2

13.8

261

25.3

2,153

1,706

79.2

19.8

582

27.0

4,741

3,848

81.2

18.8

1,237

520

84.5

15.5

166

27.0

433

85.2

14.8

110

21.4

120

116

96.5

3.5

37

30.8

$22,962

$19,278

-

Trust

_

-

84.0%

16.0%

$5,899

25.7%

♦Including C. B. F. T.
NOTE—-Earning assets plus cash items exceed deposits, because they reflect also
capital, surplus, and undivided profits which aggregate approximately 9 % of total
deposits.

It is pertinent to note that earn¬
ing assets of these banks are at
a
very high level; furthermore,
the rate of return

on

these assets

is moving up moderately, due" to
the firmihg of interest rates1 in
many

directions

as

' of

Gordon

Assistant to the Man¬

aging Director of the International
was announced by
Camille Gutt, Chairman and Man¬

Monetary Fund

aging Director of the organization.
Mr. Williams will be in charge of

public

relations for the interna¬

tional financial institution.

26.1

615

Trust

City

>' appointment

Williams

27.1%

1,230

Trust

Total

NY 1-2875

82.5%

17.5%

627

Trust

York

S.

Deposits (000,000)

514

'National

U.

From Banks, Etc.
Total

of

783

Tr.

Trust-

Public

$854

Deposits

%

_

&

Manufacturers

New

(006,000)

Cash & Due

Unin¬

vested

316

National

Guaranty

% of

1,393

-

Exchange

First

Assets

Assets

1,423

_

National

Chemical Bk.

&

$1,035

_

York-

Trust
Hanover

Corn

BANK and INSURANCE STOCKS




York

New

gested

credit

additional

3-3430

Bank

^Providence, Enterprise 7008

in

also

goods shipped abroad.

on

1891

Bank

TELEPHONES TO: Hartford,

the

some¬

requirement

reported on the
Sept. 30, 1947 balance sheets of
the following 15 New York City

believe,

N. Y. Phone—REctor 2-4383

Gibbs, Manager Trading Dept.)

PHILADELPHIA,

in

18 Clinton St., Newark 2, N. X

Teletype—NY 1-1248-49

CLEVELAND,

be imposed will be

reserve

Secretary

recommended restoration of price

and

43)

interest, in view of the

present 20%

Harriman

-Sept. 30, 1947-

NEW YORK 5, N. Y.

Telephone: BArclay 7-3500
Bell

that

place

This writer

quandary.

that action will not be

Laird, Bissell & Meeds

may

It is of

lots of pros and cons

are

regulating

STOCKS

as

By this means,

the very orders, and to control inventories,

relatively moderate.

and contradictions in the situation

INSURANCE

trols

ar¬

rangements.
W.Averell Harriman

With

BANK

mate¬

rials, through
priority and

asserted, steel and other materials
could be diverted from less essen¬

inflation cause
shortages—

1

Number

Our
arises

distribution of
steel and other

reply,

Number 1 Inflation Cause

Henry J. Kaiser

take his place
one

would

likely

boy

of

controls in the

buy

that's awful simple.
The
to stop inflation is to build
plants to make more things."

en-

actment

goods than are made, they
are bound to bid up prices. That's
balled—-inflation."

J

and

the

immediate

more

to

want

for

asked

more

goods.
Be- t;
cause, just be- 'W->
fore his death,
the man you : f

me

'Commerce,

present factories

folks

when

"So

Re¬

rell Harriman,

produce.

perate short¬
of basic

ages

materials

lot

abroad—a

and

things than our

des¬

the

on

Economic

People

on

home

;|,

lems of infla-

increasing the production and dis¬

lowest level since 1933.

Senate

-

to buy our

revive.

-

at the same time it asks for more

Joint Committee of the House and

machinery, in order to
are going to keep
wanting to buy things at

it in which he
would face to¬

require New*York and

their re¬
26%, but
this may

proposals to curb inflation.

*

emphasizing possible ra¬
steps in order to facilitate the
tioning and fixing of prices and
transition. Whether Congress will
wages.
Perhaps there are some
authorize
the Board to require
hon-luxury
items
that
require
higher reserves is problematical. not giving adequate attention to
price controls and allocations. But
Such a move would compel the the basic economic problem facing
Why?,
Because the government
banks to sell short-term govern¬ the country. I believe industry is
have
fostered
industrial
anxious to do the job that's essen¬ should
ments, adding still further pres¬
tial, but it must have constructive, expansion last year; yes, it should
sure to che upward rise of interest
have started two years ago.
rates, and tending thus to increase speedy government cooperation,
Now, any necessity for controls
which
I'll outline later
in this
the cost of servicing the $260 bil¬
can be minimized by striking di¬
lion national debt, a contingency broadcast.
rectly at the causes of scarcities
not welcome to the Treasury.
You
can
directly attack
the
The President, in his message
The way to
With higher reserves the banks cause of inflation.
to Congress, put his finger lightly
obviously would be compelled to fight it can, be spelled out, in
on the real trouble.
He said, "Our
curtail
lending,
and this, pre¬ terms simple enough for your
long-range programs must stress
sumably would be "deflationary." child to understand.
ever-increasing production."
If your son hears you complain¬
However,
the most inflationary
How
long
away
can
"longtype of bank lending, and this ing about high prices and asks,
range" be?
only moderately so, the consumer- "Why
does everything
cost
so
credit
instalment-buying
loan much?"—you can tell him:
Senator
Capehart of Indiana,
which, it is believed, does not con¬
"There
aren't
enough things minced no words on a radio forum
stitute a very laree portion of the
the other night when he strongly
being produced to go
around.
aggregate loan accounts of most People want homes, and all that championed the expansion of fac¬
tories and food production as the
large New York City banks. On goes in homes. They want auto¬
mobiles.
They are making good immediate solution.
the other hand, loans to business
money and they want to eat and
Expanding Industrial Output
for the purpose of facilitating and

including restoration
of "Regulation W." However, the
Board already has authority to
require reserves of 14% for "coun¬
try" banks, 20% for Reserve city
banks and 26% for Central Re¬
city banks,

of tax incentives' to expand-producing capacity. Says this would stimulate' competition
and' prevent concentration of economic power. Points out shortages
(in steel, aluminum and food, aihd says we are faced with a "peace¬
shortages, advocates long-range program

present crisis of shortages and
soaring prices. I am sorry that
much thinking in Washington is

advocated,

serve

the

Chicago banks to move
serves
up to the legal
it seems possible that
be done in a series of

advocates, among other pro¬
posals for retarding the inflation¬
ary spiral, curbs on credits, espe¬
cially in the category of "con¬
sumer credit" for instalment buy¬
Federal Reserve Board are

U.S.
Govts.
106.73
105.29

that

believed

soon

may

upward.

President Truman's special mes¬

Additional

is

It

trend

Forty
Bonds
103.91
98.65

Ten
Industrials
104.34
100.66

107.57
102.99

Commerce Secretary alfco urges
immediate export price controls

asked

follows:

Ten
Utilities

sage

ing.

the

as

87.31

103.65

clear that the basic

It is

interest

in

porate bond prices, as indicated
by the Dow-Jones Bond Indices,

92.94

110.79

in

found

Ten LowGrade Rails

High-

Ten

rates may be
movement of cor¬

trend

peaks.
/(Interest rates are moving up in
many
directions.
For instance,
Treasury bills dated Nov. 20 sold
at an average yield of .931%, a
Grade Rails

harden¬

of' rates, particularly in the
categories of loans to dealers and
brokers, and bankers' acceptances.
Other evidences of the upward

ing

loans

advancing
time

yield 1.43 %
compared with 1.25% last June.
In rion-government areas there

agri¬

has been in commercial and

industrialist, lading chief cause of ihflattotfto" production

*

•

•

Allocate Steel

By HENRY J. KAISER*

Prominent

DEUSEN

By E. A. VAN

Harriman Wants to

as

noted above.

Furthermore,

if earnings assets
through the imposi¬
tion of higher reserve require¬
ments and other restrictions, it
Would only be good business and
are

reduced

common

asK

sense

for

higher rates

on

the

banks

their loans.

to

Williams

Mr.

was

several

for

with
Bankers
Trust Company in its London and
connected

years

New York offices.

During the war
closely connected with the
Lepd-Lease program,-both in the
Office
of the Secretary of the
Treasury and later as a member
of Mr. Stettinius' Foreign Trade
staff. After two years in the Navy,
he

was

he

was

released

partment where

to the State De¬

he

was

to the

U.

to the

United Nations.

the

S.

Adviser

Economic Delegation

International

He

joined
Monetary Fund

in November, 1946.

Volume

166

Number 4650

THE

COMMERCIAL

&

FINANCIAL

CHRONICLE

(2167)

of

VS.
By PAUL EINZIG

Formerly Editor of the "New Republic"
i

policy.

eludes deflation will

LONDON,

ENG.—The dramatic circumstances of Mr. Dalton's
resignation are, at the time of writing, expected to be subject to a
Parliamentary inquiry, and it would be risky to make any comments
which might appear after the
inquiry has been actually initiated.
Sir Stafford

Cripps, on the
austerity. He

why the
background to
the change at

hand,

the

the reduction of the "gap" by re¬
ducing consumption rather than
relying largely on an increase of
production. Mr. Dalton's principle

deflationist while Mr. Dalton is

inflationist.

British

Treasury
should

not

dealt
The

be

with.
of

cause

Mr.

Dalton's

h i

of

not mind

flation,

cable

indis¬

cretion

wants

Cripps,

in

proved

communicat¬

did

He

classes

and

Sir Stafford

the other hand, disap¬

means.

ing the
tial

Dr. Paul

essen¬

points

his Budget to

journalist shortly

a

before he announced them
House
of
Commons.
It

probable,
the

however,

absence

of

that

the

to

seems

even

in

that

indiscretion

come

he would have
with

into conflict

influential section of the

an

Cabinet,

and

outcome

been his

quite

possibly

the clash

of

Cabinet

beyond

our

inclined

was

events

at

that

d i f ferences

cycle

under

tainty

to

similari-

e s

the

of

1921,

a

was

above

the

above

it

would

the
have

i

1 1

gently.

everything

work out
salvation before applying

her

own

for

new

Dalton

poss-ble

But

Mr.

vic¬

allowed to

was

a

pro¬

scored

half-hearted Budgetary

a

fort.

aid.

American

eventually

tory, and he
duce

to

He

ef¬
criticized,

strongly

was

not

t

n

haps

e

i

-

George Soule

Per¬

At

not.

i

Happened

in

let us summarize briefly
happened last time. Immedi¬

States, prominent figures of the fi¬
nancial and business world, and

ately

noted

ment

succeeding
the
armistice
Germany and the abandon¬

with

professors of economics, all
of whom have in the past made

of

war

controls, there came
slump in the winter of

extent, in the
country, has been undermined by
his grave error of judgment on
the

sence

resignation.

Dalton's

Cabinet,

in

and,

mons

the
to

return

addition,

feeling

popularity

to

among

(as

distinct

from

politi¬

Ministers

Parliament

of

Com¬

convertibility.
In
was
a
grousing
the economically-

cally-minded)
Members

of

the

less

there

minded

House

in

and

that

he

not

was

making the necessary ef¬
fort for assuring the success of
Sir Stafford Cripps' export drive.
It

is

he

known

tion

but

of

for

to the

overruled in

contrary

to

time

some

introduc¬

supplementary

a

was

When,

that

opposed

was

Budget,

this respect.

his

Budget, he

is

said

his

to

keep to

ity

have

done

utmost

minimum the auster¬

a

measures

his

of

some

col¬

leagues and the vast majority of
experts were urging on him.
On

the

backed

other

by

he

hand,

was

large proportion of

a

the

Parliamentary Labour Party,
especially by the Members rep¬
resenting

various

labor

unions.

Their line of argument ran as fol¬
lows: It is all very well for econ¬
omists to demand

purchasing

the

to

power.

psychological

situation.
are

meas¬

in order to mop up excessive

ures

the

austerity

at

The

last

aspects

industrial

of

the

laborers

beginning

for

need

They overlook

an

to realize
increased effort

raise their output.

Should the
government adopt drastic auster¬

ity measures in order to curtail
their
purchasing
power,
they
would inevitably react to this by
relinquishing
their efforts,
and
the
output would fall.
Conse¬
quently, the curtailment of pur¬
chasing power would be
more
than

offset

volume

of

by a decline in
goods available

the
for

sale.
Those
masses

in
of

close

touch

workmen

to think that there is

with

are

a

the

inclined

great deal

in this argument.

Not only would
organized labor enforce an up¬
ward adjustment of their wages if
additional taxation and

a

removal

of food subsidies raised their cost

additional

of

tobacco

duty,

the

majority of speakers during the
Budget debate had very little to
say in favor of the Budget.
This
did
not
indicate,
however, the
.rue proportion of supporters and
opponents in the Labour Party.
Many of the Left-wing opponents
of an increased Budgetary effort
ire .too
inarticulate on financial
natters to take part in debates
this kind.

of

New

wish, he

set out to produce the
to

ay

of cuts in food subsidies and

when

increased

willingness

This

to

work

is

particularly true
about miners, judging by the ris¬
ing trend of the coal output in
rbcent weeks.

Mr. Dalton and his

supporters in the Cabinet and in
Parliament held that it would be
a

grave error

to risk

an

able reaction.




unfavor¬

ords go, there has been

the

no

The

rec¬

continued

inter¬

of

ruption of the
the

In

to

in

cycle

the

tute,

the

we

New

Research

York

City,

at

present.

Within

cut in

dropping

14,

the

downward

ex¬

level.
more

Insti¬

Nov.

about

middle

procession.

to

fell

year

from

$2.50

bushel to below $1
of

1921;

$1.88,

they

the average,
the prewar

on

nearly

Wheat
a

autumn
been

half,

a

corn,

dropped

or

in the

which had
42

to

Labor

13%.

or

Statistics'

living dropped

Industrial production*

reduced

from

in

high of 19%

a

of

prewar

3921.

1914 to 2%
There

Cripps to scrap
budget and
to

his predecessor's
introduce much

sterner

the

securities

measures.

cepted

This advertisement is not, and is under

over,

and

spirited

revival

the

are

facts

known

ntend

everyone, and personally
remembered by many. If we were
to repeat this experience

exactly,

the

inference

But

more

order to
is

be

obvious.

analysis is desirable in
whether the parallel

see

close

as

would

it looks

as

the

on

next.

make
any
alterations
ordinary Budget in April,

Since

technical

are

understood

conceptions.
your

a

without

technical

I shall therefore ask

forgiveness for inserting at

this point a little economic

simplifying it
without

as

much

truth

be¬

that

the

yond recognition.

Everybody recognizes
basic

determinant

conditions is the

(Continued

cents.

of

economic

relationship beon page

33)

an

the Socialists op¬
further austerity. Now

to defy

to

posed

Mr.

the

Dalton

is

position

longer
be

no

he

government

would

in
in

openly any
such measures, and the majority
of the Labour Party would rally
to

So for the time being

round him.

Sir

rate,

any

The Celotex

oppose

Stafford

Corporation

3lA% Debentures (Issue of 1947) Due August 1,1960

Cripps

will have to pursue the policy he
had opposed until now within the

Cabinet.

There is to be

taxation

till the spring.

no

Price $97V2 Plus Accrued Interest

further

Nor is he

likely to cut subsidies. Those who
expected him to do away with the
cheap money policy had to learn

Copies oj the Prospectus

from his Lrst public statement as

as

are

Chancellor that he intended to do

nothing

He refused
to be convinced by the chorus of
economists who claim that cheap
money is largely to blame for in¬
flationary spending. As a result,
he

has

the

of

lost

who

their

with

the

regarded

him

as

long as Mr. Dalton
was there, but
now they are in¬
clined to adopt fully as critical
an
attitude towards him as they
did

in

securities in this State.

Paul H. Davis & Co.

Union Securities

Corporation

Con¬

so

man

be obtained only from such of the undersigned

sort.

favor

servatives

may

registered dealers

Stone & Webster Securities

Corporation

A. C.

Allyn and Company
Incorporated
Incorporated

Central Republic Company

Hornblower & Weeks

(Incorporated)

towards his predecessor.

Paine, Webber, Jackson & Curtis

Kebbon, McCormick & Co.

Case, Inc. Opens
(Special

to

The

Financial

Laurence M: Marks & Cc.

Chronicle)

FRANCISCO, CALiF. —
Case, Inc. is engaging in a secu¬
rities business from offices at 625
Market Street. Officers are Joseph
SAN

Hollzer,

President;

Eleanor

Julien Collins & Company

P.
November

Bettner,

Secretary,

and

Wollenweber, Treasurer.

Rudolph

21,

1947 o

theory,

possible

as

distorting the

circumstances to he construed

solicitation of

men,

complicated

like economic life cannot

process

be

you

wrill realize that

you

$3,000,000

Indeed it would not be easy

him

that

at

a

sur¬

face.

to

until the

a

securities.

no

as

to

almost

as, an offering of thefollowing
offer to buy any of such
The offering is made only by the Prospectus.

or

began

1922.

made it plain that he did not

and

or

Instead, he ac¬
Budget he inherited,

for sale

wer&

nearly 5 million unemployed. The
depression, which was one of the
sharpest on record, was quickly-

relin¬

has

Dalton

Mr.

the

were

unhappy

until

Agricultural prices then

They had been the highest of all,
rising to about the same level as

by Mr. Soule read be¬

Textile

1920.

led

learn how

may

these

char¬

enterprise.

business

future

*A paper

fore

economy

any

by

eliminate

and downs of

ups

boom

of

quished his post in favor of his
opponent in the government. Many
oeople
expected
Sir
Stafford

discouraged, at a moment
they show signs of an

harder.

as

1947.

of living, but they would also be¬
come

sometime. As far back

acterized

12

These

Now
what

Bureau

index of the cost of

1920

only by Conservatives but also
a
brief
Right-wing Socialists for hav- flagrantly mistaken predictions.
1918-19. This was followed
by a
ng failed to provide the financial
It is as well established as any rapid reconversion, swiftly tTsirtg
nessures required by Sir Stafford
prices, an inflationary boom in all
conclusion
of
any
science that
Bripps. While the Left-wing So¬
there will be a business recession the speculative markets, and an
cial sts were delighted at the ab¬
epidemic of strikes.

Mr.

The

in

What

mislead you, I shall
be in very distinguished company,
including Presidents of the United
rate, if

any

of

predicting them with
any degree of certainty. The busi¬
ness
cycle is not periodic in the
sense
of the cycles in physics or
astronomy, which make possible
accurate prediction.

future

to

done

The general aver¬
of wholesale prices fell from.
130% above 1913 to 50% above it.

age

method

be

have

above prewar.

shall

we

pate

uncer¬

posi¬

of

in

The

not the probability
but the date of its

recession,
arrival, its duration, and its sever¬
ity. All these things have been
subject to great variation in the
past,
and
there
is
no
known

1919-

bust

be

control.

of

with

present

theboom-and-

more

Cripps,

to

-

concerns

t i

events

claim

offset by expansion of bank

——-—

and

if
only in order that Britain should
able

>•

tremes, but in view of the present Other prices followed, though at
inflation I think you will agree some distance.
Prices of ixianuwith me that nothing that has factured articles never fell as far
been done yet has brought the as those of
crops, remaining 66%

time, and not¬
ing both the

Sir

Stafford

government surplus is not substantially
credit and investment.

—

of

support

of

a

tion to antici¬

The

Einzig

living

of

when

come

main

it made for good tem¬

on

*■

-

an

assure

certain amount of in¬

a

as

v:*"-.'w".

was

course

to

live.

let

and

per among working
middle classes alike.

course

inexpli¬

s

He

live

to

was

resignation
was

favors

rT: XM*

There is

I

ever,

'V;.X-

*,

no more
risky form of fortune-telling than the making of economic forecasts.
persuaded to discuss the future with you only because I have recently had occasion
other
tp make a careful study of what happened after World War I.
Perhaps by summarizing
is a
the

no

how¬

reason,

•

briefly what happened to bu siness after both World Wars, and points out defla¬
tionary recession has not yet occiirred, as after World War I, merely because larger bank borrowings
have offset reduced government spending, and currency volume has not been reduced. Sees likelihood
of consumer demand being unable to absorb
increased production unless prices are reduced, and con*

mitting sterling convertibility as to indiscretion in disclosing to
his budget figures.
Hints disruption in British Cabinet arose

is

i

Mr. Soule summarizes

press

There

Recession

a

By GEORGE SOULE*

London observer points out Hugh Dalton's resignation as British
Chancellor of the Exchequer was as much due to his error in
per¬

from Dalton's inflationist

11

The Milwaukee

Company

Stein Bros. & Boyce

12

COMMERCIAL

THE

(2168)

&

FINANCIAL

CHRONICLE

Thursday, November 27, 1947

The Outlook for the Railroads
<y>t<

..

..

By ROBERT R. YOUNG*
Chairman of the Board, Chesapeake

One

the

of

so

& North Western.

controlled

operating performances among the major
far this year has been that turned in by Chicago

poorest

Class I carriers

It is true that the

transportation costs have been

somewhat better than those of some of the large eastern

roads but that is hardly an

inspir¬
ing i concession.
Moreover,
not help to answer the arguments of
orily was the ratio high in itself, those who have claimed that the
but, also, it showed practically no ICC was far too severe in its cap¬
improvement over a year ago. The ital revisions in bankruptcy pro¬
transportation ratio for the nine ceedings., This road was for some
months
h r o u g h
September time pointed to as one of the mos
amounted to 43.9 %.' In ; the 'like horrible examples of the unneces¬
1946 interval the ratio had .been sary
wiping out of old stock
44.2%.
It is notable that even equities and drastic scaling down
Pennsylvania, which has the high¬ of junior creditors. It was claimed
est ratio among the major car¬ that the new capitalization was
riers, has at least shown greater far too low in the light of the
improved
basic
earning
year-to-year improvement than road's
power. It is almost frightening to
f that.
It is the opinion of many rail contemplate what might now be
analysts that this year's perform¬
ance
of
North Western merely

In searching my memory to
try and discover why I should have had this great antip¬
athy for Wall Street, which has done so well by me, i had to go back to the 1907 panic,
when my father, who was a banker, an ex-co
wpuncher, looked very gloomy around the

house

and

ceased to give
me

asked

my

ther

was

gloomy,

ever

to the

war.

JN-

One of the most serious basic
adyerse factors in the Chicago &
North
Western
picture
is the
short haul nature of the traffic.
Even though there is considerable
through traffic moving the length
of

the

line

Omaha and

between

Chicago the road has a very short
average
haul on freight.
Thus
there are insufficient line haul
to

revenues

dividend for the year bu"

for the

compensate

at best any

balance for the junior
equity will be modest. Consider¬
ing the; Unusually high level of
business and traffic this

can

hard¬

ly be considered as auguring well
for normal earning power even
with further rate increases.

Wilbur Nominated by

Baltimore Bond Club

•

-

•

Another

inations

' ' ;

11

all

over

expense

ratio.
The operating
•

'

New

weighed
powder in the building in which I
cut rifle powder told me one day
that, on paper, he had just played
Triangle File up on the Curb from
three to nine and then gone short
on
it, played it back again, and
made $900 by the transaction.
So I wrote my father back in
that

he

had

been

few

a

months,

month, but in
the

$100

and

I

Stock

got

Exchange
with

do

on

to

-

-

•

•

advice

He put

i d

e n

t;

put

a
little later why
into the rails, but the

subsequently

reason

developed
bucket shop, and

was

I think that the firm

Pearson,
Brown

&

Sons, Sec¬
retary;
and

Le

Nerval

Roy A. Wilbur

H.

King,

Jr.,
Kidder, Peabody & Co., Treasurer.
W.

of

Carroll

the

Committee

Arrange¬

on

Nominated

for

election

Edward

B.

are

Freeman,

of

officers

the

Sener,
Lockwood,

Peck & Co., and Edward
Robert Garrett & Sons.

Election

to

Mr.

K. Dunn,
will

ing to -be held at the Southern
Hotel on FridayyDec. 12, at 6 p.m.

was a

was

expelled from the
York
Stock
Exchange for
bucketing orders.
Well, I think if I had been run¬
ning a bucket shop any time in
the last 20 years I wou'd have
put my clients into the lails too.
I watched my

10 shares of Rpck
10 shares of MOP

Island and the

down, while Du Pont, Bethle¬

hem

Steel,

went

and

In

up.

General

those

•

4

held

organi¬
immediately

they didn't go up
five-eighths of a point. They went
up a thousand points.
I

saw

Motors

Du

Pont

increase

in

value

8, 10,
15, .20 times,- arid then I.saw- them
do it all over again in the 2Q's.
still

During

Herman

D.

my

Rock

.

J.

GUARANTEED RAILROAD
_

:)-

period

that

New

substantial

York

..

IS Broad Street

• ?

New- York 4, N. Y.

Telephone BOwling Green 9-6400
Teletype NY 1-1063




.

a

and

tendency

it

Central

dividends

;

true

did

pay

got iup

short of the

*

with another institution.

in the fGreat Hall of the

a

He

President of the Atlantic Na¬
Bank

in

He

was

member of the New York Stock

Exchange from 1927 to 1931.

Young at

of

Commerce,

Nov. 18, 1947.

return

New

Chambeij

York

Ci y*

that

they have set for the rest of the
railroads.
The
C

if

that

remains

fact

& O

the

doesn't bring up

the rate
of return of the other railroads,
the rate of return of the C & O is
down. That's why
ourselves in

come

interested

have

a

as

rail

securities.

reorganization, in
through-service and in the Pull¬
Company and in the New

man

York Central.

•Now, why is it that the greatest

other rails which are much
cheaper than New York Central,
but why is it that General Motors
many

the world is selling at

bankruptcy

levels

and Steel and Du Pont and all these

particularly when that in¬
dustry or that nation is about to
take the torch of liberty and carry

other

it to all four

companies have multiplied

geometrically

value,
yester¬
day wiped out; when Missouri
Pacific would have been wiped
out by the insurance companiessponsored reorganization plan, ex¬
cept for Alleghany Corporation,
when

and

our

selling,

in

certainly,

Rails

was

York

New

of the world?

corners

market

Rock Island

when

at

levels.

Central

is

It is

simply because the railroad

industry
made

rate

Political Football

a

a

has been and is being"
political fooioall on the
Since

issue.

1930, if

you

1920

take either

since

or

one

as a

will find that railroad!
bankruptcy rates are no higher than they were
then. Yet supplies, materials and
base,

you

labor have doubled.
The

Rock

Island

Situation

Court

the

and

Interstate

Commission

merce

and

Com¬

the

in¬

companies wiped out yes¬
terday, has $80 million in cash.
It
has $65 million
in net free
equity, in equipment which mar¬
ket-wise is worth a great deal
surance

than

more

it

$65

couldn't

be

million, because
replaced today at

price. So there's $145 million
of cash and equipment which you
any

could

sell

sell it

quicker than you could sell
shares of General Motors.

10,000
But

tomorrow. .You

the

•

Commission

and

the

insurance companies and the Su¬

Court say that that

preme

great

we

last

remember

You

Rock Island, which the Supreme

had quite a break
That

market.

which the

the

was

time

at

Pennsylvania and New

Central lines

York

ing

fall, when

in the stock

before

were

appear¬

Com¬

Interstate

the

Commission to argue for a

merce

rate increase, and

they were mak¬

ing a showing in Washington that
they were on the verge of bank¬
ruptcy. Those hearings were made

public, got into the front-pages of
the newspapers and you could see
the market go
those facts

down every day as
put into the rec¬

were

ord.
,

Commission

The

then

on

a

rate

been made

was

hearing

application
three

and

that
half

railroad property which on top of

had

those

there had
been three or four wage increases,
not only approved by, but incited
by
government
agencies.
This
prompted Alleghany Corporation
at that time to print an advertise¬
ment of an open letter to Mr. Al¬
fred Schindler of the Department
of Commerce, pointing out to him
that he had appeared before the
Commission the day before, urg¬
ing that the Commission hold up

liquid assets has
lion of rails, stations
fixed property, at 1913
fair capitalization for
pany

lion

$400 mil¬
and other
values—a
that com¬

has been fixed at $30 mil¬
first mortgage and per¬

of

haps $70 million of income bonds
and maybe $210 more million of
Stock. So that the bonds which the
insurance

companies and the Su¬
Court and the Commission
bave said that this great railway
property shall bear, is actually
preme

less than the cash and

equipment,
and those great bodies which are
supposed to stand for free enterrise and against Communism say
that much
of the
$400 million
should be ignored and wiped out.,
I Now, what business is this of
the
Chesapeake &
Ohio?
The
Chesapeake
9

or

1930.

.to

us.

have

10%

Ohio is earning
its capital and has

&

op

previously

years

a

a

and

rate increase until the situation

became

clear.

what

Just

he

Wanted clarified I don't know, bpt
at least, in the footnote to
%
open letter we wrote to him we
asked him how long he waited

for
the-situation tor become cle^ Mr
fore he urged a wage increase.•;, *
.

.This
farce

time

year we have .the
same
being repeated again. Tnis

the

Interstate

•

Commerce

'pretty

regularly,
since Commission is
actually going i>ut
particular credit to
the far corners of the nation to
That is simply because we
receive testimony against rate in¬

That's
been

no

fortunate

enough to creases from people who are mak- ;
traffic. ing
30, 40, and 50% return on capfThe rest of the railroad indus¬ tal; even from farmers who ai?e

try

gone

New York; from
1914 to 1922 when it was merged

Brothers.

unconscion¬

of

industry in the richest nation in

posed to have

a

Stenographic transcript of tan
address by Mr.
a meeting of the Asso¬
ciation of. Customers' Brokers find
N. Y/Sbctety of Security Analysts

Kountze

as

rate

matter of fact, I think there are

Ijiave coal

extemporaneous

of

half

the

as

As

! }'; been,

is

and

recommending

not

Central

other

pretty high price. I think'in
this period in which I was sup¬

to

tional

STOCKS'BONDS

»

Island
>

that

Kountze,
retired
banker, died at the age
of :74
after an illness of two
months. Mr. Kountze was partner
in the old New York investment
New York

was

a

being

return

railroad

I'm

to

1

Herman Kountze Dead

'

General

and

to weakness/^

.

when

stocks went up,

But

be

Motors

days,

Misouri Pacific Showed

will

short

a

New

take

place at the annual business meet¬

that it

time afterwards

go

Board of Governors

tion

until

me

in the

could
me

e s

Alex.

following.

Special Securities

office

to 'What

as

$100.

my

house

i

■X1

ferry

a

broker's

B.

*

V

a

Wilmington

Summer field

Bonds
1

$62

my

certain New York

a

asked for

and
to

I

over

and went into

on

few months I had

a

and

went

was

selling for 170
$7 dividend it's sell¬

a

York

the

then to open an account one had
to have at least $100. Well, it took

zation

Guaranteed Stocks

in

business, and that I was
going to have a look at this stock
exchange business. So I found out

me

far better

a

purchase
saying that it is cheap in rela¬

or

wrong

The annual dinner df the

V.

York

who

discover

.

|he end of the war should at least

the

Exchange

Pr

performance and

,1 earnings
record of Chicago
&
v North Western in the period since

prewar

he

Vice-

ments.

the

of

ex-member
Stock

the

I was working for
powder monkey. An

a

as

in

came

Co.,

Finally, North West¬
ern has,a large amount of mileage
of very light traffic density. Such
inflate

when

DuPont

the

10 of Missouri Pacific and I didn't

Mead, Mead, Miller
& Co.. has been named Chairman

to

my

into 10 shares of Rock Island and

e w e

profitable. Here again in the case
of this particular
road a large
proportion of the movement; is

mileage also tends

and

6

ally

light density

days,

Central is

stated

already

of

isn't

return

the

20's; the
richer. The

has

rate

earned by the coal carriers is un¬
conscionable. Well, that rate of

we

Now,

next experience with

my

Street

in

certainly

paying

New

Well,

from England.
shipment didn't come.
gold

Then

the

going to

Young

S.

5

aspect of the
picture is the large
volume of less car load freight
handled. This is expensive traffic
to handle, with an unduly heavy
labor cost involved. It is gener¬

short haul.

R.

next shipment of

the

Wall

is

did

ing at 13.
Robert

Watts,
Jr.,
Baker,
Watts

adverse

North Western

conceded that with present
wage rates the great bulk of LCL
freight is handled at a substantial
out-of-pocket
loss.
Chicago
&
North Western also handles
a
fairly heavy volume of passenger
business which is generally un¬

are

-

the

on

it

that

and

Christmas that year was going to

depend

much

Commission

able

property today than it

de¬

-on

gentlemen
facts

do.

C & O. The Interstate Commerce

20's and instead of

shipment of
gold
from
England,-

Texas

heavy terminal costs in the Chi¬
cago area.
These terminal costs
BALTIMORE, MD.—Le Roy A.
.are just as heavy on a
shipment Wilbur, Stein Bros. & Boyce, has
moving 50 miles as on a similar been nominated for the Presi¬
shipment moving 200 miles and dency of the Bond Club of Balti¬
producing four'times the gross more, it has been announced. Mr.
,•*<'-><
Wilbur would
revenue. The location of the lines
succeed
Jo¬
militates against any correction of
seph W. Sener
this .situation -on a permanent
of
basis although during the war the
Mackubln,
average
haul
did
increase
to
Legg & Co.
above 200 miles as compared with
Other nom¬
only 161 miles in 1940.

thing
pended

than

New York

y

You

those historical

nation

of

when

v

dividend.

ness

was

were

the days

New

today the New York Cen¬
tral is doing a much bigger busi¬

Wall Street.
Those

dol¬

the

But

and

because

million

a

probably

better than I

so

she said it

$7

know

fa¬

why

in store for the road had the pro¬

ferred

a

mother

my

made

Central by that time might
have been 170, and maybe paying
York

gum,

I

and

think

I

lars,

of

Yucatan
and

market

daily

my

ration

ponents of the Reed Bill had theii

points to the reappearance of the way in this reorganization.
For the five
months througl
basic weaknesses that plagued the
road in the years prior to the war. September the road reported net
As a matter of fact, it is to these income of $1,805,069 which was
basic weaknesses, rather than to only nominally above the level oi
a
year ago
although the gross
•a 'too heavy
debt structure, that
revenues were up more than $10,many
sources
have traced the
The . net income was
road's
bankruptcy.
Such basic 000,000.
weaknesses, either traffic or op¬ equivalent to $1.97 a share of pre¬
ferred stock.
After deduction of
erational, obviously are not cured
the preferred dividend require¬
merely by the process of revamp¬
ment for the period there would
ing the capital structure. For a
be a deficit of $1.99 per share ol
time subsequent to consummation
common.
It is probable that the
of the
reorganization, however,
final quarter will produce suffi¬
they were obscured by the un¬
cient earnings to cover the pre¬
usual railroad conditions incident

& Ohio RR. Co.

Noting slumps in railroad stock values accompanied by upward surge in industrial shares, Mr. Young
lays blame on regulatory bodies which hold down railroad rates and destroy capital values in reorgan¬
izations.
Predicts unless rails are enabled to earn more on capital investment, there will be another
wave of
bankruptcies and final ownership by government. Says rails have become political football,
and impaired services result when rails are not given a living wage.
Decries opposition to certain rail
mergers, and describes outlook for specific properties.

■;

as our source of

,

;

has

been

earning about 2%.
withholding their crops from mar¬
Obviously, if the balance of the
ket this year, because they are in
iailroad industry is going to go on
the high income tax brackets and
earning 2%, one of two things is
they'd rather see people; starve
sure ' to
happen.
One
is that
than ship their produce to market.
they will go into bankruptcy for
Those people are coming before
.

the second

time, oiy two, they will

be taken over
by the government.
Neither one Of those things is
a
;

very

cheerful

outlook

i' :

for

the

the Interstate. Commerce Commis¬

sion and urgipg ;that: these ^railt
(Continued on page 34)

,

$l%f"
M

Number 4650

THE

COMMERCIAL & FINANCIAL

CHRONICLE

'-frv.

fM-.:yy-.;r

■

Volume 166

(2169)

13

Prospects for Tax Cuts and Inequities in Taxg Laws
By ROSWELL MAGILL*

NSTA Notes

i

Chairman, Special Tax Study Committee, House Ways and Means Committee

Asserting

we need not despair of cutting government
expenditures, former Under Secretary of Treas¬
budgetary surplus be allocated to debt reduction, tax reduction and foreign aid.
Says tax
reduction is essential to remove brake on nation's
economy, but warns "we cannot afford to reduce in¬
come taxes much."
Foresees improvement in 1948 in structure of Revenue Act to
eliminate inequities/

ury urges

BALTIMORE

SECURITY TRADERS ASSOCIATION
Charles Gross, Harry M.
Sheely & Co., has been nominated for
President of the Baltimore
Security Traders Association to succeed
J. W. Butler,
Baker, Watts & Co.

long step forward.

as

A tax

lawyer is

expert on world politics.
He strains his capacities when he dis¬
cusses tax economics.
Yet some premises about items in the
budget have to be laid down
if questions of tax
policy are to be discussed at all. I shall make mine explicit, even
I

though

de-

cannot

bate

no

them

We

here with you
this evening.

d i t

p e n

not

despair

expenditures.

We

|

army and navy,

need

want

vigorous and effective gov¬
ernment
departments.
Experts

ex-

ures

tell

there

E.

Elwood

McCIure

Allison M.

citizen
Berry

Bernard E. Eberwein

Other nominations

are—E. Elwood
McCIure, Stein Bros. & Boyce,
Vice-President; Bernard E. Eberwein, Alex. Brown &
Sons, Secre¬

tary, and Allison M. Berry, Robert Garrett &
Sons, Treasurer.
Nominees for membership of the Board of
Governors are Mr.
Butler, the retiring President; J. Mitchell
Bruck, Baumgartner &
Co., and Howard E. Rien, Equitable Trust
Company.
The election will be held

on

Dec. 5 at 6 p.m.

end,

is justi¬
for

ing

the

e c

t

experts,
is

it

must

size of the
eral

CLUB OF SEATTLE

^ Olympic Hotel, Seattle,

according to Andrew A.

Jordan, Jordan & Co., President of the associa-?
Crtion,« Price is $9 per person and
eats, entertainment. etc., galore are promised.

(

4 '

The Club will elect

officers

new

on

Jan.

15,

#1948.

it,

be elimi¬

can

expenditures under

to

for

dollars

in

are

great demapd

Since taxes always operate as a
brake upon the
economy and-pur
individual taxes remain at alifipst
the war peak, it is

taxes

not there

that

so

the

asking to be spent.

the

natural

human

and

bigger
improve his staff.

to

Foreign

Three

items

just

have

must

We all witnessed

more

a

reduction,

reduction,
expenditures

and

last spring of the in¬
unwillingness of the Federal

bureaucracy to cut expenditures,

nec¬

both to reduce the overall
tax burden arid to remove the-tax

essary

debt

injustices

that

.

have

grown

,,

up

through

the

major compet¬
ing claims to any excess of Fed¬
eral
receipts over expenditures.
My premise is that a budgetary
surplus should be divided among

dem¬

'

especially

Expenditures

—

xrn

,

Burden

is

money

Debt Reduction, Tax Reduction

onstration

the

that

duce

must

we

determination of the

tax

tense

system.
We must continue
produce and produce mightily*
it is goods and not
merely

Necessary to Reduce Overall Tax

abroad—offer

he

money.

as

one

bright.
Finally, one way to
get expenditures down is to re¬

budget merely to Fed¬
chiefs.
Any bureau

better,

are

not

evident that

shares

We

tive

we

the prospect for tax
for a continuation of

fore,

of

attain

can

On the other hand, if

to advance into new fields. There¬

The Bond Traders Club of Seattle
will hold
their Christmas
Party on Dec. 2 at 6 p.m. at the

them

bureau

chief

BOND TRADERS

we

consider,

remaining countries dn
which, a free private enterprise sys¬
tem persists. Our domestic health,
as well as our aid to
foreign coun¬
tries, depends entirely upon the
vigor and vitality of that produc¬

today.

desire to make his bureau
and

have

can

our own do¬

the world's.

present business activity, for eco¬
nomic health here and abroad, is

MagiU

Yet
be

if

reduction,
Roiwell

there

not leave the

economic

of the few

rear control,

the

here.

we

cannot get our

a

sub-,

to

for

nated.

leav¬

j

that

us

crushing tax burdens

ever

fication

arid

problems to

well as

within a $20 to $25 billion budget.
Therefore, let us strive to that

If

physical

certainly have

mestic

we

present, to \a

maze.

to

We

strong

a

certainly; and

layman ^an
jmmen sely
complic a t e d

Charles Gross

itself

the

of

practicality of cutting the total of health.

The Federal

budgetary

need

and

the years by the rigid
rigorous application ofVthe

revenue

then

arid

laws.

We cannot

expert

mdefnitely" to, work harder
to

produce more when' the
government gets more than tftgy

propagandist

appeals that the three; that the excess of re¬
readily
be
developed ceipts
should
not
be
devoted do out of their additional earn¬
against any cuts. We are, there¬
We need a more favorable
solely to one or even two of the ings.
fore. very fortunate
tax climate in the interests hoth
in having three.
vigilant Congressional appropria¬
of satisfactory production and
f|f
Humanitarian motives combine
tions committees, well-staffed to
with good judgment in favor of satisfactory Treasury receipts.
search out and to find the soft
; Finally,
the debt ought to be
help to European countries which
spots in departmental budgets. As
paid down a few billions.
We |
will do their best to
help them¬
citizens and as professional
ought not, I,think, to devote exguar¬ selves.
We certainly do not wish
cess
revenues
dians of the profit
merely
to debt
and loss- state¬ to play Santa Claus to the
world, reduction arid to refuse to reduce
can

so

.,

-

.

,

.

Andrew A. Jdrdan-

.

CINCINNATI
The

STOCK

Cincinnati

BOND

&

Stock

&

CLUB, INC.

Bond

Club

announces

late change their Christmas Party to be held
Hotel Sinton instead of the Netherland Plaza.

Dec.

that

15

due

to

a

will be at the

way

;

The annual meeting of the Security Traders
Association of New
York, Inc. will be held on Friday, Dec. 5, at the Produce
Exchange
Luncheon'. Club." "
;;
,' J" ' ,!iy1
?
A change in the candidates for
officers is announced with three

being

nominees

we.

of

J.

John

—

contested.

T.

Mericka

G.
&

J.

O'Kane,
O'Kane, Jr. & Co.

we

First

*An

t i

n

and

can,

address

country

the

but

intelligent

g

of

in

by Dr.

can,. a

U

The

This
—

Vice-President

R.

Steven,

Jr.,
J.

Jr.,

Gordon Graves

&

and

Arnold

Wechsler

Frank

J.

—

restore^,,

buffet supper.

a

Chronicle

the

advertisement

is

not,

and

The

under
or

.

'•

"J"

vi

to

Tap Financial

CHICAGO,

offering is made only

added

to

of

the

Chicago

change.




mem¬

Stock

as,

an

offering of

the

by the Prospectus.

(No Par Value)

Share

per

King Merritt & Co., Inc.
(Special

to

The

Financial

Chronicle)

Copies of the Prospectus

Henry. M.

as

are

may

Ex¬

be obtained only from-such of

registered dealers in securities in

this

the undersigned

Stated

connected,

with King Merritt &
Ca., Inc. of
York.
.Mr.
Hellerud
was

New

Paul H.. Davis & Co.

Union Securities Corporation

•
r

:

'

'

-

•

r>

—

.

Hornblower & Weeks

-

*

Paine, Webber,! Jackson & Curtis

•

l~

A.
the

'staff of Ames*. Emerich &
Co., Inc.,;
105 South La Salle

Street/

construed

buy any of such securities.

Common Stock

agent for-United Ftfnds Mahage^ment Corp.
'i
'hv

Chronicle)

ILL.— William

Maloney has been

be

Keystone Steel & Wire Company

formerly with Slayton & Co., Inc.,
and
prior thereto was general

Ames, Emerich Adds

bers

circumstances to

;

.members of the Boston. Stock Ex¬

''

on page

41,270 Shares

•ST. LOUIS, MO,
Office. Squares Hellerud
has- become
•

(Continued

H. M. Hellerud Now With
•

(Special

no

solicitation of an offer to

as

$

Meyer in Rochester

u;

ROCHESTER, N1 Y.—Robert
Meyer is conducting

a

securities

business from offices at 153 Berlin

Street.
^

4

y/i A; C. Allynand Company
>t! -il«

E.

it) i K it

•!' y! lucorpbrated '

w»V:'
November

m -T

25,

119**7

O

i
j Z,..'1 '. .%
'a>!
i'
-

io,•

.

v.".

1 -:y

Central Republic Company
•

•

the

Moreover, in
have .found that jab

Meyers,
Co., Inc.
t. Geoffrey Horsfield

on

anyone's incentives.
the past, yye

world, Europe cannot restore

is

&

,

•*'[

brakes

any

It will not cause men to
produce more, nor will it increase

Leslie Barbier of G. A. Saxton &
arrangements.

Mahpr is with- Gordon B,; Harilon

"

starvation

aid from \us appgar^ ;,io intelligent reduction of tax
With the best will in may result in more revenue

Price $45%
,

f

widespread

on

Gordon B. Hanlon

Special to The Financial

remove

economy.

An¬

Bond

Wechsler, Ogden,

fBOSTQN, MASS.-^Raymbnd J:

change.

at

rates

be essential.

following securities for sale

& Co.

Co. is in charge of the committee

10/Posfc

hope to live

Europe is to be avoided and if

previously reported.
Following the election of officers, and other
business, the Asso¬

&' Co.r

may

its economy is to be revived and

Treasurer—Wellington Hunter, Aetna Securities Corporation.
Candidates for directors, trustees of
Gratuity Fund, national comthitteemerv and alternates, and
nominating committee are the same as

jiVith

ipdividual iricome taxes at fall.
Paying down the debt alone will

if

preserve,

Horsfield,

Goodwin, Inc.
Secretary—John

f t

we

If

peace.

to

Co., Inc. and
Jr., John J.

Vice-President

Second

drew

ciation will hold

want

democratic civilization

not

which

in

Magill be¬

do

we

we

supporting

fore the National
Industrial
Conference Board, New York
City,
Nov, 20* 1948.

Pavis, Charles E. Quincey &
Co.
and
James
F.
Fitzgerald,
Paul & Co., Inc.

O'Kane, Jr.

s

efforts to bring, it under control.

A.

J.

i

are:

President

,

Wm.

John

the

owe

a s s

supervision of the budget in every

SECURITY TRADERS ASSOCIATION OF NEW YORK

positions

ment,

duty

!■

(Incorporated)

36) '

than

V

14

(2170)

THE

COMMERCIAL

CHRONICLE

FINANCIAL

&

Thursday, November 27, 1947

Truman's Advisers Ignore

Basic

''-'U I

By

Let Mutual Funds Be Your Watch
Prospectus^
your

request from
investment dealer, or from
upon

NATIONAL
RESEARCH

SECURITIES

&

CORPORATION

(1) The sponsoring investment management organization is
stantly watching the fortunes of3>

Financial statistician, commenting on concern
of Economic Advisers

con¬

jftss

companies represented in its
portfolios in an attempt to weed
out

security

any

whose

stock market

ghost stories of President Truman, which he enunciated oyer
the radio a few days
ago, were apparently created by his Council
of Economic Advisers. It has been
reported that they now believe that
the inflation danger has taken a turn for the worse. "Business Week"

stitute

a stronger situation for it.
(2) The trustee bank safeguards
underlying securities in a

account,

collects

dends, cashes bond

public market places.

on

The

the

custodian

speculation. Points out languishing
proof government controls have debilitating effect

as

outlook

become dubious and to sub¬

may

magazine

divi¬

and

coupons,

,

desired

"What

say:

mails income checks direct to the

scared

the

is

shareholders.

council

are

from

signs

that

True

Mutual
wide

funds

also

provide the

diversification

business

essential

so

to any successful investment pro¬

fication

is

well

available

the

to

banks

small

the

ital

is

as

$1,000

ceives

the

he

$100,000,

or

careful

same

far

portfolio

part
follows:

the

on

steel

" 'Steel

outlook

as

wanted. Will pay

exorbitant prices.' Such advertise¬

experienced staff of trained an¬
alysts.
A
Morgan partner once said

ments, which have been appear¬
ing
with
increasing
frequency
throughout the industrial regions

"We

are
compelled to conclude
capital cannot be preserved
either by broad diversification of
risks or by the purchase of se¬
curities which, in the judgment

of

that

current

of informed men, represent sound
investments
at
any
one
given

conditions

time.

It is

only by the application
of unremitting attention and the

exercise

continuous

of

sound

judgment that the original value
of the principal can be maintained
increased."

or

Mutual

Bond Fund

turn
of

INC.

America,

the

fund

sponsors
realize
chip" of today may

into the

non-dividend

tomorrow.

steel

to

apply their best judgment and
unremitting attention in their ca¬
pacity us "watchdog" over $1,400,000,000 of investors' funds.
Tale of Old Cape
In

earlier

wrecks

Cod

Cape

days,

the backshore pro¬
vided rich pickings for the Cape
Prospectus from your Investment Dealer or

,

Codders.

iNCOeoORATlO

48

WAll

STREET

NEW

On

stormy Sunday it

a

tion

watcher

a

on

the beach while

the rest of the town attended Sab¬

TORK

5, N Y.

bath

service.

CHICAGO

IOS ANOUIS

that

One

the

Sunday

steel.

of

economic

Due

the

as

preacher

gust of
his heels.

on

a

north¬

a

a
ship ashore on the
side," he shouted, and for a

all

moment

the

was

preacher's

raised hand

"Just

fore

confusion

loud

stilled

until

voice

minute, brethren.

a

and

the tumult.

Be¬

go
I have just three
say." By this time he
was
walking rapidly down the
aisle, buttoning his coat. As he
you

words

"Now start

investing tlieir capital

rent

Steel

on.

Wanted

The

Nov.

unbiased

bullish

one

facts

issue

of

Calvin

perstition.

Perhaps it is
keep caution alive

to

But one should recall

Big Steel

dividends just before
similar increase at an¬

a

other time ushered in

dfc FUND
A MUTUAL

INVESTMENT FUND

INCORPORATED

1928

72nd Consecutive
Prospectus from

Quarterly Dividend

local investment dealer or

&.•'?' J>.

;-kf-

This

•

dividend

(approximately

Keystone Company

net

ized

of Boston

income and 22c from net real¬
securities

in cash
v

of 40c per share
18c from ordinary

or

holders,

"stockholders

According

the 1948 edition
of "The Farmer's Almanac," many
famous

to

attributed to
Examples:

sayings

are

"Go

man," attrib¬

west, .young

to

Horace

Greely,

first

was

another

news¬

paper editor.

"Everybody
talks
about
the
weather but nobody does anything
about

it,"

Twain,

was

Charles

attributed
to
Mark
first
written
by

editor

Warner,

the

of

"Hartford Courant."

"They
uted to

shall

record

December

11, 1947.

attrib¬

Philadelphia

L.

MORGAN

President

becomes

even

at

attrib¬

Roosevelt,

of Yale.
And

of

there

course

don't

are

were

many

Shakes¬

that

believe

plays

written

by

the

months ended
of Wellington
from $33,127,000

12

39%

$46,058,000, about four times as
much as the total percentage gain
of all mutual funds.
During the
month of October, investors

shares
in

more

than

the

Wellington

pur¬

Fund

single month
history of the

any

19-year
Nice

fund.

in

(

going, Mr. Morgan!

thereby

reach

are

ample,

false

fi¬

and

conclusions

violated.

soon

For

the Council's former

clusion

to

Marshall

tionary

effect

the

Plan

dangers

ex¬

con¬

that

infla¬

now

has

been

upset by the inflationary implica¬
tions
of
mounting
bank
loans.
.

reversal

to be

the

of opinion appears
of the main reasons for

one

President's

into

should

Congress

for

ion.

some

However,

have

not

necessity
For

of

session.

special

there

call

time,

the

been

reversal

a

of

it

opin¬

has been

obvious that bank loans would ad¬
vance.

Even

this

observer

mented

upon

such

year

more

ago,

possibility a
and this trend

has

or

on

numeious

then.

since

com¬

a

discussed

been

occasions

About

a

was

pointed out in

growth in loans

ago

it

has not stopped; it

is in fact just
The com¬
mercial banks are at long last get¬
ting back into the banking busi¬
ness
instead of being investment
trusts for government securities.
getting well under

council

The

way.

originally

thought

that price dangers were prevalent

only in specific commodities, but
now they are convinced the scales
have
swung
to the inflationary
side ot the price equation and that
things could easily get out of
hand—implying
an
inflationary
the

called

from

prevent

selling

a

commercial

for

funds

to

York, N. Y. has prepared a
on

"Distinctive
The

Mutual

Funds

Investment

booklet

called

Mate¬

including

a

loans

higher interest rates. This is
probably what will happen if re¬
serve requirements are raised, and
then the

Open Market Committee
Reserve
system

Federal

the

of

will

have

to

additional

these

use

funds to support the gov¬

reserve

ernment market while the expan¬
sion

credit

of

merrily along

goes

its way.

the

no

presents

The

of control

revival

what

would

credit

stalment

over

be

in¬

some¬

anti-inflationary but politi¬

cally it does not seem expedient.
There must be a host of people
who

looking

are

to

the

desires

for

forward

their

of

fulfillment

things through the medium

many

sales.

of installment

It is charac¬

teristic of the American

buy

just

people to

ciedit and the reimposition

on

which

restrictions

credit

of

have

expired on Oct. 31, 1947,
seem
to be politically un¬

now

would

sound.

economic

the

From

side,

instalment credit now amounts to

approximately
$5.3
billion
as
compared to around $3.2 billion
in 1929 and $4.0 billion in 1937.
restrictions it would

Without

ad¬

vance

two or three billion dollars

above

present levels because pf
larger volume of busi¬

the

much

activity than in prewar years,
but this of itself is small in com¬
ness

parison to total loans and invest¬
ments in the banking system of

billion and would not
great bearing on the
inflationary expansion.
It would
therefore seem politically imprac¬
tical
and
economically of little
$131

some

have

a

avail

very

reestablish

to

control

over

sales.

instalment

The

languishing stock market
proof enough of the de¬
bilitating effect that government
controls have on public market
should be

The stock market has be¬
"thin"
that
relatively

places.
come

so

small

activity

advisers want enacted for the pur¬

other

makes

pose of curbing inflation: (1) Au¬
thority to increase bank reserves;

sporadic

Revival

(2)

stalment

of

control

credit;

the
to

and

the

SEC

in¬
Control

over

(3)

commodity

exchanges

control

over

The

authority to increase bank
will not accomplish the

reserves

business reply card

is available to
dealers at varying prices depend¬
ing on the quantity ordered.
The

November

of

issue

"The

Exchange" published by the New
Stock Exchange has an ar¬

York

ticle

on

headed

mutual " funds

violent

in
the

modities

that

play

staple

would

under rigid regu¬
"thin" market if we

happen

lation

and

a

shortage in

a

than

cry

be much

would

There

now

changes

price

is

would

reported

further

Administration

that

price

Securities &

Research
sumer

level

folder

called

"Low-Priced

Stocks for

Velocity."

Com¬

the

ing

been

control
is

Corporation has published a new
mon

much

be

the

National

of p

because

greater.
has

The Mutual Fund."

wheat

more

raised

It

.

a

conversely in the event
of a bumper crop, without the sta¬
bilizing force of the speculator.
or

crop,

that

.

the

daily lives of everyone. Just pic¬
ture
in
your
mind's eye what

Mark Seven-Year

um. v

com¬

part in

a

can

but

stocks,

are

corn

the
and

price

the

public

without

and

wheat

or

way

course,

along

get

one

quite

changes

Of

level.

would have

"Triple Assets

Lester Collier of 44 Wall Street,

rials."

economic

on

nancial affairs should ignore some
the basic economic truths and

which

to restrict

as

so

of
the

activity.

law

no

Strides of Mass-Investment Medi¬

Notes:

booklet

those

of

similar

to

chased'

that

advising the Ad¬

are

stock exchanges.

resources

rose

who

ministration

over

Wellington Shares in Demand
During
Sept. 30,

amazing

more

persons

from

at

Witherspoon

Professor Sumner

successor

man,"

forgotten
Franklin

to

William

was

ac¬

was

Verdun, General Nivelle.
"The

vide

so,

special session of Con¬
gress on the impulse of this ad¬
vice
without
having
any
very
definite program to offer.
It has
been
reported,
however,
that
there are several powers that his

Marshall Petain,

tually uttered by his

New
WALTER

it

ex¬

were

If

is

banks

unpre¬

pared?

purpose

away

However,
the
portion of
their extremely large investment
in government securities to pro¬

be

the

loan

there

"boom and bust." So the President

pass,"

not

December 29, 1947, to
of

their

this letter that the

Famous Misquotes

is payable,

profits)

stock at election of stock-

on

again
perts
caught

the

for
funds

commercial banks

here

month

Shakespeare.

WELLINGTON

(Series S1-S2-SS-S4)




period of

a

prosperity. Today, at least, all the
signs read 'steel wanted'."

Fund

.Massachusetts

before in¬

once

its

crash,

peare's

(Series K.1-K2)

Boston 9,

leave

must

if resort must be had to su¬

even

Bullock's "Perspective" comments

PREFERRED STOCKS

Cong ress iStreet

cur¬

steel.

on

worthwhile

a

appraisal of

borrowed from
15

BONDS

50

rests

that

This

economic

uted

(Series B1-B2-B5-B4)

Tke

vigorous in¬

beginning of World
seem to have lost sight

we

"An

who

your

some

of this fact.

fair," he shouted.

IN

COMMON STOCKS

economic

have

the

and

War II

to

reached the door his hat went

m

Without

economy

said by John Soule,

"There's

INVESTMENT FUNDS

typical

long period
stagnation between

uted

back

Certificates of Participation

to

the

to

the wrong man.

easter

Funds

a

whole modern

on

ing house door,

c ustodian

today.

general

reached his Ninthly or Tenthly the
watcher burst through the meet¬

K yston e

the

present

in

and

the custom in Eastham to sta¬

was

HUGHW. LONG & CO.

along

of

the

to

steel

flationary boom, it is worthwhile
stressing once more that virtually

creased

Cod

life

of the earmarks of

that if
A

witness

for

executive

denying

payer

They will continue

bear

outlook

harried

1929

that the "blue

siphoning

it

money

pocket into
another.
enough, it will take funds
from the commercial bank¬

apparently

expectations."
Can

program

one

be¬

beyond

Photo—Courtesy of Gaines

in

a

changing

as

ing system and place them in the
Federal Reserve system.
This is

1

a

same

run

is

ginning to

re¬

selection and daily supervision of
the underlying securities by an

i

c

Such

results.

the

away

from

commer

large investor.
Whether the investor's surplus cap¬
as

bor¬

rowing

Furthermore, this diversi¬

gram.

of President's Council

regarding inflation, attacks proposals to fur¬

ther restrict credit and to curb

.

the

120 BROADWAY, NEW YORK 5. N. Y.

WITHERSPOON

Statistical and Research Department, Newhard, Cook & Co.*
Members New York Stock Exchange

.

Dog

Through mutual trust funds, the investor obtains twofold guard¬
ianship.

WILLIAM

at

realizes

the

con¬

politically out of

question, but they are think¬

in

terms

of

selective

price

Volume 166., Number 4650
control.

Meat and wheat

THE

the

are

important items just;
now,, There
have .been, enough, experi¬

a

in this
by now to prove that,
few elements of
economy can't

be

restrained

without

tionary boil arising
sector.

the

in

Nevertheless,

infla¬

some, other

of the

some

Washington "planners"

either

are

seeking to perpetuate a large ad¬
ministrative force or else appar¬
ently are very slow of perception.
They* dcn't seem to realize that
.they are working on the
wrong
end; that is, from the price and
monetary

standpoint

concentrating

instead.- of
production. As

on

Edson B. Smith

so

succinctly puts

up production until bal¬
is restored."

FINANCIAL

The whole matter

to

seems

The

re¬

CHRONICLE

(2171)

if, economic^ advisers

are",

By EDWIN G* NOURSE*

con¬

and

Holding full

requires economic as well as physical reconversion, Dr. Nourse asserts we must
pecuniary and operative^ relationships among participants in economic life. This requires objective study, of saving an|c spending t and^in vestment practice;,, as well; as...
accounting and
managerial practices and collective bargaining and labor relations. Says we have been
"muddling"
with readjustments. Stresses importance of curbing inflation, and asserts "laissez faire"
policy will
lead to "boom and bust." Says economic restraints should come from
outside, since they cannot be
developed from within.

ig¬

-

attain

of, previous ;fall¬

their predictions of things to
come must
certainly be considered
with "a grain of salt." Their dire
implications of inflationary effects

ures,

overdone.

are

Certainly

in the powerful forces of
but a knowledge of its

and.

some,

are

inflation,
presence

understanding, of; its

destination
that

we,

lead

to

one

prosperity,

believe

in

measured

as

enormously. There is no practical
way of contracting it.
Tnerefore,
the only program is to
keep on

that the "bqst" is not
quite as im¬
minent or fateful as
many would
lead us to believe,

dollars,

cannot

help but continue

,

few

a

more

years

and

recovery

For the first year and a half after V-J
Day, we amazed the world and rather sur¬
prised ourselves by the speed and smoothness of our postwar reconversion. Civilian work¬
ers and
plants were switched from making war materials to providing peacetime goods and

services,
m
ox

and

i 1 1 i
men

o

n

%

s

thoughtful

cannot mean

reabso

b

r

d

e

malcy." In
is

army,

But this

a

to

back

go

economic life.

sion.

will,

individual

e ve

munity of, citizens known

economic

i

not

savings.

"The

held

at

u

Nov..

18

the Hotel

l&Astor.
in

(This is

situation

invest the proceeds in other
types
of investment."

and

earl y

1947

'I when 1 i quid
J, savings

far

"i,exceeded

the

supply of
in

new

vest-

ments

becom¬

ing available.)
"However, fi¬
nancial
tu t i

insti-

o n s

can

nation

Dividend Income

on

"To

the

facilitate

.

such

government must

market

Mr.

for

its

Ihlefeld

own

It

switching,
support the,

obligations,"

continued.

"It

has

ample
facilities
for
doing
so
through
its
trust
funds
and
agencies and through the Federal
Reserve Banks."
Mr. Ihlefeld
pointed out that a danger in the
present

volume

of

new

lies in the excessive
to equity capital.
In

and

idea

of

had

holdings.
During
they acquired governrobligations in unprecedented

ment

amounts.Now, as other bonds
and mortgage loans become avail¬
able on attractive terms,

they

can

sell government securities and

re-

urged

grant
stockholders
dividend income so

Congress
to

on

encour¬

the purchase of equity

age

to

credit

a
as

secu¬

rities for investment in the inter¬
est

of

sound

private financing in

the years ahead.

the

reconversion

and

the

which

make.

any

to

security

war,

to

if

economic

are

are

The

less

no

probably
for

reason

in

complicated

more

abstruse.

Mr.

subjected,

illuminate

difficulty is not so much that
principles involved are actu¬

the

liquidating
the

but

harder

sons

ment

make

needed
this

eco¬

some,

The

personal

view of the

Ihlefeld

perhaps

economic

to

is

reason

interests

of

or

that

the

many

positions of greater

administrative

control

per¬

less

or

in¬

are

volved.

These persons find it hard
deal with economic
processes

With the

same

objectivity and im¬
personal skill that they are accus¬
tomed to apply to matters of
ical technique.

Looking then at physical
version

as

note

we

basis

a

of

look

Day Stresses, Importance of Securities Market;
President of

some

phys¬

Executives

also

merely

proving ground for local securities is fallacious.

as

a

E.

James

Day,

President

of

the

Chicago
addressing the Chicago Sales Executives Club
Eleventh

for

a

Annual

Sales

Congress, said,
good investment is liquidity, and
ketability will ♦>
sell

at

bet¬

a

ter price. The
importance of

rihe

market

place for

curity,

and

a se¬

had

to

spending practices, of invest¬

and utilization practices, of
accounting and managerial prac¬
tices, of collective bargaining and
labor relations practices?
I be¬

lieve

it calls for revision of

economic

•

e s

He

challenge
of

our

better

fur the

one

direct

"i

'

few have
edge of their

very

has a
in-

markets, but
working knowl¬
proper function in
a

financial
so

markets

con¬

will they broad¬

the potentialities of our com¬
mercial markets."
en

Day, in pointing out some of the
-highlights of a recent study of
modern

markets

made

as

cities

Regional

ours

such

are

as

banks

as

exchanges
to

necessary

Chicago, Los An¬

geles and others

as

are

commer¬

and. investment

The old theory that

a

bank¬

regional

exchange serves only the purpose
of a proving ground for local se¬
curities

before they are listed on
exchanges has been dis¬

market for securities.

"Corporate

or

economy."
"The Chicago Stock Exchange,"
Day said, "is the central point of
midwest financial markets. If our
midwest

league.

proved by a careful analysis of
the factors that lead to a
good

our

our

tinue to grow,

a

every-

in

securities

James E. Day

qualifications
security with good mar¬

larger

direct stake in

n

in

their

"Prac¬

|H country
I

r

at

by

The

officials

who

considering listing their
ties," Day stated, "will
nrofitable

to

check

are

The

.




re¬

con¬

rather

place

than
on

volume.

selecting

a

the basis of its

one

of
as

point."

Day

in order that high effi¬
ciency should be restored to the
giant assembly line of our national
industry so that it should serve
peacetime needs most fully.'
Economic

Reconversion

Turning now to economic re¬
conversion, it is obvious that war¬
time

conditions

market.

a

Uncle

Sam

through
us

billion

said

he

the

growing importance
The Chicago Stock Exchange
an
integral part of the midwest

financial markets is being better
recognized today and that he was
very confident the exchange will

is

the

a

cor¬

I

this

in

trying

have the

period. Nor
to think

arrogance

I could have worked out the cor¬

retesting

rect

in

answer

each

stance if it had been

(Continued

or

any

in¬

presented to
36)

on page

Twenty-five Year 6V2% Gold Bonds,
September 1, 1949, and

total

due June

The

ously

a

all

the

a

national

(1)
.

problems of

they

■

to

be

:;:An

fore

1947.

evident

the

been

detached

New

York

Club

City,

notices

the

to

issues

previ¬

effect

mentioned

that

:

above*

which

in

general,

>

manner:

^

*•

to be paid

only in case
been specifically designated by the

have

are

bonds

from

fi-om certified

bonds

bearing

such

whose numbers

distinctive
have not

numbers.

been

notified

the bondholder resides.

(2)

Bonds

drawn

for

redemption not bearing distinctive numbers which f
have been designated or licensed or certified in the manner described
above,
and matured coupons detached from such bonds, when presented for
payment
■

:

in¬

20,

certain

1941,

country ilk

which

by holders residing in the United States or in a country with which the United
States has concluded no agreement for certification, are to be paid only
upon.
presentation thereof together with an affidavit signed by the bondholder, and

countersigned
resides,

by

giving

a

the

bank
name,

located

of

the

or

in

the

nationality,

certifying that there has been
question since May 10, 1940.
above-mentioned

no

country

and

declaration

Morgan & Co. Incorporated,
140

GOVERNMENT

in

residence

and

affidavit

OF

THE
G.

the

may

bondholder

bondholder
or

be

and

KINGDOM

OF

(

|
f

j
:

coupons

in

j

obtained

at

I

BELGIUM

!
j

j

EYSKENS,

Minister

1947.

the

23 Wall Street, New York 8, N. Y..
Broadway, New York 15, N. Y.

(Signed)
November 20,

which
of

interest in the bonds

enemy

Guaranty Trust Company of New York,

New

Nov.

to

31,

three

relevant bond is attested by a declaration signed by the bondholder and
giving?
his name, nationality, and residence and also the name of the certifying agency.
Such declarations are to be countersigned by a bank located in the

the offices of J. P.

of

of securities

detached

THE

Economic

refers

May
the

of

Paying Agents and Sinking Fund Administrators need not be accompanied
by the bonds from which they were detached providing that certification of the

of

any

dated

or
licensed by the United States Treasury or certified
License 95 by the appropriate agency of the country con¬
Matured interest coupons are to be paid to such holders only in case

Coupons

sweated

to

Belgium

bonds

of principal and interest in the following

certification

address by Dr. Nourse be¬

The

York,

be

of

notice
on

Bonds drawn for redemption, when presented for payment by holders
a country
with which the United States has concluded an agree-

have

they

Forms

must

a

to the

out.

It

Kingdom

interest

Government

cerned.

large

are

the

including
and

bear distinctive numbers

Belgian

and property relations which
entailed
were,
and in

still

of

pursuant to General

come

measure

it,

residing in
ment for

Fortunately,
internally held, but

ultimate

by

of principal

henceforth to make
payments

that

debt

1, 1955.

would

dollars.

was

]

thereafter he made only on bonds bearing distinctive numbers
specifically
designated by the Belgian Government or licensed by the United States
Treasurypursuant to the provisions of Executive Order 8389, as amended.
The Belgian Government hereby gives notice to bondholders
that it has now
instructed J. P. Morgan
& Co. Incorporated
and Guaranty Trust Company of
New. York, Paying Agents and Sinking Fund
Administrators for these issues,

scarce

instruments

Government

published

payments

simply
product. to

allocated

Kingdom of Belgium

Thirty Year Sinking Fund 7% Gold Bonds,

To holders of above-described Bonds:

Producers

or

with

this debt

it

economic
there

which

adjustments could have been

made

do

the
that

by

Kingdom of Belgium

The
External Loan

were

credit

left

to

formula

due

product among clamoring private
buyers. And payment was made

278

to

rect

think

Kingdom of Belgium

External Loan

wholly ab¬
normal.
Free
bargaining
was
superseded by controls. Much of
industry was relieved of any task
of selling its product or
pricing it

all

The real value of an ex¬

central

tention,

market
over

change or an aution market is
bring .all buyers and sellers
believed

timing of their
given minute at¬

delivered, their

carefully the

neat

.

have

not
to

Thirty Year Sinking Fund 6% Gold Bonds,
due January 1, 1955

The

new

Products,

availability of mate¬
rials or equipment. Above all, the
relationship of these elements one

find

Chicago Stock Exchange said. "It
a misconception when regional
exchanges such as Chicago, are show considerable growth in the
thought of as bush league farms years ahead.
is

some

External Loan

conditions of

to

best market place for their securit'es by comparing the records of
issues of similar type and
size,

do

selection, processing,

were

securi¬
it

I

physical—to

and

a

naivete

materials—manage¬

technical,

rial,

of

an
inflationary rather
stabilizing character. They
leave us today in a confused, un¬
friendly, and vulnerable state just
as
we
are
put to the strain of
meeting the greater-than-expected
meed of aid to Europe and the
less-than-expected production at
home, particularly inrihe matter
of current afid prospective crop
yields.

than

shouId

careful

to

us

human

productivity. But they have been
adjustments which in total have
been

new

flows had to be

cial

stated,
tically

20

circumstances.

big
such

ers.

t i. mated."

Exchange,

Nov.

the

reconversion

acri¬

They have

permitted the business machine to
operate at high activity and fair

these

practices so that they may better
promote the ends of high-level
peacetime
production.
Finally,

often

be

to another and the

there¬

not be under<-

Stock
on

of

economic

ment

redesigned to conform
tastes, new technologies
developed during the war, or new
to

lot of piecemeal and
monious adjustments.

com¬

sideration, retesting, and readjust¬
ment of complex and interrelated
price structures, wage structures,
and capital structures? Does it not
require objective study of saving

Flows of material had to

where players are trained for the

should

fore,

"One

too,

that

I do
nothing has been

that

done in those two years. We have,
of course, muddled through to a

new

reconversion requires careful con¬

assure

changed—enlarged here,
there, redirected to a
of

evident

businesslike procedure.
mean

.

recon¬

tracted
set

the

at

abandoned,

redesigned, and

located.
be

Chicago Stock Exchange, in address to Chicago Sales
Club, holds^ theory that regional exchanges serve

that phys¬

can see

require¬
structures, the revision
of operation
practices, and the
redesigning
of
machinery
and
product.
Now, in parallel, is it

others enlarged, some quite dras¬

tically

and

"the

comparison,

that factories

rearranged,

reconversion and the put¬
ting
of these
adjustments into
operation according to an orderly

ments for

not

readjustments which

financing, ally

ratio of debt

difficult process of

comparisons be¬
the physical shifts we have

tween

nomic

the

as

With

time, failing to get down to the
facing of the nature of this eco¬

com¬

dispassionate, and technically
petent

reconversion.

draw

we

double taxation
to which corporation income
used
to pay dividends is now

of their govern¬

Nourse

G.

in,

will

provide the additional capital re¬
quired," he continued, "through
some

Edwin

years ahead unless we com¬
bine and complement this
physical
reconversion with the more deli¬

nomic

the

Muddled

We have lost two precious
years

ical reconversion required a fresh,

or. as¬

prosperity

between
and

Have

of

not

Any observer

stabilized

cate

Urges Congress to Grant Credit

pre-

.year

perity for the
sure

citizen

we

Readjustments

Government."

pros¬

the

ill ng last

; v a

August Ihlefeld

-

marked

contrast to the

h i

a c

sound

supply of new corporate and municipal bonds and real
es¬
tate mortgages this
year exceeds the current rate of
savings," August
Ihlefeld, President of Savings Banks Trust
Company, told the Sav¬
ings Banks Officers Forum of Manhattan, Bronx and Westchester,

We

These include the

relations

adaptation to the product

In¬

to.

is only physi¬
cal
reconver¬
It

and

seek to produce—maximum mate¬
rial well-being.

stead, we must work out a care¬
fully considered new set of pecu¬
niary and operative relationships
among the active particioants in

unexpec ted
ease,.

economic

after this upheaval
"going back to nor¬
dynamic world there

normal

no

that

person

reconversion

were

women

and

navy, and air
forces with

August Ihlefeld, President of ^Savings Bank. Trust
-Co,, sees supply.,
of. municipal, corporate and jeal estate bonds
outstripping

"

set of

new*

,

from

to

* i

Chairman, Council of Economic Advisers

stantly being surprised by obvious
economic, developments,
nore the
lessops

for at least

..u;

15

Progress of Economic Reconversion

solve itself around
the point that

it in the "Boston
Herald," "We
have blown up the money
supply
,

&

blowing
ance

should
ence

COMMERCIAL

of

Finance.

jy

'^^■.::h'r

16

"t

f^THE

(2172)

'''•

■

COMMERCIAL

&

*•.

v

;; ^:''v-•:' v'"-

FINANCIAL

■

i,;v ■< *'•'•

CHRONICLE

Thursday, November 27, 1947

Congress and High Cost of Government
By HON. CHARLES A. HALLECK*
United States Congressman from Indiana

By WILLIAM J. McKAY

House Republican majority leader, terming our Federal Government as "a
gigantic bureaucracy, stresses
importance of maintaining a balanced Federal budget and at same time reducing Government costs.
Outlines work and future plans of Congress for revision of taxes and for
holding down expenses and
expresses view Congress will not make "blank check" appropriation for foreign aid. Reviews
question

A long
stone in U.

anticipated event that will mark the most important mile¬
S.-Canadian economic history is in the offing, although
the preliminary whispers have been drowned out by the clamor of
the Canadian consumer concerning the new import restrictions.
A
great change
is rarely
accom-<^
plished without some painful dis¬ in Canadian prices to a level ap¬
locations, and before what amounts proaching that prevailing south of
to

a

virtual

S.-Canadian

U.

nomic union

the

eco¬

border.

Such

however, will

an

adjustment,

materialize, fur¬
ther
adjustments of a possibly
disagreeable nature will be necessary.

;

mal

will be stimulated by coordinated

The
.

ever,

tinue

Canada could

the buffer

^British

between the U.

economic

the failure

made

it

clear

could

dian

and

Woods

in¬

the

on

to

find

another

dictated.

eco¬

trade

in

and

the

the

practical

a

at

example

procedures

countries
better
trade

in

such

balance
will

be

of

of
a

U.

be

ade¬

Consequently

narrow

broadened

Both

countries

to' sequently

Canadian

in

order

have

to

vital

a

problem, and

the

"free"

con¬

market

should be stabilized as a
suit of concerted action by
two

countries.

The

re-

the

scope
and
transactions

that

an

unwieldy stabilization fund would
not be necessary. In this way not

the

basic requirements of U. S. indus-

only

try, both present and future, will
be assured, and that
thereby the
urgent needs of Europe will be
more readily satisfied.
In answer

flection cn Canadian credit standing be removed,, but also a more
appropriate and safeguarded chan-

to

the

Canadian

critics

can

of

be said that their alternative

currency

solution

Canadian
common

devaluation

to

S.-Canadian

A

of

Canadian

factor

counsome

indus¬

try will be essential, and in addition the freedom of the economic
border will logically entail

"Hyde Park Agreement" would be

During the week the securities
markets

moved

dollar,1 result of the

integration

of the economies of the two
tries.
It is inevitable that

rise

as

a

announcement of the

Initial improvement was followed

by

important

more

both

the

sections

external
of

the

Canadian stocks

declines

golds

and

fidence in the
ment

judg¬

of

ple

if

they

The

market.

were

also erratic,

this

was

movement

was

a

result

long-term discounting of aid
to the gold-mining
industry and
consequent profit-taking. Among
the oils, there was a
significant
jump in the price of Gaspe Oil
a

Ventures, which aroused fresh in¬
terest

in

the

possibility

of

the

production of oil in commercial
quantities in Eastern Canada.

Kurt Safranski

LARCHMONT, N. Y.—Kurt
CORPORATION

Safranski is engaging in a securi¬
business from offices at 122

ties

Brookside Drive.

& company
64 Wall

Street, New York 5

WHitehall 3-1874

peacetime

end

the

sued

various

by

as

NEW YORK 5,

rector 2-7231

N. Y.

NY-f-1045




distinct

a

is¬

con¬

tribution.
And

it

is

real

privilege and
participate on
this program with our Secretary
of the Treasury (Mr. Snyder) and
Dr. Magill, a nationally
recognized
authority on taxes.
honor

for

a

to

me

That's

"fast company"
for an
Congressman.
But it so
happens that the Indiana Con¬

Indiana

is able to talk to

gressman

who

one

line.

has

you

as

the

than

reducing taxes in no
major appropriation

22

I

can

thus talk

battle-scarred veteran

Our topic

Government

a

Gigantic

Bureaucracy
The Federal Government is the

largest and most costly operation
on
the face of the globe.
It has
become a gigantic bureaucracy of
approximately two million per¬
sons, with offices, desks, typewrit¬
ers, file cabinets, dictaphones and
mimeograph machines, performing

Provincial

Corporate

challenging
reducing the cost of gov¬
ernment the majority in Congress
courageously applied itself.
We
of

took

the

ing extensive

affecting the

powers

daily life of the individual citizen.
And just this week

the President

recommended that
other, agency

we

with

create

an¬

far-reaching

powers.

In the last 14 years the Federal

and

and

position

that the real
budget policy
is not how much we can spend
wisely, but how much we can

criterion

of

bureaus

bureaus

1,141

of

521

around
agen¬

around

two

sound

on

afford.

deficit
the

Balanced

of

these

we

for the

Apostles

of

years

of

had to argue

balanced

budget.
deficit spending

the

school have been well entrenched
in

high places.

harmful

They

the

in

public

see

nothing

accumulation

of

which now ap¬
proaches $260 billion.
They say
it isn't really a debt anyway, since
we

it

owe

deed,

debt,

ourselves.

to

And, in¬
people were
by that doctrine.
They

great

a

deceived

many

allowed themselves to believe that
when money came from

Washing¬
ton it did not cost them anything.
Last November there appeared
to
be some awakening.
But the
real

question yet to be decided is

whether

not

or

illusion

that

this

dangerous

coming from
Washington is free has become so
money

imbedded in the minds of

people

to

But
have

make

many

it

apparently we no longer
argue the case
for the

to

balanced

budget. The President,
good friend the Sec¬
retary of the Treasury, now speak
affectionately of the importance
of having a balanced budget. Pos¬
sibly I can be excused for saying
that the Administration suddenly
and even my

discovered

its attachment for the

proposition
proposed

a

tant, it is dangerous to individual
rights and liberties.

when the Congress
reduction in taxes.

retirement.

the

cution

of

needs

the

the prose¬
And it was

for

war.

likewise necessary for the govern¬
ment to increase its revenue and
engage in
meet

extensive borrowing to
requirements.

the

war

it

must

the

be

borne

government

then

operated

*An

It

war

under

must also

address

by

Halleck

before

dustrial

in

mind

materially
and

was

successive
be borne in

Congressman

Conference

the' National

Board,
York City, .Nov. 20, 1947.

In¬

New
,

called for pains¬

demands
has

limited funds.
a
high oraer

upon

called

ior

statesmanship and real
To
of

It

of

courage.

give

you
some
conception
magnitude of the tabk, I
your
attention
to the fact

the

call

that
four

of the $37 V2 billion budget,
important items aione totaled

$27

billion

109

million:

national

defense—$11 billion 256 million;
benefits—$7 billion 343
million; interest on the public
debt—$5 billion; and international
affairs
and
finance—$3
billion
veterans'

510 million.

Four

a

at

that time I also

new-found

solicitude

Principal Items

These four principal items rep¬
resented around

estimated

fiscal

year

them

to

73%

observed
for

debt

The fact that the budget is bal¬
anced
does
not
itself solve the

problem.

Our problem is how to
budget at a reason¬
able peacetime level so that the
people may be accorded relief

of the total

expenditures
1948.
Even

ior

tne

reducing
minimum,
elimination
of

reasonable

a

by

painstaking
and
b.y obtaining greater
efficiency in administration, they
waste

would still represent a substantial

part of the total Federal budget.
course,

properly
we

threat to

be

our

be

concerned

are

All

so.

must

must

we

national

our

defense,

and

agreed

tnat

are

prepared

for

any

national security. We
that our military

sure

leaders have whatever funds they
need
for
that
purpose,
but no
than they need.

more

That involves

a

careful

of each recommendation

tailed

scrutiny

appraisal
ana a

of each item

posed to be spent.

de¬

pro¬

It involves

an

elimination of waste, extravagance
and duplications. For every dollar

spent we must get

a

dollar's woith

of defense.

And

that

is

exactly^what the

majority in Congress ^has been
striving to accomplish.
In addi¬
tion to a careful writing of the
Army
and
Navy
appropriation
bills, we passed a bill for the uni¬
fication of the services.
serve

so

impossible
to cut the cost of government the
way it should be cut.
as

And

meet

reducing tne cost of

every
item of the budget,
it has called
for sound appraisal of the relative
merits and urgency of
competing

about

Budget

many

spending

case

million employees. Of course that
is costly. And, even more impor¬

to

The job of

Of

all kinds of activities and exercis¬

deficits.

Municipal

To this difficult and

task

a

tonight—"Meeting the

peacetime

control, save lor the
brakes the Congress applies on
appropriations.

During

and two tax bills.

SECURITIES
Government

conspicuous by
Everyone
wanted

of

out

last session

ernment and

government

the

1939 seems to me to
demonstrate that Federal spending

Case

At the

times

of

originate

on

of
Congress I fought the good
fight for reducing the cost of gov¬

Federal

budget

of

budget for 1948 thai

a

four

over

must

measures

this

is

firing
bills and

the House.

less

level

spending,

appropriation

All

tax

been

expanded before the

CANADIAN

were

prevent our returning in the
immediate future to the former

is

of ideas constitute

that

TWO WALL STREET

publications

board
and
such
this for an exchange

your

meeting

But

INCORPORATED

around $9 bil¬
Even granting that
changed conditions created by the

necessarily depends upon an in¬
formed public opinion.
To that

It was, of course, inevitable that
Federal Government expand

Taylor, deale

A. E. AMES & CO.

Charles A. Halleck

the

CANADIAN STOCKS

1940

war

cies

S.

new

gover n m e n t

582,000 employees to

Opens

budget for
1948, submitted to
Congress last January,

1939 and

tative form of

agencies

MUNICIPAL

too often

economy for the otner rellow.

in

lion annually.

represen¬

Government has grown from

PROVINCIAL

government

By way of comparison, the ex¬
penditures in the prewar years of

proper

functioning of
our

wartime

provided for government expendi¬
tures of $37V2 billion.
It was the
largest peacetime budget in his¬
tory.

the

the facts.

Know

1948, the third year after the
The question is, can' we af¬
a

the

American peo¬

internal

bond

replaced by disap¬
pointed liquidation. To some ex¬
tent

GOVERNMENT

I

con¬

in

a,nd ea,rly spectacular buoyancy in

of

CANADIAN BONDS

irregularly

Canadian import restrictions,

new

the
a

But

still have

High Cost of Government"—itself
implies that the cost of govern¬
ment is high. Of that there should
be
no
dispute. And there is a
great drive on now, as in the past,
to make that cost
higher.

sorely jeopardized,

absence.

taking attention to detail in

strong.

"Battle of the Budget."

new

was

its

government has

as a

of the

had

The Administration's
the fiscal year

to you

success

fiscal

peacetime.

in

the!

problem.

moreover,
is an essential
in the new
plan of full

reorientation

,

provides

whatsoever

economic

U.

re¬

in

now

ford

the ultimate

revolutionary change of policy, it

no

embarrassing

an

are

is

a

nel would be provided for American investment, without which

this

of

would

we

of

in

a

that

pressure

relatively simple matter, and

that

mind

politics

all

two

A

war.

in this market are well known,
Therefore its control would be a

of the

reduced.

when the

man

mar-

S.-Canadian

achieved,

be

must

be

can

year

the direction

the

way

to

years

costs

states¬

inte-

to

grate the production and the

keting

deplorably

tal.

|

designed

Canada

protected.

interest in this

large?

is

many

provide a proper channel for this
indispensable movement of capi¬

The
grand-scale
"Hyde Park
Agreement" now in course
of

preparation

for

ensure- a willing
flow, U. S. capital invest¬

in

should

merits

enterprise. What is
logical, therefore, than this
epochal experiment which will
as

of

"free" dollar market in New York

more

serve

S.¬

quately

of individual

the world

two-way flow of U.
capital.
In
view

and full
ment

to be

on

In order to

come.

Apart

geographical proximity and
of the easily acces¬
sible U. S. markets, Canada alone
today shares with this country a
deep-rooted belief in world free¬
of

pres¬

exist

northward

vastness

dom

restrictions

relatively youthful de¬
velopment, it is inevitable that
U. S. capital must tend to move

from

the

incomplete while the

Canada's

sheet-anchor.
The choice
between Britain and this country

virtually

integration

Canadian

nomic

was

Cana¬

concludes, despite difficulties, Government

midly. As a matter of fact,
developing some slight dif¬
picked a heck of a way to make

a
It's
living.
T*'always tough

good

economic

dlrastic

free

a

sequently, the Canadian adminis¬
had

interim

restrictions.

>v.ill be
ent

the time-honored U. S.-BritishCanadian exchange triangle. Con¬
tration

irritating

American

Do¬

rely

U.

f One great task, however, still
remains
unaccomplished.
North

convertibil¬

that

longer

no

jresent

as

achieve

nor¬

and the
S.-Canadian trade

of
the
new
"Hyde Park
Agreement." As a result it will
be possible to dispense with the

Also,

of the Bretton

\ currency schemes to
ternational exchange

minion

S.

systems.

more

goods,

planning in accordance with the

con-

precarious balance

a

of

of

aims

indefinitely to endeavor to

maintain

ity

not

assure a

exchange

volume

long-range benefits, howfar outweigh the immediate

sacrifices.
■

can

of Government subsidies and

To say that there are today few such
problems is to put it
a few
recently referred to in a speech in Congress are already
ferences of opinion.
I have about concluded that I have

to eliminate

sults

It should

from

waste

that

re¬

duplications in pro¬
curement
and
general
defense
operations, and place our whole
establishment

defense

on

a

more

efficient basis.
And

there

is

more

to

national

defense than the size of the milir

tary establishment and the num¬
ber of dollars spent for its main¬
We must have

tenance.

a strong,
productive economy to
support it in the event of an
emergency.
That is why over-all
government policy must promote
lull production capacity of our
system of private enterprise. Then
we
can
safely spend less on the

efficient,

regular establishment.
A sound major item in the Fed¬
eral budget is that for veterans'
benefits.
Before the war these

expenditures
amounted
to
less
$600 million.
For the pres¬
ent fiscal year 1948 they exceed
from
the
burdensome
wartime $7 billion.
A grateful nation has a definite
taxes and the public debt retired
in an orderly fashion.
obligations to the veterans. We
must discharge that obligation. And
The election
balance

the

of

gress was
of

a

the

new

Con¬

demand that the cost

government be reduced.

Some

of my good business friends vig¬
orously insisted with me that the
budget should be reduced to $30

billion.

But when it

came

to

the

job of actually reducing and elim¬
inating expenditures, the public
support the Congress should have

than

especially must we provide ade¬
quately for the care of the dis¬
abled and their dependents.
Hundreds of bills have been in¬
troduced

efits.

into

Congress to
in¬
veterans' ben¬

and extend

crease

Each has

appeal.

If the

a

certain political

Congress were to

(Continued

on page

25)

Volume 166 -Number 4650

THE

COMMERCIAL

&

FINANCIAL

CHRONICLE

(2173)

Warn Banks Against

Expanding Credits

Credit Control

Joint statement of

Co., St. Louis, appears before Senate Committee on Bank¬
ing and Currency against Senate Joint Resolution 157, which would
reestablish credit controls. Says it would adversely affect middle
and low income groups and force
redemptions of savings bonds.

which1 standing has risen rapidly during
to the past year and a half, from

proposes

Vre-establish

$6V2 billion in 1945 to more than
consumer,$11 billion now. The fact of the

t

con-(matter is that less

1 s.

r o

His

of this

than one-half

figure of $11 billion

repre-

|statement
to sents the kind of credit we are
% the
Commit- talking about when we speak of
tee follows:

r

The

; v

Bankers

can

installment
mean

desires
to

to

known

the

Senate

^

Committee

Banking
Currency

on

and

its
position with respect to control of
Senate

credit

Joint

as

in

proposed

Resolution

No.

157.

It was only a few months ago that

Congress,
that

its

in

wisdom,

decided

credit control under

consumer

Regulat:on W of the Federal Re¬
Board

serve

was

against the pub¬

lic interest and should be discon¬
tinued.

The resolution adopted by

Congress last July f xed Nov. 1 as
the date for the expiration of this
The

control.

American

Bankers

Association believes that Congress
acted wisely in declining to ap¬

lation

W

unwise

that

and

for

it

Congress

would

given for
sumer

to

reverse

the

restoration

credit controls

of

con¬

not valid.

are

We note that the resolution before

the Senate

Banking and Currency

bills

that

Single-payment
made

on

lump

inter-

elec¬

gas,

month

each

loans

loans

are

sum on

notes to be repaid in one

a given date.
Obvi¬
ously, these do not fall into the

installment loan classification
the

that

reason

chants
able

do not

dealers and

for

mer¬

goods

on

this basis.

our

contention

establishment

the

of

even

temporary controls such as these
is not required and will not have
results

claimed

for

such

con¬

trols.
Consumer

credit

controls

are

as

a

to check the upward

spi¬
ral
of
inflation
with
its
rising
prices and high cost of living, and

measure

have been featured

as

primary requisites for its
for

bringing

the

middle

relief

cure.

peoole

to

lower

and

of the

one

As

in

income

credit controls would work
additional hardships on members
of these grouns who have demon¬
strated that they are sound risks.
grouns,

Instead cf helping them, it would

only

make

them

to

it

difficult

more

needed

secure

for

consumer

goods such as furniture, household
appliances, and automobiles for

transportation. It is

belief that

our

The

amount

of

used

money

in

installment buying and
therefore,
consumer
installment
lending, is but a small fraction of
consumer

the

buying

in the hands oi

power

the public as represented by cash
in
circulation;
bank
deposits:
United

States

cash;

in

Bonds,
convertible to
liquid assets of

other

and

cash

Savings

readily

are

The

total

circulation

of

amount

is

approxi¬

mately $2-3 billion. Bank deposits
by the public amount to
$131 billion, of which nearly $80
owned

in the form of demand

are

deposits.
billion

There

in

which

time

also

almost

are

deposit
be

can

$52

accounts

used

by

the

are

all concerned.

dur'ng

this

pe¬

riod of inflation has been smaller

in

relationship
than

come

it

to

was

in¬

consumer

before the

war.

The Association does not believe
that
a

pattern,

in the

area

reimbosition

do
of

controls

act

nor

will

constitutes

credit

consumer

critical

inflationary
believe that

we

credit

consumer

significant
deterrent to the inflationary forces
presentlv at wo^k. Moreover, the
Association is cf

restoration
not

in

of

alleviate

the

as

a

the opinion that

the controls
the

bad

used

are

said,

stated

the

United

bv

States

Congress
amount

on

of

in

his

Nov.

public, which

convert¬

are

goods.

of these items

Adding

together, it

ap¬

that through money in cir¬
culation, through bank deposits,
pears




that

credit

dangerous

through United States Sav¬
Bonds, the public possesses
substantially more than $200 bil¬
lion of money or its equivalent

been

effort.

for

exerting
sure

on

and

war

foreign de¬

goods and services

are

strong upward pres¬
prices in spite of the high
a

of

volume

response

financing the

Domestic

mands

has

credit

greatly inflated in

our

physical

produc¬

tion.
The

demands

tionary

would

without
in

the

the

of

be

infla¬

further

any

use

bank

in¬

credit,

tion

to

other

A

factors

outside

the

banking system.

substantial

increase

in

pro¬

take place

slowly and to

limited

a

degree. In industry they are de¬
pendent upon corresponding in¬
in the

creases

basic

raw

the

and

of the

available supply of

materials, plant capacity
productivity

number and

labor force.

mand and to make for still

higher

of

the

Deposit

Currency, the Fed¬

the

Insurance

National

Supervisors

unanimously
present

the

times

of

amount

greater than

installment credit

of

that

it

would

credit

the

is

an

alterna¬

used

otherwise

War Boncls

sav¬

to the extent
by people who

public

is

redeem

their

savings deposits
borrow against their

or

in

of

the

use

banks,
savings and

of

Banks

view

are

that

require
the
the country to exercise

caution

policies.

It

is

in

at

their

times

these that bad loans

are

lending
such

as

made and

future losses become inevitable.
It
is
recognized that a con¬

tinued flow of bank credit is

tive to the dissipation of the

ings

Association

State

conditions

bankers of

amount 40

of

Corpora¬
committee

nec¬

essary for the production and dis¬
tribution of goods and services.
The banks of the

adequately

country have
this
important

met

need in the reconversion
period.
Under existing

conditions, how¬

ever,

the banks should curtail all

loan shares, or life loans either to individuals or
busi¬
policies, etc., to secure nesses for speculation in real
with which to buy goods.
estate, commodities or securities.

insurance
cash

Consumer

credits are repaid in a
relatively short time, and may
provide the necessary stopgap to
forestall the

deposits

or

liquidation of savings

Avoid

War Bonds.

Pressure

Redeem

It would
at

this

on

to

juncture, to

People

to

be

important,
avoid taking

spend their savings by depriving

(Continued

on page

should

21)

guard

over-extension of

against

consumer

the

credit

and should not relax the terms of

installment financing.
As far

Savings Bonds

seem

They

as

Walter E.

types

existing condi¬

sumer

The

supervisory authori¬
ties strongly
urge directors to see
that their banks follow these
.poli¬

cies

maintain adequate capital

in relation to risk assets.

the

dence

in

indicate
has

the

Midwest at least to
considerable easing

that

occurred,

not

uncommonly

demonstrated inability of many
individuals to meet monthly pay¬

to

appears

be

vate

marked

increases

in

pri¬

debt can

only lead to price?
higher than those already
generated by the vast wartime ex¬

stJl

pansion

in the public debt and
international demands for Ameri¬

goods.

can

of

organized

related

of

Consumer Credit

Consumer

tively

credit

small

but

role

plays

this

flationary

entire

situation.

volume

consumer

of

im

The

in¬
total

credit' out¬

standing is currently at an all-time
h gh and
rising at a fairly rapid
rate.

Installment sales credit, how¬
ever, is still below its prewar vol¬

being

ume,

limited

primarily

by
the output of
many durable goods
especially automobiles. All other
types of consumer credit are at
levels.

should

or

in

While

no

attribute

one

as previously
required. Yet,
given prevailing inflationary con¬
ditions and limited possibilities
for expanding production of
many
goods, the wisdom of such exten¬

ficult

to

that

argue

growth

in

recent

credit

consumer

months and weeks has not aggra¬
the rising price spiral for

vated

many
goods and services.
volume of consumer credit

The
out¬

President's

to

credit

terms

to question.
recommenda¬

Congress that greater re¬
be
placed upon general

straint

credit

extension,

including

res¬

conditions and prospects now
gen¬

erally

apparent.

On

Congress

rests the decision to act

in

act
to

the

credit

determine

be

to

not to

or

field, and, if

so,

the specific policies

followed.

Caution and

uncertainty perme¬
community, but
upward movement of prices

the

the

of

open

toration of consumer credit
regu¬
lation, stems from the inflationary

ate

pressure solely to
credit, it would be dif¬

seem

The

car

inflationary

consumer

weakening

tion

upsurge

the

relaxation

ments

rela¬

a

Such

groups.

would

nonetheless

in

credit and

consumer

is not difficult to explain in terms
of
competitive
actions
among
credit
extending firms and'the

sive
Role

the

business

continues.
vances

tent

Still further price ad¬

certain.

appear

The

ex¬

of

such price rises will de¬
pend in large part upon the effec¬
tiveness of whatever private and

public

policies

are

adopted

respect

to credit and
other factors involved.

the

with
many

standing is low relative to overall
disposable income of individuals

considering

the

ships of these

ation,

prewar

however,

relation¬

This situ¬

measures.

should

not

give
an attitude of
complacency.
On the contrary, if
prewar rela¬
tionships are still relevant for
present abnormal conditions, here
rise to

is evidence that further
ward
are

pressures

for

forthcoming at

there

is

creasing

strong

up¬

conservatism

in

Robert P.
the

Boylan, Chairman of
of

Board

Governors

There

is

probably

of

interests

tending

no

cepted

the

New

Stock

in¬

mittee

il¬

those

of

the

Mr. Boylan, in

apparent conflict
between
credit ex¬

and

Ex¬

Com¬

United Hospi¬
tal Campaign.

an

agencies

York

change

overall

better

the

Exchange has ac¬
chairmanship of the

credit extension.

lustration of

of

New York Stock

when

time

clear-cut need for

a

Boylan Heads NYSE
Hospital Fund Group

credit

more

a

referring

to

the serious fi¬

con¬

with and responsible for
the general trend of business than
in the field of consumer credit.

nancial

From the point of view of the in¬
dividual credit extending agency,

tary hospital

cerned

a

greater

selected

volume

outstandings
more

successful

operations; from
ther

standpoint,

marked

seen

of

as

fur¬

up

in

more

credit

infla¬

York

volun¬

system, said,
"All
must

of
be

us
con¬

cerned

Robert, P.

Boylan

eco¬

however,

plight

New

City's

business

overall

an

expansion

adding

of

carefully
obviously

demand.
bank

of

further

is

con¬

studies

of

well beyond the recommendations

rather

merely increase

credit,

4-5%; and the
principal
up
5-18%.
The

new

nomic

production

Terms

Comprehensive

weekly

"caught" in
inflationary spiral which
will be intensified by
any further
increases in the money
supply
With "full employment" of man¬
power,
materials, and machines,

nation

tions should be confined to financ¬
ing
that
will
help
than

Hoadley, Jr.

of

means

possible extension of

bank credit under

Sees Easing of Consumer Credit

extent

in

The Board of Governors of the
Federal Reserve System, the Con¬

finance companies and all others.

relaxation of consumer
earnings are
credit terms since the end of
virtually
unReg¬
changed; ulation W on Nov. 1 are not avail¬
prices, up able, but there is sufficient evi¬

record

Therefore, a further growth of
outstanding bank credit tends to
add to the already excessive de¬

promoting the greatest possible
economic stability and hence en¬
during good business volumes for

ction

u

erage

portant

duction, agricultural as well as in¬
dustrial, would be highly benefi¬
cial. However, increases can
only

d

of

has risen only
about 1%; av¬

through continued rapid

of the

mid-

physical

year,
p r o

expansion of bank loans, in addi¬
control

now.

Since

demand is being steadily

extreme

an

taken

are

proportions.

bank

of

to the needs for

ings

the
out-

of

volume

and

to

the

boom
The

action

upon

policies

Banks

tion and the executive

consumer

any action which would tend to
out pressure on people to redeem
their government securities or to

was

address

17,

consumer

It is

real estate.

or

of

conditions

glibly.

modities

ible into cash and usable for pur¬

would

and indeed
President of

or

cautioned

are

lending

chase of

resulting from shortage of supply.
Statistics

banks

their

tionary

forces
in
our
already
readjustment money-price swollen nation. There
will
in large is urgent need to
coordinate these
degree depend two points of view, with the end

■

eral

all

——.

extent of such

and to restrict their loans to pro¬

States Savings Bonds in the hands

market for durable -goods,-

commonly

nation's

tighten

of

Consumer

we

the

troller

the

on
many sides. The prin¬
cipal problem, for the remainder of 1947 and at least well into
1948
clearly will be to combat more inflation—and prepare for the inevit¬
able adjustment which can be
expected to follow even current price
levels. The<8>——•——

the National Association of Super¬
visors of State Banks participated,

prices.

played little part in the inflation
credit

which the executive committee

public for purchasing goods; and
as
if this were not enough, there
are close to $52 billion of United

outstanding.

Consumer

System, the Comptroller oil
Currency, and the Federal De¬
posit Insurance Corporation, in

increased

th's phase of credit extension has

with which

serve

but

Fraction of Purchases

b'llion

proposed by their advocates

the Governors of the Federal Re¬

crease

Installment Buying Small

individuals.

It is

joint statement issued by"

a

the

ordinarily sell dur¬

consumer

June 30,

the

in

as

met

are

which

1948.

In

higher prices.

prices continue to mount

on

not

tric, and telephone services; gro¬
cery bills; butcher bills; and other

Committee provides for the exer¬
cise of such controls only until

that

made

public utilities such

be

in this respect now.
It is
conviction
that the
reasons

sion and foresees still
Pressures

can

caution in credit expan¬

more

(

preting the statistics on credit. also told to
guard against undue
'More than $6 billion of the re¬
expansion of consumer credits.
ported $11 billion of consumer
Text of Statement
credit outstanding represents such
consumer advances as single-pay¬
The text of the statement fol¬
ment
loans; charge accounts in lows:
stores; end-of-the-month bills for
Our country is experiencing
a

the controls exercised by the Fed¬
eral Reserve Board under Regu¬

itself

does

the permanent extension of

prove

our

for

buys.
generally not

is

It

Bank economist points out further
expansion of private debt

only lead to higher prices. Advocates

ductive
purposes
only, thereby
everything the curtailing all loans for
specula¬
This distinction
tion, whether in securities, com¬

consumer

make

consumer

credit.

credit

Asserting principal economic problems for some time will revolve
around inflation and inevitable
price readjustments, Federal Reserve

confined to productive purposes.

to

To many, consumer credit means

Association

Kenton R. Cravens

credit.

consumer

Ameri-

instalment credit and .wants loans

•—:——•

Economist, Federal Reserve Bank of Chicago

National Association

Supervisors of State Banks
cautions against inflationary ef¬
fects of rapid expansion of bank
credits. Sees danger in mounting

tile-Commerce Bank & Trust Co. of St. Louis, representing the Amer¬
ican Bankers
Association, appeared before the Senate Banking and
Finance Committee in Washington in opposition to Senate Joint

^credit

By WALTER E. HOADLEY, JR.*
Business

of

R. Cravens, Vice-President of the Mercan¬

157,

and

ration

My,.

Business Trends

Re¬

serve,

& Trust

Reso lution♦>—

Federal

Comptroller of1 Currency,
Federal Deposit Insurance Corpo¬

Kenton R. Cravens, Vice-President of Mercantile-Commerce Bank

On Nov. 24, Kenton

■U.Wi'lV

17

that

of

the

one

finest
sions
life

of

our

democratic

is

facing a critical
gency." Mr. Boylan said
79%

increase

expres¬
way

of

emer¬

that

a

in

^Summary excerpts from re¬
marks of Mr. Hoadley at the 14th

operation ex¬
penses in the last four years has
placed the voluntary hospitals in

Annual Convention of the Ameri¬
can Finance
Conference, Chicago,

The

111., Nov. 18, 1947.

says.

a

desperate

financial situation.
implications are serious, he

18

able

tional'

requires that an international
organization be a public interna¬
tional organization in which the
United States participates either

only cure President Truman offers for the
relief of inflationary pressures is the imposition of
controls which he himself recently characterized as

by treaty or by Act of Congress,
and which has been designated by

government

'police state,' the application again of
controls over prices and wages,
:.

the

to

Order
the

collec-

Act;
On July 11, 1946, the President, in
Executive Order 9751, designated
the Bank as a public international
organization entitled to enjoy the

gotten no one any¬
where and, just as surely, pussy¬

footing with any hocus pocus of
the total state has held everyone

national

is

suffering

not
It

criticism.

the

from

comes

system,

NEW BRANCHES

opinion of this Depart¬

no

intended that
income tax should be imposed
the interest

paid by the Bank
on its bonds owned by non-resi¬
dent alien individuals or by for¬
eign corporations not engaged in
on

Bunting

Earl

trade

paid for."—Earl

business

or

Such

States.

in

United

the

result

a

to be

seems

the intent and purpose of section
9 of Article VII of the Articles of

Yes, anything and everything worthwhile
to be "worked for" and "paid for."

has

Agreement.
will

Bank

only this simple fact could be brought home
every adult in the land, most of our troubles

If

Moreover,
have

the meaning of

over.

by Non-Residents

income
within

the Internal Rev¬

thereof, interest
not

gross

Code under section

enue

be

on

the

116

its bonds

considered

within

the

since

sources

no

from United States

REVISED

CAPITALIZATIONS

from

United

(C)
can¬

Non-Taxable

Bank

Chevalier

a

States

tion and

resident alien individuals

Revenue

resident

business in U. S., is not

or

the

of

Bank

paid to

on

non¬

for¬

or

trade

subject to taxation.

business

or

is

States

not

in

the

trbller; Edgar? S^Blatberwick, .As¬
Assistant Secretary.

French Republic."

State

sistant Secretary; Evar 3: Skobg;-

The

Allan

Committee

Executive

of

director

The Savings Banks Association of
the State of New York anounces
election

the

Clarence

of

East

elected

G.

ury

The U. S. Treas¬

Code.

ruling stated that such inter¬

est

thereon)

by

whomsoever

ceeding

Carl

President

York.

Richter,

A.

and

Manhattan

Savings Bank

The

Savings

Jan.

Viceof

Treasurer

the

Banks

Asso¬
sav¬

ings banks in New York State,
having assets in excess of $10 bil¬
lion
and
having
7,098,000
de¬
positors.

or

Code.

made

'(ii) if the sole jurisdictional
basis for such taxation is the place
currency

in which it is issued,

quested by the Bank some time

paid, or the loca¬
tion of any office or place of busi¬
ness maintained by the Bank.'

the

"Under the Federal income tax

from
the Acting Secretary of the Treas¬
ury to R. L. Garner, Vice Presi¬

laws, non-resident alien individ¬
uals and foreign corporations not

which had been re¬

This ruling,

ago,

communicated

was

to

Bank in the following letter

dent of the International Bank.

the

of

Office

Nov.
-

Secretary

Code

Garner:

July 1,

1947, relative to the applicability
of the Federal income tax on in¬

International

by the

paid

Bank for Reconstruction and De¬

velopment

its bonds owned by

on

non-resident

alien

individuals

or

foreign corporations not engaged
in trade

or

business in the United

States, has been receiving consid¬
"The

and

Reconstruction

for

Bank

is

Development

interna¬

an

tional organization resident in the
United

States

and

is

juridical
entity separate and distinct from
its

member

Bretton

(59

a

The

governments.

Woods

Agreements

Act

512)

authorized

the

Stat.

President

to

accept

membership

for the United States in the Bank
and

provides

Article

VII

that
of

the

section

9

of

Articles

of

Agreement of the Bank shall have
full force and effect in the United

States and its territories and pos¬
sessions upon acceptance of mem¬

bership

by the United

the Bank.

States

in

The President accepted

membership for the United States
on

Dec. 20, 1945.

on

Section 9 of Arti¬

and

from

sources

within the

Mr. R. L.
Vice

Garner

Trust

Madden

J.

elected

an

Assistant Vice-

the

of

formerly

Thomas

20

as

President

New

of

Company

Nov.

on

was

Company.

He

President, Internationl Bank

for

Reconstruction

Devel¬

and

opment

Assistant Secre¬

an

Madden joined United
States Trust on May 15, 1916.

York

New

What

States.

Trust

Company
with

announces

is

domestic

Nat'l Bank of

re¬

viduals

the

in the

derived

been

within

the

from

United

States,

"Under

Code,

as

section

116

(c)

of the

tional

Organizations Immunities
Act, approved Dec. 29, 1945 (Pub¬
lic Law 291, 79th Congress) in¬
come

of

an

international organiza¬

Depart¬

a

native

of

LaFayette
County
F.

Early

Mitchell

Missis

assistant manager
Bond Department in 1939.
made

he

was

given

a

well

as

has

the

of

other clubs.

as

in

Center

celebration

leave of absence

three

and

designated

are

directors,

elected

are

stockholders

by

the

the

by

whom

of

of

Board

System. Of the six elected by the
stockholders, three are Class A
directors

(representing

three

and

ture and

windows

the

its

of

"Children's

of

Book

ing matter for boys and girls of
all ages. The collection was sup¬

of

foremost

the

Harry C. Kilpatrick
of

trustee

of

York,

ber of shares

at

Courant"

"After

Trust

Kil¬
and

tingency
capital

plus

officers and

the election of Keith Williams

Buffalo

of Buffalo, N. Y.

nounced

on

rank of

William

S.

Nov.

as

Savings
were

an¬

10 by

President
Mr. Williams

trustee

in the United States of moneys be¬

the Buffalo "Evening News" from

is

Rogers,

President

worth
late

C.

Co.

of

Pratt
He

Inc.

the

bank

which the foregoing
which

&

Letch-

succeeds

Breckinridge Porter
of

also-had

the

the
as

a

according to

is taken, and
following to

say:

The officers

promoted and their

hew positions follow:

Joseph
dent

and

H.

of the

recom-

Miller,

Vice-Presi¬

Secretary; Raymond F.

The

to surplus.
is $300,000 with

sur¬

like

amount.

The

profit

account

stands

of

$110,000

and

❖

Directors

Trust

of

of

Company,

J.

N.

at

*

of

Board

Newark,

un¬

at $15,000.

reserves

❖

19

Nov.

on

ap¬

Fidelity
also of
Newark, to purchase the entire
assets of Clinton Trust Company
and to take over its banking of¬
proved
Union

offer

an

Trust

No.

at

the

of

Company,

Clinton

505

Avenue,

Lyons Avenue and Aldine

Street,
in
Newark.
A
special
meeting of the preferred and com¬
stockholders of Clinton Trust

mon

Company has been called for Dec.
16, to act upon the offer. If threefourths

all

of

stockholders

in¬

two-thirds of each class
of stockholders, accept the offer,
cluding

Clinton

banking

will

Trust

surrender

privileges

will

be

Union

its
by

and

assumed

Trust

Company

before the end of this year.
the

offer

Union,
Clinton
full

made

Under
Fidelity
stockholders of

by

preferred
Trust

the

would

retirement

shares,
1948.

Bank

"Daily
reporting

21

reserve

now

divided

olus

Company.

seven

the

Nov.

approval

Fidelity

recent

President.
Mr.
Vice-President

of

of

this also said:

Savings
a

Assistant to the President of The

trustee

(par $25) from 10,-

000 to 12,000. The Hartford

elected

meeting of the board of trustees,
was
announced
by
Glover

Promotion of

Company of Hartford,

the

it

Beardsley,
patrick
is

*

posal of the directors to increase
the
capital
from
$250,000
to
$300,000 through a stock dividend
of 20%, and to increase the num¬

business

was

Harlem

the

New

*

Nov. 20 approved a pro¬

on

its

juvenile books."

a

agricul¬

industry.

Trust

Conn,

and at

Bank

directors

stockholders of the River¬

fices

was

man,

plied by many
publishers of

banks)

B

commerce,

*

The

noted by Arthur S. KleePresident of the bank, that
"in addition to being of great in¬
terest to children, the exhibit will
be a valuable guide to parents and
school teachers in selecting read¬
It

Class

are

(representing

Week."

before

Prior to

whom

The

the

in order to enter the army, where
he served four and one-half years

time.

of

Bankers

office
in
Rockefeller
a
display
of juvenile
in
connection
with
the

books,

In 1941

embarking upon his
cle VII provides in part as fol¬
longing to such organization, or banking career, he served six
from
lows:
any
source
within
the years as deputy clerk of Shelby
United Sftates, is excluded from County Chancery Court. He is a
'"'(c) No taxation/of any
gross income
and^ exempt from graduate of Memphis University
shall be levied on any obligatio
Federal income taxT For applica¬ Law School. He is also Secretary
or
security issued by the Bank tion of such exemption, which is of the Memphis
Security Traders
(including any dividend or inter¬ effective only with respect to tax¬ Association.




for a time Assistant
Administrator
of
the
Washington. Mr. Hall

member

a

Com¬

being released with the
Captain. Upon his return
the United States in stocks, bonds, to the
bank, he was made Assistant
or
other
domestic
securities, Vice-President and has been as
owned by such organization, or sociated with the
department in
from interest on deposits in banks that
capacity up to the present
tion received from investments in

Bank of Boston has nine

six

transfer of $50,000 from the con¬

wa

of

of

plained that the Federal Reserve

Continental

Trust

was

in

Manufacturers

sippi,

Chairman
Directors, ex¬

medation directors authorized the

re-

Mr. Mitchell

de¬

amended by the Interna¬

he

pany,

to

ment.

termined under the provisions of
section 119 of the Code, for the
period specified therein.

Cor

Bank

sources

as

been

spondent

less than 20%
has

suc¬

transferred

foreign corporations, if
of its gross income

or

of

ceeding Joe H
Davis,
who

hands of non-resident alien indi¬

Fran¬

moved to

principal

the depart¬

has

Board

the

20

Nov.

on

Creighton,

became Vice-

the

of

San

he

Manufacturers

York

manager

income

in

Colonial Trust Company of New

Memphis

ment,

of

Clinton

appointed

corpora¬

from United States sources,

President

the

Club,

Mgr. of
Bond Dept. of First

constitutes

considered

or a

not

career

1913. Later

Chicago where he

was

bonds, notes, or other interestbearing obligations of residents,
corporate or otherwise is treated
as being from sources within the
United States.
However, interest
received from a resident foreign
corporation

business

cisco in

F.H.A.

Mitchell New

election

M.

side
Manufacturers

Deputy

Washington 6, D. C."

the

Albert

Mr.

Guaranty Corp. Before going with

MEMPHIS, TENN. — Early F.
interest
from
such
sources
is Mitchell, formerly assistant man¬
determined
by
statutory
rules ager of the Bond Department of
under section 119 (a) (1) of the the First National Bank of Mem¬
phis, has been
Code.
In
general,
interest on

tion

eration in this office.

sections 211(a)

the Internal Revenue
any amounts received as

of

United

"Your communication of

terest

under

interest

19, 1947

Mr.

Dear

tax

231(a)

Washington 25

or

engaged in trade or business with¬
in the United States are subject
to

TREASURY DEPARTMENT

payable

1948. Announcing the re¬

of

Governors of the Federal Reserve

The Board of Trustees of United

his

Very truly yours, ''
(Signed) A. L. M. Wiggins
Acting Sec'y of the Treasury

Nov. 20 as directors of

on

1,

sults

of New

ciation consists of 131 mutual

of

held—

est, therefore, is not subject to
withholding under
Section 143
and 144 of the Internal Revenue

of
re¬

President of The Sea¬ ton. Mr. Forbes is a Class A direc¬
men's Bank for Savings in the. tor and Mr. Allen is a Class B
City of Newi York, to serve as: director. Each was-chosen for a
Treasurer of the Association, suc¬ term of three years beginning

United

thereof.

& Son, Inc.,
Mass;;,- were

the Federal Reserve Bank of Bos¬

nounced on Nov. 25 that the United

Revenue

Bird

of

Walpole,

Michalis,

subject to taxation

Reconstruction and Development an¬

rttp'fK

Forbes, President of the

Street Trust
Company of
Boston, Mass., and Philip R. Allen,

under sections 211 (a) and 231 (a)
gret the passing of Percy M. Hall,
States Treasury Department has of the Internal Revenue Code, re¬ Vice-President in the Industrial
ruled that interest in bonds of the Bank paid to non-resident aliens,
spectively,
and therefore,
such Credit Department. He had been
or to foreign
corporations not engaged in trade or business in the interest is
with
the
bank
since
not subject to with¬ associated
United States, is not subject to Federal income tax under Sections
1935. Mr. Hall who was born in
holding under sections 143 and 144
211(a) and 231(a) of the Internal^
West Chester, Pa., in 1887, began

The International Bank for

F.

made the presentation on
Nov. 20. It was in "recognition of
Mr.
Goodhue's services
to
the

tary.

eign corporations not engaged in

Vice-President; .Wil¬

Harder,

Vice-President;:
Mayer,
Treasurer;
Robert W. Ramsey, Deputy Con-,

French

the

of

H.

Herbert

York,

York

bonds

liam

Legion of Honor. LudviC Chancel,
French: Consul General of New

under

"It is concluded that interest

International Bank for Reconstruc¬
Development that under Sections 211 and 231 of Internal
Codes, interest from bonds of the Bank, when paid to non¬
individuals or foreign corporations not engaged in trade

.cusennardt,

of New York has been

Company
made

or

Manhattan

The

of

sources

(a) (1).

Treasury Department informs

President'

F. Abbot Goodhue,
The

States
section 119

Bankers

and

NEW OFFICERS, ETC.

ment that Congress

every¬

Bank Bonds Held

Inter¬

Immuni¬

-

"It is the

body in this land, that progress
has got to be worked for and
Bunting.

would be

by the

Organizations

ties Act.

suffering

is

from 15 years of inattention. Our
biggest job is to realize and to
show
everybody whose living

to

conferred

benefits

back.

"Enterprise

and

exemptions

privileges,

CONSOLIDATIONS

Executive

being entitled to enjoy

as

immunities provided by that

tivists have

from

through

President

the

rationing.

"Concessions

News About Banks

Act

"The

consumer

beginning after Dec.'
the Interna- ,
Organizations Immunities

years

31, 1943, Section 1 of

Precisely!

even

Thursday, November 27,. 1947

& FINANCIAL CHRONICLE

COMMERCIAL

THE

(2174)

which

receive

value

is

$50

of
per

dividends accrued

the

their

share,
2,

to Jan.

The original preferred stock¬
of
Clinton
Trust
were

holders

depositors
1934

of

the

received

for

bank
e?.ch

who

in

dollar

of

their

deposits 500 in cash, 250 as
a participating interest in Newark
Mortgage Company, and 2'50 in
preferred stock of the reorganized
Clinton

been
of

Trust.

paid

the

bank

Dividends

have

the preferred stock

on

since

1934.

Common

stockholders of Clinton Trust Co.
would receive

$16 per share under
less possible adjust¬
ments for a capital gains tax. on
the sale to
Fidelity Union, un¬
known liabilities which may be
the

offer,

before
liquidation
(Continued on page 37)

presented

is

Volume

166

Number 4650

THE

COMMERCIAL

&

FINANCIAL

CHRONICLE

(2175)

is assured, by higher standards of

Sees No International

Stability
Without Exchange Stabilization

hoi^sekeeping, general control and

There

en-

turn

issued;

Madden,
of

Institute

the
of

Interna¬

tional Finance
of

New

York

ties

Dean

manent

So

long

J.

T.

Madden

less

per¬

foreign trade

strictions exist and
to

on

large extent by

a

the

governments, ^and in most
cases through the licensing of im¬

ports, the exchange rate of a cur¬
is of no great importance.
Moreover,
since most countries
are forced to import large quan¬
tities
of commodities and
have
rency

overvaluation
is

not

in

a

to
export, the
their currencies

little

relatively

of

serious

as

would be

it

as

freely competitive world mar¬

parities by

The fixing of the

ket.

the various members of the Mone¬

Fund has, therefore, solved
nothing, and the world at large is
still confronted with the problems

tary

establishing exchange rates on
or less permanent basis
and the removal of exchange re¬

of

more

a

tertwined

These problems are in¬
and both will have to

be

before

strictions.
solved

international

semblance of

a

stability

can

be

achieved.
,

In

analyzing

the

of

obstacles to
stable ex¬

bulletin

the

rates

change

power

remove
price
controls, rationing, and subsidies
and to permit the exchanges and

to

development, it is argued,

a

would
all

find

re¬

their
the

hasten

those

elimination

factors which

vent

ultimate

tion

and

now

of

of

pre¬

stabiliza¬

currency

would

restoration

level.

own

the

accelerate

normal

more

nomic conditions.

eco¬

The removal of

exchange and price controls, it is
claimed, would have the following
effects: (1) Exchanges would de¬
preciate rapidly, with the result
.hat imports would tend to de¬
if

the high prices

because of

crease

imported

goods

in

of

terms

national currency.

The lower
change rate would stimulate

ex¬

ports to the extent that goods

are

ex¬

obtain

to

increase in wages. (3) High prices
■VQul'd
stimulate nro-hietion

thus

in

result

supply

of

increase in the

an

farm

manufactured

products

goods.

make

(4)

and

This in

available

more

joods for export, thereby leading
to

restoration of equilibrium

a

least

d

an

improvement

of

payments,

in

or

the

bring

the

governments show a large ex¬
cess
of expenditures over reve¬

to

nues,

serious approach can, be

of the government would increase

stabilization of the cur¬

and the

Any effort in this direc¬

A

to

tion could have

only

temporary

a

effect, since sooner or later the
increase in the means of payment
lead

would

tion

further

to

deprecia¬
the cur¬

devaluation

rency.

of

The

or

prerequisite,

first

therefore, for the stabilization of
currencies is the establishment of
sound fiscal

policies, and particu¬
larly cessation of the practice of
meeting budgetary deficits through
to

recourse

the central

and

com¬

mercial banks.

halting of inflation would
increase the incentive of the in¬
the

to

farmer

work

harder

sell

to

This would lead to

and

of

his
an

products.
increase in

stockholders feel

about

dealers

.

.

them.

and brokers who

have been

trying to

about

at

rate

increase

neglected

for

Time and

state.

stockholder to

a

become

As it is he is only

pany?

again

interested

in

the

welfare

sideline player who

a

will

management

togher business activity

his

of

com¬

gets in the

never

these

of

managers

business

budget could be balanced.
budget would mean

balanced

creation

to

end

an

of

new

about

know

On

surface,
be sound

to

this

.

without

.

have

all

received

this

excellent

by

progress

As

he took

as

soon

was

not

done

are

doing

busy

so

and

far

so

years

is

ago

and

headache.

a

the bad

all
So

well as the

good.
finished his study of what he thought
.

.

.

as

he wrote to the stockholders and told

company

He said it was a mess
He also told them what he thought must be

so.

get this business back

.

the track again.

on

would

have

no

currencies
countries

of
at

currencies

lasting

or

European
present
time

many

the

would not lead to

an

increase in

production. It would merely
an

bene¬

Devaluation of the

cause

increase in the cost of imported

goods and thus bring about a rise
in prices and probably a further




If

any

show

To the stockholders of

Since

with

your

considerable

you,

forward

While much remains to

company.

done, the accomplishment of the last few weeks enables

view the future with
It is too

early

as

a

of

measure

that

yet to fairly present

has

account

thus incurred have
Sales

$52,000

been

been

them

of

die

first

fallacies

would

but

politically dangerous.

place,

depreciation

October

in

crowded

.

.

who

.

'educe imports.
that

However, the liquida¬
and losses

$70,000 figure,

as

are

the

necessities

ment.
is

and

materials

raw

a

on

Grofoot, Vice Pres.
Of Blair & Co., Inc.
Blair & Co., Inc., 44 Wall Street,.
York City,
announced the.

New

election of E. J.

t

m e n

C

not feed their

of

their

these

population

or oper¬

of

the upgrade.

position is

Our bank loan

financial

matters

attention,

management's
I

until

showing steadying improve¬
our

credit position

reduced $3,500 in October and

was

am

have

consumed

production

a

problems

pleased to report that

our

considerable

have

not

part of

gone

has been stepped up and that

the

sub¬
—

Mr.

Crofoot

further improvement in

our

operation

Over-the-Counter Quotation Services
For 34 Years

tween

and

prices and

accelerated.
ments

lead to

in

a

wages

Since
number

(Continued

demands for

the
the

race be¬
would be

United

Rice

erman

on page

40)

Mill

and

Warehouse

Co., Tuckerman, Ark.
During
World
War
Crofoot

was

II,

Mr.

chief of the division

of

foreign finance of the United
States Navy, Washington, D. C.
and held

the rank of Lieutenant-

Commander.
as

Prior to the

war

Coast Water Co., Bay City,
of
Southwestern

Tex.;

President

Rice

Mill, and President of Bay City
Rice

Mill, and

trial

was

other

interested

j-

Profit
$5

Preferred

35-year-old New
pany,

which

stock

England

has

accumulation

of

of

an

com¬

dividend

a

$77

share.

a

Earnings over the previous ten
years
have averaged $21.30 a
share.

While

no

dividends have been

paid for a
earnings in
ten

years

number

of

years,

of the past
covered annual divi¬
nine

requirements

Ten-year
the

average

Common

by

a

wide

$4.07

earnings
a

in

share.

Recent price 7

request

NATIONAL QUOTATION BUREAU, Inc.
.

Established 1913
46 Front Street, New York

Chicago

148 State

4, N. Y.
San Francisco

St., Boston 9, Mass.,

Tel. CAP. 0425

:

ir»

utility and indus¬

enterprises.

on

,

he

President of Southwest

special situation mailed

govern¬

of European

*

Descriptive analysis of this

there would be largeunemployment.
Secondly,
permitting the currencies and the
prices to find their own level
wages,

Crofoot

popcorn

scale

soon

J.

Recent price 37

materials

higher

E.

margin.

Furthermore, without
importation of industrial raw

would

"

of T. & C. Co., a Blair subsidiary
and the
major manufacturer of

dend

currency.

the

un¬

manufacturing efficiency

their

own production has
increased, ir¬
respective of the prices in national

Mr.

is the founder

countries will be forced

foodstuffs

Vice-

Pepsi - Cola
Bottling
C o.
of Los Angeles
and Lucky
Stores, Inc.

The

similar amortization payment is planned for November.

attended.

as

Director.

For

industrial

import

Crofoot

ompany's

Although the final

Payables have been reduced sharply and

While

companies?

compared with

reading when completed.

current

The commodities

being imported by most
European countries at the
present time are primarily basic
of

these

owns

anyway?

minimum.

a

the

to

inventory position, of

our

for September and $42,000 for August.

In

of

consideration

some

This also goes for the big in¬
dustrial giants as well. After all

numerous

progressing satisfactorily

kept to

me

optimism.

which I made mention in my previous letter.

of

country

Dairy Products Co.; President oJf
Dairyland;
President
of
Guli

,

communicated

has been made by

progress

be

last

I

number
be

socialism1

this

too.

served

it should make pleasant

also

in

want people to be

you

partners and to cooperate in1
worthy endeavor you have to»

analysis of last month's operations is not available, at this writing

to

the

.

stockholders got this letter:

the government.
Such a policy,
'"■owever,
not
only
contains
a

greater consumption of commodi¬
ties produced at home but also
in larger imports.
Obviously, so
of

.

Last week the

plants.
In
order to prevent starvation, many

conditions prevail,

they
what

He didn't pull any punches.

hopelessly

to

investment

over

with this

wrong

them about it.
but

their

on

He started to tell them

did he do?

own

intervention

ate

ficial results.

communism

in

companies^

of

vending machines in the
States; partner of Oak.
Farms, a dairy firm in Dallas,
Tex.; owner of Pepsi-Cola Bot¬
tling Co., Sacramento, Calif.; part¬
Jim Cleland knows some¬ ner of Gobies Dairyland, Wichita
hundreds of good people Falls, Tex.; and partner of Tuck-

He realized that there were
who bought stock in this company several
else.

program

since it allows

economic forces to take their
course

thing

tion

the

eems

sumption but also for export. In
many countries the large supply
of
money
results • not only
in

these

and

talk

a

with

And

pur-

•hasing power through deficit fi¬
nancing.

interest

more

these

less

sidiaries

who

everything except keeping their stockholders informed as to what is
going on should take a look at what an investment dealer by the
name
of Jim Cleland (of New York City) has been doing with a
little company that got into difficulties due to management.
When
Cleland took over a few months ago some of the bright boys who
had been running this company were saying "What does a broker

without which these nations could

as

of

lot

present
of

Some

revenues

of commodities avail¬
able not only for domestic con¬

rehabilitation

be

a

spend

game.

(5) Due
prices and the

in

like yoa

more

the President and
stockholder's money on employee benefits, on reports of the excellent Crofoot will
the
advantages that may be derived from this or that pension fund, assist hi
bonus, welfare, physical education program, or what have you, and develop¬
ment by Blair
the only consideration given to the people who
actually own the
business and have their money invested therein is an annual report of new indus¬
trial enter¬
couched in language of interest only to a lawyer or an accountant.
Then we wonder why people are only interested in buying stock prises and in
for a price rise. -Under such conditions is there any other incentive the manageand

realistic level.

a

the

exchange

stable

a

the supply

long

would

and

serve

the investment public in an intelligent manner can attest to the fact
that stockholder relations in most corporations are in a deplorable

thus

and

the currency would not drastically

The

dividual

and tries to find out

callous way.

same

Investment

commensurate

a

the process of infla¬
tion continues and the budgets of
So long as

rencies.

makes

.

ible

balance

made

enemy when he calls upon them
the wheels go round.
They

an

manufacturing business?" Well, so far at least, he is
ivailable.
(2) Prices would rise showing them. He is putting common sense into this business and
sharply/ and this in turn would he's getting results. Sales are going up, profit margins are being
bsorb a large portion of the vast raised, unusable inventory is being eliminated and debts are being
purchasing power at the disposal paid. The current position is improving and customers who have
pf
the
people in a number of not been prompt in paying their bills are being told, "pay up or go
and they are paying.
countries, except where labor was to court"
|

marks:

no

what

terms

purchasing
exchange and

turn would

establishment

the

in

currencies

prices
or

more

a

basis, the bulletin stated.
as foreign-exchange re¬

is carried

their

Such

many
on

of

to

pari¬

of

spiral of prices and

of their external

ex¬

currencies

the

from inflation and overvalua¬

.ng

tion

however, it is
impossible to
change

quest for informa¬

a

were

your

as

.

Under pres¬
ent conditions,

the

in

President.

Jim Cleland

you

welfare

today.

their

University.

fix

company officials in

ignore their stockholders
The only time they wish they hadn't done
wages.
.this
when proxy time comes arbuhd, or some needed change in a
In discussing the advisability bf
permitting exchanges to find their company's affairs necessitates stockholder's approval. Then the glad
hand and the smile come forward.
When these shortsighted gen¬
awn level the bulletin states:
tlemen complain about socialism, bureaucracy, and the lack of the
Adverse Effects of Removal of
general public's interest in the preservation of our free enterprise
Exchange Restrictions
system they can only thank themselves for contributing to such an
attitude.
They have been saying to HELL WITH OUR STOCK¬
It has been stated that it would
HOLDERS for years and years
and that is just the way most of
ae better for tne countries surter-

Stabili¬

Director

shortsighted

there
the

tion and he is treated like an interloper. Some
managers of many of
this country's smaller corporations greet the average over-the-counter

•in the

by Deari John
T.

of these

one

to

running some of our smaller com¬
panies whose securities are owned
by the
great American
public

dealer

"Cur¬

zation"

looking through the

like

the Marshall Plan on the recon¬
into effect it will lead to drastic
monetary changes in many countries and that this will mark the be¬
ginning of stabilized international exchanges, according to a current

rency

too many officers of

are

been

luck

if there

...

People?

publicly owned corporations who
wrong end of the barrel.
They act
they own some of the companies in which they only hold a
managerial position.
Many a time an investment dealer will call upon
have

of sterling.

Good

■

CLELAND,
■

Are Stockholders

It is generally expected that if
struction of Western Europe is put

bulletin

JAMft* P.

By JOHN DUTTON

Y. U. Institute of International Fi¬
nance, points out fixing exchange parities under present conditions
avails nothing. Holds immediate removal of exchange restrictions
would cause severe inflation with adverse political effects. Sees no

titled

conservative research;
Very truly yours,'

Securities Salesman9s Corner

Dean Madden, Director of N.

likelihood of early revaluation

19

:

Teletype BS 259

N. Y. Telephones: HAnover 2-7914

20

THE

(2176)

COMMERCIAL' &

FINANCIAL

CHRONICLE

Thursday, Novembet 27, 1947

other necessities which
able

which he

(Continued from

,

world

which

power

productive

6)

page

once

was

Britain's,
It

is

but

idea

an

only

been

which

after

found—

return—has

my

admirably

I

developed

in

a

book just published, or rather re¬

published. Ic is by Brooks Adams,
brother of Henry Adams, and is

qalled

"America's

premacy."

It

was

Economic Su¬
issued 47

first

I will not go into it in
detail, but will merely mention
that, with remarkable foresight,
Adams pointed
out a ; growing

years ago.

weakness of Britain and concluded

that

that weakness would result

ip; World instability.
it

condition

a

which

remedied only if

to

some

step into

the

left vacant

be

could

be

other great

namely, the United States,

power,

would

thought

He

place about
the decline

by

of the British power.

The concept that I took to Eu¬
with me was this: that we

rope

must
our

if

the

assume

position which
power demands that We take

the

world

and

peace

Just

as a

cles

are

is

is

to

stabilized

be

be~ maintained.

to

good voice or good mus¬
lost if they are never

had

to

spend unexpectedly

large

amounts for the purchase of food.
In France
also the
shortage of
food

intensified

with

the

difficulties

the

black

considerable amount of
time and effort in coping with the

black market.

They

market

in¬

and

creased the

inflationary pressures
in that country.
The illustrations could be mul¬

a

In France and Ger¬

for example, the worker is
virtually obliged to take time off
from his regular job and spend it

many,

in the intricate toils of
rate
tem

to

clandestine

and

provide

elabo¬

an

barter

family

his

sys¬

with

tiplied indefinitely. With a little the necessities of life.
While he does this, his work—
reflection, I am sure you will see
how bad crops dealt a crippling the production his country needs
blow
to prospects for economic —suffers. I cite only a couple of
reconstruction. Furthermore, you illustrations, related to me by M.
can see how they contributed
to LaCoste, French Minister of In¬
situation.

of

the

political

In

his

French

In

by careful thought and reason.

has

to

and, with it, great re¬
sponsibility. We must be prepared

seems

to exercise

industrial production.

power.

measure,

that

sponsibility,

with re¬
shall surely

power,

or

we

lose it.
,

;

It is pleasant to be able to take

note

of

many

signs that

prepared

exercise

and

our

to
fulfill

we

are

power

our

responsibilities.

another

this

side

stands

our

obli¬

gations. I believe there is

no his¬
torical precedent for such large-

scale

Congressional investigating
The more one thinks about
thfem, the more remarkable—and

trips.

encouraging—they
was a

appear.

Here

great proportion of one na¬

tion's

most

responsible officials,
working hard and objectively to
determine

how

best

that

nation

could help the rest of the world
to' prosperity and stability.
The
fact that Congress has shown such

willingness to entertain and im¬
plement a foreign aid program
testifies to the Congressmen's sin¬

cerity

and

their

to

realities

of
the
economic
which they saw in Eu¬

rope.

mining

where

areas,

me

turn

now

those

realities,

facts

of

to

utmost

to

some

some

of

of

those

consequence

to

America and basic to the formu¬
lation

of

a

program

of

foreign

assistance.
ji The

in

western

Europe, I be¬
lieve, is two bad harvests, caused
by

a series of bad weather condi¬
tions not equalled in more .than a
hundred years. From Norway to

Italy, western Europe experienced
drought in the summer of 1946,
followed by a freezing winter of
severity not known since Na¬
poleonic days. This, in turn, was
followed by an even more severe
drought this summer.
a

The resultant bad crops are of
vital significance. I suspect that
the public here has failed to esti¬
:

mate and properly appraise the
importance of the bad harvests. It
is one of the most critical factors,
if not the most critical, in both the

I

cause

in

Food

Cause

of

and

summarize

to

effect relationship

categorical terms: inadequate
food in Europe is the root of in¬
adequate production. I say this
emphatically because in too many
quarters in this country one hears
the allegation that Europe's trou¬

a

coun¬

pound

to buy in

the morning, they return
city and sell half of it in

the

to

the

afternoon, thus obtaining

workers,

which

and

miner

once

tween

leisure

another

a

suit

longer exists.

British

the

in

It is not easy, you

left

over,

as

velvet, is half a pound of butter
for themselves and their families.
of situation

sort

same

ap¬

clearly in Ger¬
many.
One sees at every station,
platforms crowded by men/women
and children, some of whom have
waited 24 hours or more to get
even

more

train.

a

people

Let

me
explain in
relation of food

the

productive work.

more

detail

to

man's

a

food

quite simply, less
physical stamina. How hard can
means,

man

work if he gets, as in Ger¬

many,

somewhere from 1,500 to
calories a day—about half

a

2,000

American

an

accustomed
a

ounces

seven

consume?

laborer to

French

three

to

worker

do

of meat
of

ounces

How

a

a

job

is
is
on

week and

bread

a

day,

which is his official ration?
The

the
is

fact

diet

of

in

the matter

France,

is

that

for example,

managements feel obliged to give
their

workers

one

good

meal

a

day, a meal which the companies
largely subsidize. Similarly, in the
German coal mines, the British
occupational authorities .supply
the

miners

one

njeal

each

day.

men simply could
day's work, and it
is quite, understandable.
:

In

remarkable
working, for

where I had

France

in

detail

an

op¬

with

two

large indus¬
trialists, I found that they are
getting about 85% of the pre-war

efficiency from their labor.

Of¬

ficial

out

French

statistics

bear

this finding. In Italy, there is uni¬
versal

comment—even

spoke to

me

Pope Pius

to this effect—on the

extraordinary vitality and eager¬
ness
of the working population.
The limit to their production is
not a lack of will; it is a lack of
raw
materials and coal for fuel
In

England, there is, to be sure,
appears to be a valid com¬
plaint about the effort of what

what

they call "casual" labor—workers
on

the

docks,

in

the

building

trades and, unfortunately, even in
the
coal
mines.
But
for most

established

which

industries—those

workers

have

security

in

of

job tenure—rthe effort of the em¬
ployees

not do a good

ards.

I

was up
was

to pre-war stand¬

assured of this bv a

representative

group

of

British

industrialists.

lack

Incentives for Work Absent

productive
more

output. .It is
subtle, and it is a

the coal mines, I be¬
in Amer¬ lieve it is worth pointing out, the
.Even in

manifestation which we
ica have never seen and
never

been

to

may

purchase his food

ration and

the Russians
to drive out

by

up

actually

serve

there

satisfy the family needs.
In the light of what is to
seen
in Europe, I feel that

cannot be

too critical of

have taken
than

be
we

the Eu¬

tokens

substantial.

are

that,

they

of

More

promising

are

what

be

can

numbers of

plished by those countries if we
give them the help with
which they can help themselves.
Although I believe that last
the

summer

British

Government

properly to inform its
of the crisis they were

people

people who had been
chiefly because they were

discontented

miners agreed to a six-day week;

into
something like De Gaulle's party
or a combination of other parties.
You cannot consider the French

economic situation without bring¬

ing in the German aspects.

imports

particularly gasoline,
deeply cut; an all-out effort
set under way to step up the

French

willing to recognize
restoring the German
economy. At the same time, they
want to be very sure that their
are

the need for

protected when Ger¬
production
is

security is

industrial

man

brought up to a higher level, and
that Germany does not become a
menace.
Security is necessarily
a vital factor in French thinking
on

the

subject.
Situation

German
In

Germany, the food problem
is of overwhelming importance.
As elsewhere in western Europe,
the crops have been bad. But the
situation in Germany is not one
which, as in France, could be
much improved with a few good
harvests.
Instead, it is the result
of the division of Germany into
two parts, the Russian zone and
three

the

western

French,

was

The western

British

tion

England;

Germans driven

"austerity"

was

ter.

Shinwell, whose efforts in
of higher fuel production
were
less
than
acceptable, has
been replaced.
And, last week,
Dalton,
whose
performance
as
Chancellor of the Exchequer was
under criticism, was also removed.
behalf

France

I

had

discussions

of

length with Ramadier, Prime
Minister; Schuman, Minister of
Finance, and several other top
some

of

Americatts.

have the addi¬

than

more

the

of

zones

and

zones

export program which is vital to

In

Coal

from the Ruhr is, of course, vital
to the French, and I believe: the

were

more

It

dissatisfied.

and

could be that they may head

accom¬

only

million

five

of the terri¬

out

belongs to Poland.
area was always
the poorest agricultural land, al¬
ways dependent partly on the out¬
side world and partly on eastern
Germany for food. It cannot live
without those food imports
and
consequently we are feeding it,
tory that

now

But this western

from

the

farms.

produce

And

we

of

American

paying for it.

are

General Clay properly conceives
of

this

problem as getting Ger¬
off the backs of the Amer¬
taxpayers.
This cannot be
done by growing more food in the
western zone; there is not the
many

ican

land

and

solution

to

resources

must

do

it.

The

therefore,
through increased German indus¬
trial
of

come,

production,

German

ported ond
to pay

that products

so

factories

thus

be ex¬
the money

may

earn

for the necessary food im¬

ports.

officials, as well as
Ambassador Caffery and his top

I have always had the highest
regard fGr General Clay's ability,
but even so I was surprised at

economic and political advisers.

how well he has done in

government

came

pression that the French
termined

to

They

straighten

de¬

are

their

out

and balance their budget.

currency
.

I

with the distinct im¬

away

are

their crisis.

power.

Otherwise the

But there is a second way that
of adequate food
supplies

the

portunity to discuss the situation

and

low that almost all industrial

so

But

the mot part very earnestly-and
diligently.
1

The first effect

obvious.

mation—set

to

And

fact is that they are

toward

trend

anti-Communist pro¬

of the ranks of Communist voters

are

shirking it.

judgment.

strong

a

De Gaulle's

will agree, to ask a man to work
for money, which cannot be used

facing, in a few weeks' time they
developed a real determination to
fight the trouble out. The coal

on

proved

Cominform—Committee of Infor¬

clothes—no

of

mines..

And

representing

recent

be¬

choice

in

the

is

people in France every day.
municipal elections

The

radio, leisure

had—the
or

Gaulle

De

more

gram.
The re-established Comintern or

had failed

out this superficial and essentially

planned, to restore her situation, the worker is obliged to




absent.

the wage
they would have earned that day
amount of

,

had

are

the

have less than optimum effort does not
obliged
to
worry appear to be the result of per¬
the^ British have been using up about. But this is what happens: versity on the part of the miners.
their three and three-quarter bil-. In periods of food scarcity black The fact is that in England, as
lion dollar;Joan. Similarly, it was; markets spring up—I mean real throughout Europe in a greater or
the reason why France could notj black markets, in which a major less degree, the traditional incen¬
spend her American credits and( sKftre^of the community's food tives for work are absent. A Brit¬
other dollar; resources hfor the' purchases .takes
place,; not just ish coal miner can earn, in three
purchase of capital equipment, as kfe&ks and-butter. To/Jive in this or fpuriedays' work enough wages

she

have,

not to be had.
The
which is available to our

are

choice

money

malicious

affects

■
It is one of the most significant
for example, for "the in¬
creasingly rapid rate with which

that

invoked and, what is more, ac¬
on each train the
packed shoulder to cepted by the people. Meantime,
shoulder in the compartments, on in the Paris Conference on the
the blinds between the cars, and Marshall Plan program, the Brit¬
hanging on the steps—all for the ish representatives had proposed
bles stem from laziness. You have purpose of getting out into the a much expanded production ef¬
all heard the crack: "If they wont'
country to scrounge a little food. fort.
Some of the leaders of the Brit-:
work, then let 'em starve."
It They are swapping their valuables
implies that the Europeans are for a sack of potatoes or whatever ish Government, it seemed to me,
were
less able or vigorous than
sitting down complacently and they can get.
waiting for Uncle Sam to support
I
submit that with
the food they might have been. But since
that time there have been major
them comfortably in a life of in¬
situation such as it is in western
dolence.
Europe, one might expect the peo¬ changes in the Cabinet, all of
The facts simply do not bear ple
them, in my opinion, for the bet¬
to
be
unable
to .work
or

somewhat

*

forage in the surrounding

try for butter. If they find

pears

in

Europe."
reasons,

it

thumb

sore

do not hesitate

the

political 'and economic climate of

v

a

but

Inadequate Production

what

outstanding single circum¬

stance

like

out

Atlantic,

Energy, in the form
calories, must go into a worker
if he is to produce energy, in the
form
of
productive work. Less

Foreign Assistance

Let

the

is vital, some of the
miners knock off one day a week

The

is

)J.v

of

of

Formulation of Program for

*

that

That is its effect on

Inadequate

intelligent

appreciation

one

Europe.

summer, as
other Federal

national awareness of

and

There is a
very direct and logical connection
between food and production. It
may not appear at first glance on

Europe last

a

effect

to me to be too often over¬

looked here.

The very fact that some 215 Sen¬
ators and Representatives went to

well as
scores of
officials,
is a convincing demonstration of

the

even

own

We .have national power in great

with national

to

dustrial Production.

Malnutrition and black

production

so

enough to form a prepise judge¬
ment, but I have the impression

ropean people and dismiss them
province, he said, with the charge, that they are not
markets created by shortages—all there is a valley in which tobacco working or exerting their best ef¬
these results of a bad harvest are can be grown. Above it are for¬ forts. If we had had in this coun¬
exactly the pre-requisites for a ested hills where timber,: despe¬ try the proportionate hardships of
good harvest of another sort—a rately: needed for the rebuilding war, the consequent suffering and
So the disastrous crop failures of the
good harvest for aggressors. This of the country, can be cut.
is the atmosphere in which agita¬ long as there was a black market two post-war years, I doubt very
much if the people of America
tion
can
grow,
in which false in tobacco, the inhabitants spent
would have stood the trial with
promises
tend
to
be
accepted their time in the valley, growing
the patience and endurance of the
without examination,
in which a contraband product. When the
peoples of England and France
market
was
cleaned
up
opinions are formed and political black
and Italy.
affiliations
are- hastily
entered they returned to the hillsides and
; Indeed, the steps toward recon¬
into out of despair instead of such produced the lumber that France
struction which European nations
important decisions being reached needed.

deterioration

a

Insufficient food, the result of
bad weather for almost two years,

exercised,

like

would

or

worked,

once

for

amenities of life which he

small

Instead, she spend

economy.

avail¬

are

luxuries

himThe

to

also squarely facing
Perhaps the crisis in

retaining

good officers and civilians
staff

his

on

and in his administration

long after the

so

He and

they
doing a first-class military
government job; as good as can be
done, I believe.
war.

are

England,
and
the
steps taken
there,
made it
easier
for
the

again

French

man

the

Government

propose

necessarily painful corrective

action
even

that

must

be

part of

so,

stand is
of

to

a

whom

taken.

the

But

courageous

reflection of Ramadier,
I

got

im¬

excellent

an

pression. I thought him a middletype of Frenchman of the
best character, intelligent, sincere
and honest, willing to stand by
his principles.
He did what had
to be done in cutting off all im¬
ports but wheat and coal.
He

.class

even

cut the bread ration to

fifth of the

sumption.
action

to

situation.

prewar

This
meet
It

average

was

the

has

one-

con¬

courageous

facts

been

of

the

rewarded

by Communist-led demonstrations
against him, and by strikes in part
for political purposes.
Much is to be heard
about

De

Gaulle.

growing political
tant.

I

because

do

I

not

do

I

in France

believe

power

want

not

his

is impor¬

to

think

predict
I

know

Italy's big problem, as I saw it,
revolves around the Ger¬

trouble—specifically the loss

of

the German market.
A large
part of Italy's exports used to go
to Germany and Central Europe,
and in

return she got wheat

and

the coal without which her indus¬

try cannot operate.

The collapse

of

Germany has hit Italy; I should
say, more seriously than any other
country
though
closer

in

western

Belgium
physically,

air
Holland,
grievously

Europe,

and
are

affected too.
I returned to

Paris at the time

when the Marshall Plan report of
the Paris Conference was in ifs
final

stages. That report, the re¬
ception it got here, the three
corollary reports to it prepared
here—the Krug report, the Nourse
report and the Harriman Commit¬
tee report—all strike me as most

encouraging
earnestness
both

sides

working out

manifestations f:
intelligence

and
of
a

the

on

Atlantic, in
fresh and promising

*

Volume-166
solution

to

Number 4650

the

world's

problems. IV•'-•',

THE

economic

be prepared

?.■>?g» difficulties

to submit to
that

arise

COMMERCIAL

sage

yesterday, which the

istration is

Admin¬

proposing to meet the

situation, and the serious
derstanding reception to

and

un¬

the idea

of a Marshall Plan
and of interim
aid which Congress has
accorded.
This

understanding, this willing¬

to

ness

be

bold

and

in

generous

share

with

in short

we

Europe items already

supply here.

Truman, it seems to
me, faced this situation squarely
in his message to Congress yes¬
terday. Without mincing words,
ne
proposed
certain
measures,
he

to

us secure

help

admitted

materials

the food and

to

a

economic

recognition

life

of

the

is

in part

validity

of

some of those
clearly observable
facts that I mentioned at the out¬
set.
It shows an appreciation of
the fact that, if
Europe starves

and freezes this

winter, there will
certainly be chaos and confusion,
and that from that chaos and

fusion

can

only

con¬

Wisely, it seems to me, he
authority to impose
price controls and rationing if the
asked for the

pressures

peace of the world.

I

believe there is

throughout
we

give

America

help

realization

a

to

that

unless

speed. I have

with

and

perhaps even avoid the ne¬
cessity for extensive Federal con¬
trols.

Food,

Our

The

place

food

conseration, for

the

event

Jhan

difficult for

that

event,
program of the
tions

Marshall
general

under

now

would

much-used

but

propor¬

quote

nevertheless

curate phrase—"too little
late."'
Will

Plan

consideration

be—to

to

prove

vastly

to deal with.

us

a

Marshall

Plan

a

ac¬

and too

Work?

As I say, I believe the American
people understand this. But they
also ask a perfectly
proper and
natural question: "Will the Mar¬

shall Plan work?"
pose

have

we

They

"Sup¬

say:

this

program and
spent $20 billion in four or five
years.
Will it save western Eu¬
rope?
Will" it preserve
among

those

16

ideas

participating nations

of

the

democratic

our

of

way

life?"
I

think

categorical
tions.

I

anyone

give

can

answers to these ques¬

believe

you

entitled

are

to doubt anyone who tries to
pre¬
dict what will happen.
But one
can

give, with a high degree of
certainty, an answer to the alter¬
native proposition:
If we fail to
enable

the

escape

wholesale

western

Europeans to

starvation

and

freezing, then the worst will hap¬
pen. And it will be for keeps. If
we

them

save

mit

that

situation

may

But if

on.

them, we
fought for in
save

of

must ad¬

we

now,

the

changed later

area

will

we

lose

a

be

don't

all

we

very
important
world.
And we will

the

a

not have another chance.

have

chance

lated

step,
knowing that

to

take

We
a

risk,

if

.

or

we

Not

A

Gilt

Edge Investment

taking this step
just because it is not a gilt-edged
investment.
It is a speculative
investment that

we

ourselves

fronts lest
burselves

we
on

distant

a

be forced to protect

our

Unfortunately,
land of

must make to
on

home front.
we are

.

still in

a

The shooting phase
ihayUbe over, but peace has not
ytefr) been achieved. We are still

.

lack

the

of

.hree

years
a

have

we

From the

crop.
season

we

sbout
even

as

1946-47
able

were

550
so

had

more

million

to

wheat

growing
export

bushels,

and

I have tried to describe

in

earlier

my
remarks, Europe
left on short rations

has been

This fall, however, has been the
driest in 60 years in
Kansas, Oklanoma
and the Texas Panhandle

Fortunately, just over this
week-end, there have been
life-giving rains in that area.
much wheat has

last
some

But

already been lost

Worms and insects have consumed
of the seed during the Octo-

dryness.

oer

And

.with

even

the

raihs, the back of the
drought has not been broken. Most
important of all—something thai;
must

be

emphasized again apd
again—even if the rains continue
if the

several

weather for the

weeks

winter

is

and

the

wheat harvest

"normal."

thd
the

through

best

possible,

at best be only

can

That

next

is,

will

we

not

war.

which at the best will be unsatis

factory and, if the rains do not
continue, may prove disastrous
We

hope for a bumper corn
crop to help out the, at best, "nor¬
mal" wheat crop, but in
any event
the

fearful

the

end

need

of

necessitate

our

must

cut

of

Europe
fat

seven

plus
years

reconsideration

a

national

our

food

down

pattern.

on

of

We

domestic

our

consumption of wheat and wheat
products.

During
Ihe
a

war,

the
no

position

shooting

one

phase

wanted

of

be

in

to

of feeling that

he had

done less than he might have.
So
it is now; all of us must be able
to

feel

of

,

later

that

we

have

done

the

world

and for the

Their

and

for

to

recover

relative

as

itive

their hope is high. They are
good people, living in good lands
They have the skills, the deter
and

mination, and in large part the
equipment and the resources nec
essary for success.
But war and
weather

have

for

the

n

,

r

'.economic
quences

.>

of

inevitable

and

social,

our

people than to help-other

political
conse- I to stand
starvation* We must1 feet.




free

and

on

their

men
own

that of boom and

other

road

of

wholesome

what the

seen

economic

ment, will depend

do.

Certainly the
it

the

or

and

readjust¬
the policies

on

labor, and capital

immediately ahead.

Until these policies become more

stop inflation if

evident,

so.

can
wishes to do

bust

moderate

a

of government,

will

Whether it will

best.

we can

only hope for the

present good-time,

almost

prohib

large housing

a

way

past, high level activity in
peacetime has al¬

inird,

the

basic

materials

is

so

substantial

even

a

still

leave

for

a

publican

and

the need for aid to Eu¬

leaders

substantial

who have
tered civilian life and

young

men

now

reen¬

in

are

the

of

creating homes and
Men of this type, who

process

families.

will

suffer,

some

to the point of ex¬

even

tinction.

ticularly applicable to millions ol

agree

assures

merchants

them

of

woulu

drop from the recent abnorlevels, the fact that both Re¬

rope

ai

instituted

at

Democratic

incomes

they need badly enough to buy

page 17)

such

present prices.
We believe that this fact is par¬

prosperity
levels by any past standards.
Fourth, while export demand

on

their

of

purchasing
the thmgs

tha.

great

decline

them

(Continued from
them of the means for
out

demand

steel,
oil, and several otne.

coal,

iron,

Credit Control

pro

gotten under

meant prosperity.

ways

Consumer

credit

in

wartime

control

was

September, 1941,

measure

as

designed

to

reduce the demand for peacetime

goods,

in
transition

order
to

It

goods.

to

production

months when the

ing the war, and who for the most
part are employed in positions of

attack

country in

of

war

broke upon

war

all its fury.

Pearl Harbor

on

the

in effect only three

was

had little opportunity to accumu¬
late substantial cash reserves dur¬

the

facilitate

The

might be

said to have

practically ended the
export
relatively low income, are partic¬ need for it. From then on, there
"guestimate" on ularly worthy of credit considera¬ was no question in the public
tion.
Yet
they find themselves mind about doing without things
retailing, it is my judgment thai
unable to meet the high cost of it
wanted in order to defeat; the
department store unit sales will
living and at the same time to enemies, it is doubtful if Regula¬
continue to drop. The high cost
of living, the high prices of com¬ pay cash to acquire goods with tion W had much effect. Restrict
a

volume.
To

this

locus

which to advance the standard oi tion of
the
production of con¬
modities, the high taxes, and most
important of all, more available living of themselves and their sumer goods took care of the situ*
families.
hard
ation. For the most part durable
goods will cause physical
A striking demonstration of this
volume to drop. If we have an¬
goods could not be had. fact has recently been provider
other round
of wage increases,
Despite consumer credit con^
in
the mass
cashing of Armed trol and throughout the period in
dollar volume may hold its
own,
if

not,

will

in

be

all

probability,

moderate

a

dollar volume
in

of

soft goods.

It

drop

in

sales, especially

*•-

be "gilding the

may

there

even

lily" to

tell you to watch inventories
and,
even
if not, you have heard the

"Wolf,

of

qry

wolf"

often,

so

but

I

want

to

to

ride

better

and lose

just that.

say

few sales than

a

inventories

your

Jose

your

Also,

ride

to have

policies' should be tightened. Don't
go overboard on relaxing install¬

ment

terms and conditions.

better

than

an

some

them.

Over

lars

these

bonds

It

chance

even

sort of qualitative,

is

that

consumer

credit controls will be inaugurated
in Washington. In
any event, re¬

in

the

for

that, as a general propo¬
sition, the customer who is pay¬
ing you for what he bought in
1948, will not be able to buy as
1949!

order

a

to

purchase

billion dol¬

quickly
provide cash
of goods and
were

services urgently needed by
and

men

This

these

women.

significant
could
find

illustration

happen
its

of

the

of

what

the public

were

credit

sources

again

to
re¬

stricted.
The

inflationary
do

pressures

stem

not

from

on

install¬

lending and installment buy¬
ing but from the vast purchasing
power in the hands of the public,
generated by the wartime fiscal
practices

excessive

overlooked
about

The

facts

in

by

appeal

the

discus¬

install¬

consumer

credit does not necessarily
pyramid demand for goods. As r
mortgage on his income, every
ment

installment loan secured by a per¬
son for the
purchase of a giver,

Conclusion

merchandise

of

p.ece
In

is

just

sc

conclusion, while
physical
volume will undoubtedly drop in
1948, prides are another matter.

much mcney

If government,

that it increases total bank credit:
and up to this point, the increase

if labor, if capital,
pursuing the inflation¬
policies of the last two years

persist in
ary
—and

I

see

of

little

indication

shall

have

inflation

of

a

another

instead

of

a

badly needed price readjustment.
With all the, emphasis of which I
am
capable, I warn government,

labor, and capital that postpon¬
ing the day of economic reckoning
can
only - compound the penalty
which

we

all will suffer.

Monday,
United

serious

the

President

State^,

of

recognizing

(2)

commodities such
and

others;

|

rare or scarce

as

the

total

only

minor portion ol
factors which have ex¬
a

bank credit
inflation.

grains, steel,

in

For

the

as an

element

ing continued to mount. • On the
other hand, as to the
argument
that

freedom

credit to such

from

credit control
of consumer

use

degree that it will
greatly increase the demand,for
goods and further the inflation of
a

prices, it is worthy of note that
in the weeks since
Regulation W
permitted to lapse, there has

been

evidence of

no

rise in the

a

significant

of consumer credit.

use

Moreover, consumer credit lenders
haye, with few exceptions, kept
their
terms
within
reasonable
bounds.
The nation's banks are the
est

providers

for

small

of

consumer

larg¬
credit

borrowers
of

today.
down-payments

The

and
terms that has been suggested by
the American
Bankers Associa¬
tion
is
essentially conservative,
and it has met with almost unani¬
mous

acceptance among the na¬
tion's consumer credit lenders. It

be possible to cite isolated
instances in which some marginal
may

lenders have extended terms that
bank would not grant, but they

a

are

clearly in the minority and in

most

cases

represent

the

outer

fringe of installment lenders., !7
We

no

see

broad

upon

need

to

c

reimpose

and

resolution before this Committee

On

the

other

hand, if put into
effect, it will have consequences
affect

alreadv

the

vast

ham per

to

reasons

terms of business volume whether
not

or

consumer

credit

controls

reestablished-

Although •'the
banks are the largest
lenders; in
this field of credit, they never¬
are

adversely the groups
mentioned, whose ability theless have confined their lend¬
ing to loans that are sound, not
only for the banks and for the

to acquire needed goods has been
i ostricted
the most by the infla¬

nation's

tionary price spiral.
So

far

as

the business

commu¬

economic

for the financial

nity is concerned, the adverse

re¬

borrowers.

mits wjll fall most

the

a

business

men

resources

heavily

on

with small financial!

who

definite

need

for

safety, but also
well-being of the

We feel that there is
social

and

consumer

economic

credit

on

the

rely upon credit part of low income groups, and
volume neces^ that the banks, as leaders in the

sales to supply the

's^rv to -cower:.their expenses* nBteH
(3) Continue^ rent control;
(4): Ceilings;'M on;; commodities prived of .customers .by the impo
which have a direct bearing on 14d
^
severe credit!terms Which
the cost of living;
vr'cannot be-met by their patrons,1
,

after it ended, prices con¬
tinued to rise and the cost of liv*

sweepings restrictions
majority in order
un wi se len ding prac¬
given, we dc
not
believe
the
curtailment
ol tices of the distinct few.: How¬
consumer
installment credit will ever, to banking as a whole, it
accomplish the purposes of the makes no appreciable difference in
panded

which have not been foreseen and

Character;
of

bp^n

will

^control—primarily

Allocations

h?*s

the

by the country, made the follow¬
ing recoinmehdatiohs to the Con¬
gress.:'
v-j
■
■ ! ■ (1)
Credit1
qualitative in.

that cannot be spent
by him for something else. It k
inflationary only to the exten'

the

danger of inflation faced

effect,

years

schedule

inflation.
of

use

spending

These

government.
sions

in

both during the war and for two

the government and

of

continued
be

was

•

was

ment

to

which such control

will stimulate the

redemption

mass

Terminal Leave Bonds provides a

member

much in

of

cashed

prices

retailers have now
point where credit

the

owned

and

you

store.

most

to

come

It is

inventories

your

Forces Terminal Leave Bonds by
the young men and women who

in

the last few months, that it must
be getting monotonous by now,

*

the

to

construction in

the

:

be

choice

a

economy

salesmanship,

Despite

prices,

round

is strong

travel next year.

in the months

It remains to be

our

also,

change—we

people of Europe.

will

a

road

some prod¬
there is a snortage o.
housing relative to need as wel;

ucts;

ourselves

.

and

by

which

there is still dearth of

,

tion

wants awakened to

extent

can

time, per
hap$ for some few years, put them
obliged,, .therefore, to take some, ip a position where
they need
of ,the, risks that one has to take
leg pp. from us. Our help is not
i# ,<war. •' And - more important, we being given to let thtem live as
are. still obliged to make some beggars, v so they can
beg some
sacrifices that are essential in war; more..
Rather, it is being given
L r, .rFor future security; for the kind to help them into a
place where
: of a peace we want, we must now
they, can work and produce the
1 be prepared to make a maximum
goods that will make them inde
effort, even at some costs. Pri¬ pendent of aid. from America
marily we must conserve food, to Surely, there can be no project
save western Europe from starva¬
more worthy of our
country and
.

because of

great

have another

bumper crop year.
We have here, then, a situation

Wage control in industries
where price control is being insti¬

country

some

present

(9)

Congress will

will

billion-bushel

one

commodity

(7)

ply buy, not because of need, but

mal

winter wheat belt.

our

of

tuted.

in the •"DacKiog-

siock

J repeat: We still have
of

taken much

important part

an

there

of-customer-demand" theories,
especially in America where peo-

right

everything possible for the benefit

We cannot omit

protect

the

at

We have had seven fat
years in
our cereals harvest.
For the past

calcu¬

calculated

a

now

we may either suc¬
fail; but also knowing that
do not take the
step we fail
beyond any doubt.

ceed

af

moisture

throughout

even

don't

a

of

consequences

time

In

of
revamping

that

sure

so

Supply;
(6) Restriction
speculation;

Further control of exports;
(8) Authority to allocate trans¬
portation facilities;

all

can

national usage of our food

our

I

am

short

will be no depression in
1948?
Well, iirst, there is too much pur¬
chasing power loose in the world
oday.
Second,
while I have never

program

adequate

more

we

(5) Rationing of commodities in

7)

page

the wage-price inflation

on

spiral.
Why

gram nas at last

where

our contribution is
certainly
the food front.
I submit that the
need for an over-all

necessarily be Russian Commu¬
nism, as seems to be generally
assumed.
But inevitably circum¬
stances will push Europe to one
extreme or another; and in either
situation

Contribution

make

not convinced that the result will

a

Greatest

supply for next year is over¬
whelming. You will agree with
me, I believe, when you consider

catastrophic

round

demand.

will

no

create

steps

of

desire to predict
what will happen; I am

precisely

such

and

Europe,

promptly, conditions abroad
deteriorate

make

necessary.
But first he repeated
nis urging that all of us, whatever
our role in the
country's economy,
take voluntary action to minimize

arise

political
which will endanger the

raw

must

Europe

nave.

helping Europe regain its equilib¬
rium and in aiding it to fight its situation should
way

drastic,

were

which

21

(2177)

Prosperity! or ^)epressMn*in>1948?
(Continued from

President

which

CHRONICLE

FINANCIAL

certain

when

'

Jiiven more
encouraging, I. feel,
is the excellent
piogram embodied
in the Cabinet's
recommendations
and in President
Truman's mes¬

&

■field,,should continue to serve the
those groups within the

needs >6f

framework

policy..

of :

a

sound

lending

,

22

THE

(2178)

Our

COMMERCIAL

Danger*! an Increase in
«

Reporter

Governments

on

Thursday, November 27, 1947

FINANCIAL CHRONICLE

&

'

*

'

1

*

•

>

at or near par, and even a decline
(Continued from page 3)
7/8 % has not increased tne amount under par would not deter a mu¬
of bills held by the commercial tual company, trust fund, estate
By JOHN T. CHIPPENDALE, JK.
banks to any great extent.
The or:,iprivate investor from switch¬
The statements by Treasury Secretary
Snyder and Reserve recent tightness of money resulted ing, once the greater capital safety'
Board Chairman Eccles, before Congressional Committees seems ji the sale of 1% C.I.'s and Notes of a government bond "has been
to have been pretty well expected by the money markets, since to
the
Federal
Reserve 'Bank,, exposed as a myth." Reserves are
sufficient to take care ef losses,
prices of government securities were hardly effected by these re¬ when
only
recently
the same
marks and requests.
It is believed that much water is .likely banks were quite happy to hold and higher yields would overcome
to flow under the bridge before additional powers are granted to
one-year Federal
obligations at the reluctance to openly reduce
reserve funds.
the money managers.
Even, Mr. Eccles, is not so sure that a yield under %%.
Jhe wants them.
This would appear to indicate that the political
Obviously the only inducement
Unsettled Government Bond
to
factor is not to be taken lightly when it comes to action by the
prevent
the
investor
from
-

'

...

.

.

.

.

.

.

Likewise, quan¬
requirements, which

be, against the forces of inflation.

-powers that

titative credit controls, such as larger reserve
have been asked for, are not likely to solve

the problem.-

...

Both

Mr.

Snyder and

Eccles

Mr.

now

to

seems

that

feel

loans.
t

.

*

.

horns and don't know how to let
sales

be stepped up

go

of it?

.

*

.

the

Are

.

with dropping government security

in

will
toward Treasury securities.

prices

attitude

their

is

deflationary but it could
increasing unwill¬
ingness of present investors in
government securities to hold on
be offset by an

take place is anyone's guess.

.

.

alter
When this will

be

they

before

over,

.

.

willing
.

of circulation could
decrease of

offset the

is

debt

powers

...

trend

than

total money supply. The re¬
duction of the outstanding public

prices?
that be* now trying to change the bad
psychology that prevails in government market?
It seems
as though investors will have to be
convinced that the down¬

•

(velocity

the

Can savings bonds

.

to

to

a

It is much safei
bank to make

of them.

any

for

.

SPOTLIGHT

commercial

a

90-day loan

commodities at

on

iy2% than to hold 2% 51/49 bond
if

bank-eligible issue, the
due Sept. 15, 1967-72,
seems to be occupying the spotlight in the government bond market
for the time being.
This bond has been under considerable
pressure because the feeling appears to be quite general that the
differential between this security and the longest tap bond will con¬
tinue to narrow.
The three-point spread between these obliga¬
tions that has prevailed for some time has already gone by the

they decline to a 1%%
yield. The interest rate for com¬
mercial loans can be adjusted al¬
most instantaneously; the income
on government bonds is fixed.
A

boards.

adjusted

The longest

.

.

.

.

.

.

...

The

longest

given for expected lower prices in the

reasons

bank-eligible

(1) the increase in commercial loans (2) larger
demands for mortgage money, (3) credit restrictive policies of

the

r

are:

authorities,

issues in

which

liquidation

causing

are

order to maintain

reserves.

government

of

.

.

is the

no

doubt that

as

risk assets increase in the banks,

which
conservative posi¬

these institutions will seek more
tions in Treasury obligations, which are the short-term issues.
This is taking buying away from the longest bank bond.
Never¬
theless, there seems to be no need for the authorities to support the
longest eligible obligation at present levels, because there appears
to be no reason why a price about the same as that of the longest
tap issue, would have too adverse an effect upon the government
case

now,

.

.

.

market,

or

the banking picture.
far

How

decline

the

renewed;
easily be
the depos-t total. II
government bonds cannot be sold
to, or hypothecated without pen¬
alty with a Federal Reserve Bank,
they become a permanent invest¬

go

the

in

longest

.

.

.

.

cautious

that they are now scared
obligations, except the most riskless

Bank

will

.

ones,

.

The desire for liquidity as well as the

our

.

.

.

adverse influence upon

..

Such

are

being

.

.

over

.

.

and more settled conditions will be

.

BUYING BILLS

\ : ,7 Non-bank investors

are still selling eligibles, a good many
in the intermediate-term maturities, particularly the

the 2s due 1951-53, and the 2s due 1950-52.

.

.

.

of
2s

Scattered

selling by these institutions has been in evidence in the 2V4S due
1956-59, the 2V2S due 1956-58 and the ZVzs due Sept. 15, 1967-72.
It is reported that the funds obtained from the sale of these eligible
issues has been put into Treasury bills.
.

.

.

...

REDISCOUNT RATE
are making the rounds that the rediscount rate will be
shortly after the certificate rate goes to l1/s%.
This
would be done so that certificates could not be pledged at Federal
for borrowing at a profit.
Reports of increases in reserve re¬
quirements in Central Reserve Cities have added to the general
unsettlement in the government bond market, and gave prices another

: Rumors

increased

.

.

.

.

.

.

Jolt, particularly the longer-term eligible obligations.

.

.

%

The very

large war loan call that was recently issued and
which will be payable Dec. 1, undoubtedly indicates very heavy
cash repayments of the Dec. 1 certificates., .. This might be the
beginning of

a

move

greatei

a

government bonds

preference to corporate.
The

at present these points stan.
The estimated surplus for
fiscal year 1947-48 is prob¬

ever,
out.

the

On the other hand

ably too low.

the stop-gap aid and other imme¬
diate
payments to Europe, etc.
may

consume

that

of

the

foregoing?
officials

our

We can see
confronted

are

To induce the

on

the part

of

holders

to

take

cash

for

maturities and wait for higher yields before putting these funds

to work.




oreciable

bonds

at

relatively

low

yields instead of exchanging

gov¬

securities

ernment

cial loans at the

into

commer¬

to six ratio.

one

(B) To induce the non-commer¬
bank investor to hold on to

cial

bonds

government

better

yields

can

be

although

obtained

in

the corporate bond market.

surplus.

Sales

of

be estimated

can

figures of 1947.

predictions to the contrary,
large-scale redemptions of non-

government securities
The govern¬

place.

reduce

total,

the

floating

however,

Their

debt.

will

be

only a
fraction of the government securi¬

maturing within
to

ues

tion

There

buy.

that the

whicl

a year

record

sell

the

that

banks will

continue

to have sufficient funds to expant
loans.

the

But

the

increase

in

loans

in

deposits will
exert pressure on all bonds. A de¬
cline
of
eligible bonds to par
and

decrease

commercial

under par may
for

of

fear

banks.

start

a

A

decline

selling wave
capital

considerable

losses.

ineligible govern¬
spite of a pricedecline in corporates will induce
the

of

bonds

ment

investor

in

foreseeable

-

today when
compete with
long-term credit

banks

traditional

agencies in this field.
We

would

the

by

to

the

that

believe

which

have

to

amount

be

bought
to- maintain
government securities
very small.
Once the

authorities

prices

on

would

be

beyond doubt, government

•proven

bonds

less

will

continue

hold

on

the

to

to

"risk-

be

and

assets"

"secondary cash
reserves."
As present yields on
government bonds are sufficient

to pay for overhead and dividend
requirements of all institutional
investors, the retention of govern¬
ment bonds at a time of price un¬
certainty in the corporate .bond

commodities

and

classified

markets

be

can

prudent. Any port¬
folio manager who maintains his
government bond position under
as

these circumstances would be free
of

Retention of govern¬
soon stop the

reproach.

would

bonds

ment

expansion of loans.
If government bonds were to
drop in price under par and com¬
mensurate with the yield increase
of corporate bonds, a retention of
government bonds would be open
to question.
Any banker holding
government
bonds under those
circumstances

be

would

in

a

less

favorable

position to take advan¬
tage of the business possibilities
that develop.
Resume

The

task

confronting

presently

monetary authorities,

our

viz., to

stop inflation by monetary means
seems insoluble if we approach it
with
a
completely
mechanistic
point of view. An increase in in¬
terest rates in itself has never and

will not

this

in

stop the in¬
loan-deposit

case

flation

due

to

circle.

The

increase

rates
the

the

huge

interest

of

furthermore

is

limited

by

of the floating

amount

debt and the necessity of keeping
interest rates within budget esti¬
mates.

only

can

be

stopped

by an interruption of the loandeposit circle, and this has to be

psychological
mani¬
fold: they include yield and price
stability of government bonds at
accomplished

by

The ways open are

means.

time when loans to other debt¬
increase in risk. Fluctuations

a

ors

of

government bond prices to an
where

extent

could

bonds
regarded as

government

longer

no

be

"secondary cash reserves" would
increase switching operations from
government
securities to high-

yielding private loans and securi¬

will widen.

There

that

be

very

little doubt
have

the

to support the market.

Eli¬

the

means

their

can

authorities

government

chological
of

means

stopping

unless

new

bonds by psy¬
is the only way
inflation—

monetary
legislation

be ob¬

can

tained.

is

curities below cost in order to get
the necessary funds. We estimate

rate

bonds

as

investments

for

their

ever-increasing thrift ac¬
counts.
If they were able to buy
high-yielding government bonds,
presently held by the banks at
or above market value.
Any fur¬ this move—instead of being infla¬
ther decline in prices would rap¬ tionary as our expounders of a
idly melt away the unrealized mechanical money theory would
profit in the government portfolio, let. us believe—would have certain
Certain security profits are neces¬ deflationary effects by reducing
sary to compensate for losses on the scramble for certain corporate
loans which are unavoidable when securities,
mortgages,
etc.
The
a business recession occurs. Com¬ present
yield
spread
between
mercial banks x whose income ac¬ equipment trust certificates and
counts
are
subject :to constant high-grade utility bonds proves
scrutiny by investors would be the point, Furthermore, time loans
of the governments

reluctant to translate

into

the

institutions

these

of

re¬

quicker

ties, thereby enhancing the loan
governments in spite of higher
deposit circle with its disastrous
yields in the corporates and mu¬
inflationary
effects.
Inducing
nicipal market. The yield-spread,
present investors to hold on to

last government bond

that 20%

is

The

much

a

no ques¬

gible bonds can be bought by the
Federal Reserve banks; ineligible

will

he

than

commercial

Inflation

be

can

declare for
willing to also by the postal savings, social
in security and other government
funds.
order to get the funds for loans trust
Furthermore,
the
necessary to his customers, as long government could relax restric¬
tions on holding ineligible bonds
as the security for the loans seems
sufficient.
We doubt this.
Very by commercial banks against time
few banks are willing to make deposits.
During the past year,
loans if it is necessary to sell se¬ commercial banks bought corpo¬
banker

Every

the

saturation

Postal savings
other govern¬

All

marketable

be

and

cash

Stability

commercial

would

ment accounts should show an ap-

of

be drawn

can

double problem:

his

billion

two

to

one

surplus.

would freeze the present holdings

Conclusions

a

.

...

due 1952-54,

the first six
months of next year would have
to be full of assumptions.
How¬
during

the Federal Reserve Bank contin¬

represent

investor to hold

ment

.

monetary

not

banks to hold short term govern¬

.

.

are

below

If the risk
of higher interest rates is as great
in government bonds as in cor¬
porate there is no incentive for an
in

the

of

ties

(A)

lows, especially in the eligibles, is causing liquidation not
only by banks but also by non-bank investors.
While volume
has not been large it has increased in the past week, with more
securities now appearing in the market for sale from out-of-town
deposit institutions that have not yet been troubled too much by tight
reserve positions.
They feel that lower prices in the longest bank
obligations are a safe enough bet to warrant liquidation at current
levels.
If prices go down as they anticipate, they will buy the
securities back and get a better return.
On the other hand, if they should stabilize at or near these
levels, then they can repurchase the issues sold with assurances

which

par

grade corporate bonds.

by

attitude

an

the refunding operations

New

.

estimate

established, their holding

What conclusions

fear of lower prices

.

below

bonds

.

LIQUIDATION

.

An

movements

ment, therefore, will, have appre¬
would.i ciable funds at their disposal tc

safety of capital than that of high

ing issues for cash instead of taking the securities that

in the offing.

forthcoming. It w-11 have to
be proven in the next six months
that the government is still wili¬
ng and able to hold governmentbond prices above par.

long-term gov¬

opinion, also monetize the
Once a possibility of a de¬

is

that

that the down trend is

support will always

be

has not taken

A decline of the

from

offered in exchange for maturing obligations.

funds

excess

them either at

100, 90 or 80.

practically all government
Treasury bills.

of

have

not

with which to buy

and higher yields is resulting in many holders turning in matur¬

.

whether this

at

tight¬
the National City

of money,

ness

.

.

.

The recent sup¬

port given to the government bond
market will not answer the ques¬
tion
in
the
investor's
m.nd,

bonds because of a general

would

.

no

tutional investor.

E. F. & G. bonds

debt.

issue is holding well at about the 101 level, be¬
cause the authorities have had to step in and support it, since their
credit restrictive policies have apparently carried government bond
prices down farther than was expected.
There is no doubt that
the powers that be have put uncertainty into the market for Treasury
issues, and have stopped the trend from shorts into longs.
They
have also created a condition that is causing investors to be so

.

are

non-salety in the case of cor¬
porate bonds will have to be
proven conclusively to the insti¬

that if the Chase Bank has to sell

in

will

eligible

The longest tap

of the Treasury.

with

bank

a

There

of government bonds, anc

case

the

social security

par

an

deposits.

cline of government bonds

of controls that may be granted by the Congress.

M

unsuitable for

ernment

;

...

will

.

SUPPORT

could have

to

the

buyers of consequence for bankeligible bonds outside the banking
system. And it is safe to assume

.

.

depend upon the restrictive action of the authorities and the kind

4

a

.

SHORTS PREFERRED
There is

loan may or may not be
the loan volume can

demand

in the longest eligible.

1

even

ment

Some of this has been

.

.

.

switching from

institutions.

similar

sult

willingness of the government to
low-yielding to pay cash for government bonds is

of

more

rates may not halt the inflationary trend in
Could it be that the authorities have a bull by the

;

v

the

in the

higher interest

Inflationary

a
high yielding security is safety
contrary: Further
the government of principal. As corporations have
bond market may have definite v^eiy little to worry about interest,
inflationary effects. An increase rates, the safety of pr.ncipal in

On

(5)

unsettlement

DILEMMAfli;

A

Market

and

losses evident in

are

book-losses
the

yearly

one-year

trated

statements.

Most ineligible bonds

would be reduced.

are

held

The

more

credit would be

than

Firm to Be Known

Mallory Securities

it

the

of

Alabama

Corp., Inc. will be changed as of
1, 1948 to Mallory Securities

Jan.

Corp.,
and

Paul H. Mallory
Montgomery on

Mr.

Inc.

Mr,

E.

B.

Sept. 26, 1947 purchased the

entire

assets of Alabama Securities Corp.

Mr. Mallory was

with Roy GridHe entered

ley & Co. until 1938.
the

U.

S.

Navy in 1941 and re¬
ceived his discharge for physical
disability in 1943.
E. B. Mont¬
gomery

of

the

Co. of

i

senior

is

American

Vice-President
Life

Insurance

Birmingham.

John B. Stephens Dead
John

concen¬

belongs, viz.,

7

surance

ALA. — The
Securities

BIRMINGHAM,
name

in¬ Miller
companies, savings banks

where

as

rt*»n/\tr

B.

Stephens of Clokey &
at
Medical Center,

died
nttr

NT

T

1 "7

<•

Volume 166

THE

"Number 4650

-

Capitalism the Cause of Wars ?

(Continued

leged

li ^n first

have "egged" on

to

of

page)
first one

and then ics opponent in
devilish plans to promote the
sale of war munitions.

the

was

actually the

tional

almost

credit

dollar

Corporation,
General Motors,
Standard Oil, and other similar
concerns were
prime movers and
instigators of World Wars I and II,
when any sane person knows that

na¬

manpower

and

are

the

absolute
potentials
which
provide the indispensable mechan¬
with

in

wars

In

which

this

to

win

Billion

it

Germany which touched
sparks that caused these
conflagrations.
the

In

previous articles published
the
"Chronicle,"* the writer

Age.

reckoning the cost of mod¬
warfare, we must take into |

ern

was

off

gigantic

Dollar

enter¬

prise system and growth, and who
nave
the audacity to assert that
the du Pont Powder Co., the Steel

pack¬

unlimited

who hate our free

abroad

case

Dollars Win Wars

and

and

Yet there are those at home

"long, long ago," it is de¬

Money in billion

in

account the untold billions of dol- '

consistently attributed tnese
great World Wars to "Imperial¬

lars,

ism"

francs,
pounds
sterling,
and lira, besides
many mil¬

marks

lions of

men

at

the

front

and

of

weapons

to

and

manism,

at

for

foreign

trade,

tell

war.

And, too, the cost of world-wide

raw

Every level-headed

propaganda and the vast inde¬
terminate
property
losses
and
postwar
maladjustments to the

tional

economy and life of the contend¬

stops

seriously
final

must

reckoned

also

with

the

who

person

fact

the

biggest

losers

now

tors

and

tune
to

both the

of

Old

losers

a

to

Certainly

World

opening
possible $15,000,000,000

gious sum, if and when expended
come

out of the pockets of United

States
will

four

citizens

never

and

will

years,
most

or

(2)

made it possible for the Soviet to
chase the Germans out of Russia
a
cost of

(2)

What

nation

satellite

additional

an

World

War

tremendous
and

causes

lion

other

Allies win

(9)

debt

York

Franchise

State

Unem¬

World

to

War

New York

lied

countries

the

aggregate

in

World

sum

War

I

$14,791,340,307.53, of which $11,435,365,215.21 principal
and $3,355,975,interest

accrued,

remains

unpaid to date?
(5) Senator Harry Byrd of Vir¬
ginia is on record that $19,000,-

City Franchise

(11) New York City Sales tax.
(12) Real Estate and other local
taxes.

tor

the

and

directors

ex¬
as

bondholders

stockholders,

well

in

as

these

corporations,
and
their
working personnel were obliged
to
pay
heavier taxes on their
earnings in war years, and on
everything they ate, wore and
bought, than in peace years. An

executive,

for

$150,000

year

example,

earning

000,000 has been spent abroad by
United States in postwar aid

since 1945.

for himself

Perhaps
this
is
the
"Dollar
Slavery" and the "American Im¬

the

perialism"

elapsed since the

had

in

his

which

mind

recent

Meadow
And

Mr.

when

Vishinsky

he

harangue

delivered

at

Flushing

Park.

yet

are

that

a

these

"Dollar

Capitalism

provoke another

totalitarian!

that

President

taxes

and

and

balanced

writer

thinks

the heaviest loser in

Wars

the Allied

for
of

in

in

of

need

war,

can

is

the

which

a

Does

an

un¬

child in

the

last two

we

aided

to




this land

U.

be

figured

—the

in

death

dollars

loss

and

cents

and

lifelong in¬
juries to the youth of our land—
the Republic's most precious
pos¬

❖Writer
Nations

Peace,'
and

a

of

'Why

Will.
in

a

New

Insure

Not

League

of
Permanent

the

'Chronicle,' Mar. 9, 1944,
Critics' of this article,
by Force in an
16, 1944, and
Americans isolationists?1 £an. 11,

'Reply

to

Mar. 30, 1944, and 'Peace
Uncivilized World,' Nov.

'Are
1945,

'The

Civilization,'
Pres.

Failure

Mar.

cf

22,

the

White

1945,. and

Man's

'How

Truman Can Regain His Lost Pres¬

tige,' Feb. 13,

1947

issue.

situation.

Does

War

your soph¬
istry doesn't make sense! Forget,
if you can for five
minutes, that
you are a Communist, and if you
honest with yourself, you will
reverse your assertion that
capi¬
talism in the United States will be
are

of

cause

not

a

pay

For

no
or

Finland?

settlements
her

Vi¬

was

Before

have

Allies

any

been
in

peace

arrived

the

late

at

war,

according
to
Winston
Churchill, has one-third of Eu¬
her

under

appropriated

or

Latvia, Estonia,
Prussia

having

control,
seized

and

Lithuania,
of Finland,

some

Hungary,

half
Poland, the entire Balkans (ex¬
cepting Greece and Turkey), Outer
Mongolia, and that isn't all.
War

Wholesale

Is

Murder

communication

a

York

of

to

"The United

"The

tions of New

Historical

Founda¬

York," stated:

billion

human

beings
during
wars
since the beginning of time—sev¬
been

times

killed

more

than

the

entire

world's

population today. As one
authority recently pointed out
during .the last three thousand
years there has been war in some
.

.

.

part of the world 12 out of

every

13

peace

More than

years.

8,000

treaties have been made with

an

life of IVz years."1

average
is

matter

a

of

record

cold

that the actual cost of

to the

wars

States taxpayers from the

United

Revolution to and including

World

War II totals $412,743,561,885 and
our casualties in the same period

2,100,174

men.

The records

casualties

that

disclose

on

both

sides in World War II totaled ap¬

44,789,630,2

proximately

started

never

and

cause

Mr.
love

a

lost

never

Vishinsky,
peace

without

war

while

or

sides.
Us

Reason

but

know

why

the

States

Above

era

and

a

knows

goodwill to

men.
will remember 1

men

And dream His dream

again."

(Continued from page 9)
a

(Committee

for

Co-operation
with Finance Companies, of which
I

from

of

conduct

embodies

their business, which
full recognition of the

a

of this Committee that great con¬
is expressed in all quarters

relationship of their business to
functioning of the economy;
with full recognition that the fu-.
ture status will depend on right

action under these circumstances/'.

am

member.

a

I

know

meetings of the entire body and

payments, and everyone
asking whether banks and fi¬
nance companies would hold the
line, and while I do not pretend
to speak for other banks, I know
from
remarks • made
by
many
was

bankers that there would be most

there

were

consequences

to be deviation from the standard
terms.

My

bank, as I am sure
you all know, has strongly sup¬
ported the finance companies for
many years, but I know that the
of

would

Board

my

radically

if

is

there

deviation

any

the

terms recommended by your

Spe¬

cial Committee and the American

Association.

Bankers

That

(2)

very

friend

good

of

the finance companies and pioneer
in lending them moneys, which

helped to advance the industry
to its present very prominent po¬
sition, Mr. Arthur W. Newton, re¬
tired

Vice-President

National

of

the

First

of

Bank

Chicago, made
an
address on April 2,
1937, in
which
he
said, speaking about
competition in the finance busi¬
ness:

this

"If

had

competition

con¬

a healthy lessen¬
ing of profits. Unfortunately, as
we
all know, it has taken that

vicious

competi¬
smaller
down payments and longer terms
have; with the growth of automo¬
bile sales,
resulted in using up
the extra capital and credit that
have been injected into the busi¬
tion

in

course—a

Of

terms.

course,

ness."
How

right Mr. Newton was in
condemning this practice, and the
very serious consequence of this
extension of terms, is evidenced
by the repossession figures for
that period.
Remember that Mr.
Newton spoke in April of 1937.
In 1936, 5% of all cars financed
were
repossessed.
In 1937 this
jumped to 9%, and in 1938 to
15%.
The figures show that it
was this period that
brought the
greatest losses to finance com¬
panies— much greater than any
other
'30s.

period, including the early
This is very visual evidence

of the serious consequences

of the

I

a

of

1946

issue.

believe that it has been

to

Quoting

instalment1

re-control

on

the radio that such

recommendation

sented

will

be

pre¬

the

Special
Session.
Joseph M. Dodge,

Mr.

President of the American Bank¬
ers.

Association:

"The
course

the

surest

recontrol of

tell you

to

need

not

of

to

ways

that
have

credit

instalment

on

drastic and possibly permanent
basis would be for banks and fi¬
a

to extend long
payments in'
I do not believe

companies

nance

and low down

terms

the present cycle.

further evidence is necessary.

only way

(and of

banks

Reasons for

While
be said

These

Consequences:
if

doubt

I

much

that includes finance com¬

why the above con¬
sequences would be true, possibly
it should be touched upon. One of
the most potent reasons is the
in

mentioned

I

one

with

connection

Newton's

Mr.

speech; that
losses jumped

repossessions and
tremendously during that previous
period.
I have figures showing
that in
new

some

was

of the prewar years

retail

car

much

as

18

over

37%;

as

under one-third down

and

26%;

used

third down

I do not need to

tlemen

the

9Jl.<
•

H

■

■

'■

months

new

as

cars

much

under

cars

much

as

as

one-

34%.

as

quote you gen¬

prices

for
used,
you are
more familiar with
them than am I, but it must be
perfectly obvious that low down
payments and long terms do not
mesh
one
bit with
prices that
are
from 50%
to
100%
higher
than they were at the time these
sub-standard
terms I
have just
mentioned
were
in
effect, and
present

automobiles above

new

and

which in themselves caused losses.
What

more

losses could be

severe

sustained with the present prices,
and in the present cycle, if un¬
sound
left

terms

to

are allowed,
anyone's horror.

can

be

Position of Banks

You

gentlemen may well say,
"What is going to be the attitude
of our bank competition?"
You.

already know that the American
Bankers
allel

Association

terms

par¬

recommendations.
In preparation for this talk I tele¬
phoned the Chairman of the Con¬
your

sumer

own

Committee

Credit

American

Bankers

of

the

Association.'

That Committee had just taken a

telephone survey of 35 cities and
surrounding territory.
So, as far
as
the Committee knows, banks
are

100%

with recom¬
An article in the

pleased

"American Banker" last Wednes¬

day indicates, likewise, that banks
a^e holding the line.
I know from

personal conversations with many
bankers who
themselves

hold

are

that

in

the business

they

intend

to

line; similarly, I know
that
banking
authorities
are
watching carefully to see that
sound terms are observed by the
the

banks, and while I am not em¬
bowered to speak for the regu¬
latory authorities, my con versa-;
tions do indicate that they will

panies) can keep themselves free
multiplication of government
regulation i# by a voluntary and Strongly look askance
coordinated self-discipline in the^tion therefrom.

from

■ny

need

to

as

mended terms.

(3)

to

do

for

fined itself to rates, it would have
been
sound
and
would
merely

most

I
one

own

from

were

45

the

and down

announced

computation includes the
of tribal days when whole popu¬
continually
exterminated
and nearly every male died in warfare.
Also the many
generations when war
was' the
chief
occupation
and
whole
"civilizations" were destroyed in wars.
(2)
Source:
"World Almanac," pps.
44

dreamed

Business Trends

credit.

Together

who is not a per¬

prefers peace and
tranquillity at home and abroad
(1)

God

ago

Consumer Credit and

made

person

cannot

lations

He

countrymen
than anything

more

long
dream

war."

a

You have all been reading
in the papers that a fight will be

long

We know that love is strong.
For

my

57.4% of the total
mobilization of 65,038,810 men on
37,508,686

United

and

endeavor

goal.

Of peace,

extension of unsound terms.

vert

country's

our

just

casualties in World War I reached

Any

entire history,

our

"Live and let live" has been and
is

of America

States

have resulted in
the

"Times," Dr. Francis
Miller, historian and

Trevelyan

were

'V; *1.

Throughout

We hear the angels' song;
Amid the hate and greed of war

change

Mr.

you,

expelled
from the League of Nations
by the
member nations of that
organiza¬
tion because of
aggression against

It

first!

tacked

Mr. Vishinsky, please

substantial

remind

we

shinsky, that Russia

en

great; power, \be it big or small,
strong or weak, unless we are at¬

write this down in your Commu¬
nist book:

attitude

A Reminder to the Wise

May

have

not
any ~

upon

"Above the voices of the world

or

war

country like the

a

aggrandizement in any form.

head

will

and
war

And now,

serious

with Russia

war

United States because we have
interest in territorial expansion

New

of

with regard to the trend of terms

Pay?

No,| Mr. Vishinsjky,

East

world

curse

cern

session.

does

this

23

A Challenge to Mr. Vishinsky

the

loss to our country and
to mankind in war, which cannot

Let

it, the

spiritual

ternational

in

else

visit the

greatest

Not

about

1

r

the

S. is $1,962.
on

country profits most

standpoint of cost in
and property
values, Montaigne's wisdom that
"there are some defeats more tri¬
umphant than victories," applies
more significantly to our country
than any other in the present in¬

industry,

The writer has not dwelt

War

mistake

From

At present date,
instance, the per capita debt
for every living man,
woman, and

both

fair

figure the amount

the losses caused

costs everyone

Industry

no

an

point

we

industrial and business executives
it

countries to win. Who,

instance,

to

wartime

higher prices and
economy?

Why
Make

vetoes,

exorbitant

Prefer

Country Is The Heaviest

statement to say that any man,
regardless of his nationality, will
admit that this country has been
World

been

out what inflation

with Russia

ended, Con¬
able, due tp

personal incomes. As

on

aftermath

us

have

years

war

Truman's

the

of

Loser?

The

two

over

has not

gress

will

Country"

wants
war

during wartime or at
In spite of the

present rate.

fact

for gain.

What

a

reduce

"mouth-pieces"
have
the
bare¬
faced impertinence to tell us that
we

(2179)

peacetime*

human,

generations.

"Fifteen

Moreover, the management

would, according
to Karl J. Wiemer, tax expert and
C. P. A., have only $37,700 left

the

that

means

in

for

City Occupancy

New York

ecutives

of

war

corporations and indi¬
vidual workers will have to meet
the extraordinary burden of taxes

In

(10)

help her
II?

that

of

II?

countries

debt

present $258 bil¬

our

tax.

in

(4) What nation loaned the Al¬

092.32

New

in¬

are

business

rope

New York State

years

tax.

(3)

and

con¬

Russia,

tax.

(5)

with

What nation dumped $66,000,000,000 of its taxpayers' hardearned money into
Europe, Asia,

more

Another outstanding reason why
capitalism does not favor war is

the

little

Stock

(7) Federal Unemployment tax.
(8)
Social Security Old Age

I
the

Capital

ployment tax.

I

$1,287,644,000

the

were

(4) Federal Declared Value In-

thirteen

helped

in the
subject to
following:

were

Federal Income tax.

come

paltry two

countries

normal

uncertainties.

with

(6)

befriending nation against which

Russian

manu¬

tax.

$11,681,000,000 to the

two
hundred
thousand dollars?

mass

corporations

area

Corporation

(3)

simple questions, viz:
I
I
(1) What nation befriended and

million,

to the

tax.

Politburo—a

the Soviet has
repaid a

are

ahy other world power.
per¬

(1) 95% Excess Profits tax.

I

few

at

York

wartime

in

I

the

Taxes

informed

in

Right here, it would be interest¬
ing to ask the Soviet trio—Stalin,
and

which

New

kind.

Vishinsky

War II

taxes

likely

be repaid in cash

Wartime

every

facture of munitions, planes, ships,
bombs, tanks and guns had to
forfeit 95% of their excess profits
to
our
government. Among the

$24,000,000,000, and that prodi¬
next

the

variably followed by deflationary
losses, unemployment, maladjust¬
ment of prices and debts, breeding
labor unrest,
strikes and other

the

knows that the peacetime in¬
dustries which were converted in

the

the

property,

son

World vic¬

over

manifold

wealth,

of

its

manpower.

Exorbitant

so

evident in the global war just
concluded, for the United States
is being called
on
to feed and
finance

and

with

war

destruction

times, the vie-!
are
in

nations

or

Capitalism—
capital, industrial enter¬

abet

or

-

nation

interna¬

perpetuate peacetime business
conditions and not to encourage

accounting.

In these modern

what
to

means

to

Do Victorious Nations Win Wars?

torious

consider

war

and corporate property in
this country — will agree that
Capitalism's preference would be

be

in

to

invested

ing countries during this and fu¬
generations

years

inflation

postwar

prise

ture

that

you

peacetime

markets

materials, self-aggran¬
dizement, territorial
gains
and
domination by force.

necessary
to manufacture
and to utilize present
day destruc¬

mechanical

has

everything
which
imperialism implies: Pan-Ger¬

home
tive

will

spiritual values occasioned ducive
to
prosperous
financial
by World Wars I and II.
conditions than war years and that

cidedly out of date and out of
mind in this day and
generation.

ages

•

broken

his

But if that

the political, social
business maladjustments and
by

ours

and

nation

ism

& FINANCIAL CHRONICLE?
and why our

Is

in

COMjyiEIlGrAL

fie~

at

devia-

THE COMMERCIAL. & FINANCIAL- CHRONICLE

(2180)

24

than

more

Defense of Bow
"Dow

(Continued from page 4)
ket

him

caused

to

The type of study and time in¬
volved, necessary to the prepara¬

who

editor

was

Journal"

Street

his death in 1929, began

of

the

expound¬

study
one

such

Robert

1932

market,

its

move¬

characteristics

undertake

books

and

ously these

Rhea, who be¬
in Dow theory

competent Dow
requires years of

the

and

to

and4 material,
tliat enable

study

It

of

ments

Weekly.

books
of

become

theorists.

ing and interpreting Dow theory
in
that
paper
and
"Barron's"
In

such
kind

to

men

until

1909

the

is

"Wall

the

of

from

major

tion

theory which came to be known
as the Dow theory.
Dow died in
1902. The next year William Peter
Hamilton, an associate of Dow's,

the

writing of

material.

had

men

fit

to

a

sound

about the time of

World War I,

knowledge
of
market.
They were students of

his service,

"Dow Theory

the market in the fullest

interested

came

began

sense of
the word, and scholars.
Only the
uninformed can ridicule and be¬

This service has been

Comment."

continued, since Rhea's death in
1939, by Perry Greiner, an asso¬
ciate of Robert Rhea, and is now

little
of

The

year.

Dow

preted and by men of outstanding
ability and unquestioned integrity,
both in privately circulated serv¬
ices, and in the columns of highly
responsible financial journals.
>None of these men, nor any other
competent Dow theorist known to

terms

the

manner

standing

Is

theory is

of

and

about

that Mr. May writes

and

secondary

these

Dow

theorists

highest character for Dow theory.

tions of change.
ompetent
close

Market

Students
I made the

orists

are

None

of

points

have

could

continued to write Dow theory for

In

book form under the title of "The

Stock Market Barometer," 12 edi¬
tions of which have been pub¬

recognition of this
to

the

subject of

elected

Hamilton

the

a

all of Hamilton's discussions

of the

price movement and of Dow
theory, from the files of the "Wal

In

subsequently incor¬
in his book, "The Dow

1932

which

| ron's"

completed

on

se¬

the "Dow The¬

in

appeared

Weekly

a

and

"Bar-

which

were

later published in book form
der that title.
"The

un¬

Story of the

Averages"
after

an

was

published in

1934

news.

In

data

1938

and.

historica

Robert

of

Dow's

reading
the

averages,

20

Wednesday,

on

23rd, confirmed a bearish in¬
given by the industrials
days

bear

before.

Together

the

gave

market

in

signal

stocks

a
a

That
age

day the industrial aver¬
closed at 301.22 and the rail
166.51.

average

at

months

later,

those

or

averages

Thirty-two
July 8, 1932,

on

41.22

were

and

13.23, respectively.
did

the

Dow theorists
for months after

know

not

of

summer

the

bear

reached

1932 that the

market

though

they

that it may have

lowing is

full

a

had

end
been

recognized

been.

of

copy

The fol¬
a

letter

that I received from Robert Rhea

July 26, 1932.
ter
to

were

Copies of this let¬

sent to other friends and

"The

declines of both

rail

were

with¬

The 35-year

rec-

Cumulative Value of

—Confirmed—

$1,000 Theoretical Fund
Gain

on

Bear Market

Date

Price

Dite

Price

'k

6-28-97

44.61

12-16-99

63.84

43.11

10-20-00

59.44

$1,413.10

59.59

.25

1,434.67

Confirmations

7-12-04

51.37

4-26-06

92.44

79.94

2.580 QB

4-24-08

70.01

5- 3-10

84.72

21.01

10-10-10

81.91

1-14-13

84.96

3.72

9-15

3,123.24
3,239.42

65.02

8-28-17

86.12

32.45

4.290.61

5-13-18

82.16

2-

99.9-3

21.66

5,219.95

4-

3-20

2-

6-22

83.70

6-20-23

90.81

8.49

12-

7-23

5,663.12

93.80

10-23-29

505.85

226.06

18 465.10

64.39

95.01

36,025.41

^31-39:',13)1.84

'3.48

'37,278.67

5-24-33

84.29

6-23-38

127.40

9-

7-37

7-17-39

142.58

1-13-40

145.19

1.83

37,960.87

6-15-44

145.86

9-

17&.63

22.50

46,502.06

3-46




"Tne
of

element

in

is

reaction

favor

(rally)

this time because the slide-off
of the

at

was

normal

100

(the normal time interval
major declines being about

days).

"The

market

the unusual

gave

picture of hovering

the lows

near

for

more than seven
weeks, and
might be said to have made a line

the

latter

weeks

"Because

of

all

Each

things,

and because the volume tended to

plications

of

the

averages

been uniformly bullish, and
reasonable

to

expect

that

have
it is
nor¬

a

mal

secondary will be completed
even
though the primary trend
not have changed to 'bull.'"

may
I

knew Robert Rhea

from the
death

summer of

in

1939.

I

intimately

1931 until his
knew

never

of

group may do somewhat better
than the other group for a while.
Dow
theorists would
like
their

critics

to

Cowles'

ket

properly

classify

"Can

the

Stock

Mar¬

Forecast?"

Forecasters

critics

The

discovered,

Dow
theorist knows, that Dow theorists
were
and
are
fallible in their
as

every

the

1932

after

the

tained

theorists

missed

bottom, both before and
event, but they main¬
increased

or

their

capital

during the 1929-32 decline and
they did very well in the last half
of 1932, in 1933, in 1935 into 1937,
and in subsequent years.
Mr.

May

trots

all

out

the

of

arguments of the critics of Dow
Iheory. The critics say that Dow
theorists miss much of the moves
and

they use our figures to prove
What they do not know or un¬
derstand
is
that
Dow
theorists

it.

usually recognize change in relaitvely close proximity to the ex¬
tremes at which it sets in.
if

Robert Rhea

ever

I doubt

had

the

ex¬

perience of waiting for confirma¬
tion of major change to initially
take or liquidate a position. '■■■' I
have yet to have that experience,

though

1
is

will

have

it

confirmed

highs of the

averages

if

bull

a

the

at

in the

July
near

of

Hamilton's

1926,

If

the

critics

judgment of Feb. 15,

was proven to be wrong. But

how wrong?
his

Hamilton expressed
opinion, on practi¬

personal

cally a one-day decline from the
highest price that the industrial
average
ever
reached, that the
bull

market

ages had
of

was

The

over.

nor

aver¬

was

volved.
The

industrial

closed

had
Two

average

that

158.30

at

day.

trading days earlier, it had closed
at

end

of

highest in its his¬
to that time. Before the

up

March

the

sold

averages

down to 135.20 and over the

ensu¬

philosophies.
Bull

Mr.

trial

or

May

average

186

Bear Market?

says

has

without

that

risen

not.

a

163

theorists

bull

mar¬

"What

Hamilton made!"

error

would

it

error

an

Hamilton

had

an

And what

have

been

if

that

it

enables

theorists

Dow

recognize their mistakes
My soon. ^
'

to

its face value, and

analysis

of the

of 26 years,

which presented fore¬

for the

casts

stock

market

the Dow theory.

based

According to
were

suf¬

ages and

sold them only when he

became bearish or

doubtful.

The

study is based on these and other
assumptions. The fallacy of the
Cowles study is in its use of un¬
warranted assumptions.
There

ent

have

periods

this

performance

bullish.

been
of

I have

three

when

year

the

differ¬

market

the
was

pointed out all of

failed

to

see,

that
quickly recognized impor¬
tant change, adjusted himself to
it and pointed the changing im¬
plications out in his service.
It
can be said of Rhea, and of other
competent
Dow
theorists,
that
they erred in judgment frequently,
but that they were quick to rec¬
ognize their errors. It can also be
said
that, they did well in the
least

at

report,

to

was

Rhea

market.

The critics

see

the trees but not

parade of the
the theory
survives.
Dow theory is as vital
now as it was in the days of Rhea
the forest.
The
critics is endless,

and
are

Hamilton,
legion.

yet

its

and

followers

The field of finance needs more

of the stock mar¬

students

sound

Dows,

Hamil-

tons, and Rheas—and less

of those

the

of

ket—more

attract atten¬
their efforts
disparage the creators.
I trust that you will publish my
momentarily

tion to themselves by

comments in full.

JUSTIN, F. BARBOUR.
Barbour's

Dow

Theory

Service, Inc.,
12 East Grand

Nov.

255 editorials,
a period

in addition he
of judgment

errors

What he

Rhea.

or

Ave., Chicago, III.,

10. 1947.

reason-

written by Hamilton over

the

recorded
of

A .W. May's Answer

undersigned cited the his¬
bull and bear "confirma¬

The
torical
tion

to

Letter

Mr. Barbour's

points" contained in Mr. Bar¬
that

bour's service because he felt

utilization

of this eminent Dow
authority's
own
interpretations
was the fairest way of putting the
controversial case;

writings

current

leave

theorists

bewildered

quite
did

not

He

thereover.

identify Mr. Barbour by
no criticism of him,

because

name

but

particularly as
other Dow
the
uninitiated
of

only of the Dow Theory, was

intended. He perhaps should
added

that

have

interpretations

the

copyrighted, and if so, re¬

were

grets the error.
The

undersigned

believes

that

the other criticisms voiced in. Mr.
Barbour's letter have been com¬

pletely

answered

in

the

articles

themselves.

He is correct.

A. WILFRED

MAY.

can

Dow

theorists

who

pre¬

the conditions of bull

mar¬

ket extreme, rather than the con¬

ditions of bear market extreme
are,

great antagonism towards Dow
theory, or Robert Rhea, or both,
for he took the Cowles report at

sp^The. Cowles Report* represents
an

Wright must have had

Norman
a

not

subsequently
recognized that the major bull
trend had not changed.
One of
the advantages of Dow theory is

sume

from

tations

cause

to

to

145.66.

of

of

interpre¬
year that I thought
sume
that this year's rise is the
that the performance of the mar¬
first phase of a bull market, be¬
ket
was
bullish, but he would
cause of the character of the plothave been incorrect in assuming
tings of the averages since midthat I bought stocks, or suggested
Mav
are
nrobably long stocks
Dow theorists who presume that their purchase.
In the 26 years of Hamilton's
this
year's rise is a secondary
movement in a bear
market, be¬ editorials, there were only seven
Those

and secondary extreme
discuss, but there were only
14
confirmations
of
change
of

primary

months ranged between
Aug. 14, 1926 and an Oc¬

12

No Dow the bullish
plottings and perform¬
give the answer at ances in my analyses, yet I have
this
writing,
but
every
Dow not said that a bull market was
theorist recognizes that the major confirmed,
nor
have I made a
trend can be in the process of single purchase of a common stock
for any account. Cowles could as¬
change.
or

theorist

ing the course of the seven cycles,
there were many indications of

low

indus¬

from

Dow

knowing whether it is
ket

the

They may add

their

to

166.64

Hamil¬

theorists,

Dow theorists do not run in and

tober

ing

ficiently definite to permit scoring
25, 1929 and of 90 as bullish or bearish. This
Rhea's forecast of July 24, 1932, it was done
by a majority of five
is to their credit.
If they pre¬
readers.
When
doubtful,
the
served their capital in the interim
Cowles group assumed that Ham¬
better than Robert
Rhed, more ilton abstained from
trading. When
power to them.
If the achieve¬
bullish, they assumed
that
he
ments of the critics since are rela¬
bought equal dollar amounts of
tively better than the achieve¬ the stocks included in the aver¬
have Mr. May tell us of their suc¬
cesses, their methods, and their

a

out of the market.

who

ton's warning of Oct.

ments of competent Dow

was, forecasting.
serious question in

counted.

162.31, the

tory

Cowles these editorials
bettered

If there was

neither plotted a forma¬
secondary or major re¬

the question of
confirmation of major change in¬

on

future.

Hamilton

what

major trend.

Dow, Hamilton, and Rhea made
brilliant contributions to the art

versal,

Dow

to

as

positions on declines of
present market.
secondary
proportions
in
bull
markets, and they may sell on
Hamilton's Error
advances of secondary proportions
Mr. May refers to Hamilton's in bear
markets, but successful
error of judgment in 1926.
He also Dow theorists do not materially
refers to Norman Wright's "Fal¬
change their positions for the du¬
lacies of the Dow Theory," and
ration of the major swings. Dur¬

of

other

little

decision

2

to

will come out well the minds of one or more of the
period of time, for they five judges as to the forecast, that
understand the market, but one forecast
should
not
have
been

Rhea

and

3

is

There

value.

a

any

tion

prematurely calling the end
the 1929-32 bear market.
He

without

is

group

over

that judgment.

of

these

of

groups

maintaining value in

are

tentative positions, contingent on
confirmation
of
a
bull market.

Alfred

time

normal

a

to
out precedent.

Bear Market

1-03

to

three months.

and

Confirmation of Bear Markets

6-

re¬

run

days, but are sometimes
only three weeks and occasionally

industrial averages between early

of Cumulative Gain of $1,000 Invested in Dow
Jones Industrial Average on Dow
Theory Confirmations of Bull
Markets with Liquidation
taking place on Dow Theory

—Confirmed-

Such

to

"Barron's" Weekly.

^Theoretical Results

Bull Market

third and

a

tend

about 40

market

years."

March and midsummer

Rhea's

the

for

after

major bull market with the un¬
precedented duration of almost six

outlay of $18,000 in the

gathering and tabulating of much
statistical

Charles H.

method

stocks

averages

of

Rhea

ries of articles

ory"

All of these edi¬

were

porated
Theory."

the late

known

Dow-Jones

two

graphic picture of the
daily movement of the Dow Jones
averages
and volume
of" daily
trading. A few months later Rhea
employed a college professor to
go to the Library of Congress to

torials

Street

dication

making available for the

Street Journal."

do not know the

"Wall

railroad

1931, at a personal expense
$3,800, Rhea published "Graphic

copy

trade

the stock market movement from

In

Charts"

theorists

its bull market peak, Hamilton,
under the heading, "A Turn in the
Tide,-" said in part:

Oct.

first time

Dow

of

"On

ship in the Royal Statistical So¬
ciety.
of

keeps
indica¬

for

points of major extreme.

the

well

fellow¬

to

periods

covery

Most of the time

Journal,"
Oct. 25, 1929, with the industrial
average 81 points, or 21%, below

con¬

stock

speculation, English economists in
1923

theory

alert

versal.

discussing the workings of it. His
articles subsequently appeared in

In

bring
interme¬

formations indicative of major re¬

ilton prepared a series of articles
in 1921 describing the theory and

tribution

moves;

tions under which major extreme
is usually reached; and, (2) the

upwards of 26 years had they not
been students of the market. Ham¬

lished.

markets;

major extreme at the
moment they are established but
they do recognize, (1) the condi¬

students of the market.
men

less than

two-thirds.

tnan

period.

that

and

Dow

Dow theorists

point that Dow the¬

these

to

bear

major

tions represent sponsorship of the

Dow Theorists Are

more

a

conditions

moves.

and these publica¬

men

such

and

around 50% of
on
the decline,

lost

ground
seldom

are

during

Philosophy

a

bull

the

diate

These

qualified

and

orimary

writer, ever described the
theory, or suggested its use solely
of.

knowledge

action,

every

two

these

of

theorists

Dow

incidentally as to secondary trend.
% On any other bas.s the analysis

'

analyzing and interpreting the
diminish on
recessions and
in¬ stock market. Like the Russians,
crease
on
rallies during the ten who can see nothing good in this
trend
and
intermediate
move¬
days preceding July 21st, almost country, the critics of Dow theory
ments of the market. The knowl¬
no
anyone trading on the DOW THE¬ see
good in this philosophy.
edge and judgment of the indi¬ ORY would have
bought stocks on The critics have found the errors
vidual determines his success in
of Hamilton and Rhea, but have
July 19th.
Those who did not,
the use of the theory. Dow theory
had a clean-cut signal again on missed their wisdom and achieve¬
develops the art of thinking in the 21st. Since that date the im¬ ments.

been

in the

and

philosophy for
stock market analysis and inter¬
pretation, and the forecasting of
the
probable
prevailing
major

nearly 50 years Dow theory
elucidated and inter¬

For

has

such/ high

Dow Theory

1937.

cember,

wisdom

market students.

writer's
Dow theory interpretations have
appeared regularly in tne Chicago
"Journal of Commerce" since De¬
16th

its

in

the

after

recovery

primary

fairly

a

recoveries average

Obvi¬

deep and
the
stock

Each

shows

year, are probably in

a

liquid position.

a

averages

uniform

and Banking" was published.

his

advance

Theory

Theory Applied to Business. ord of the

Thursday, November-27, 1947-

and have been,

present

for

confirmed

firmed
of

some

my

this

bull

and

bear markets.

seven

con¬

Clement A. Evans Opens
New

:

Savannah, Ga.

Under Simkins
SAVANNAH, GA.~Clement A.
& Company, Incorporated
opened a new branch office
in
the
Liberty
National Bank
Building, under the management
Evans
has

of Arthur B. Simkins.

E. J. Duffy to Admit
Edward

J.

Duffy

&

Co.,

Ill

The value Broadway, New York City, mem¬
bers

of the New York

Stock Ex¬

judging Hamilton's forecasts
judging them primarily as change, will admit Charles J. Wil¬
of major trend, and liams to partnership on Dec. 4.

is

in

to

forecasts

i

Volume 166

THE

Number 4650

COMMERCIAL

&

FINANCIAL .CHRONICLE
single essential function
•- f.;

Congress and High Cost oi Government
(Continued from
pass

an

quire

woula

re¬

billions

of

it

and

dollars.
It

conviction

my

veterans

do

of

not

tne

want

the

become

to

even

government.

Tney

opportunity. They want the
opportunity that freedom gives
them—to find their place in life,
to exercise their individual ini¬
tiative in a job with a future, to

home, and to raise and ed¬

a

ucate

their

better

can

tion

that

taxes

to

And

fulfill

we

than

cles

children.

debts

excessive

and

constitute

how

this obliga¬
the obsta¬

remove

to

the

proper

functioning of our free economy.
This brings me to the third ma¬
jor item in the Federal budget,
which likewise arises out of

ditions

created

which

makes

the

by

return

a

con¬

and

war

to

prewar

peacetime budget level presently
impossible.
I refer to expendi¬
tures for international

affairs and

finance.
The

original budget estimate for

this

item

for

year

1948

was

lion.

the

extension

current

fiscal

the

of

of

aid

to

subsequent
Greece

and

Turkey, the expenditures are
ceeding the original estimate.
Since

the

then

the

ex¬

a

that

fact

buying for foreign
account is exerting a terrific pres¬
sure on prices here at home.
No
one
will deny that if, tomorrow,
all
buying for foreign account
terminated

were

would

we

see

downward
drop
in
prices.
Obviously, no such course is to
be
adopted by our government.

what is the

But

We

answer?

that

told

not

be

in

extended

foreign

such

amount

to

seriously jeopardize our own
stability
at
home
or
threaten
seriously our own economic and
governmental disintegration and
collapse.
What then now is the
as

situation?
It

to

to

seems

that

me

if

we

are

the essential correctness

assume

of the President's recent message,
we

confronted

are

with

situa¬

a

tion

Administration

involving, on the one side,
risk of disintegration and collapse
what

is

said

abroad

Italy, and

deficiency appropria¬
tion of $500 million for the United
States
Army.
In other .words,
since the opening of the new Con¬
gress and submission of the origi¬

our

nal

planned, managed and controlled
economy with all that portends
for the preservation of our full
productive
capacity
and
our
American way of life, which ad¬
mittedly today makes us the hope
of friendly peoples whose resort

a

has

budget, the Administration
requested around • $1 billion

500

million

additional

expendi¬

tures for international affairs and

finance,

which,

appropriated,
over $5 bil¬
lion for this purpose alone.
would make

if

total of

a

The

tainties

in

national

our

economy

inflation

ruinous

budget

has seriously contributed to
present difficulties.
At this point, I might engage

in

considerable

to

hostilities.

And

under the so-called Marshall Plan
we

being

are

still

asked

additional

to

extend

over

four-

a

$16 bil¬
No one has

period of between

year

lion

aid

and

$22 billion.

been able to tell

with any cer¬

us

tainty exactly what the program
will ultimately cost.
The majority in Congress rec¬
ognize that aside from any hu¬
manitarian
considerations,
the
United States has an important
stake

in

promoting world

recov¬

ery, both in the interest of na¬
tional security and in the interest

of

foreign

trade.

there

But

definite limits to what

do, and there
what
I

we

can

cannot

we

are

should

definite limits to

are

possibly predict what

this vast foreign

aid program.
I can assure you, however, that
it will not simply "rubber stamp"
the

Administration's

recommen¬

dation.

And I can assure you the
Congress will not make a "blank
check"
appropriation. We have
no
intention of embarking on a
world WPA program, which does
a disservice to the recipients and
threatens

our

own

economic

sta¬

bility.
fact

The

I

shall

wish

to

emphasize

criticism

which

have

of

for

leave

past

contributed

present problems.

our

another

That

more

1

ap¬

propriate occasion.
We must look ahead.

whether

I,

any

I question

today

one

has

to this dilemma.

answer

sure

find the

thi
But

I think

answer.

we

shaL

I

earnestly hope that some ^
can be found to reasonably meet
our
minimum
requirements
abroad, avoid ruinous inflation or
Governmental
regimentation
at
home.
in

We

Congress, directly and
through the assistance of others,
have obtained great quantities o.
information regarding conditions
home

seek all

tion.

and

abroad.

shall

decisions

proceed

All

momentous

of this, of course,
bearing on the cost

definite

a

expedi¬

in making

care,

this

on

question.
of

shall

possible further informa¬

We

tiously, but with

has

We

government and tax reduction

Subsidies

in

Cost of Government

Another

type of government
expenditure that makes for the

high cost of government is sub¬
sidies

and

grants-in-aid to state
and local governments. The Com¬
mittee

Reduction

on

of

Non¬

has

1934

speculative ven¬
ture.
There is no guarantee of
success.
And, as a representative
of the people who will pay the
costs in taxes and
in prices, I
cannot assume lightly the respon¬
sibility of passing judgment upon
the proposal.
respects it is

a

It must be understood that

for

penditures
constitute
come

are

And
that

foreign
many

of

small

persons

must

the

will

burden to federal in¬

a

taxpayers,
it

aid

ex¬

also

be

shipments

of whom
incomes

understood

of




goods

under

various

mise

to stimulate exports and domestic

consumption,

for

housing
and
They are paid in

other activities.

essential

Federal

Expenditures

reported that for the years
to 1946, inclusive, Federal
expenditures for 33 items which
are subsidy payments to business
and

farmers

114,

or

162

a

an

totaled

$13,610,911,of $1,046,993 -

average

and

year,

for

this

same

period the Federal payments di¬
rect

to

tive

programs

states

amounted to

and

for

within

coopera¬

the

$35,097,616,156,

because

which

They

they take
are

We

all

recognize

circumstances
dies

appear

with Joseph

high level there is

no

postal

on

that

in

some

But it is per¬
fectly clear that over the last sev¬

the

years

Federal

extentsively used

this

has

device.

pedient
problems

an

As

ex¬

politically popular
dealing with particular

or

planners

obtain

could

over

sage

making expenditures they might
not otherwise make, into increas¬
ing expenditures for
sojne particu¬
lar- purpose, and into yielding to
the dictates of the Fecial Gov¬
in

some

the

administration

of

government is to the

people and the closer the collec¬
tion

of

is

taxes

their

to

expen¬

diture, the greater will be the
efficiency in government expendi¬
tures and the greater will be the
public resistance to wasteful and

expenditures.

unnecessary

The

people then definitely see the

re¬

lationship between taxes and ex¬
penditures.
In recent years the
people have allowed themselves to
oelieve that money from Washing¬
did

not

cost

them

anything.

The

fact is it has cost them many
times more, not simply because of
the duplication of State and Fed¬
eral operations but also because
of the inability of a government

far removed from

local situations

high, there is no doubt. And most
people are agreed that the cost
of government is
too high and
reduced.

must be

That it

be

can

the

reduced

majority in Congress
almost alone and single-handed
has demonstrated by its action at
the last session in saving almost
$4 billion 500 million.
And

should like to point this

I

for the

that

majority in Congress
almost every suggested re¬

duction

vehement

with

met

op¬

position from the

department or
agency involved. When their rep¬
resentatives appeared before 'the
House Committtee on Appropria¬
tions, they did not direct their
testimony to where and how sav¬
ings might be made. They insisted
maximum

the

instances

amounts.

In

some

Committee

considerable

enced

experi¬
difficulty in

from the department or
the necessary details con¬
cerning their personnel and activ¬
getting
agency

ities.

In

some

instances

they

the country with
half-truths and misrepresentations
with respect to particular reduc¬
tions proposed by the Congress.
propagandized

I take

pride in the fact that the

majority in Congress has the will
and the courage to economize.
It
is

politically easier to leave ex¬
penditures alone than to reduce
them.
Every government expen¬
interests

and

supporters, both in and out of
government. Everyone is in favor
of reducing expenditures for the
other fellow.
But the only way
to cut spending is to cut it. And
the majority in Congress did ex¬

actly

has

that

automobile

an

to

a

vested

without

impairing

a

I

believe

that

tax

reduction

is

urgently necessary to strengthen
our
country.
I also believe that
it

is

wise

whittle

to

Co. in De¬

Interim Aid for

Europe

To Be Discussed at

IBA Gonvention
aid

Interim
Marshall

for

Europe,

and

Plan,

their

the

impact

the United States economy will
be the major topics for discussion
on

But he didn't.

huge bureau¬
such as we have in Wash¬
ington,
far removed from
the
people and out of their direct
control, the result is waste and
extravagance. It seems to me that

with Keane &

was

troit.

taxes enter into the cost of every¬

When you have a

cracy,

a

to

haircut.

program.

the closer

the New York

F. A. Pakas

office of T. J.

week

from

w as

previous¬
ly manager of
trading de¬
partment for

in his mes¬
to
the Congress

Correctly, he could have added
that $3 out of that $10 goes for
taxes, Federal, State and local.
Also, he could have said that
thing

Mr.

Pakas

Feibleman & Co. and prior there¬

"The housewife who goes to buy
food today must spend $10 to buy
what $7 bought a year ago."

grants-in-aid

the States have been coerced into

ernment

depart¬
ment.

reduc¬

said:

so-called

the

this

and

activities local

more

organ¬
ized securities

Both of them the Pres¬

President Truman,

in character.

By

tax

firm's

the

of

newly

ident vetoed.

situations. And it has

control

two

passed

tion bills.

City and will
be
in charge

is

know, the majority in

you

Congress

method by which national

a

more

been

differ

tax rates.

and

method of

oeen

It

Administration

continuing the policy of high gov¬
ernment spending, there is no ne¬
cessity for continuing the wartime

Govern¬

ment has all too

;

Co.,
Street,

York

New

excuse

with respect to the level at which
the
budget should be balanced.
Just as there is no necessity for

subsi¬

government

the

&

Klein
67 Wall

budget.
Where the majority in Congress

justifiable.

are

out

associated

national income is at the pres¬

and

and

ton

Pakas has become

budget

special concessions

are

Frederic A.

not to have a balanced

diture

on many forms
easily measured.
in various appro¬

not

the

Jos. Klein & Go.

taxes

With the pre¬

and public housing. They
involved in loan guarantees

or an

termine the total cost of subsidies

that

and

ent

connection with school lunch pro¬

states

average of $2,699,000,000 a year.
It is virtually impossible to de¬

balanced

our

grams

on

be

should be
balanced, I certainly agree. When

of

find it.

the cost of government.

many

should be reduced.

and

other
patriotic to make wise and prudent expen¬
Congress, motivated ditures.
only by love of country and a
sincere desire to do what is righ
Government Costs Can Be Reduced
in
the world,
am struggling to
That the cost of government is

here tonight is that foreign assist¬
ance has become a major item in

In

should

bills

They were paid to hold
prices, for benefit payments
farmers, for shipbuilding, and

with

along

Members

at

do.

final action the Congress will take
on

to

their

policies

It presents one of our
problems. In one form
or another,
the American people
have already extended over $20
billion in foreign assistance since
of

resort

or

such methods of planned econ¬

foremost

cessation

confronted with

we are

disintegration and col¬
lapse at home because either of

picture.

the

security and
at home. And on the

the risk of

of the great uncer¬

one

to

future

our

omy

question of aid to foreign

nations is

to

other side

to

Question of Foreign Aid

and

that

has recommended $597 million of
interim aid to Austria, France and

mean

down

priation

eral

aid
is to be advanced to prevent the
disintegration and collapse of the
governments and economies of
certain
friendly
nations.
Most
have said that foreign aid should
are

headings.

Secretary
Treasury have officially
taken the position that the budget
the

of

rates.

an

immediate

$3 billion 510 mil¬

Because

matter of fact, no one, not
the President, can now blink

As

that

want

own

home.

at

is

wards

supplies
in the United States are a major
tactor in tne price of goods here

F. A. Pakas Joins

The President and the

to

abroad out of the limited

16)

page

bins,

inese

billions

of gov¬

ernment.

down

our

at

the forthcoming convention of
Investment Bankers Associa¬

the

America

of

tion

Hollywood,

at

30 to Dec. 5, it was
announced by Edward Hopkinson,
Tax relief, debt reduction and
aid to Europe can be compatible. Jr., Drexel & Co., Philadelphia,
Fla.,

national debt.

Nov.

President of the IBA.

I

do

the
Speakers scheduled to appear
argument that it is not inflation¬ include Willard L. Thorp, Assist¬
ary for the government to tax the ant
Secretary of State for Eco¬
people excessively and spend their nomic Affairs, whose subject will
money, and that it would be in¬
be
"Fundamentals
of European
flationary if the people were per¬
Recovery"; Dr. John M. Cassels,
mitted to keep more of their hardEconomist of the Department of
not

earned

accept

as

sound

money.

Commerce, who will discuss "The

Many benefits would flow from
reduction of the intolerably high

Impact of the European Recovery

wartime

Other

taxes.

Plan

on

the

United

States

and

Supplying Countries"; and
The per capita burden from Fed¬ Eugene R. Black, U. S. Executive
eral taxation is about seven times Director, and E. F. Dunstan, Di¬
before World
as great as in
the decade following World War I.
as
great as it was
War II and 10 times

Undoubtedly the very large por¬
tion of income taken by the Fed¬
eral Government in taxes has been

rector of Marketing, of

the Inter¬

national Bank For Reconstruction
and

duct

Development, who will con¬
a
forum in which the role
Plan,

of the bank in the Marshall

the bank's plans

for future secur¬

ity flotations and its lending pro¬
gram will be discussed.
wages.
Mr. Hopkinson cited the anti¬
Excessive tax rates have stifled trust action
against the Invest¬
the desire of many persons to risk ment Bankers Association and the
their capital and exercise their
problem of finding new sources
ingenuity in expanding industry of equity capital as the two major
to produce and provide jobs.
problems of distinct importance to
a

factor in the demands for higher

Savings for investment are made
by persons in all brackets, but
their taxes are now so high that

they

discouraged from making

are

these savings.
Lower taxes would be welcomed

the securities industry
be

which will

considered.

New Member of the

Chicago Stock Exchange

by persons in the lower brackets.
would mean greater

CHICAGO, ILL. — The Execu¬
tive Committee of The Chicago
for the great mass Stock
Exchange today announced
workers—more money for ne¬
the election of James N. Russell

Lower taxes

take-home pay
of

cessities

investment

and

in¬

to

to membership in the Exchange.
Russell is a partner of the firm of
the majority in Gottron, Russell & Co., Cleveland,
Congress to the question of "Meet¬ Ohio. With his election, the firm
ing the High Cost of Government" becomes registered as a member
is this:
The cost of government firm.

production.

crease

The approach of

must

reduced

be

is

level.

It

should

be

a

a

to

a

difficult

challenge

reasonable
task

to

that

every

firm has

The
been

a

member

for several years

of the

Cleveland

Stock

Exchange, and Richard A.
patriotic American. And, secondly, Gottron, partner of the same firm,
by reducing the cost of govern¬ is now President of that Exchange.
ment the American people can be Private
wire
connections
have

given relief from excessive and
stifling taxes. The one is neces¬
sarily dependent upon the other.

been

established

to

Mitchell,

Hutchins & Co. in Chicago.
Also elected to membership was

Summarizing, our position is Andrew S. Messick, partner of the
firm of Andrew Stewart Messick
that, by courageous, honest, states
manlike and careful action, we & Co. Messick's company has been
should be able to meet our re- an active member of the Board
abroad, provide all of Trade of Chicago for several
governmental services years and is presently engaged in
and functions, begin the orderly, expanding his business to include
liquidation of our national debt stocks.
and
also give, the people much
Approval was also given to the

quirements
necessary

tax transfer of a membership from
accomplishment Hugh D. McBain to Frederick M.
of The First Boston
of our full strength and security, Fritschler,
our
peace, happiness
and pros¬ Corporation.

needed

and

relief—all

perity,

to

well-deserved

the

the

and

preservation

of ■pfhe

Exchange

now

has

153

cherished';and blessed way of^ member firms, the highest in its
life.
ry.
?
our

.

26

THE

(2182)

New Money
(Continued from page 4)
Mellon merely directed his Assist¬
ant
Secretary to look into the
matter of reducing the paper cur¬

rency's size and submit recom¬
mendation®. According to a press
release at the time (1927), "Mr.
A. W. Mellon announced that he
has

the

approved

recommenda¬

tions submitted by Assistant Sec¬

retary Dewey for

reduction in

a

(7 7/16"

by 3i/8" to 6 5/16" by
11/16")." That was all there was
to it.
Secretary Mellon was on
firm legal grounds.* Nc change in
the Secretary of the Treasury's
powers over the currency has oc¬
the

in

It

interim.

would

then, that the present Secre¬
powers to effect the change
by
Representative

seem,

tary's

proposed

Rogers in the color scheme of

our

already ample. Mrs.
Rogers' proposal for special legis¬
currency are

lation

to

accomplish the revision
is, in view of the foregoing, some¬
what mystifying. It is in this ap¬
parent anomaly that the more
searching implications for the en¬
tire economy of a currency recall
at this time exist.
The

Implications

of

Currency

a.

Recall

Unlike the 1929 recall, the pro¬

posed

modification,

if
adopted, will have been preceded
by over 12 years of steady annual
currency

low metal

backing for the dollar

drastically

weakened

has

cially indicative of MIC causation.
In reality they reflect the flight
to the dollar that began with the
in

1934

and

acceler¬

ated

rapidly with the gathering of

war

clouds in the late

Columns

2 and 3

juxtaposed.
that

while

MIC

1930's.

capita has,
since 1936, jumped 304%, MIC
per
dollar

of

gained only
than

to

as

look

salaries

elsewhere

serviceman

man

and

166%—slightly
Obviously we

half.

have
the

per

wages

for the

and

more

shall

than

the

to

laboring

explanation.

Column 4 contains the first, and
will be developed
later, the

closest correlative in the entire
Table. Liquid assets per dollar of
MIC
retain
their" identity with
MIC

because

of the

war-inspired
practice
(prewar, postwar, and
during war) of transacting both
business

and

cash

a

personal

basis

affairs

for the

sons

MIC

since

of

fantastic

the

rea¬

shown

by

increase in

whether there is any corre¬
between the expansion of

cover

lation

MIC and the changes that have
curred

since

1920

oc¬

(that is, where

phases

of

the

economy.

Although all of the gold

now

in

the United States is not
specifical¬
ly pledged behind the currency,
Col. 1 reveals that the actual

yel¬

*His powers

over

cal composition
upon

complete and rested

certain statutes: viz., national

—Section 104
"Such notes

of

.

as

the cuvrencv's Dhvsi-

were

the

Title
.

.

shall

Secretary of

direct."

Other

U.

S.

of

12

be

the

U. S.

in

and

the

workings

Column

is

U.

"U.

S.

shall

as

of
see

the

R.

such

Treasury
S. 3571,

form
may

MIC

where

5

in

th<?

relation

doubled

since

to

1939

constitutes

by

far

the

greatest

amount of

MIC, as Column 6 il¬
lustrates:
Right
now,
92%
is
publicly held, as against 75% in
1929, 85% in 1939.
It

has

vastly

been

argued

greater

expenditures

rate

since

of

that

the

consumer

1936

justifies

unprecedented expansion of MIC.
Columns 7-10 do not support this
the reverse being true if

view

—

anything. Total
ditures

It

the

almost

economic

an

such

in

consumer

1947

(Column

expen¬

weaker

7),

for

personal

increase in
1936

.

Secretary

best."

(Also

U. S. Laws & Statutes.)

credit

position.

point),
of

finding
in

credits since

consumer

(128% since 1944, the war's

tion

.

apparently required

Broken down, it would seem that
purchasers of durables need 44%
more cash, nondurables
58%, and
services 138%. In view of the 62%

low

.

case

is,

were

it

peculiar correlation of
growth of MIC with that of

the
a

MIC

riddle

large part of its

the nature

ness

quest for the solu¬

our

and

practice

scope

be

may

answers

of busi¬

surrounding

per¬

sonal expenditures.

of the banks; but
still remains, why,

out

currency

the

question

these funds

once

expended,

were

they did not find their way back
into the banks as deposits in the
usual

manner.

2

3

4

workers'

war

and
not the

wages

pay

were

only causative factors behind the

tory workers hit the wartime peak
in 1943
(14,560,000); in no year
since has
that figure
been ex¬
ceeded. In August,
1947, \it was
about

15%

below

about

10%

below

(12,565,000).
Factory payrolls, for all the in¬
tervening wage hikes, are still
1943's.

The

Armed Forces averaged 11,300,000
in 1944, the peak year, increasing
from

January's 10,300,000 to De¬
11,800,000, about 15%.
It is now down to 1,400,000. Fur¬
ther, Series E War Bond sales

cember's

averaged

annual

factory payrolls in 1943
Moreover, most over¬

personnel

total

(about 40% of the

in

1944) were paid in for¬
currencies. The writer;) can
attest
naval

to

this,

funds

in

having
Brazil

supply officer. All payments

a

in

were

Brazilian

incoming
in

of

1944.

seas

as

33%

over

average
and

more

cruzeiros.

personnel

than

that

and

could

$50 for

had

to

any

No

bring
reason,

be

exchanged
immediately for native currency
Thus, despite a stabilized' factory
wage and Armed Forces pay situ¬
ation, 1944 saw MIC increased
from $20.4 billion to $25.3 billion,
over 26%
(well in excess of the
entire
With
and

amount

large

of

bonds,

MIC

amounts

servicemen's

war

5

Money in

Money in
Circulation
year— (Billions)

Gold

Stocks

Circulation Wages &
Per
Salaries

these

in

of

1929).

workers'

going into
figures would

pay

Per $

Capita

Per $

Tolat

Bank Drs.

6

Outside

Commercial

7

9

8

Per $

10

Expenditures

Non-

Total

Durables

Durables

Services

1947

$28.29

$0.74

$198

1946

$0.23

28.25

$0.12

$0.02

0.73

$1.08

$0.18

200

$1.41

$0.30

$0.64

0.25

0.13

0.02

1.06

0.20

26.75

1.89

0.32

0.68

0.75

191

0.23

0.12

0.02

1944

1.01

0.22

22.50

3.33

0.35

0.70

0.91

163

0.19

0.12

0.02

1943

0.96

0.22

3.32

17.42

0.34

0.62

1.26

128

1942

12.38

1.84

92

0.15

0.11

0.02

1941

0.89

0.14

1.82

0.23

9.61

0.40

2.36

72

0.16

0.12

0.01

1940

0.96

0.12

0.98

0.22

7.85

0.34

2.80

59

0.16

0.11

0.01

1939

1.07

7.05

2.50

54

0.15

0.11

0.01

1938

1.10

0.20

0.28

6.46

2.25

50

0.15

0.01

1.12

1937

0.10

1.12

6.45

0.19

0.26

1.97

50

0.14

0.01

1.15

0.10

1936

0.92

0.18

0.26

6.24

1.78

49

0.15

0.01

1935

0.10

0.98

0.19

0.27

5.57

1.81

44

0.15

0.01

0.10

1934

1.08

0.19

0.26

5.37

1.54

0.10

1.25

0.20

0.26

0.12

1.55

0.24

0.26

1945

0.16

0.12

0.02

0.92

postwar period has been in major

obvious preference,

an

newly

developed on the part of
civilians, for transacting personal
and business affairs
Evasion

Tax

in cash.

The

obvious

two

evasion

market

operations.

There
has
been
a
third, the financing of enemy in¬
telligence and propaganda activi¬

have

in

occurred

amounts

the

of

0.17

0.11

0.10

2.68

1.00
1.05

0.28

0.21

0.51

0.30

outstanding

various

currency

suggesting

eloquently

the

prob¬

of (a) the flight to the
dollar; (b) individual uncertainty
about the security of banks, espe¬
cially after the 1933 experience;
(c) fears of inflation and soft
money (this explains the notably
greater increase in coin over the
currency

in

those

denominations

in

used

ordinary consumer
business transactions, the $10-$100
bills.
Such ordinary transactions
would justify an increase of about
60%

in

the

$l-$5

categories

in

40%-80%
enced

jump

actually

represent

may

a

experi¬
cOmbina-

ation of the effects of the notori¬

"stoopies'"

ous

incidental

market,

saving

and

(that is, hoard¬

ing).
Considering, however, the rela¬
rarity of the $50 and $100

tive

notes

for

business

continued

the

purposes,

growth in their rate of

issuance in

the

postwar period, as
stabilizing to decline
the others, suggests that they
are being used as a repository for
savings, or as temporary storage
for capital, rather than as a medi¬
against the
in

of

exchange. Because of the
ease in handling and storing fewer
bills, the larger denominations,
um

$500,

$1,000, and $10,000, would
to be superior for this pur¬
Oddly, nevertheless, a curi¬

pose.

reversal

occurred in the

bur¬

geoning popularity of these large
bills, coincident with the issuance

by the U. S. Treasury Department
through the Federal Reserve Sys¬
tem in

May, 1945 of

an

order di¬

recting all financial institutions to
make

full

a

change

of

any

ex¬

currency
involving
cash in excess of one

of

sums

report

of

thousand

dollars

in

bills

of

$50

and above, or any denominations
if the sum exceeded $10,000. Ac¬

companying
report form,

a

later revision of the

Oct. 24, 1945, the
Treasury advised the Federal Re¬
on

0.01

0.11

1.47

0.24

0.24

put

4.54

0.92

37

0.12

0.01

0.07

0.82

0.16

0.17

lessened the need for tax enforce¬

4.24

1.01

34

0.09

0.005

1929

4.46

0.90

37

0.09

0.005

1928

4.51

0.85

38

0.005

fullest

serve

follows:

as

"The

end

of

hostilities

has, unfortunately, not
end to tax evasions, nor

an

0.06

0.58

0.12

0.14

ment.

0.06

0.47

0.12

0.14

ment

Accordingly
is

this Depart¬
to give the
reporting

continuing

attention

to

the

1927

4.56

0.90

39

0.005

and

1926

4.60

0.91

39

0.005

1925

forcement program

4.52

0.91

39

0.01

1924

4.56

0.92

40

0.01

1923

4.54

0.87

40

It would seem, then, that the 5and 6-fold increase in those bills

0.01

4.62

0.73

43

5.18

0.51

48

—

—

0.01

—

from

—

—

M.M.M




complied by dividing columnar figures (1-10)
r")

phases

of
.

its

official

tax

en¬

.

are

surveillance

free
and

therefore most suitable for saving
—

NOTES: (1) MIC excludes 1920-33 $287 million withdrawn from circulation
in 1934.
(2) All 1947 figures estimated.

(3) All amounts

other

($20, $50, and $100) that

0.01
— mmmm

into money in circulation.

fully
acquainted'
workings of the Bureau,

the

Internal

evasion is

Revenue
issue.

an

concern

tax

peculiar
does not

law

itself with

taxable

when

Our

Federal income tax

income

the sources of

(Lucky Luciano,
the
White
Slaver, was always
careful to pay his income
taxes).

fear

marketeers
such.

as

It

have

little

to

is

only if they,
so careless as to
over¬
look the necessity of full
disclos¬
on

Form 1040 that

into

aroused

they would
with
an!

difficulties

Bureau of

Internal Rev¬

enue.

Black

marketeering, it is

gener¬
known, occurred in numer-:
forms of business and
agricul¬
ture at about every stratum of in-,

ally
ous

The usage of

come.

ination bills

was

large denom¬

necessary in such!

transactions to insure expeditious.'

with

the

as

against trading,

mates

part
their

strongly inti¬
unwillingness on the
many owners to submit

an

of

cash

accumulations

to

the

small

the bundle.

physical

The old tin

size
box

of

and

bulging black

suitcase went
style with the Torrid Twen-.
Further, in this connection,

out of

ties.

undetermined

an

number

of

ref¬

who had converted their
foreign funds into U. S. currency
ugees,

liquid

1930

1920

of

and

additional

The

1931

0.01

become

with

price

index.

.

associates, once of Long-'
champs fame, like A1
Capone,

view of the rise in the consumer's

0.18

1921

and

have

the

least

0.19

38

penalty fine).

occurred

0.16

0.87

evasion (tax
only
liable to
a
Mr. Henry Lustig

is

movement, while maintaining the:
required confidential atmosphere;

43

4.18

tax

$l-$5 bills); (d) the rise in the
commodity price level; (e) the
impact of war. As is plainly evi¬
dent, the most striking increases

43

1922

avoidance

ure

43

1.25

liable to criminal'

are

prosecution for

run

0.78

1.14

Revenue, are liable to
their owners, more

confiscation;
importantly,

By indexing the individual de¬
nominations, using 1936 as 100, the
table reflects the effect upon U. S.

0.74

0.01

cash, not susceptible'
explanation to the Bureau'

to full

of Internal

Black

5.41

0.01

currency recall will result.'

have been

5.43

—

a

the process, all those
deposits '
for the New Colored
money of the'
Old Colored

the large bills ($50-$500 notably),

1933

—

they'

—

Representative

denominations, with the emphasis
on
the unprecedented growth in

1932

—

operations

Jn

black

and

market

reasons

usually go hand in hand.

effect

for

motives

conducting a sizable business
chiefly on a cash basis have been
tax

black

theip—for

Rogers'>
recoloring proposal be adopted, in

Black

and

by, depQ^itipg

Should

Marketeering

ous

Per $ Personal Consumption

Banks

Banks

Per $

the

appear

Currency
Liquid Assets

into

rise

able nature of their function.
That

TABLE I—U. S. CURRENCY
RELATIONSHIPS
l

that
can
only be
guessed
at.
Among those reasons are, as men¬
tioned, income tax evasion and/or

its

of

liquid assets; the end of our quest
ties within and without the United
will probably be found in an ex¬
States; this latter is admittedly of
amination of the nature and mo¬
minor importance, however, in re¬
tivation behind the extraordinary
lation to the first two. The extent
accumulation of liquid asset sav¬
of
tax
evasion and black marings that has occurred, particu¬
keteering, nevertheless, in terms
larly during the war. No doubt
of dollars and cents is almost im¬
the equally phenomenal
rise in
possible to delineate accurately.
factory payrolls during wartime
Some idea, though, of their scope
expansion, and in servicemen's
may be derived from Table II be¬
pay, were among the prime causes
low
showing the
changes that
behind the initial issuance of the

eign
personally

shall

notes

That

not for the

disbursed

reason

more
cash than in 1936, a
of considerably less personal
credit expansion
and generally

form

Code,

the

be

all.

hint

not be

may

at

one

would

to

seems

explanation

80%

some

covered

S.

the

deem

of

debits

quadrupled since 1929. Cur¬
rency in the hands of the public

Code:

Treasury

31,

in

notes

such

currency

by Section 40, Title
"Money and Finance":
be

found.

that

year

available statistics
permit) in the

various

amount

1936,

especially that
from 1941-1945, are
patent, others
are
abstruse,
and
still
others
downright suspect.
The accom¬
panying Table I attempts to dis¬

suggests that
in the course of study¬

even

routine scrutiny of bank officials

part due to

Table

initial withdrawals of currency is
demonstrable. The number of fac¬

mounted

of OPA grew to be most onerous
with war's end. This is
clearly

and

Some

in

level

1920 to 1930, money in circulation

World War II.

S. Money
Circulation

servicemen's

bank

history, not surpassed until post-

suggest that the astounding expansion in wartime MIC antjl the

of U.

above

Thursday, November 27, 1947.

continuance

ing usual economic pursuits, will
the answer to the question re¬
garding the phenomenal rise in
MIC during the past 12 years be

on

in

CHRONICLE

ever-increasing
amounts—especially as the price

increases in the amount of money
in circulation (see
Table). From

(MIC) actually declined irregu¬
larly, a period of the greatest
peacetime boom in the country's

Anatomy

The
not

FINANCIAL

Cold?

or

The

the

purposely
show
clearly

are

They

&

since

1940, and except for 1946, has not
been so poorly supported in that
respect since 1921, coincidentally
the last comparable postwar year.
Nevertheless, the ups and downs
in U. S. gold stocks are not espe¬

..

.

2

curred

for Old—Hot

devaluation

the size of the paper currency

COMMERCIAL

who

late

habitually had all their,
with them, de¬

resources

scended

upon

habits

these

veloped

in

shores

our

1930's and

early

individuals

Europe

the

in

1940's.

The

had

de¬

of

necessity,
due to the Fascist harrying, of do¬
ing business for cash only, had
become too ingrown to
cast off
easily. Carrying large amounts of
currency
on
one's person could
only be accomplished comfortably
with the larger bills. Undoubted¬
ly, this group's monetary prac¬

tices

augmented the

MIC

out

of.

all proportion to its numbers.
Rather
than
face
the
almost

dead

certainty of confiscation and
prosecution, tax evader-

criminal

holders

of

an

undetermined

MIC

amount of the

would not at¬

tempt to exchange their
for

the

New

Colored

currency

money.

As

the government could set a dead¬

line, by which time all

Old Col¬

ored currency must be
exchanged,,
the
Treasury
would come
into!

"windfall"

taxes

of

tions.

(The banks

credit

the

amount of
as

vast

propor¬

would

government

simply
with the

unexchanged

currency

of the deadline date.)

The

ex¬

act

figure which this sum would
reach, though, is not easily ascer¬
tainable.

If the view is taken that

ldrge part of the extraordinary
concentration of currency savings
in the higher denominations can¬
not, generally speaking, stand the
light of day, then the government,
it can be seen, would benefit by
a

an

indirect

payment

of

what

might be considered a huge back¬
log of "uncollected taxes." This
amount, were the relationship of
the larger denominations reverted
to the 194.0 status and
personal
expenditures financed in the same

proportion, could
$4-$10 billion.

range

between

Looked at another way, the nonbusiness denominations

($50-$10,000), that is, those not used reg¬
ularly as a medium of exchange,
constitute over 30% of the MIC.

In

addition, it is extremely doubt¬

ful that

all of

inations

outstanding

the

lower denomT

are actually
required in normal business trans-

Volume 166
actions

Number 4650

Were

return

a

THE

made lo

central

COMMERCIAL

cities; at their
the 1936-1640
relationship of fi¬ highest, 1937 and 1942, they never
nancing personal consumption ex- exceeded
26%, the statutory limit.

penditures

•

;;::apllar

with

of

about

in

money

10c

per

circulation

;<see Table I) instead of the pres"?i18c' a 45 % reduction in the
piC would be in order.
This
Would

reserve

Since

reserve requirements could
if. increased, exceed *26%;
excess reserves :iwould,
with the

not,

currency recall) be over $4 billion,
and that has important implica¬

&

FINANCIAL

CHRONICLE

other,

exchange their Old cur¬
for the New, would be to
it for anything tangible—
houses,- cars, jewels, stocks, com¬

ther lessen

$16
such

need

total

it

is

for

of

contraction

'would,

-

the

billion

even

Any

the

MIC

in

submitted,

-shock value for

a

MIC.

have

a

the

economy not
susceptible to full evaluation.
The remainder of this article will
be devoted to
exploring the
mow

pos¬

sible impact
tion

a currency recolora¬
recall would have on cer¬

or

tain segments of U. S. life.

Effects of

»

A

+

a

modities,
would

what have

be

no

recall

•actually have to

would
to

occur

such

'

The

set

threat

mere

off

of

a

cnange in the amount of
the MIC would touch off so
many

anticipatory moves of
ing nature, by both

far-reach¬

a

actual

and

potential owners of outstanding
'currency, that most phases of the
nation's

life

"affected.

would

be

markedly

Few citizen's daily lives

would be quite the same for

some

months

afterwards, once the cur•rency change proposal evidenced
a
convincing
chance
of
going
through.

In

'

reality,

Repercussions

is undeposited bank deposits. Con¬

ceivably, all transactions, whether
business or personal, could be fi¬
nanced
by
check.
Experience,
nevertheless,
has
demonstrated
-the feasibility of restricting the
payment for certain business/per¬
sonal expenditures and purchases
cash.
That most of the cur¬

to

outstanding
is
not
necessary
for such purposes, at
least when they are bona fide,

rency

now

has already been discussed.
turn

to

banks

.excess

A

re¬

deposits of the

as

ndfall" taxes, supra, would ef¬

w

fect.

The

would

haps

municipal bond market

similarly be affected,

more

estimated
in
figures at about $12 billion,
could profoundly alter the present
currency,

no

benefit

and

commodities would

pricewise

initially.

Such
of the Old Colored
money as is
"hot" would rapidly be sold at
discounts

to

those

the risks.

sume

its

in

small

into

way

as¬
cur¬

amounts

the

markets.

The greatest of all
markets, how¬
ever, would be the black market
in the currency itself. Now a set¬

ready recorded its desire to curb
inflationary forces through con¬
tracting credit, this development
major

a

setback.

In

'

order to sop up the additional excess

reserves,

require-

reserve

ments would have to be increased
to

31%.

They

are

20%

now

TABLE

two

\Vhile
be

States—at least until the deadline
no

As

its

life

would

necessity for setting
its

would

be
up

short,
special

apparently

activities

exist,

would

probably
justify the description of being
"rampant," to put it mildly.
The

bank's

problems

in

han¬

be

manifold.

Whereas

in

the

to

as

the

Rogers

2.6 billion pieces would have

over

to

be

the

were

processed.

usual

both

There would

transition

currencies

period

would

be

when

be

out¬

standing, with its implications of
confusion

lays.

and

extra

Combined
a

clerical

with

deadline

the

on

out¬

prob¬

complet¬

ing the substitution, the foregoing
pocket
bank

a

measure

by

expense

of out-of-

banks.

Alert

management

would, how¬
ever, take full advantage of the
opportunity to add a previously
untapped source of new deposits
new

business

with

an

un-

ket

in

U.

S.

anticipation

a

major black

mar¬

either in
during the actual

currency,
or

processing of the Rogers proposal,
would be an
inflationary force of
the
first
magnitude.
The
only
course

may

open

not,

to those holders who

for

II—U. S. MONEY IN

one

reason

or

an¬

would

the

were

rate

of in¬

similarity in the extent of

the

rise
in the wholesale price
level, this is an illuminating con¬
trast, the explanation for which
may possibly lie to some extent
in the eye-opening difference in

TI

20%

rates

World

to

to

lowest

—

and

War I ranged
in World War

65%,

91%.

The
more
profound economic
intimations in the Rogers currency
proposal would flow
from
the

politico-diplomatic
the

Federal

duction

steps

which

Government

take, especially
and

The

regards tax

as

financing

the

re¬

Mar¬

Repercussions
of

the

risk

of possibly

stepping on the toes of some party
officials, both high and low, there
should -be no politico-diplomatic
reasons
why both Republicans and
Democrats

would

not

welcome

such a currency plan as
Repre¬
sentative
Rogers proposes, with
open arms.
On the contrary, it
opens up- possibilities which in a
Presidential-election year, could
not be more
promising. First of
all, few politicians would miss the

chance

of

engaging in

nation¬

a

wide witch-hunt for "the rascals"
in a key election
year. It is such
a

worthy cause, like being "agin
Second, and vastly more

$1

$2

the

$10

401

1947—

442

264

201

180

227

1946—

442

263

206

191

239

$50

610

637

as

Monetary Fund would,
result, benefit greatly.

a

money,

five or
would this

S.

ten

every

con¬

other than

medium of

exchange.
basis, the
is normally turned
(that is, renewed) about once

Further,

a

on

piece

a

garding the
is going to pay for it? As esti¬
mated above, the "take" in hot
money could approximate $4-$10
billion. Such

a

sum

would, in the

a

year

Therefore,

anyway.

the

element of cost would be of minor
consequence.

there is a good
Representative Rogers'
proposal going through, if not in
1948, perhaps in 1949. It has all
of

the

best arguments on its side.
Nevertheless, it would run into
strong
opposition
from
many
quarters, whose arguments would
not

be

run

as

too

rebut.

to

easy

They

follows:

(1)

A

would

clear

(he

way

for

in
dential,
omy

of

the

currency

disruptive to the

critical,

a

i.e.,

a

econ¬

Presi¬

has

$500

319

296

71

67
144

$1,000

$5,000

$10,000

at

implications,
es¬
outstanding loans
just below the all-time

with
or

highs.
There is

(3)

that

assurance

no

the amount of "windfall" taxes, to
which the government may fall

heir, would anywhere nearly ap¬
proximate the
sums
postulated
above (viz., $4-$10 billion). There¬
fore, the alleged benefits are of
doubtful

eventuality.

arguments of the pros.

They fol¬

low:
new

color scheme for the

(2) The country does not need
than $16 billion of cur¬
in circulation, if that much.

any more

The recoloration could

which
MIC

owners

would

to

that

(3)

serve

as

would doubtless leave the

Recoloration

deposits.

as

at

this

time

inaugural of a peri¬
recall which
formally fix control over

the end-use of U. S. money as an

exchange medium, in the hands of
the individual designated by law,
the Secretary of the Treasury.

417

621

625

675

324

296

114

208

254

432

315

581

599

337

304

232

100

133

238

383

482

501

587

312

412

197

182

373

200

143

133

(4)

217

332

381

371

1942—

412

235

302

171

1-31

283

129

122

stricted

-157

186

259

273

255

271

213

221

126

129

139

media.

139

150

175

170

182

202

193

209

342

256

(5)

168

198

come

>45^

"

125

122

111

125

129

120

135

1939—
•

116

157

114

112

103

428

112

333

114

105

115

1938—

104

130

142

106

105

160

97

286

103

99

102

109

118

123

242

91

178

100

100

98

97

100

103

108

86

67

100

100

100

100

100

100

100

do

.1937—

100

104

101

Tax evasion would be
to

other

The

than

Federal

re¬

currency

debt

and

in¬

1936—

100

100

100

100

100

100

1935—

90

92

92

94

90

88

91

1934—

85

87

85

91

85

82

88

84

81

83

1933—

84

86

81

80

71

94

39

79

entire

79

89

91

87

93

89

114

55

of

91

90

100

89

taxes

has

become

so

Government

to

British

Nov,

1936-47

+ 101

+ 80

+ 127

+301

+ 510

+ 537

+630

+219

1,060

31

411

623

457

51

52

.86

;81

449

17

181

156

75

8

7

.27

.27

+ 196

Millions of Pieces—
Total
1947—

1936

2,627
944

NOTE: 1947 is

as

of

Aug

31.




—29

—33

reduced

rampant
consider

currency

in

18.

In

order
in

to

lead

to

as
a

recall

and

an

notes, Sir Stafford
Chancellor of the Exchequer,

effectiveness

+ 164

be

new

% Change—

+342

could

in

finishing this article, a note¬
worthy
development
regarding
British
currency
has taken place.
In England,
the alleged black marketeering in sterling

.

89

often

used--the
The $2

bill,

recoloration

it

while

proposal

good opportunity to

a

accomplishing

more

objectives.

Gelotex Debenture
Issue Oversubscribed
Paul H. Davis & Co. and Union

Securities

Corp.

headed

an

un¬

publicly

offered

issue

group which
Nov. 21, a new

of

$3,000,000 of 3V4% debentures of
The Celotex Corp., due 1960 and
est.

The

and accrued inter¬

issue

has

been

over¬

subscribed.

Proceeds

from

estimated

the

financing,
$2,865,000, will be
$2,500,000 of bank

at

used to pay off

loans

made

to

protect the work¬

ing capital position
pany while it

of

the

com¬

engaged in its

was

present broadscale expansion pro¬
gram,
with
the
balance
being
added to the general funds of the
company.

Celotex has spent around $14,000,000 for additions and acquisi¬
will

since
be

1944.

further

These

additions

increased

by $1,100,000 for the three months ended
Oct. 31, ^and acquisitions by
$1,700,000 for the same period. An

$1,600,000

will

be

needed to complete additions now
in

The expansion pro¬

progress.

gram

involves

new
or
improved
Louisiana, New Jer¬
sey, Ohio, Texas, Indiana, Michi¬
gan, California, Illinois and Lon¬
don, England.

facilities

in

Wall Street Riders

Thanksgiving
Breakfast
A

revealed

the

of

Wall

Street

Struckmann

of

the

Bank

of

the

Manhattan Company, will be fol¬
lowed by breakfast at the Forest
Hills Inn.

On the Committee in charge of

arrangements
ride

are,

the

for

the

Misses

breakfast

Virginia

the

McGaffney of Dunham & Fletcher

the

and Adele Lotz of J. & W.

issuance

Cripps,

achieve

squelching

of

tradition

Riding Club will be observed on
Thanksgiving morning when the
financial district's equestrians will
hold their Thanksgiving breakfast
ride at Forest Hills, L. I.
The ride, which will be led by
the Club's President, Mr. G. H.

*Since

<

90

most

essential

178

104

bills

"race track money," has long out¬
lived its usefulness and should be
eliminated from the currency. The

currency

198

170

be
easily
problem of as¬
signing colors could be simplified
by making the rarely used $50$10,000 notes the same color and
reserving four standard shades for

a

probably re¬
figure, as the

difference in banks

207

134

could

The

rency

246

—

probably

additional

(1) A

223

1941

and

overcome.

tions

On the other hand, the opposi¬
tion would probably find it even
more
difficult to cope with the

435

1940—

completely revamped. The major
difficulties, printing time and
color processing, are
technological

harmful

could be the

730

simpler than those of 1929 when,
in effect, the entire
currency was

priced at 97 V2

year.

pecially
now

the

$100

changes in the designs

no

derwriting

recall

be

more

currency are in prospect,
the mechanics of the
job are much

would offer

Summary

Undoubtedly,

chance

duce

would

(8) As

40%

over

of the

Rogers
Prospects and

heavy first

Plan, but much of the second. This

as

of the MIC would have been
or less immobilized.

the

recall

of the Marshall

largely eliminated,

$l-$20 denominations.

upper range, not only finance the
year

the present amount of
MIC, long
bugaboo of private and govern¬
ment economists, will have been
a

over

bills and thereby accelerate bank
business transactions.

answer

conjunction with No. 5, be
based in part upon employment of
the same "windfall" tax income.
*
(7) The inflation potential in

entire currency

387

1

.

say,

U.

of

found counterfeiters, it would also
serve
to
thwart
any
concerted
efforts to use U. S. currency as

1943—

,

refurbishing

Not only

years.

1945—

*

,

a

periodical

: 1944—

•

S. money
Recall of the

(6) The Marshall Plan financ¬
ing may, as an alternative to or
in

ternational

odical

$20

•

•

U.

to

perfect

politician's

CIRCULATION, BY DENOMINATION

$5

is

the base.
would put an end to
many such markets for an indefi¬
nite period. Operations of the In¬

would
Coin

these

currency would undeniably facili¬
tate the handling and counting of

currency recall may

Total

Circulation

of

$64 question re¬
Marshall Plan—who

a

(1936 = 100)
:'

currencies with

usually

sin."

important,

One

(2) A probable increase in the
banking structure's credit base

Politico-Diplomatic

Outside

eased.

currency

could

shall Plan.

provide

Economic Repercussions

boom

fol¬

be equal to that of World War
I,
the amount of MIC now would be
about $15 billion in excess. In view

the

The onset of

contraction

connection, it is interesting

1%

some

tive Rogers' currency recoloration
Could
be
the
inaugural for a

in MIC for World War II to

of the

in

Plan

governmental adminis¬
trative point of view, Representa¬

I's

medium of exchange.

note that

Marshall

postwar

War

current

a

would

surging black markets* in vari¬

ous

the

change their Old currency hold¬
ings for the New.

same

would be
the

of

time,- the diplo¬
be strength¬
only would the success

—

tangible form be assured; certain
other frictional aspects of our re¬
lations
with
foreign
countries

From

MIC

years

in

face-lifting, 900
involved, in
recoloration project,

pieces

investable,

material, it would still leave
$8 billion more than is

crease

the 1929 currency

million

the

as

about

dling the mechanics in exchang¬
ing the new for the old currency
would

left

similar

a

lowing

it

the

applying, such

''windfall" taxes, which the tax
evaders provided by failure to ex¬

front

ened. Not

of

by

27

by

year

dropped 18%
from
1920-1922.

World

in

Federal Reserve has al¬

be

in

of

directly.

burst;

from

plumbed potential.

; would

After

boom

highest

and

outstanding in
Reserve System.

Reserve

markets' in

date.

such

loanable, into fixed inter¬

tax

currency would soon
be well established in the United

deflationary,
holders, the banks,

securities

income

would infer

Federal

but not

tled part of the postwar economic
life of most of the
world, black

the

•

walling to

Much of such

would

rency

find

supply situation.
Instead
of banks having excess reserves of
about $1 billion, the figure wo»m
be $13 bilion, permitting a credit
base expansion of about $65 billion,
three
times
the
present

As the

Federal

est

In this

Stocks

amount of all loans

;

per¬
reduction in

somewhat
new

Presidental

a

the

matic

way

funnel

needed

ability of

money

'

if

so

round

"

would

Treasuries, incidentally would be

so

in circulation

money

position of

further strengthened by any debt
reduction which application of the

controls
Financial

a ven¬

be

rates has occurred beforehand.

economy im-

mediately.

word, that would be

The technical

geance.

not

reverberations that would register
•in most parts of the
'

of the

would

•since the

At

There

you.

of effectively
curbing these activities. In an al¬
ready >tight&' market
for ^dur¬

personal and corporate income tax

Currency Recall

currency

sense

"monetizing" the debt with

1948

cutting taxes.

imply a return of most of tions' for the securities markets.1^ ables these
•^operations would of
largest
denominations
and
Such an amount of excess re-s necessity be disruptive.
On the
of the smaller to
bring the serves would be almost totally in- other hand, removal of any such
^MlC down to about $16 billion, vestable, and would find its way sum as $12 billion from the pub¬
that is, a reduction of
$12 billion:
mostly into the U. S. Government lic's hands; which the actual ex¬
Parenthetically, it should be ap¬ bond market. The resultant effect change would probably
effect,
Treasury bond prices would'
probably carry them toward rec¬
ord high ground.
In the1 pdrest

in

ward

swap

some

on

politician to put his best foot for¬

rency

tne

preciated also that a decrease in
the present unprecedented
rate of
personal expenditures would fur¬

(2183)

the
on

maximum

marketeering
that such "a

sterling, Cripps stated
currency cancellation would come without
warning." Since it is a foregone conclu¬
sion that U. S. Currency is being used
for a base for marketeering in sterling,
a
recall
of
American
monev
probably
would accomplish the Chancellor's objec¬
tives without necessitating a British cur¬
rency cancellation.

man, as

well

as

SeligMr. William Salis¬

bury of Union

Securities and W.

F.

Smith,

Baldwin

of

Barney

&

Co.

Chas. Walker in Buffalo
/'Buffalo, n. y.—Charles w.
Walker is engaging in

a

securities

business from offices at 1045 Elli-

cott

Square.

28

Thursday, November 27, 1947

FINANCIAL CHRONICLE

&

COMMERCIAL

THE

(2184)

restore their production to a level

topics in Wall Street

Current

there

(Continued from page 6)
author

The

of

volume

a

Science

of

Dewey states that
activities
over

in

"Cycles:

on

Prediction."
there

economic

are

life

moved

in

certain

a

short cut here to re¬

no

at

tirement

30.

and down
rhythm with a regularity which
oan not be sufficiently explained
by; chance.
On account of this
up

level

at

been

has

Business

which

True

Be

to

some

a

long that it is now

so

high
in the

further but if
doesn't watch his step, he may

he

advance

recent years may

in

wages

be interpreted as a criti¬
cism of the prevailing distribution

easily

position of the boy at school who
rose to the head of his class.
He
can't

their

resulted

divergent trend of prices

from the

Good

Too

has

which

equilibrium
and

Mr.

long period of time have

a

is

where

any

purchasing

of

is,

There

power.

basis for assuming
that the division of national in¬
come which existed just prior to
however,

the

no

ideal or even satis¬

was

war

be

they

sell

can

of.]

enough

the,, Marshall

/•,

will

Plan

operative.

be

not

,.

goods to other countries to

able

other

to

buy

the

goods

Construction

from

which

countries

There is no need to, stress the
they can
not
produce at home. In some importance of construction activ¬
cases
economic difficulties have ity for the economy as a whole.
been greatly aggravated by politi¬ In
the
business forecast of the
cal upheavals and difficulties con¬ Westinghouse
Corporation, men¬
nected with outside political con¬ tioned
earlier, the prediction of
trol.

The

has

ports of

etc.,

of all this

consequence

been

crying

a

need

im¬

for

materials, machinery,
large scale. For obvious

raw

on a

several

years

of

prosperity

largely

based

on

the expectation

intensive

of

was

activity in the

con¬

struction

industry. In addition to
basis to reasons the
only country that can housing demand, accumulated
regularity, Mr. Dewey makes the
division
cautious statement that he con¬
supply such needs in quantity is during the war years, there is gen¬
is. The point to be stressed is that
the United States.
siders it unwise to disregard the
erally believed to be an additional
any great shift in economic relapossibility of the continuation of
While the productive capacity deferred
demand
caused
by a
tionsnips creates frictions. Another
these trends exhibited in the past. time, his family and his friends
of this country has shown itself sub-normal
rate of
construction
watch him with great pride and point to be emphasized is the ap¬
on the whole
for a number of years preceding
Without question, some of the
equal to the foreign
parent transfer of dollars from
still greater anxiety.
the war.
demands made upon it, no solu¬
cycles demonstrated by Dewey
one
group, of people who spend
Fear of a business recession is
tion has as yet been found for
are
As
striking with regard to the
against widespread hopes
of
what
they
make
to
widespread.
During the decacie most
regularity of the pattern shown
payment by foreign buyers for that construction activity would
preceding the war there were al¬ another group which may spend
slip back into a less re¬
spected place.
No matter how
well he does, he can do no more
than hold his own. In the mean¬
easily

and to the

length of the period in

the past to which this pattern can
be traced. His 18% year cycles of
estate activity and

real

of build¬

ways
many
millions of unem¬
ployed looking for jobs. The war
changed all that. Now, however,
the pressure has gone and surely
we are in for trouble again.
So
warns
one
school
of
thought
whose attitude is marked
by a

ing construction are a case in
point. At the same time, the ap¬
plication of the knowledge of
cycles is limited by the obvious
fear
complex born during the
fact that the behavior of ups and
depression years when "eternal
downs in the past is no guarantee
of

such

the

in

behavior

future.

continuation is

a

ac¬

as probable, there is still
enough for changes in the
length of cycles and for other de¬
viations to render the study of

cepted

room

cycles at best

an

ment of research.

seemed

prosperity"
but

come

Even if such

have be¬

to

costly dream.

a

by side with this

Side

psycho¬

recession
based on scrutiny of current eco¬
nomic trends. This fear has to do
auxiliary instru¬
with
inventory
accumulation,
concrete fear of a

more

Dewey himself

price maladjustments, etc. There
of the
usually is some emphasis on the
emphasizing
temporary character of the com¬
that knowledge of the facts in¬
volved
should be
of value
"if ing recession and on the good
prospects of a subsequent period
used with intelligence." His 18%
of several years of good business.
year building construction cycle
The
stock
market decline in
brings this point out clearly. If
the past pattern is a correct in¬ the autumn of 1946 has probably
the

admits

of

study

cycles

of

dication

tion

will

levels to
be

limited

the

a

future,

construc¬

from

current

low point which

sometime

reached

in

coming to

a

may

1953-

Thereafter there will

1954.
rise

value

by

decline

be

a

peak about 1962-

been

an

business

probability of

a

straight 18% year cycle.
How¬
there have been divergencies
of similar size in the past. At the
same
time this divergence* gains
in interest when compared with
the construction forecast included
ever,

in

the

business

general

survey

events and to what extent it help;,

bring those events to pass by
its own action. The 1946 decline

effect.

another

yet

measures

By

could

ments

the

out

which
same

construction cycle worked out by

at

time

a

in commit¬

be carried out with¬

severe

would

repercussions

have

if

come

the

had been taken at

measures

time when business

was

falter¬

of

ing.

him, "the next low point in the
construction

ferent directions. Which will come

before the late
The

reason

between

the

come

1950's."

discrepancy
views is prob¬

two

Today

out

for the

the adjustment
Newbury for what he

made
by
calls "the

ably

during the next 12
Any prediction on that
limited by the circum¬

top

on

months?
is

score

stances

that

involved

some

of

the

factors

delaying effect of the war." Such
an adjustment seems well founded

intangible that
they can not even be reasonably
guessed at. Others are of a more

and demonstrates at once that ne¬

tangible nature.

adjustments in the inter¬
pretation of cycles may be so
weighty that anyone who fails to
make them may find himself in

are

so

to the tune of several years.

As

matter of fact,

a

according

to

and

Wages

riince the end of the war, prices
and wages have increased greatly.
If

they had

moved in harmony,
each additional cent charged for a

.

basis

the

ol

prices and wages
dinarily different

were

in

as

ness

great.

For,

busi¬
has moved in cycles. So have

far back

the

is

temptation
as

But

seasons.

found

that

one

can

no

see,

one

has yet

magic formula which

would enable the average mvpstor

to look up the cycle'of heavy

dustry with

one eye

in¬

arpl find the

right prices at

w^iyh

sell

Motors

General

'other.

wjhlag the

Or, putting it differfehtly,




resulted

in

extraor¬

and
shifts in

scope

'

The

w^r also with
sumption of food.

important

consumer

These
and

purchasing power.
shifts are still continuing

the

ones

regard to con¬

Despite the fact that here and
prices are stilL being in¬

there

would seem to be
a
good over-all prospect for a
gradual flattening out and subse¬
quent decline of the price spiral.
creased, there

for this is the tremen¬

capacity of the
United States, the rate at which
this capacity is being utilized now
and the prospect of a decline in

dous

productive

sectors in the fore¬

demand

some

seeable

future.

Improvement

in

efficiency resulting from a smooth
materials

of

flow

fect

of

a

beneficial ef¬

a

new

and wages can be
though it may not
ideal and though it will not

tween

prices

hoped for,
seem

be

in¬

productivity

This way, attain¬
equilibrium be¬

prices.

on

ment

from

and

worker

creased

permanent.

Right

relationships

many

now,

the

require adjust¬
ments and any further increase in
the cost, of living of the urban

in

economy

population will intensify existing
be

that

have

eased

taken

place have not yet been fully
digested. Consequently, there is a
lack of equilbriiim iii the econ¬

by

a

gradual

re¬

consumer's bill of

daily expenditures and any de¬
velopment that goes counter to
this desirable object tends to in¬
crease
the chance of a violent
correction

taking

the

place

of a

healthy readjustment.

about

at

foreign

$15

$3%

For several months

far
sue

past efforts

been made to set

the stage

Congressional decision of
reaching importance. The is¬
at stake is illustrated by such
a

headlines

as—"Marshall

Plan for

Europe," "World Dollar Famine."
The
the

economic

issue

in

complicated.
strain

steps

of

problem behind
question is not too
As a result of :the

war

allowed

and

to

the war, the

and

the. British

the

general trend on the part of
to question the
pre¬

billion.

In

bil¬

also

be

partly of

taken

after

vailing price level and to think in

against the high level of construc¬

evaluating

these

tion

tribution of those

was

resources

that the

means

which

largest dol¬

An

the

and

costs

labor

often

a

come,

good deal of criticism was directed

resources, however, allowance has
to be made for the uneven dis¬

of

level

low

productivity in the industry.
flow of materials also

uneven

blamed for high building costs.

This development

brought back to

experience of the
construction industry after World
not
owned
War I when an equally steep in¬
which want to make the largest
purchases here. Furthermore, gold crease in costs brought about a
holdings are often looked upon as sharp decline in activity during
a
protection for individual cur¬ 1921 and then an equally sharp
rencies and as an iron reserve to and rapid decline in costs helped
restore
construction
be spent only in case of emer¬ to
activity
gency. Consequently, foreign na¬ within a short period so that vol¬
tions are exteremly reluctant to ume attained a high level in 1922
lar balances and

the

gold holdings are
by
those
countries

spend

dollar

their

memory

when other industries were rather

resources

on

the

purchases in the United States, no
matter how important they seem

slow

to them.

declined "since

repetition of the
will take
place can not be said yet but it
does not look as" if the comparison
will be too striking. A revival of
confidence in business generally
appears
to have spread to the

annual rate o'

construction industry. Government

The

ness

of

the

presenl

at

lion.

annual rate of $17 bil¬

an

They

have

still at

were

about

At

in

peak

were

but

is self-evident. A1
May, last, exports

activity

their

an

September

$13.4 billion in

the

to

recover

from

reces¬

sion.

Whether

importance

level of exports for domestic busi¬

a

1921-1922

forecasts

experience

of

construction

activity

the export boom
following
World
War
I
they
reached $8.2 billion and-during
World War II they did not excee^

for

$14.3

billion.

estimates predict a total construc¬

ports

which

peak of

reduction

A

in

ex¬

in

place

took

1921

when they declined from $8.2 bil¬
lion to $4.5 billion is believed tc
have

contributed

to

the

severity

of the recession of that period. vA

moderate

gradual

reduction

now

might not be harmful because il
would

take

of

some

the

from the^price
However, there is no
away

wish for

pressure

structure
reason

tc

sudden drastic contrac¬

a

tion.

power

not impaired

was

enhanced
or

not

by

the
in

out
be

cannot

However,

question

its

said

but was
Whether

Plan will

be

present form
th:s moment

at

is- hardly
any
substant al aid to

there

that

Europe

will

United

States

The

war.

the Marshall

carried

extent

extended

be

in

1943

this

of

by

and

aid

the

1949.

will,

of

be modif ed by the results

course,

of

European harvests and by the
of European industrial re¬

The

repercussions
on

of the
the domestic

revised

in terms

of maintenance

activity at

than
s'on.
were

downward

have

ago

been

revision

other

a

months

few

to

subjected
and

more

tion volume this year of $12.5
lion

compared with

as

of $10

an¬

recent

bil¬

volume

a

billion reached last year.
is

There

hardly

any

question

that the deferred demand in hous¬

ing is large. It may be so large not
only

there

because

is

actual

an

deficit in construction but also be¬
cause

quality and size of accom¬
pub¬

modations demanded by the

lic have increased in recent years
as

the standard of living has

some other respects,
the consumption of food.

improved in
e.g.,
So

far

the

failure

of

the

con¬

struction

industry to hit its stride

has been

no

misfortune.

Business

activity has been so high that a
rapid increase in construction this
year would only have accentuated
existing
shortages
and
price
squeezes.
Next year may be a
different story. Better availability
of materials, greater productivity
of labor and continued buyer cau¬
tion
may
bring building, costs
down to a point where accumu¬
lated demand will finally, assert

actively and where the con¬
industry wilj. become one
Mar¬ of the main
sustaining pilars of

econ¬

should perhaps be weighed

omy

current; year which were

itself

struction

shall Plan

ness

the

just

Living conditions in many parts
of Europe are extremely depressed
and help can only come from the
one
country
whose
industrial

European Aid—Dollar Shortage

for

has been some¬
disappointing. In line with

what

of in¬

covery.

have

contracts this year

States at

holdings

vestments in the United

speed

Continent of Europe
Isles-- have been
omy
which, it is true, has not generally - unable to restore the
yet had any harmful over-all ef¬ standard of living of their in¬
fect but which1 represents a po¬ habitants even, remotely to the
tential thread bf. trouble. \
level prevailing before the::war.
Emphasis placed on'the lack of Neither have they been able to
.

estimated
and

even

duction in the

Westinghouse forecast, the pound of butter would have been
high point of construction activ¬ offset by an additional cent
ity may well occur about the same earned
by
the
consumer.
The
time when the low point will oc¬ change would have been mainly
cur according to Mr. Dewey.
Ob¬ technical, except, of course, for
viously, only a person with gcod all those who depend on fixed
nerves
and one who expects to income. to
pay
for their living
live a long life should be advised expenses.
V
to determine his investment pol¬
As
it
was,
the increases in
on

livestock

and

meat

the

only
Prices

the

icy exclusively
cycles.

products

even

difficulties. These difficulties can

cessary

error

for relief overseas.
It is impossible to tell how much
xonger a return to a more regular
supply-demand relationship will
be
postponed by these exports
However, it is sometimes over¬
looked that the large demand for
farm products

should also have

we are faced with a set
conflicting developments which
tend to pull the economy in dif¬

will not

and other

large exports of grain

reason

at

construction

proportion.

by the possibility of a lower corn
and by the continuation of

The

estimated

trend,

rising

new

terms of lower prices to

prospect of a price reduc¬
agricultural prod¬
has been dimmed recently

instance

been

of

been

crop

or

have

billion.

continuous

a

volume

lion

of certain

farm

$6-7

the

consumers

The

ucts

balances

show

Foreign holdings oi
gold valued at $35 an ounce have

have been of small

pre^

extremely

was

reductions

and

good

taken

were

business

when

a

cycle

price

products. As in numerous other
respects, the domestic standard of
living is higher than it was before

Mr. F. D. Newbury
for
the
Westinghouse
Electric
Corporation.
According
to
the

prepared by

in¬

their purchases made here. True,
foreign dollar resources are by no
means
negligible. According to
recent calculations, foreign dollar

reductions

in
some
consumer
goods.
On the
whole, however, these reductions
of

stances

what extent the stock
merely predicts coming

to

market

community on the alert and was
construction during the next five responsible for many steps taken
in order to prevent the predicted
years.
Generally, the opposite is
trouble. The concern caused by
looked for.
Present construction
the market decline had a salutary
activity
represents
a
deviation
effect
because
precautionary
from what it would be under a
the

turn

been

have

there

1943-47

of

the

since

point

dieting trouble it put the business

accept
low level of

prosperity.

Approximately

for

had

to

of the total, at
current period

It will always be a moot

States

hesitate

of

the

during

months.

Anyone familiar with present
housing conditions in the United
would

lesser percentage

is not exclusively
predominantly caused by
export requirements but by in¬
important factor in the creased domestic per capita con¬
picture of the past sumption of some foods, such as

to

1963.

a

least

tion

uneasiness there exists a

logical

factory. Nor is there any
assume that the present

in

terms

Besides,

a

high level rather
further

expam-

exports to

Europe

of

business for
come.

of busi¬

only 42% of total exports in
36% of total exports in

,

a

•'

number of years

V

v

'J '■ '

to

'a

'f •'•"Jl

Temporary Prosperity

,

Business activity; since! •YrJ Day
has been greatly more favorable

than .even the optimists* dared to
August, 1947.
It can be seen, hope. Against an avalanche ef dif¬
therefore, that the volume of fu¬ ficulties such as physical recon¬
ture American
exports will mot version of a gianti .war ^machine,
be determined by exportations to long drawn-out strikes, sharp cur¬
Europe
alone.
Canada,
South tailment of government spending
America and Asia all have their and a- growing tide of recession
own
dollar
problems*
Maybe, forecasts,-: volume .of t production,
1946

and

*

and
consumer
de¬
though, the recent efforts aimed distribution
*
reducing barriers. to world mand—all have held up, at very
trade may have a favorable effect high levels. The speed and flexi¬
on U. S. trade with areas where
bility of the economy in switch-

at

^

.!www«wwMmiE*^^

W>.

'Volume

166

ing

over

not

Number 4650

have been

;V In

from

the

war to peace

THE

could

prosperity does not depend
solely orf inventories or exports.
One might go one
step further.
case,

surpassed.

face

of this

good news,
character of the

the

temporary
present period of full employ¬
ment is being stressed with in¬
creasing emphasis. There is no

Even

if

business

and settle at

disaster.
covered

that

full

will

help to

the

pressure

functioning of business
somewhat

inventories—cannot con¬
indefinitely.
Government
spending at present rates is still
being subjected to growing criti¬
tinue

curtailment.
demand

The

supply of

come

more

Even

steady.

after

all

conclusion

that

has

been

the

to

up

present

prosperity is basically temporary
in character.
At least, it is not
more
temporary than has been
any other period of prosperity ex¬
perienced in the past. As it is,
there

will

probably

always

industrial

traordinary demand makes itself
felt for a temporary period
only.
The reason may be the
develop¬
ment of a new
industry, of a new
foreign market, of a shift in liv¬
ing habits or some phenomenon
such

the unprecedented foreign

as

demand

for
American
goods
which stems from the dislocation
of World War II.

below

j One

conception to get away
especially is that business
activity stands and falls with the
of a large accumulated
demand. While this demand is un¬
presence

questionably
times
were

a big factor in busi¬
there have been many

when

industrial

nations

prosperous without the stim¬

ulating influence of a shortage in
automobiles and refrigerators. In
the machine age the main drive
to

create

labor

demand

has

been

for

the

goods

effort

and

to

im¬

people's standard of living
through the ever-growing use of
prove

machines

and

countless

tions.

%

inven¬

•

Of

the

demand

sectors

Ditious
the

GI

of

how

to

drive
i

natural

inventories.

after

prolonged

a

war, business tried to rebuild its
inventories as soon as materials
and finished

able in
had

this
time

products, were avail¬

quantity again and it

obvious that
been

would

was

inventories

as soon as

rebuilt,

source

demand
vanish.

about the middle

from

Some¬

of

1947

it

had practcially come to a stop but
where was the recession which
was

of

supposed to follow cessation

inventory

|the slack

buying?

Obviously

taken up by some
other sector of business. Exports
are

frequently mentioned.
people
are
beginning to
about how

worry

we

will

offset

a—say—$5-$8 billion drop in ex¬
ports.
With domestic shortages
and prices being what
they are,
this question seems rather aca¬
demic right now.

as¬

have

that,

length

of

been

carried

any

Some decline in

exports; at least should be readily
absorbed by domestic demand,

few

a

are

months

ago

and

a pair
learning

started

brick, apply plaster,
nail, wire a house and

a

how

construction labor.

gaged in

construction.

average
construction

of

age

labor

skilled

our

is

around

It is through ignorance or
ill grace that our critics condemn
years.

the construction

fact. Did

industry for this
just fight a war

not

we

with young men? There was no
pool for apprenticeship under the

draft. Did we not prior to that war
just pass through a 10-year de¬
pression when we held out no in¬
centive

to

youth?

In

15

years

of 40 becomes 55.

man

Now

with

GI

our

a

swinging into stride, it is not in¬
appropriate that we suggest that
those

who

criticize

cumstances

today

to

to

cir¬

and not eight
for the ammu¬

and ten years ago

nition

look

load

their

muskets!

They should remember that the
boys whose chosen industry they

smooth; level of operations being
attained. The construction indus¬

try is a case in point.
come

'

the

activity for

backbone
many

Jt

may

of

years

be¬

business

to

come.

It has not yet hit its stride. How¬

ever, the latest reports mention a
rather > unexpected
increase
i n

genius of

in the face of trying mate¬
rial shortages, adverse labor con¬
ditions
and
interference
from
year

sources,
not the least
them the Federal Government.

of
It

must be

a phenomenon to eternal¬
confound the economic plan¬

ners.

•

Here is

an

-/

example of the supe¬

unit

able

to

of

the

effectively

need.

a

being

economy

react

quickly to

It is

and

testimony

in favor of the small
businessman

with his compact, skilled
manage¬
ment. Could the mere
ponderance
of

bigness have done

well?

as

We

Yet some of our critics assail us
because the construction
industry

is

a maze

of small

units, buying, as
they say, at retail; and employing
the technique of custom
fabrica¬

tion

instead

These

pf

critics

some

mass

important

production.

to

seem

disregard

considerations.

us

lay

Let

cards

The high cost of

building is due
primary factors: One, the
high cost of taxes; two, the high
cost of materials; three, the
high
cost of labor, and four, the un¬
steady flow of material and labor
to four

to the job.

This last factor is due
dislocations and shortages of

both material and labor.

prime

influence

on

It has

productivity is the basis
building cost. This condition

of
of

is

improving as prices be¬
firm and delivery definite.

come

It

a

productivity

and

flow

is

the

curve

of

of

cause

improving
productivity in our in¬
an

dustry.
Costs
There

Will
is

Be

evidence

that, if at least current conditions
prevail, the cost of construction
will become stabilized.

We cannot

guarantee that because there are
too many
contributing factors out¬
side of our industry and

beyond

control.

But

the

10

at

years

today's

or

more,

prospect

is

cost if—and this is

impor¬

tant—the large operator could ex¬
ploit without cost to himself the
years of effort and cost in train¬

ing skilled mechanics for the job,
and

the

efficient

oly nurtured
cient

level

verse

the

patronage

customers

level

of

suo-

built up to effi¬

demands create

steady

of

sources

and

by

small

many

whose

a

of
di¬

reasonably
year in

demand

and year out.

Yet that is

goods

that

precisely the bill of
attempt

some

to the public.

They

to

sell

use all manner

of devious threats
and coercion to
gain their ends. Even
arms of the

Federal

Government are
being
subverted to political ends to re¬

form

Stabilized

abundant

for

the

on

analyze the cost
building, whether it be a home,,
for low
factory or store.

to

guaranteed

without diminution,
perhans the
argument for bigness of the con¬
of
struction organization would make

us

our

be,

conditions

duce
the

that

high-level

today

pro¬

production

and

of

satisfaction

prospective result of

some

of this

intervention is entrenchment of

a

^onooolv dwarfing in
magnitude
the objects of current

attraction.

We

furor

not

perfect.

about

alleged

are

But

this

wasteful

of small business firms
engaged in
the
distribution of construction

materials

and

gaged in the
tens
and

of

financing of building:
thousands in engineering
In fact, a verv Jar**e

design.

which

sector will be

drying

up.

demand

In




any

equipment; thous¬

ands engaged in the
manufacture
of this material. There
are thous¬
ands
of
small
businessmen en¬

centers

free

of

our

almost 4.ono ft00

individual

constitutes

enterprise

the

system

initiative
American
are

en¬

Rome of these practices are
bad. I oppose them. I
call O" the
industry to rid itself of them.

They
do
-They bring

nobodv
more

good.

any

harm

to

those

who trv to footer them
than they
harm" the public. The
exercise of
this evil is a matter of
exercise of

pood public relations
industry

and

is

not

dragon presented
public.
care

Tt, is

our

so

job.

within the
the

terrible

often
Let

to
us

the

take

of it with dispatch.

Our

construction

industry

is

en¬

of

the

operations of the building indus¬
try. We must take an active in¬
terest

in programs for urban
to

all

of

are

branches

re¬

direct

of

con¬

we

and

improve

Our objec¬
tives must be to protect the
public

life, health
the

and

property

and

time to permit the

same

at

exer¬

cise of

individual initiative in im¬
proving the design, the materials,
the

of

equipment, and the methods

assembly

or work which go

into
building and other construction.

fade, for the construction t,- Sixth, we must accelerate and
worker is
primarily a progressive," intensify the industry programs
for
industrious citizen willing to
apprenticeship and training,
give
a good
day's work for a good day's including refresher courses.

Seventh,

He just doesn't want to
get
caught on the short end. It is our
job of public

make every
effort possible to
keep costs down.
We always have

relations—to

and

pay.

relations—employee
make

him

the

see

we

Let

look at this picture real¬

us

istically. The Department
tells

merce

tion

us

that

new

of Com¬

construc¬

activity of all kinds is about

all

always

lines

more

so

problems of costs
will.
They are

of

business activity, no
relatively in construction

work

than is the case with other
services and commodities.
We are
this postwar
price boat to¬
gether. We all have a great stake

5V2% of gross national product to¬
day. Before the war in periods of

all in

active

a serious
responsibility to do
part in keeping the boat afloat
by stabilizing the price structure.
This stabilization of
prices, if
past experience is

business

10%.

it

amounted

According to

that

to

reckon¬

will need to increase

we

new

our

construction activity
a

relatively high
level, using past performance as

our

measure

of

"relatively high."

What does this mean?

A month¬

and

our

any

will

have

to

be

on

criterion,

level

a

per¬

manently higher than before the
We

war.

ly volume of $3,000,000,000 and an
employment
of
4,000,000 .men.

level

That's

will

have

to

find

this*

market.

a

challenge to all

of

us—

We

labor and

by

series of

a

will

do

that

adjustments.

best

in

free

a

Denunciation

of business
and
anti-trust prosecu¬

management to get the
"mostest of the bestest
there first-

the

est."

tion fail to go to the
heart of

problem

Recommendations
What
low

the lines we must fol¬
to meet the
problems of the
are

construction industry?

First,

must keep

we

tactics

We must let the
public
know what construction
means to
our
economic
health
and

high

standard

of

inflation.

The

our

pre¬

scription for the whole
economy
is simple.
It has been stated ae
follows:
"The need is to work and
pro¬

the public

informed.

of

duce

more

effectively,

consume

more

economically, and maintain
stability in wage rates, to prevent

of living and what
the another turn in the spiral while
industry is doing to improve its production, competition
and econ¬
service to the public.
omy bring prices back into ad¬
Second, we should examine cri¬ justment."

tically the fact-reporting agencies
which
need

this

serve

to

know

correctly

ac¬

and

Will
In

curately where
volume
down

in

what its
of

the

we
stand, what our
activity
is,
broken

of

usable

categories,

relations

are

to the

we

in the
in

must

bring

about

public wo^k, and other
measures,
which will tend to
stabilize the
flow of nrivate and nublic

funds
needed construction.
is
essential
that
suppliers
where thev have not
already done
into
It

reestablish and continue their

customary practice of emoting and
honoring firm prices and of main¬
taining definite delivery on spe¬
cific projects
titv

of

delivery

on

which the

material

and

auan-

time

.

of

known factors. It is
not
intended that all prices be
maintained rigidlv. The suggestion
cleans
simnlv that the sunnlier
limit,s his risk to SPeci^'n proiopts
are

of his own

choosing.

This will

he

of preat P°sistancfe to
contractors
in their effcrts to
stabilize mures,
and thus will
ooen the door to in¬

vestment dollars nq.w in hiding.
There are
nendipg^in Congress
hills which

wouldgjepntinue

permanent

basis

the

on

present

a

re¬

long

inflation.

the construc¬

run,

exert

can

downward

its

most

pressures

on

by

investing more heavily
training of skilled men and

technical

tion

for

cure

industry

powerful

rest

stability in construction ac¬
tivity. We must encourage the ad¬
vance
planning of private and

so

tion

the

take it?

the

costs

more

is

we

and

economy.

Third,

That

We

industry.

offers

must

research.
real

aggressive
see

We have

tunitv

to

Construc¬

opportunities

young
men
to
it
that

trained to take

and

to
we

they

are

advantage of them.

an unparalleled
opoorinitiate a far-reaching

activity through the Building Re¬
search
Advisory
Board.
That
Board

in

its

own

distinctive

way

become

different

and

the

to

what the

should

and

can

building industry
Advisory Committee on

Aeronautics is to the aviation industrv. It
the

can

take its place beside

Highway Research Board

as

a

second

strong arm in the construc¬
industry's progressive and

tion

forward

looking efforts to imits service and to render ant

nrove
even

has

greater contribution than it
the past to the country's

in

economic welfare and
Our
secure
are

job

jn

is

our

doing

a

>
-

.

*.

must

we

job ahead is such that he will not acute now, however, on account
of the postwar increase in
be working himself
the gen¬
out of a job
eral price level. Costs are
by being truly productive.
up in

The

wants.

is

us

production, to
prolong the job,

will

the,demand for construction

high level

before

essary that
the worker in the
ranks see this vista. When he
does
the urge to restrict

could

con¬

If

challenge that assumption.

in

even

enduring that

enrolled under the banner of

time

other

so

by 100% to reach

oeroentage of

some

huge, and

or

look out upon five to ten
years of
unprecedented activity. It is nec¬

cient low-cost production.
We

I do not regard

The work

hold back and to

riority of the versatile, efficiently
small

too

must

techniques of mass production to
the decentralized
organization and

development which

"

our

struction—highways, buijding and
heavy construction work.
Fifth, we must modernize build¬
taught by

inevitable,

velocity.
They should remember, too, that
there are considerably more than
100,0000 of these young men today

muzzle

We

application

prospect.

the

present

modern

and to

men

the

courage

widen

new ones. To

must stimulate

we

research.

a

to

ing,

of

take

accomplish this
technical

ing and other codes
their administration.

tribute

a

bigness there is virtue and effi¬

attacking have had experience
dodging rockets and other mis¬
siles

to

steps in

qualify them by practical test.

Their reasoning
continually harps
back to the
assumption that in

are

buildirtff activity. Maybe construc¬
tion will step forward just at the
when

interest

effective

develop

bitter experience.
a
bust as

is

However, even if this were not reasonable.
methods of distribution, about al¬
it would not necessarily be
restrictive
Construction is performed for leged
practices, and
temporary slackening in
the mo^t part by numerous small many of the other notes of the
business''activity might create a
better balance in many fields and businesses. There are in the con¬ popular- critical theme song that is
being reolaved on the
struction industry more than
political
200,thereby encourage the emergence
000 contractors. With but few ex¬ jukeboxes todav. even if all of it
or
revival of: industries
where
were true,
would be but a drop in
there ekists a large demand but ceptions, they are small business¬
the bucket in the cost
of construc¬
where prices, labor or other diffi¬ men, These are tens of thousands
tion.
a

self

and

should

we

brought together to achieve the
miracle of almost 1,000,000 houses

It

bad. •'A

prevented

lowering the aver¬
obligation of labor

an

own

fellow

Fourth,

markets and

the American system that so
many
and so diverse a
group could be

doubt it.

»

apprentices

r

far

It is
its

their

principle underlying this leg¬

interest

ly

55

the

islation.

It is true that
average worker's
outlook is conditioned on the
idea
of boom and bust in our
construc¬
tion work. It is a lesson

if;so,

have "so

It is

pulling down

helping to train these
another with

one way or

many

You must remember that
today
the

our

culties

to the lack of skill of
many work¬
who came into the
industry as
a result of war's
demand for labor.

Their lack of skill is
the productivity of

preparation of architectural

engineering plans for needed
public works. We should endorse

ers

than

9)

page

vance

tory level of productivity is due

may

farther

the

Much of the present unsatisfac¬

concern

"recession"

or

and

payable grants administered by
me
Federal Works Agency for
by states and cities for ad¬

Insufficient Skill of Workers

necessary.

we

pipe. It is truly remark¬
rapidly and how com¬
petently these boys are filling the
depleted ranks
of
our
skilled
able

was

most

Now

"correction"

prices which

on

lay

a

hread

Let

was

jobs

of

possible

rate

a

apprentices. These

overalls

table.

As

view

the

the shortages and

ease

who

men

which

of

cannot be achieved without
fullest cooperation of labor.

However, they

immediate

be considered temporary due
to their very nature, the one the
prophets of gloom declared the
first likely to cause trouble was
accumulation

at

million

struction industry apprenticeship.

may

the

60

In

away.

(Continued from

from

now,

own.

pleasant than those

age.

'

ness

its

29

use

for

be

sectors in the business of an
nation where an ex¬

some

of

more

over

stepped out of uniform into
this

noted, it still does not add
the

lems
are

(2185)

completely dependent upon pro¬
ductivity .This is primarily a re¬
sponsibility of management, but it

and

materials be¬

raw

experiencing now.\ As Pro¬
fessor Slichter pointed out recent¬
ly, full employment creates prob¬

workers.

other durable goods is
going to be
reduced constantly as production
and

CHRONICLE

war

autos

for

employment is
blessing.
Maybe

unmixed

no

lation of

and

decline

FINANCIAL

peak, it would be no sociated with a depression. At this
It has already been dis¬
moment, a depression seems far

nitely and we have seen it shrink
during recent months.
Another
big demand factor—the accumu¬

deferred

to

were

level 10-20% below

a

&

are

the present

doubt that foreign trade cannot
continue at present levels indefi¬

cism

COMMERCIAL

to

security.

build.

We

are

knowledge that we
good job. We also

have'the obligation to replace in
mind the amazement

the public's

of Ignorance with the
knowledge.

sureness

o£

•

30

THE

(2186)

'"in

legitimate markets, and the prices in the so-called black
markets, with limited supplies on hand at that, are mat¬
ters not easily erased from memory.
Since President
Truman, reading the election returns in a realistic
removed most of the controls, prices have risen

way,
to a

of

point where they now constitute a political problem
considerable magnitude. But the politicians are unde¬

cided, confused and divided on the question as to what
to do about them. They know not whether to suffer the

The Real Price

It is about time the

sting of which they

of
understand-

authorities, and, probably, many

realistically. Nothing is to be gained by
subject. Attempts to
control prices by fiat not only fail, but would in every real
sense be a failure even were they to succeed for a brief
period. Efforts to reinstate price controls or rationing, or
both, might or might not defeat some politicians next
autumn and elect others, but it may be taken for granted
that neither of them would in the least contribute to an
of delusions on the

elimination of the

underlying conditions which are respon¬
of which complaint is made. On the

sible for the situation

mightily in the perpetuation of

contrary, they aid

these

power

into account.

Velocity

ought by now to be evident that one need not be a

It

what is

or

The

adhere to

upward pressure on prices caused by increased

constitutional

indication of

no

own

as

loudly

as

the politicians or would-be

about "speculation,"

may

as

posed

appear

Partly

and of faulty war
most of all as a
politically inevitable effect of the most costly war of all
time, the supply of money in the hands of the general public
is so large that it would have been regarded as fantastic by
any living man less than 10 years ago. Accustomed as we

outgrowth of war extravagance run wild
financing, and perhaps, in dollar terms,

have become to

astronomical figures it is still almost incred¬

ible that currency

and bank deposits in the hands

of the

general public total $165 billion as compared with $60 bil¬
lion in 1939 after six years of New Deal squandering. Even
less credible, or creditable either, is the fact that this figure
rose more than $5 billion during the past year, a period of
months which might almost be termed the second full post¬
war year, and is now nearly $15 billion greater than it was

he

predicated

is

upon

Smith's enunciation of the

Adam
idea

life

that

does

man,

every

long as

so

the

violate

not

justice, should

laws

of

perfectly
interest in

Now, there appears not to

be the slightest question

widely held than ever before
in our history, or, for that matter, in the history of any
other country on the globe. It is all very well for the
Federal Reserve or any other "research group" to come *
forward

crackpots

with
as

"sample"

surveys

employed by many

evidence of "concentration" of the holdings

"liquid" assets of the country. They may or may not
be "concentrated," depending upon the definition of
of

that quite

certain that
before been less "concentrated" in the

elastic term, but we are quite

they have never
hands of the "fortunate few" than they are at
In

addition, of course, the great

this time.

rank and file hold de¬

Federal Government in amounts
never before dreamed of.
These obligations, or many of
them, were sold to Tom, Dick and Harry on the plea that
they could be held to provide funds for postwar spend¬

mand obligations of the




we

and,

Problem

think

lem
of

of

could well consider

we

inflation

economic

the

as

All

economic

other

problems
They can all 1

incidental to it.

be solved

•

prob¬

primary importance.

our

are

together.

known.

high prices in the '
are
pretty
well
x

Production for war pur- ;

The

bring

both

left

his industry and

squarely

petition with those of

people.

man, or

capital in^o com¬
any other
order of men."
turned

Marx
ends

the

value

to

revolutionary

proposition that "the
a
commodity, or the

of

quantity of any other, commodity
for which it will exchange, de¬
pends

the relative quantity
for its

upon

Dalton

Works

Abbott, in his
Economics,

of

points out the differences between
the two systems, somewhat as fol¬
lows: "Marx applied his construc¬
tion
to
the
'class
struggle' of

last

was

this
laid

before
the
American
The battle between the
forces

ideological
the

and

Monday,

issue

way

of

tremendous

1

goods. 1

chasing power than we had ever •'
previously enjoyed. Before enough
could

goods

consumer

be

pro- •

duced, the demand resulting from '

financing, due
created a national
debt of about $278 billion, most of
which under our system of mone- r
Deficit

Second,

to

had

war,

socialism tizing debt, is

of

American

based upon our

a

consumer

high purchasing power had started
the upward rise of prices.

Battle of Ideologies
as

all

time, this production '
has created more per capita pur- (

omy.

late

with

us

of

At the same

to
which our government
should try to manage our econ¬

As

States

shortage

any,

centuries-old

of

causes

United

established the extent, if

have

"left

be

free to pursue his own
his own way and to

lne

constitution, rages

a

decided influence'

value1 of

the

Under

the

on

the

dollar.

American
American f

on.
Socialism
vs.
democracy, quantitative theory of debt monecapitalism vs. managed economy, tization, the higher the debt the •
regimentation
vs.
free
enter¬ cheaper the dollar; the cheaper
prise. These are the issues which the dollar the higher the prices.
must be met squarely; these prob¬
Third, An archaic tax system .
lems must be solved by the Amer¬ has been an influence against any

ican

people

before

we

can

ever

hope for economic and social sta¬
bility in America and peace

throughout the world.
There should

broadening of the production base,
so
that we find it impossible to

produce

capacity to meet the :

to

demand.

be no question in

Fourth, Almost 90% of producpolitical course tion
costs,
are
represented by
we
should take.
Autocracy, so¬ wages which have remained high
cialism, communism—collectivism enough so that the demand for
tem
is based upon exploitation in
any form—is as undesirable and
goods in short supply has come
and
that its irreconcilable con¬ as ineffective an instrumentality
from current earnings. Some, but
flicts would lead to its dissolution. for
governing any people as is a not all, corporate earnings like¬
Just as slavery passed into serf¬
pure democracy.
There is little or wise have been very high. All of
dom, and as feudalism passed into no
difference
between
absolute this has resulted in the continu¬
our

,

minds which

capitalists and wage workers. He
believed that the capitalistic sys¬

capitalism,

according to Marx,
its turn will pass

so,

capitalism

in

into socialism."

monarchies and the different gov¬

these two

going on for more
three centuries.
Incident to

despotisms.
workable

than

vested,

political
struggles
there
coincidental but like¬

these
have

been

wise

important

very

economic

seem,

of

collectivism.

last analysis, are
Each of them is un¬
sovereignty is

the

in

Both,

The struggle between

forms

ernmental

forces has been

unless

paradoxical as it might
in an individual with un¬

limited

political power.

Pure democracy has been char¬
acterized as mobocracy.
No true

of

ance

large amounts of

"static"

savings and idle capital.
Add to
this the demand for goods inci¬
dent to

the creation of large for¬

eign credits.

According to the October re¬
of the Council of Economic
Advisers to the President which
port

impact of foreign
domestic economy,
raising
in the United
nomic pendulum has been swing¬
functioned as the governing in¬ States through government, semi- '
ing between liberty and legisla¬
strumentality of any large number government and private financing
tion, between competition and co¬ of people.
Our forefathers effec¬ sources, at the rate of $11 billion
operation, between capitalism and
tively found the political golden a year to finance an export sur¬
some
form of collectivism.
The mean between these two ex¬
Abbott

that these funds are more

States

it is that our problems be;

essary

I

(Continued from first page)
of

way

struggles.

when the war ended.

theq

which<

Prime Importance of Inflation

Our Basic Economic Problems

Leonard

result of New Deal profligacy and New Deal
prosperity by deliberate inflation, partly as an

United

the

of

some

also have in mind how nec-:

us

poses

Master

as a

woo

at

problems

lasting world peace.

in light of such facts as these!

production."

effort to

■

First,

not

of labor which is necessary

Money Supply

•

settled early and effectively if we
are to have world economic, po- ;
litical
and
social
stability and:

only how ill-conceived, but how puny many if
most of the anti-inflationary steps now being pro¬

no

this discussion proceeds.

let

look

a

economic

confront

supporting this large increase in stored
up purchasing power (or to be less polite, this stored up
inflation) as a price factor, has been a long accumulat¬
ing consumer deficit of many types of goods. It must
not be forgotten that a long period of depression pre¬
ceded the feverish activity of the war years. Any cur¬
rent or future purchases for foreign shipment may or
may not add, dollar for dollar, to the demand for goods,
depending upon circumstances, but they certainly can
do nothing to subtract from it.

"monopoly," "prof¬
of course, that the
direct result of the
supply—and can be

Now, cur¬
rent
destruction
of war with its resultant reduction of supplies below the
point of real if not desperate need. The demand of these
unfortunates becomes "effective" by reason of the gen¬
erosity of others less adversely affected and now gen¬
erally more fortunately situated. In the degree that it
does become thus "effective," it adds to the call for cur¬
rent output without either increasing production or re¬
ducing demand elsewhere—unless, of course, the bene¬
factor reduces his consumption.
How it is that the
benefactor can "contribute" to the relief of others in
existing circumstances without reducing his own con¬
sumption of the articles in demand will become clear

take

basic

Of course,

poli¬

large degree to anything else.
demand is an outgrowth in part of the

traced in

>

With these thoughts in mind, let t
us

iteering," and all the rest, the fact is,
rising price trend of the day is a
excess of "effective" demand over

own

order of men."

man, or

Not

Shout

as he;",
of jus->

laws

industry and capital into compe-;
tition
with those of any other,

Indeed the trend
has apparently been slightly in the other direction. The rise
in prices during this period was evidently supported by a
$15 billion increase in money supply.

conditions.

the

interests in .Tils
end to bring both his

his

pursue

sustained movement to¬

a

violate

tice—to be "left perfectly free to

employment of funds.

active

free i

individual—so long

of every
does not

§ayings. bonds might reach to convert their
holdings and pufcilte cash into the markets. It is to be ob¬
served in this connection that during the past year or two
been

government,

economy and free society. Only as;
we
continue to protect the right ;

war

more

American system of free;

and our

activity of funds already in hand could in appropriate cir¬
cumstances be substantially reinforced by any decision that
holders of

•

maintain only so long as we:
our American principles >

can

commonly termed the "velocity" of money turn¬

over.

a

of the American form of govern->
ment.
It is a record which we •

"quantity theory" extremist to agree readily enough that the
price level in these circumstances is fixed and will be fixed
very largely by the rate at which the public at large decide
to make use of these funds—that is the rate of "turnover"

there has

ingly and more
further nursing

but it is obvious that they must all be taken

ward

Situation

faced this price situation more

the rest of us,

accumulated from

current

the past,

happened in 1946, not only in the political arena itself
but in the markets in which the housewife—and all the
rest of us, for that matter—are accustomed to finding
the necessaries of life. The bare shelves in the so-called

have or fly to others the
have learned by sad experience.

purchasing

measure

nivi

population of less than 7%
of the population of the world,
we
normally produce and con¬
sume in the aggregate, more than
50% of world's goods. That is a
record which is accepted without
challenge. It is a record made pos¬
sible because of and not in spite

bonds outstanding to the increase

(Continued from first page)

ills they

With

It plight be misleading to add the war savings
in money supply to

ing.

As We See It

ticians

Thursday, November 27, 1947

FINANCIAL CHRONICLE

&

COMMERCIAL

debate
neither

further

still

is

side

in

says:

going

"The eco¬

on.

While

innumerable dis¬

putes can be said to have won
complete victories, we are bound
to recognize that society in Amer¬

most of the Eu¬
countries, has been moved

ica, as well as in
ropean

toward

economic

extension

of

tions."

democracy

government

and

func¬

democracy

has

ever

successfully

dealt
aid

with

upon

we

the

the

are

plus.

Consequently,

tremes.

under

the American

we

have

constitution,

this very novel

American form of
government. It should be our ob¬
jective to likewise find the golden
mean

between

the

extremes

economic philosophies.
shall have done

so

When

of

be

as

constant

the progress of
as

the

first

three

quarters

of '

and

services for the same period !

was

running at the average rate of

we

the United States should continue
to

In

1947, the dollar value of exports
was running at the average rate of
about $19
billion a year. ■ The
dollar value of imports of goods '

it has been

$8 billion

a year.

The export sur- 1

plus is about $11 billion.

contend that it is the
Fifth, The availability of in¬
during the first 160 years of our
government to find existence as a nation.
creasingly large volumes of easy '
golden mean between these
money credits.
The United States is the great¬
two
extremes.
In present day
Now that the causes of the in¬
est nation On
earth.'
We don't
America our economic problems
have to argue it. It is self-evident flationary plaque are fairly well •
can be solved
only when and if
Many of

province
the

us

of

,

;'

Jr'< Volume 166
<•?"'•;'•»''iavy!' "•;

■Viv-f-

*:

"'i^ii ii'

known,

ir

n

v

THE

Number 4650

—

i is 11'

i,

i ~

...I*,

i

i!,

The

First,

.

%■

$?■'
•fa

as

'■

_

capital
•

'W
»

of

If

easy

world

over

a

program

is

last. Monday made
certain general recommendations
as possible panaceas for our eco¬
nomic ills. Many of his proposals

Mi

;

•,

message

be

opposite to the American
system as socailism is the oppo¬
site of democracy. The American

so

for

enduring
peace.
We

an

and

under

an

economy

activate

the

it is this fact, that gov¬
-

with

its

self-seeking

bureaucrats, starry-eyed theorists
and
temperamental
tamperers,

we

adhere

funda¬

mental principles of the

American

wisely

To borrow from the
works of Marx in any respect is

life.

way of

If

selves.

the

to

a large measure basically our
attempts to stabilize our economic
and social systems. It is important,

President

frequently dominated by political

in that billions of dollars will be

expended by the State and Fed¬

for

asked

has

The eral Governments

in the years fol¬
its
statutory
adoption.
traditional, tried, and safe method lowing
After the policy has been deter¬
of controlling
the velocity and
volume of credit has been to raise mined, the writing of the bill to
and lower bank reserve require¬ effectuate the policy is almost a
ments and re-discount rates. The matter of routine. If it is estab¬
Federal Reserve Board now has lished that it is the primary obli¬

the

gation of the Federal Government

authority to raise rediscount
Rediscount rates

rates.

are

to

now

in

the

interim

administered
attainment

the

aid

and
this

of

is

results
basic

tered without serious set-backs to

much money we will appropriate

annually out of the Federal Treas¬
ury, for the generations to come.
It is a simple matter to set up the

machinery and the standards for
the effectuation of the policy, in¬
cluding the proportion of the cost
which State Governments shall be

requirements. Of expected to contribute. If it is de¬
have termined that it is a primary obli¬
gation of the States, then the writ¬
Up to the present time the Fed¬ ing of the bill to effectuate that
eral Reserve Board has not asked policy is equally as simple. It be¬

to raise

to

reserve

such authority would

course

well defined limits.

within

be

in such

amounts the Federal Government

any authority to
requirements.

reserve

The Federal Reserve Board has

legislation authorizing it
to
guarantee bank loans.
This
seems somewhat inconsistent with

asked for

sound

objective,

the

policy of the President to con¬

tract

credit.

For

this

dent of the

-

guarantee

asked

has
control

President

The
credits.
under

to

He

now

controls

for

consumer

to

reimpose

consumer

over

credit by

production.

oiir farms and

and

to encourage

as

factories,

habilitation, and stabilization, and
fac¬

of our farms and

effort

tories.
The

impact on prices incident
to domestic buying for foreign ac¬

largely offset by a
government ex¬
penses.
If there is sufficient co¬
operation between the President
and
the Congress, the costs of
government can be reduced amply
to take care of all foreign-aid re¬

count

can

be

in

curtailment

both for interim aid

quirements,
and

for

long-range

reconstruction

and

of

programs

rehabilitation.

But, in order to lessen the impact
of

foreign aid

the

on

raised

monies

domestic prices,
for these

pur¬

must be carefully and judi¬
ciously expended.
The Congress
poses

will not advance to the State De¬

large sums for either
interim or long-term aid without
partment

requiring the money to be spent
and invested in accordance with
certain sound standards.
Foreign
aid can be most effectively ad¬
ministered

by the creation of an
agency of the gov¬

independent
ernment.

A corporation,

we

will

relatively small cap¬
ital, with authority to expand this
capital a given number of times
by the issuance of the agencies'
notes, bonds and debentures. The
money can and should be spent

say,

with

under

a

well

defined

President in

standards

to

give the maximum amount of aid

wages and prices where they are
To do so, he knows, you
permanent prosperity all over the now?
world would be for all practical know and I know, would invite
strikes,
production
slow-downs,
purposes, almost boundless.
and many other conditions which
The foreign aid program can be
would raise havoc with produc¬
effectuated with much less money
tion. How can he use power to
than is being asked for. I have no

hesitancy in saying the job can be
under

done

proper

management

with one-third of the amount re¬

quested by the Paris Conference
and by the Administration.
We

allocate
as

goods in such a manner
to effect in any degree the gen¬

eral

If he borrows
industries
increase the production of auto¬
price level?

steel from the appliance
to

rency

the

least

might

amount

be

of




into

When

control.
control

we

until Feb.

29, 1948, there was some hope that
through the removal of govern¬
mental obstacles there would be
such

an

acceleration of residential

building that the demand especially
for rental properties, might be
reasonably met by next March 1.
In any event we will have to

take

up the question of continuing rent
controls shortly after the regular

exert every

American
ican

dollar

and

the

Amer¬

economy.

us—although he has been re¬
quested to do so—an example of
what

Keep the Dollar Stable
Let
mind

us

have very definitely in
under
the
Bretton

that

currencies
the major countries of the

Woods Agreements the
of all

power

commodities

to

priorities.

he

He

or

has

would select upon

the

we

hold, but

we

While

control by

given

us

no

commodities he

which he would

should not be un¬ riously to affect the production of

made

discussing this
problem. We will not set up the
machinery, and then build a pol¬
icy around it. We will do the first
things first. We will establish the
policy once and for all, and then
provide for the machinery by
which to carry out that policy.
There is little doubt that this mat¬
ter

will

the question of

be

definitely

settled

at

the next session of Congress. This

policy will be formulated and this
bill will be written in the House

Banking and Currency Committee
after full and complete hearings.
Hard Work

and High

Production

The Remedy

It

has

been

a
pleasure to be
tonight. Let me, in
closing, say that I believe David

with

you

Lawrence

in

article

recent

a

summed it all up

when he said in
substance that there was nothing
wrong with the world, and that
includes
the
United
States
of

America, that hard work, high
production and sound fiscal pol¬
icies

will

not

therefore be

correct.

It

should

objective to en¬
courage work and production to
the extent that through produc¬
our

tion we will

nomic ills.

cure

all of

our

eco¬

Can anyone deny that

the only solution of the economic

problems confronting the United
States lies in producing to an ever

expanding full capacity? And that
full production must ensue not
only at home, but especially in
those countries which

cipients of
way

after

we

our

our

aid?

are

the

re¬

Only in that

fiscal

sound

can

which

policies,

hope will be patterned

American

system, be at¬

tained.

Cyril J. O'Connor & Son
Formed in Brooklyn
BROOKLYN,

Y.~ Cyril

N.

J.

O'Connor & Son has been formed
with

offices

Street

Public Housing

to

business.

at

engage

188

in

Partners

Montague
a

securities

Cyril J.
it might be O'Connor, formerly with Hare's
well to clarify our thinking in
Limited, and John J. P. O'Connor.
respect to public housing, espe¬
cially slum clearance. There is a
we are on

rents

and

basic

allocate

inkling of what

seeks

dollar

converted

rent

for

continued rent

message

effort to assure mobiles, he might possibly lower session convenes.
If it appears,
the price of automobiles tempo¬
tha tall possible factors of foreign
then as it does now. that the de¬
rarily. If the automotive industry
rehabilitation
and
stabilization
mand for rental properties will
had enough steel, it would theoret¬
are
fully utilized to save every
not have been reasonably met by
dollar of American money possi¬ ically double its output, but what March 1, we shall give considera¬
would
happen to the price of
ble. And why should we do this.
tion to the continuance of rent
The saving on the
Because of the impact which the appliances?
controls, any new legislation must
financing of any foreign aid pro¬ price of automobiles would be be in such form as to continue
completely offset by the increases
gram will have on the value of
the encouragement already given
in the prices of appliances.
This to the construction of rental units.
the American dollar and on Amer¬
illustration might be applied to
ican commodity prices. These fac¬
The greatest possible benefit to
almost
every
segment
of
our
tors are first of importance as an
both tenant and landlord must be
economy.
Why rob Peter to pay
aid to our own economic stabili¬
achieved. In all probability, rent
Paul and disrupt our whole econ¬
zation. The vital economic prob¬
controls will be continued in some
lem in the world is right here in omy in the process?
form for a definite period after
America.
The most pressing ne¬
Up to the present time the Pres¬ next March 1.
cessity is the stabilization of the ident has not been able to give

must

He has
world, except the Russian ruble, impose price controls.
diplomacy.
There is no reason are practically speaking, as effec¬ given us no information whatso¬
why .foreign countries should not tively tied to the American dollar ever as to what wages, in which
pay for a
large part of the aid as they formerly were tied to gold.
industry, he would seek to con¬
given in the currency of the re¬ In consequence, any fluctuation or
trol.
By the very lack of this
cipient country.
A pool of for¬ disequilibrium in the American
eign
currencies would thus be economy, and the American dol¬ specific information, or at least
created from which loans might lar, is immediately reflected in
enough of it to offer a basis for
be made for productive enterprise currency and economic fluctua¬
clear
thinking,
he
may
have
in the country receiving the aid,
tions all over the world.
We
or
in other countries whose cur¬
should be proud of the position created such uncertainty as se¬
with

asks

his

make

in years gone by in

has the authority,

law,

existing

respect.

In summary, we will not
mistake that has been

the

regular session of Congress.

authority

Highway Act for guid¬

this

in

ance

loans will
probably not be given to the Fed¬
eral Reserve system at the next
to

power

as

or appropriate for
grants-in-aid, and the standards
upon which the expeditures shall
be contingent. We have the prece¬

the

reason

a

shall authorize

tax structure reasonably large amounts to make

our

manner

a

maximum

what

to

comes

raise

priorities, beget a vast brood of proclaiming an economic emer¬
available all necessary funds for contradictions and
uncertainties
gency, and if there is any question
This can the production of producer and They promote illegal operations; about his authority, I believe the
Thus, we they encourage black markets; Congress would not argue too long
be brought about through adjust¬ heavy consumer goods.
they open the doors to many other about that matter. But what ef¬
ments in the tax base which will enter the second stage of our pro
of foreign relief and re¬ evil influences which will deter, fect will the control of credits on
encourage expansion of plants and gram
habilitation.
but never can encourage produc¬ the consumer level have on do¬
give assurance to producers, agri¬
In being realistic we must mestic
It is only a step into the third tion.
cultural as well as industrial, tnat
commodity prices? Hardly
they are not going to be penalized stage in which the foreign country recognize that if the President is a ripple! High prices today are
by expanding their production. may by proper application of its given the power to control prices, not the result of credit inflation.
When we have made the neces¬ resources, put itself in a position power to allocate and ration, and
Such controls over the volume
sary adjustments in the tax base where it can qualify for the use power to discriminate through the
and velocity of credit would have
to encourage production, much of of other and larger reservoirs of use of priorities, yes, even if he little or
no
effect upon prices.
the idle capital and savings will be credit originating in the Interna¬ is given
the power to control It might be a desirable technique
put to use in the production of tional Monetary Fund and the In¬ wages, he is not going to roll back to have handy when and if there
capital goods, in the expansion of ternational Bank for Reconstruc¬ prices; he is not going to roll back is a threat of inflation incident to
capital structures, and can result tion and Development.
The fi¬ wages. To do so, he knows, you any decided increase in the vol¬
in
many
instances in doubling nancial assistance which could know, and I know, would be dis¬ ume and velocity of credit.
Is he
production capacity and effort of thus be made available for re¬ astrous.
going to freeze
The
adjust

can

question

the Congress for

economic problems lies in the full
then these
countries
use of America's capacity to pro¬
.to court financial and economic may become good risks; there will
duce, and the freedom of con¬
disaster at a time when the per¬ be reason to presume that loans
sumers to choose what they desire
petuation of the American way of to them can ' be repaid, thereby
in
the marketplace.
Everything
life is more essential than any¬ opening up a new reservoir of
the government does must
en¬
thing else which Can be imagined. credits, Export-Import Bank cred¬
courage increased production, not
I am fairly certain the Con¬
We can remove further threats its.
slow it up.
to a depreciated currency by bal¬ gress of the United States, if the
ancing the Federal budget and re¬ interim program is successful, will
Evils of Controls
not hesitate to increase the capital
tiring as much of the debt as pos¬
of
the Export-Import Bank
by
Price controls, allocations and
sible.
We

slums, and build houses

or otherwise, then
about 1%. Under the authority 6f
existing, law,
rediscount
rates it merely, becomes a matter of how

production effort. The only
practical solution for our

our

clear

for low rental

emotionalism, cannot successfully have been as high as 7 %. If it is
manage our economy. The Presi¬ found advisable to raise reserve
dent's proposed panaceas for the
requirements, then new legislation
of the recipient country can even¬ ills of our economy should
be is necessary. I do not attempt to
tually be converted into dollars. studied in the light of our past predict what the Congress will do
In that way, the United States tax¬
painful but enlightening experi¬ in this respect, but, personally, I
payers could be assured that a ences.
can
see
no
harm in giving the
large amount of their investments
Chiseled on the Archives Build¬ Federal Reserve Board authority
,

for foreign aid will eventually be
ing in Washington is the truism
people have always come up with repaid either in dollars or goods. that "What is Past is Prologue."
If the interim plan is success¬
a solution of their problems if they
It almost follows as a matter of
had
an
understanding of them. ful, we will recreate the ability of
course, in the light of our experi¬
All our problems, economic, po¬ the people receiving the aid to
We will help them get the ences, that price controls, ration¬
litical and social, have been solved work.
ing.
priorities
and
allocations,
within
the
framework
of
the strong bodies by which they may
whether on the producer or con¬
American Constitution.
We can work and thus create the capacity
sumer levels, cannot be adminis¬
continue to solve our problems to work and produce for them¬

if

31

to

International. Monetary Fund in
such a manner ihat the currency

as

best

producer

authority to control credits.

by the government. If
have proved anything since

V-E Day
ernment

of years,

course

would

This

ized.

recovery

cannot

currencies of the
recipient countries will be stabil¬

Proposals

and

Problem of Credit Controls

The

managed

foreign-aid

our

anchor

the

be

What's Expected of Foreign Aid

The big problem is what can be
The President in

are

(2187)

consumer

many
goods,

world economic,
Only a
sound, solvent, safe America can

we

sav¬

done about it?

his

•

CHRONICLE

the possibility of

the economy and
The President's

.-[0*',•)' ;■'(

social and political chaos.

those countries.

successful

'

•

•

;

volumes

Large
credits.

money

li:t-

and

.-I

,

,

Fifth,

\v

spending.

A tax structure which
discourages maximum production.

Third,

Idle

'}, X>;

& FINANCIAL

COMMERCIAL

matic, consular, military and other
purposes, could be paid from this
pool, thus removing the necessity
for equivalent large amounts of
American dollars being exported
to pay our current expenses in

.

amounts of government

Fourth,

'•1

The mindful of the' responsibility fa
in the recipient country keep America and American inUnited States for diplo¬ stitotiows strong and stable against

the

of

high prices may
follows:
v
/ ■

The

.'.'v.
ings.
;

• ;x

,

expenses

shortage of
against high purchasing power.
Second, Excessive 1 y large

:
\

of

causes

be summed' up

'■<

,n.

that of the recipient country.

be

mode to find the cure.
V '

/.i1. !

....

should

effort

every

i. i ■

•

issue

nection

are

housing,

involved

which

has

in

this

never

con¬

been

Odess Opens New

Branch

TUSCALOOSA, ALA. — Odess,
effectively legislated on by the
Federal Congress. It will be our Martin & Herzberg Incorporated
objective at the next session to has opened a new office at 2313
determine

whether

slum

clear¬

Eighth Street under the manage¬
public housing are the
ment
of
Owen
C. Leslie.
Mr.
primary resposibilities of the Fed¬
eral Government, or the primary Leslie for many years was with
responsibility of the State Govp; Merrill Lynch, Pierce, Fenner &
ernments. The settlement of this
ance

and

polic^ will defemine

our

course

for possibly generations to come.
It is important, in that it affects

^Beane

indBirmington,

and

was

Tuscaloosa correspondent of Fen¬
ner

& Beane.

%
-'IS

r>

32

COMMERCIAL

THE

(2188)

FINANCIAL

&

CHRONICLE

Thursday, November 27, 1947

for tax reduction at the
and

again at the

this

business

mean

inflation

time?

the

Federal

administration is finally

ready to

Second,

•

if

Even

adopt a concerted anti-inflation
policy is it not locking the barn
door after the horse has escaped?
of

Some

been

have

may

you

present here in May of 1946 when
I spoke to the American Indus¬
trial
Bankers
Association
on

"Avoiding Boom and Bust in the
•

I then pointed out

United States."

driving the economy
toward further inflation and dis¬
tortion in the price structure? Or
have the forces making for price
close of 1947

of the post¬
war transition period was not, as
many people thought, a problem
of avoiding unemployment. It was
a problem of preventing price in¬
flation.
Permit me to quote a few
sentences from my remarks, which
are still in point today:

•

we

may

the

in

aggregate
demand
for
American goods and services in

the"" probable

interpreting

events of the next year,'

it should

be borne in mind that the present

structure is seriously dis¬
This
distortion may
be

price
torted.

in the behavior of the

seen

cipal components
sale

While

prin¬
whole¬

of, the

price

index.

rise

the

in the

for evad¬

factured goods 71%, and manufac¬
tured goods 65%.
The extraordi¬

as an excuse

policies. A government nary wartime and post-war de¬
mand for food and fibre—products
which permits
politically powerful
generated the
labor and agricultural groups to of the farm—has
raise prices, while holding down largest price increases in this field.
The same type of distortion exists
the closely-related prices of other
economic
groups,
is not being *n the consumers' price index.
Against an overall increase
of
honest. The first step in any real
about 60%, food has risen 95%,
program to prevent further price
clothing 87% and house furnish¬
inflation is an unswerving policy
of forbidding any wage increases ings 85%; whereas miscellaneous
household
equipment has risen
with
inflationary
consequences.
The present situation calls for a only 38%, public utility services
and wage

deflationary
monetary
and fiscal policy.
The two basic
methods of accomplishing these
results are to create a substantial
strongly

in the Federal budget,
tighten the money mar¬

surplus
to

and

kets."

bring an end to increases
in cost of living; it would ease
the
upward pressure
on
wage
rates; it would reduce the present
large excess of unfilled jobs over
job seekers;
it would increase
productivity and the efficiency of
industry.

Policy

Failure

a

administra¬
concerted

In fact the Federal

tion

has made

never

a

price level.

effort to stabilize the

been

have

Its actions

inconsistency.

tissue of

exhorted

has

It

businessmen

a

prices

reduce

to

while encouraging labor unions to

raise wages. It has penalized land¬

while
promising
farmers
to
support
ever higher prices for their prod¬
for

lords

raising

rents

ucts. It has maintained easy money

conditions

18%, and rents

bare 8%.

a

Farm

closely-related
commodity
groups
of
textiles,
hides and lather goods, and foods
products

have

and

the

possible

made

and

a

of

bell-wether

the

been

of

relationships
somewhat resembling that which
to

set

a

price

existed before the war—even at

a

much

higher average level
of
prices—one of three things must
happen in the future: first, prices
of farm products and their de¬
rivative
commodities must fall;
further rises must occur
in
the
prices of manufactured
goods, rents, and public utility
services; or third, both the first
and second types of price move¬
ments must occur simultaneously.
second,

For reasons that I

shall give in a

moment. I believe that both types

lation W. Small wonder that many

During the past three
prices of manufactured
more than prices
of s.emi-manufactured goods;

of

skeptical of the ability
to deliver

are

us

the

of

administration

price stability today.
ago,

stood

their

levels

in

OPA

price

controls

with

33%,

about

time,
&

Since

1940.

have

above
that

rationing

and

abandoned,

been

the

exception of those on
rents; excess profits taxation has
been

discontinued;

increases

have

of

been

with

made

ministration;

general

substantial

of

couragement

wage

amount

the

the Truman

price movement will probably
during 1948. There is some
evidence that they have already
begun.

months,

goods have risen

budget
prices;

a

a

climax; business

for inventory and
plant and equipment have
been
heavy;
consumer
outlays
for
goods
and
services
have
reached
all-time
peaks; and a
halting but persistent rise in resi¬
dential construction has occurred.

the

impact of all these
forces, prices have surged upward
with
the

frightening rapidity. Today,
price index stands

wholesale

at about

the

double its 1940 average;
of living index is more

cost

than 60%

over

its prewar level.

Are Higher Prices Coming?

Now,

we

increases

ask,

in

Are

the

ness

outlook

are

as

in

laggard in the upward
that

are

un¬

these

fession of the boom, the

ities

spec¬

will

the

pro¬

probabil¬

forces

behind

further large

post-war nrice inflation have

themselves, and that
no
further large increase in the
all-commodity index of wholesale
nrices will occur during the next
year
or
two.
There may be a
moderate decline in this index.

ards

have

incomes

dollar

flation.

that

these

it

is

the

are

probabili¬

nevertheless

unexpected

strength

possible
of

de¬

mand for goods, general wnge in-

unwise tax

°reases.

untimely

credit

reduction, or
exoansion may

prolong and intensify the nresent
boom.

It

makes

desirable

is

this

possibility
a

Federal

that
anti-

inflation

urogram.

price

would guarantee
instead of a moderate

a

For

further

inflation

severe

recession. More serious distortions
in the
more

price structure would take
time

to

eradicate.

In

no

facetious vein I say that a mod¬

prospect?

erate recession from present boom
conditions would be the best thing

we

in

approach the




would have

rapid in¬

more

The time to cut taxes is

when

al¬

that

machinery for human
possible, because
ever-mounting
labor
costs.

of

There

additional

is

loss

no

or

to

living has

civil

pensioners,

teachers,

and

items

of

become

serv¬

cerned with

durable

goods

to

1948.

in

duction
home

the

the

that

could

happen to the United

view

revival

cannot

housing would

The

volume

home

But

strong

a

building

the

which

summer,

business

are

contract

upon

sumers

production
by
con¬
by business enterprises,
and

building

are

tion costs are not accurate and the

likely

made

People

prices of

than

figures indicate
are that residential

changes

will

continue

slowly through

pany

countries?

to

Consumer

factor

in

comparing

with this

expenditures depend

ex-

This

1948.

element of. demand will be
Demand

are

the

construction

by foreign

homes

new

expen¬

plus

a

next

year

is

one.

strong probability that

a

duction

Business Spending

in

income

tax

a

rates

re¬
will

be made

during the course of the
The amount and the timing

year.

of

reduction

tax

year

will

with

reference

well

as

in

election

an

be decided
its political as

inevitably

to

to

economic

its

The

quences.

conse¬

probabilities

are

that taxes will be cut sooner, and

by larger amounts, than will best
serve
the interests of price sta¬

bility.
of

In

be

the level
probably
by Federal

any event,
in 1948 will

business

supported

better

fiscal policy than it has been

this

year.

Spending by Foreign Countries
In retrospect

of the

one

it

be

can

that

seen

most powerful factors

behind the present boom has been
the

net

enormous

surplus of

ex¬

this

from

ports

country.
This
postwar peak annual
rate of about $10 billion during
the
second
quarter of 1947, as
reached

a

other

countries with great wants
large accumulated dollar
balances purchased heavily in this
country.
Their actions
placed
additional spending power in the
economy whilst removing
goods

and

from

the amount of consumer in¬

On the other hand, there

diture.

took

apparently
high
costs
Dossibly our indexes of construc¬

principal

The

upon

ot

"buyer's strike'

a

making.

in

place during

American

Consumer

con¬

despite

What

governments,

the

was

that

in the

was

whether

disappointingly
spring and gave color tr

low last

lower

by

built

skyrocketing

costs.

building

continues.

demands

the

be

been

intense desires for

the

forces that will shape the

outlook

has

equanimity.

examine

us

Ado
the

houses

of

be inhibited by

financing the sale of

consumer

housing.

has

number

question

You who are con¬

view this fact with
Let

in

reduction

a

modern

only about half of the num¬
ber
of
additional
family units
added to our population.
The rea

up with demand, the
reduction in the potential market

will

strong demand for largei

more

been

catch

actual market.

living in tem¬
Since 1941, the
family has in¬
35%, which alone

total

these

of

up

to this the fact that since 1941

commodities, be¬
cause
the rest of the public will
take everything that can be pro¬
duced.
But as supplies of these
sales

Amer¬

doubled

or

about

creates

this has not limited

So far

ants.

millions

for

relatives

creased

priced automobiles, re¬
frigerators
and
other
durable
goods of high unit-value "out of
market"

million

are

porary quarters.
real
income per

already

the

three

or

families

with

gains. It
say that

make

overstatement

no

the sharp rise in cost of

two

ican

those with

living, while

of

fered

domestic

markets

and

had

highly inflationary

come,

consequences.
Never has there been a time when

of

an

and also upon the amount
Very large demands by business,
spending power con¬
enterprises for new
plant anc
hold in the form of cash,
equipment
and
for
inventories
savings bonds and bank deposits
(have been important factors in
—their "liquid assets." Spending
creating and sustaining the present
for consumer goods is currently at
boom.
During 1946 and the first
a very high level in line with the
half of 1947 businesses added b'lpeak rate of consumer disposable liors
of dollars to
their inven¬
income. It is running at the rate
tories.
In the latter half of this
of about 90%
of disposable in¬
year inventory-building has sub¬
come, which was considered to be
sided in response to a feeing ot
a
normal ratio in pre-war years.
cauticn about the future of prices
There are good reasons for be¬
Judged by prewar relationships
lieving that consumer expenditure and
allowing for the effects oy
will not fall much during 1948, if
higher prices, business inventories
employment and income does not are not
high at the present time.
decline. There are still very large
Indeed, business would have to
wants and needs for durable goods
hold an additional $10 billion o'
of nearly all kinds, particularly
inventory to restore the ratio of
homes, house furnishings, home inventory to sales that obtained
appliances, automobiles, and in 1939.
It is probable that in¬
household equipment. As rates of
ventory building will not con¬
reserve

sumers

tribute
1948

the

fall in

consumer

why"

no

use

of

if

an

are

the Federal

rate of about

was

and produc¬
during the sharp

outgo

is

at the rate of
billiop per annum.
now

exerting

a

deflationary influence on
the economy, with very salutary
effects.
President Truman for¬
heavy

tunately
prevailed
against the
strong Congressional movements

•4

an

fal¬

pure

lacy.
The

been

rate of export supoly has
declining steadily since last

May.

The effect of Marshall Plan

aid will be to keep this rate from

declining
wise

rapidly

as

would.

other¬

it

as

this

In

the

sense,

Marshall Plan is anti-deflationary
instead
of
inflationary.
It- is

probable

that

Congress w;ll vote

the emergency

billion

the

over

relef of about $1.1

tide

to

Western

winter.

whether

It

Europe
doubtful

is

full

the

$8 billion for
reconstruction
and
development
asked for by the Paris Confer¬
will be extended.

voted,

because

amount

will

Probably
smaller

this

suffice

if

the

other

recovery are

The

two

present.

factors that would do

most to

get the economies of Eu¬
off dead center and on the

rope

road

to

are,

recovery

first,

in¬

of

their

fi¬

and, second, lifting of the

"Iron

Curtain"

across

the

merce

between

rate

mar¬

notably mercurial in itc
The

chances

are

that

of

that

normal

cuts

now

flow

of

com¬

agrarian Eastern
industrial Western

Europe.

Neither of these condi¬

tions

certain lines such

exports.

be satisfied by American
If
France, Italy and

and
cline

j

as

iron and steel

utilities.
It may de¬
moderately in the aggregate

public

because profits in many manufac¬

Con-j turing

running

than $10

is

conditions necessary for European

and
as

trading lines will be
competition becomes

solidating^the financial operations
On
of government and putting them keener and more pervasive.
on
a
cash basis, the surplus of the other hand, a sharp decline
in
property outlays seems un¬
cash inflow from the public over
^ore

WPA

nances

smaller

Federal finance is

international

expenditure on new
plant and equipment will not in¬
crease further in
1948, except in

Government

$7.5 billions.

are

American

stabilization

behavior.

I

is operating with a surplus in the
conventional budget at an annual

exports

the

ternal

the

will

refer to income tax reduction. At

present,

large
protect

from depression like

economy

has been

weapon

recession.

to

some
econo¬

ket for goods and serv'ces and bv
the prospective rate of profit.
It

clear indications

general business

it

plant
equipment has been rur.nin?
at the phenomenal rate of about
$4 billion per quarter.
This type
of spending is governed by the

spending may be

anti-depression

employment

as

large estimated size of the future

large calibre which it
there

mists—that
needed

by

Continental

and

between $5 and $6 bill'on will be

Business spending on new

expected in 1948 is. that the Fed¬
eral Government is holding in re¬
of very

the
1948.

an-l

emergencies, they
less cautious spenders.
reason

in

notion—nurtured

British

ence

in

tion,

meet

Another

In

1947.

recession of 1920-21.

sumption outlays are only about
twice as large.
With larger re¬
will be

in

recession

will inventory depletion
important force of contrac¬

an

tion

are

to

did
a

m

The

be

amount

serves

it

of

expansion

export surplus was less needed
and wanted by the United States.

neither

holding about 3V2 times
of liquid assets they
held in 1940, although their con¬
They

economic

to

as

event

ably be disposed to spend on con¬
sumption a larger fraction of their
current
income
than
formerly.

serve

While
ties,

shaping the busi¬

prices

forces

their

1948

witness
further
in¬
prices that have

doubtedly
been

having

of

of

anex

While

rise.

creases

expenditures

for new

Under

the

signs

almost spent

to
rising
tremendous export boom

has mounted to

reached
tacular

the

due

largely

give

ad¬

substantial surplus

a

products

en¬

has been developed in the Federal
-

of

occur

I

index

living

substitute

hands wherever

consumers

evaporated in still

spoke eighteen months prices of semi-manufactured goods supply of many of these goods ex¬
the wholesale price index have risen more than prices of pand, sales may be expected to
about 40%, and the cost of raw materials; and prices of farm increase... Consumers will prob¬

When

methods for mechanizing produc¬
tion.
Management is : eager to

benefits to

flexible dollar incomes have suf¬

price inflation, along with certain
basic metals.

expansion in business and
home mortgage credit while at¬
tempting to curtail the extension
of consumer credit through Regu¬
large

that

below

much

Meanwhile, technolog¬
progress has opened up new
:

taxes been cut in 1947 most of the

ready had to curtail their stand¬

If the United States is to return

Administration's Anti-Inflationary

be right in saying that tax reduc¬
tion would
be premature.
Had

recession

a

would

flexible

In

ing the responsibility of following
non-inflationary monetary, fiscal,

being used

Such

still

is

1940.

ical

v

all-commodity index since
1940 has been about 100%, prices
of farm products have risen 125%,
raw
materials 98%, semi-manu¬

symptom
rather than the cause of price in¬
flation.
Direct price
control is
the

combats

"OPA

1948.

worker
of

is no reason for fearing a
spending
will sudden collapse of business invest¬
call forth more
goods, and not ment.
merely higher prices. That time
Government Spending
1948,. with a consequent fall in
has not yet come, although it may
employment and income and an
It is almost certain that Federal
The amount of price inflation
come
during 1948.
easing of prices?
To supply a we have already had in the United
riscal policy will take a less deOne important category of con¬
reasoned answer to these ques¬ States
has
had
adverse
effects
Tationary turn during 1948.
On
sumer
expenditure
is for new- the one
tions, it is necessary to examine upon markets. It has produced a
hand, Marshall Plan aid
homes.
Any way one measures it, to
the principal political and eco¬
Europe and expansion in pubhighly inequitable redistribution the
desire for more housing is in¬
nomic forces that are likely to be of real income. Persons with in¬
lib works construction will in¬
tense.
We know,
for example,
at work in 1948.
crease the level of Federal
and

that the great problem

■

played themselves out,
expect some decline

in

States

this

of

Events have proved him to

year.

(Continued from first page)
despite even broader powers than
those
now
requested,
does the
Federal administration really

beginning

middle

Europe

and

can

other
their

countries

budgets

currencies

peoples
the

need

would

be

farmers

liver

to

so

had

balance

would

stabilize
that
their

confidence

for

in

American

greatly reduced.

would

the

their

and

produce

cities

own

them,
dollars

Then

and

de¬

produce they
hoarding or failing to
ploying
about
10,000.000
more produce, because they can obtain
men and women in industry than
in
exchange
only
depreciating
it did in
1940.
Each of these paper that can be see^t in black
workers requires a complement of markets.
Then capitalists would
plant and equipment in order to come forth with gold and dollar
work most efficiently.
The ratio assets they are now concealing
of efficient capital investment per and
invest them
in productive
likely.

The

nation

is

now

em¬

are

now

Volume 166

Number 4650

■

.IV,

.....

(2189)
equipment.
If Russia can be in- 1 for the
purpose of reducing their
duced to join with the other
three' potential lending powers.
It

occupying

powers in

many as an economic unit and to
lift the Iron

eral securities

Curtain, then the
problem of Western
Europe

food
and

the

needs

of Eastern

toward

business

on

and

forward

pressing

economy

kets.

Euro¬

Within

as

past

now

probabilities

summarize

regarding

outlook in 1948.
shown that at least

have

present

peak

given

boom

of

net

demand

h^is been

is good,

rise

forces

expect

surplus.

economic

the

and

for

Consumer

hand,

are

down after the
when

year

farmers

whole

high

to

be

can

is.

of events

or

more

by

their

is

wants

demand,

as

as

a

satisfied.

whole, is

a

A rough meas¬
being spent in
country is the figure known

the

dollars

national income.

demand equals

sumers

sible
may

and

that

businesses.

the

great

successfully

round

of

It is pos¬
labor unions

general

wage

It is possible that
higher costs of
construction may cause residential

construction to collapse.
I am in¬
clined to discount these
possibili¬
ties.

Congress is

aware of

price

now

belatedly

the evil
consequences of

inflation.

(It

as

this awareness, in

1936 and

peared!)
most

the

soon

Labor unions have
the

of

past

increased

two

years

ap¬
seen

wages

evaporate

of
in

national

in¬

Wars, de¬
income) was

otherwise, there
net

no

the

ause

iust

increase

purchasing

government
not

was

ment

the

it

But

The

much

took

power

gained.

case.

spent

than

demand, #be-

public would have lost

much

as

the

in

and

concerted policies to fight infla¬
tion on the monetary and fiscal
fronts
and

well

as

I

wish

to

servations
At

as

through

price

rationing controls.

At

the

govern¬

more

from

the

time,

same

creased
ments

their

of

^ouble

money

people.

loans

deficit-spending
of

bank

the

private

a

expansion

It

banks

and

i?o-

invest¬

nature.

This

government

—

and

expansion
investments to

loans and

the private sector of the
economy
—was
what
increased

demand,
brought full employment, and in¬
duced higher prices in both
wars.
Deflationary
It

Trends

last,

close

with

made to prevent credit

from

ob¬

some

monetary conditions.
efforts are going to be

adding

expansion

to

money demand.
Reserve authorities

The Federal
have taken several

mild and

ten¬

_

follows that

if,

after

a

war,

ceives, there will be deflation
prices

and

probably

a

of

recession,

by

policy.

you

may

richer

us

or

rising and fall¬

In the last
quarter of 1919. after
War I, government

began

to spend less than it
received, and
in the first half of
1920 there was

Treasury surplus.
a

This

deflationary

was

of

influence.

Bank

loans to private
business
stopped expanding in the middle

of

1920.

tract.

and

soon
began to
inevitable result

The

con¬

In

1946,

as

in

World

1919, the

govern¬

adding to the

at

let

pause

a

produc¬

on

War

I, industrial
relatively little.

grew

its

us

up

peak, which

came

in

was only 19% above
1914,
depression year. But in World

War II industrial
production
than
doubled, and

more

though it is
lower than in 1944, it is run¬

now

ning about 85% above pre-war.
Agricultural output grew much
less

last

time

than

this.

The

dif¬

ference in production would have
meant that we
should not have
had so much
inflation, after the
recent

war

except for the fact that

num¬

war,

accounted

the

for

peak.

tween

both
the

while last time it

only

The

quarter,

a

relationship

demand

therefore

and

at

be¬

supply

just about the

same

is
in

is

wars—as

shown now by
equivalence be¬
prices and those of

substantial

tween present

1920.
The

basic task of

prediction, as
I see it. is, on the
demand side,
to guess what is
going to happen
to government
spending and taxa¬
and

Plan,
likely to remain
large as they have been

these

items

about

as

are

past

probably

two

little,

is

prospect of

a

prices such

as

should

not

decrease
at

any

the

State

immediate

no

drop in agricultural
occurred in

expect

much

of government

home, especially if

ber

though
larger.

years,

if

therefore

1920. I
further

spending

we

remem¬

construction programs of

and

local

governments.

If

receipts remain at about their
present level, government fiscal
policy is therefore likely to con¬
tinue

to

curb

inflation

about

as

whether

further and
ures

more

in the near

expansion

of

powerful meas¬
future. The recent

credit

has

been

cf

large dimensions.
Since August
1946, outstanding commerc'al

of

loans

have

consumer

risen

about

credit

40%

about

and

35%.

if

1947

the

Federal

control
tem

may

of

system to
credit. The Sys¬

raise the
of

legal

reserve

member




banks

people

1920 is

reasonably close. But bank

billion

far,

credit

shows

Bank

loans

more

the

a

parallel

different

and

than

it

with

duce

billion

guess

cancelled

the

June,

1946,
more

deflationary

operations. If bank loans had

fallen in 1947

as

this

year.

well

as

as

I

Congress is going to re¬
1948 taxes. If it
does, the

they did in 1920,

is
not
likely
future to need so much

near

bank
up

other

prolong inflation,
things being equal.

Bank

Loans

and

Investments

What about bank loans and in¬
In

1919

and

1920

banking situation differed
mentally

from

Loans had
to

been

finance

pecially

Business,

believe,

many
in the

money

recently to build

as

inventories

tion.

or

expand produc¬

Nevertheless,
there
is
a
affecting all these matters

factor

which is very different
the
situation

from

now

immediately

the former

That

war.

for

that

of

speculative

of business inventories.

funda¬

today.

extended

speculation,

the

mainly

and

es¬

increase
This time

ing

power.

Unless prices soon begin to re¬
treat pretty generally, consumer

demand,

after

backlogs

durable

goods

of

did

as

American

one.

such

demand
the

for

will

probably shrink. The

quence will be

mand

months.

was

Auto¬

mobiles

were
not
so
widely
owned; their output had been cur¬
in one-quarter of one

tailed only

then

year—and
normal.

the

only

Radios

market,

much

less

trical

It

on

been

elec¬

Such

backlogs

part in the 1920

no

to

was

of

yet

had

household

of

played almost

25%

there

equipment.

use

to
not

were

and

far

a

greater

degree speculative than the
ent

that

pres¬

The natural inference is

one.

the

present

one

may

last

About

Consumer

Demand?

One major factor remains to be
considered
the effect of
prices
—

on consumer

moment

demand.

consumer

demand,
by far the largest ele¬
ment in the stream of
income, be¬
gins to fall persistently, business
will quickly curtail
output, money
which

is

in

circulation will shrink, unem¬
grow and the vicous
circle of recession will be upon us

ployment will
It

is

widely believed that
depression beginning in 1920

the
was

by a buyers' strike agains*
the high cost of living. The statis¬
indicate

strike,
spent

since

no

actual

consumers

dollars

more

in

buyers'
not only

1920

than

in 1919, but actually
bought more
goods in quantity. What did hap¬
pen, however, was that in
1920
high prices prevented consumers
from

buying

all

that

Increased

showed

up

in unsold

rather

than

larged sales to
If

this
we

sort
can

being

was

produced.

again,

output

inventories

insufficiently

en¬

consumers.

people

and

along the

under these

line—for

of

conditions the

decline.
With both government and banks

withdrawing

purchasing power,
the recession would be here.
A Prediction

I have

on

arrived at the point

now

where you
out

will expect

limb with

a

diction.

to

me

go

definite pre¬

a

Instead

of doing that, I
indulgence for a number

your

conditional

statements.

If business should reduce

prices
and
profits permit, and food prices are
brought down, we might avoid a
increased

as

recession

productivity

for

which

any

a

year

If prices rise

is

likely to be

the

two, and

or

would

came

spondingly
milder
quickly over.

be

corre¬

and

more

higher, there
sharp recession in

even

a

future.

near

A favorable factor which
did
not exist at the end of World War
I is the fact that world demand

for

American

continue

food

longer,

is

likely

and

exports

to
of

this and other American
products

be large

may

long

as

the United

as

States Government finances them.
Another favorable element for the

time-being is the larger backlog
demand, coupled with

of domestic

the

fact

that

bank

reserves

are

ample. Also, insofar as speculation
in inventories
may be avoided, we
in

are

Jess

danger now than in
probably lost the oppor¬
tunity to prevent a post-war de¬
pression entirely when we* aban¬
doned war controls too
quickly
and

of

thing

have

still

want

let

but
to

happens

a

automobiles

houses, they will go on buy¬
ing them, no matter what prices
they have to pay, if necessary bor¬
rowing the money to do so. With¬
out going into the detailed figures,

inflationary, forces loose,
still

we

have

moderate

down

What
all

is

an
opportunity
by holding prices

it

much

as

as

possible.

have

we

another

to

fear

1929

most

after

of
the

United States stops
financing ex¬
on
a
large scale and the

ports

domestic

backlogs are filled. But
consideration of this danger prob¬
ably takes

beyond the imme¬

us

diate future.
For

the

present,

anyone

who

wants

to make his own forecast
should watch two main factors—
the

government surplus, and the
of bank loans and private

course

investments. The larger
ernment

surplus, the

ward pressure will

government
increase

of

vestments

direction.

for

may

other.

depression
much more
quickly than other¬
wise, and it is likely to involve a
sharper
price
readjustment.
It
does not necessarily
follow, for
instance, that just because a lot
of

conse¬

lessening of de¬

of bank credit would

use

caused

tics

a

1920. We

longer.
What

all

course

recent

participation
18

which makes up about
of the total national
income,

70%

did not

war

involve the accumulation of

and therefore to

vestments?
between

done

it,

in

influence of the government's fis*
"al

can

has

picture.

investments

June, 1947. This slightly

than

it

as

effect will tend to sustain
present
demand or even to increase

irivate securities increased about

Reserve

consumer

requirements

powers

the

$7

and

the

from

So

lic.

renew

took

about

$7.5

pub¬
President Truman has asked

it

during the first half

spent.

Through these two channels alone
about $-3.8 billion have been added
to the spending power of the
Congress to

and

much

many of them have now exlausted this resource of purchas¬

of

expand.

figure.

pre-war

and

beg

general

and incomes

There

years

the

savings they had already laid up,

that
con¬

to

at the lower income
levels have been
cutting in on the

in

The

With the
emergency relief
this winter and the Marshall

sumers are
saving a far smaller
percentage than during the war,
the rate of saving has fallen

longer.
Other
consumer
credit
may increase if installment sales

relief.

the

predict

many

loans for these purposes will
tinue to grow for several

spending in the form of loans and

You

take

automobiles,

to

private bank loans
and investments.
If Europe had
recovered,
there
would
be
in
prospect a decrease of government

oublic,

will

therefore make a guess at
the future demand for bank
loans.
On account of the
large unsat¬
isfied
wants
for
houses
and

boom.

ber of dollars in the hands of
the

they

must

shorter—only

spending

accounted
for about half the national
income

is

that

production and trade just because
it happens
to be available. We

government

tative steps to t'ghten the money
markets during the past year,
it

likely

expand credit at a time when
the demand for loans on the
part
of those who are
good credit risks
falls off.
Money is not used in

output and conseemployment and deMidyear Economic Re-*

and

can

to

large

during, the

They

in
borrowing money
think. But banks can do little

may

government-financed demand also
increased much more in World II
than in World War I. This time

tax

was

the recession which
ensued.
ment stooped

In

So

check

1919, it

in

World

a

tion.

to

mat¬

entirely in the hands

something to

numerous

Consumers

must be
a

in

of

of

almost

of bank

difficulty

of

some

for

alone.

minute

tion,

government reverses its fiscal
pol¬
icy and spends less than it re¬

"ourse

on

accounts

as

this

government

the past several
years has taught
the need of coordinated

that

or

would have been

much

us

_

poorer, not the number of dollars
in our pockets. It is the relation¬
ship between demand and supply

Even

unless bank credit
expands at the
same time
enough to balance the
reduction of demand caused

hope that experience of

moment

Supply

makes

con¬

higher living costs.
Businessmen
are
going to watch inventories
closely.
Finally, it is not too
to

that

first

our

(and national

will

1937, business recession

tins

tual production of goods and serv¬

ices

investments, it

con¬

restrict the expansion of loans if they want to—
though perhaps not so much as
those of us who
may have had

probably be enjoying

production

lhe public in the form of
taxes

be re¬
called that the last
time it devel¬

oped

discussing the future

remembered that this is not

thinking that I have forgotten
supply. It is the ac¬

then

greatly increased by government
spending. If the government had
spent only money it took from

press for a

third
increases.

be

expanding their loans

ter which is

all about the

We

Now, in both World

an

con¬

on

great
"priced

a

been

consumer
had been falling behind prices ever since the middle
of 1946. Out of this income con¬

and

reserves

come, if the demand for them
tinues to grow.

do

By this time

a

mand

wrong.

bv

go

ample

of the banks themselves.

The

not

inflationary psychology may de¬ got this money, directly or indi¬
that would "lead
to
a
rectly, from the banking system.
inventories

have

and investments for some
time to

excepting

money.

recession at

our

have

may

been

never

put' down

combination

It is possible that

for

should

jwe

It is taken

velop

scramble

supply

Recession

a

an

come.

off for another six months
the inescapable
price re¬

adjustment.

In

demand

cept,

next

may prolong the boom,
further
price
inflation

produce
and put

be

may
a

supply of

increase;

once.

may

to their
income taxes.

possible that

short

mand

as

come

made

items,

have

of the

ure

accompanying easing off of
employment and national income
appears probable.
Of course, these
evaluations of
is

can

to have virtually every¬

in

ple have to spend.

a

probabilities

American

ing prices, not the amount of de¬

the

an

It

When

adding

1947

the

of

rather the number of dollars
peo¬

moderate recession
in the general level of
prices with

the

to

at

sense,

Economic

on

now

beginning of

sales

balance,

than it

likely

without

present

On

both

goods and services.

specific

we may

expansion

deflationary
prices

to the

»

for granted that while
people may
at
times
cease
wanting certain

moderately in

further

be less

production

or

the

passed

spending for residential construc¬
tion, and Federal fiscal
policy will
Farm

supply.

influence, notably just the desire people

may decline
On the other

the

supply, business !
and either prices tend to

sometimes

be sustained at
present rates and

1948.

be

banks

stability

thing

exceeds

the

to

spending and business spending
will
probably do no better than to
they

not

legal minimum, and in some '
districts even below it. Now the

_

two

strength

accumulation

export

tween demand and

the
busi¬

the

It

have

their

inventory

would

reserves became inThe reserve ratio fell

sufficient.

that

port of the President, issued last
July, called attention to the fact
that the disposable income of the'

j not, because

(Continued from page 11)

ness

that

,

quently

and

three

..

restriction
mand. The

conducive to the continued health

Probabilities of

exports from America.

us

situation

desirable

a

pretty C clear

fields, and a continuance of this
tendency could quickly lead to

look 1920 the banks had to restrict
borrowing 1 credit, whether they wanted to or

loans and

Summary
Let

It

up

excessive stocks of goods. A collapse of credit is therefore not so
likely to arise from this source. In

increase

is

many have already
out of the market"

exer-

j cised more caution in building

In

economically useful.
Europe
needs tough-minded
diplomacy as

well

the

current

development.

and apparently business has

,

may

firming

the

this must be viewed as

higher yields on longterm high-grade obligations have

and economic decisions
that alone
will make our aid
effective and

money

structure

will

companies

to
In

rates.

months

political

loans

finance

year, as a result of the deflation¬
needs
extensive
help ary budget position of the Treas¬
America
to
rebuild
her ury and the active demand for
shattered economy.
It is in our credit by business and consumers.
national interest to
provide this Following the historic pattern, the
aid.
But economic aid
should not first impact of tighter money was
be
viewed as a substitute for felt in the
short-term loan mar¬

Europe

higher

a

it

inflationary boom,

of

and that 1948 will see a continuation of current tendencies.
Rates

cash

up

mop

from

Russia and other
pean nations to make the

movement

a

to

Higher money rates have been
the making for more than a

in

far less urgent.

of

rates

balances.

Europe
manufactured goods would be

for

ning

by the Federal Re¬

banks

serve

emerged. It seems likely tnat we .the stock market has not
recently
have witnessed only the
begin-, experienced an.

may
further sales of Fed¬

treating Ger¬ also initiate

33

ward

a

If
or

out

for

the

One

prices.

credit
in

of

the

The
in¬

and

opposite

these

factors

time counterbalance the
both

start

to

exert

up¬

downward pressure, look

case

The

works

down¬

be exerted by

against
bank

the gov¬

more

inflation

or

deflation,

as

be.

may

forecaster

will

of

course

also remember that

output
vided

is

a

large physical
sign, pro¬
are
buying the

favorable

consumers

product. And he will
bomb

shelter

consumer
or

a

total,
trend.

few

if

the

run

purchases—not
lines

shows

a

for the

volume

in

of
one

only—but in the
steady downward

.

.

34

THE

(2190)

COMMERCIAL &, FINAIfQIAE CERp^ipLE
ihat

If

The Outlook for the
submit voluntarily to tnat valua¬

roads

oe

Kept

return,

*yo

tins

011

to

being wiped down, to an ap¬

proved capitalization by the Com-

basis.

iMow, why is that strange situ-; missipn of $310,000,000,, as they
ation existing as to rates, on an have done; if they are going to
,

and Mr.

Clement

to lose my money.

and

half

a

didn't'want me
Well, I'm very

One

Central

York

returning their

not

are

by

out-of-pocket

Now,., perhaps it wasn't

bureau which
atrocious reorganizaT

government

fixed

these

either

for

the

bad

so

Interstate

Com¬

plans and fixed that ridicu¬ merce Commission or the insur¬
capitalization for the Rock ance companies or the Supreme
Island, is the one which fixes the, Court to fix^that capitalization for.
rates; so that, haying fixed $310,r the RqcJc Islapd backiin 1935, when

ordered.

profitable
the

Palm Beach to repair some hurri¬
cane

senger

Island

Rock

for

unconscionable, thing

pretty

yesterday,

even

they have been fixing rates
capitalization be, all

years,

were

the

last. 15

the

all

we

000,000, ;ias being, a fair capital of
the

was

last

even

in

take

week,

lawyers were down in Chicago,
That's one reason.
backing up the principle that $80,The second reason is that, as 000,000 of cash and $65,000,000 in
and
$400,000,000
of
you all know, any politician in equipment
rails and stations were only worth
Washington is interested only in
getting votes. So the national de¬ $310,000,000. That, I cannot under¬
fense
and
some
75
million
in¬ stand, except on the basis that
vestors and insurance policy hold¬ they were so interested in the new
that

the

Island

Rock

afford.

can

board of directors of the Rock Is¬

have got to become secondary.
So that they are glad to take the

ers

land

sacrifice

testimony of these farmers and
shippers
throughout
the
country against a rate adjustment
the

railroads

fellows

vote

because

and

few

a

willing

were

hundred

to

Poor Railroad

Services

the

poor railroad security holder
Now that same strangeness and
only represented by a lot of
mystery existed
regarding
security analysts and customers'
through-service. You know that
men; and who in Washington is
in the Pullman
hearings in Phila¬
interested in one of those?
delphia, two years ago this time,
Mr. Franklin of the Pennsylania
Composition of Railroad

is

third

a

dreadful

itself,
clash
on
that, they came. out and bid
95 l/z for $30 million of Chesapeake
&
Ohio
bonds, when I had a
sealed bid in my pocket for 100
for the same bonds, or a differ¬
ence
of 4 V2 points or $1,350,000,
and that's why I'm for competi¬
tive bidding, if bankers insist on
C

situation

exists

made up of

are

and

while

X

and

[names omitted by Editor]
may
pay
lip-serv¬
rate increases,
they may
on
a
big show before the
then

they

in

go

[name
omitted
how anxious

so

by

this rate increase?"

"Oh,

comes

they

difference

It

just

of

it
the

over

car

Rock

that if

say

They

they still jerk

out

there

in

the

couldn't get

that

on

train

for

a

six

that
$50,000

those

bad

a

which

a

return

which

year,

for

are

cars

Pullman

a

written off eight or

was

built;
more;

done,

1915

bonds

at

or

'25

par

to

that

Now,

we'd

n't

only

I

way

is

one

can rec¬

that

the

air

of these things would¬

one

disturb

me

much,

very

but

when they pile up in a
series, why
then they begin to make me won¬

or

der; maybe I'm right. So in that
Pullman proceeding we turned in
a
firm commitment to subscribe

in¬

$75,000,000 for
and we said, in

endorsed by the bank¬

equipment,

new,

application to

our

the

were
as

The railroads

they

didn't

were

need

and

over¬

them

were obsolete.

You

I'm

not
surprised at a
body going in for that
kind of stuff, but I am surprised
at the insurance companies, be¬
cause, after all, they are supposed

to represent the insurance policy¬
holders of the country, and if they

going to submit voluntarily to
procedure
which
takes

court

Clement

and

Mr.

Metz-

came

down, all the way to
Washington, to help us save our
money? They said, "It's a bad risk.

any

political

are

Mr.

man

Insurance Companies Blamed
Now

are

blocks

streets

between

those

and

the East

last

citadel

in

few

about

down

when it
I'm

Wall

the

to

Street is

level

able community, and that applies
to all its branches all over the

country,

when

and

Wall

Street

goes, so goes the Statue of Liberty,
and every thing I owe to Wall

Street,
because
God
knows
I
haven't lived in the last 20 years
on

salary,

my

net after

taxes.

I

lived
you

analyst,

simply because I am,
gentlemen, a securities
I'm

and

shouldn't

your money,
you

the

to

do

and

it."

do

it.

we

You'll

lose

cannot allow

are

The
tions

keenly

inter¬

can

roads

—

losing
them

down

our

new

know

to

135

keep

money,

rail¬

us

—

from

furnishing

equipment. And do

that

Commerce

the

entire

you

Interstate

Commission

backed

they

railroad

a

figures of railroad

ififc wabsa «#ssi

the

public

is

riding

junk, and they're going

a

New

still going on.

put

a

see

they

have, what the
when

that

to make

up

revenues are; and
industry—which used

most of the

the New York

trading

as

it

through, without protest, then I
were

not

exercising

their

obligation to the nation as a
whole, to protect the investor. I

think they
and

I

wreaked

,

something

the capitalistic
recover

misled by a few
those
few, have

.

from

system

who

50

which

may never

from.

what

knows

needs,

Bob

New

make

you

lawyers

down,

incubate

on

you

after
it for six
turn

you

Pacific,

the

and

make these railroads
even

rates,

present

on

gold mine,

a

and

can make
the farmer happy and
everybody happy. The only per¬
sons, that will not be happy will

be

the

presidents' of

roads,

these

rail¬

I

said, "If the trouble with the

New

York

Central

the

is

that it's got too heavy

fact

terminal
expense, the obvious answer is to
put it with a railroad that can
give it

give

long haul. Now, if you'll
the Rock Island and the

a

me

Southern

you
-

a

Pacific

and

and

the

the

Central,
long haul."

a

I

Now

haven't

the

or

other

of

Nickel
a

this railroad

situation is

dread¬

a

condition."

don't

knowi

He

what

We have been

said,
we

"I

are

just
going

trying to tell him

of therm

cause

•.

Now,
Allegehany
Corporation
has paid off all of that $80 million

debt,
it

it.

Out

Series

A, preferred, it has
102,000 and retired

chased

we

million

of

the

even

because

came

in

only gotten; rid of $100 of
capital item, but it also got rid
of about $80 : per share in back
dividends, and today Allegehany
Corporation has some bank loans
of about $24 million and has cash
against that of about $13 million
or

net debt of about $11 million.

a

Allegehany

cannot
pay
divi¬
dends because it still has a deficit,
that reason

and

for

the

corporation's

duce

its

ferred

capital.

stock

is

at

common

5

dividends

we

haps, to

then

debt,

cash

it

to

Alleghany
it had $80

and
pay

didn't have
its payroll

all tied up in

the
Guaranty Trust Company under
indenture, and they didn't like
was

an

me

so

money

they wouldn't give
for the payroll.

of

to

into

which
I

it

about

hope

we

want
we

great,

new

cause

the

of

in

era

chief

these

railroads,

railroads

to

keep

behind

got

I
a

incentive

Commerce

have

that
enter

to

be¬

which

companies' manager

Interstate

now

stock

if we
market

say

aoout

are

had

h

entitled.

again

the insurance
ment

$30

that

see

common,

are

to

think

back

one

get the kind of rail

ever

to

there's

day, per¬
off those dividends in

pay

and

converted

into

convertible
and

on

share and

cash

we are using
earnings to re¬
The prior pre¬

us,

the

and

Commission

down

rates

is

that they
Island safely

now

the Rock

into the fold. So they won't be as
interested now in keeping rates
down.
So

I

look for

for

ment

pect to

the

be

better rate treat¬

railroads

and

I

new

when

era,

securities

trading
the

on

in

New

Stock

again

Exchange will
important feature.

an

ex¬

the railroads enter a

see

Greenbrier Hotel

sigh of relief when

a

the government came to us at the

into

1937

pur¬

that;

not

lot

Alleghany Corporation
When

100,000 and retired
660,000 shares of

its

of

part

its

shares out of

We heaved

Corporation

of it at a
prior preferred
purchased '29,000

good

a

but to continue.

things,

the
and

they tried it on me
they got licked, and every time
they made evidence for the SEC
and the ICC, and; that's why you
have competitive bidding rulings
today; not because of me, but be¬

great

any

us

beginning

,

of

"We want to
and

we

the

sold

a

it

and

War

buy it for
to

*

said

hospital,'.'

a

them

for

million and realized

.a

tax-wise

net return

about

gave

$6

thankful

us

a

million,
to

be

at

Incidentally, they didn't like me
same investigation

pressure

reminded

$3

loss which

of

and

we

were

of

the

hotel

out

business.
But

-

the end

of

the

war

the

the

because in this
I

he asked

President

me

with

Truman—

what I

railroad

said, "Open it

up

was going to
finance, and I
to competition";

down there and I

Young,

tried it in
Union Terminal,

railroad

or

Union

Cincinnati

in

time

York

Greenbrier and

under

they

Louis

St.

every

give

down to his office next day,

"Mr.

.

Alle¬

I'll

covered

ghany Corporation
Plate

Sea¬

men

said,

up

job."

a

price

have

who will have to give

sioner, discussing railway

less than carload lots and this

tried. it

Terminal;

you

Mr.

Commissioner

I'll

Seaboard,

and

on

us

gentlemen

you

Two weeks ago I was down with
an Interstate Commerce Commis¬
express

us

show you a cost of transportation
that
will
amaze
you
and
will

do

Railroads Need Living Wage

like

fellow

a

hearing

I said, "You'll
there—let him

tral, and then if you will give me
the Rock Island, and the Southern

were

think

on

been

hearing, while

will give me the New York Cen¬

on

did, under insurance company in¬
fluence, and allows these railroad
reorganization. plans to go
they

Bowman,

Stock Exchange--

when that industry sits back

think

oanker

Life

had

Central

York

interlock—but

opera¬

out every month. You
the property.
You can

around in

today

Erie

in¬

Mr.

Board

Haven

the

approved without

board

come

They brought all

Railroads

for

measure, see how much cash

lawyers of the Association of

American

"natural"

a

equipment; if they




New

on

"If

to do about it."

going to

as

I said,

Street, and
great and honor¬

a

ful

are

the

on

well

as

down."

of Wall

proud

and

Rock

to .sit

then

railroad

that the

him

terlocking
application
of
Hagerty of the Metropolitan

and

to rate of return.

comes

property of the
Island, together with $80,000,000 of cash and $65,000,000 in

of

I reminded

and

to

They tried to get into the Erie
and

has

months

There is the

fair

a

stock,

which

of private

the railroads up, and our Supreme
Court backed the
railroads up,

$400,000,000

,

bonds

circumstances.

Of

Church

Trinity

River.

the

get

can

those

premium.

historic

enterprise.
It is rendering the nation d great
economic service, for a very in¬
adequate reward. They are just

like

The

one.

and

we

important

you

of

possibly live."
said, "Well, Mr. Commissioner,
that's why we are down here with
an
application to acquire control
of it. But I suppose," I said, "that
you're going to turn us down.
You're going to debate oyer it for
six months and turn us down,"

was

Street

sell

I

our

have

Commission
and
to
approved by the
the
being in the public Supreme Court, that we had $500,just two or three 000,000 ready to put up to replace
years
later
those
Rock
Island every Pullman car in the country.
bonds were wiped out, as
being And do you know that Mr. Gurley
excess.

that

analyst.

vestors who dug up the good old
hard cash to buy them, and those

interest,

is

than their stockholders.

insurance

'29, but in 1930—they sold these

Commission

with

I

interest in the air

lines may have more influence
with Mr. Clement and Mr.
Gurley,

the

jail.

were

that

thing

ested in the railroads because

ible bonds—not in

ers.

only

The Work of Wall

that

you

Because, the Rock
Island sold $30,000,000 of convert¬

bonds

the

again,

reconcile

can

Well, that was mysterious and
strange. I have tried to reconcile

.

convertible

in

books valued at nothing.

the Interstate Com¬
Commission
and
the

in

Now,

what

Island

be

ordered in the last 12

were

oncile

Supreme Court have
all

kinds

months.

and

York Central can't'

open

if I had done to the5

or

companies,
merce

service

ten years ago, and stands on their

his capital

a

So, now, I should

because

cars;

isn't

rate increases.

gentlemen

rottenest

around

making

now,
on

the

world

those

although he
is
big campaign all
the country against railroad

running

it's

months, and I have been advised
by the Pullman Company that the
most profitable runs they have are

security holder."
all, look at my Board of
Directors here. They are big
ship¬
pers," — Mr. Z [name omitted

now

can

March, and
I do know that we are turning
people down every day who want
to go to Hot Springs, because we
do not have sleeping cars; yet,
only 112 passenger cars of all

world

yards, to discourage them—within

say

does

out

the trains

up,

dirty.

so

the first week you

After

by Editor] right
only earns 40%

is worried how he

bring

hotel to clean

reservation

railroad

poor

Now, I do know that Mr. Bow¬
man

most

the

for

you

And

what

-

make?

cars

York Central

a

revenues."

O

&

siuuife -on ujarus ana uepiing witp
themselves, because.,I don't think

York

told

they

thought, and I still think, that the

them

Editor],

are

cost in increased

Now, there's two things that I
want to make very clear, and one
of those things is that I also have

and

behind the

scenes and sit down with a Com¬
missioner who says "Well, so and

just

the

its

Greenbrier Hotel next

and this

—

that,

—

Now, what happened?
When
through trains were established—

Interstate Commerce Commission,
and

that the

of the New

him there's
So I said to the Commissioner,
in the coun¬
"Well, Mr. Commissioner, if you
try to take care of 133 railroads, had taken our
$500 million you'd
and that they also told him that
have cured that situation." "Well,"
the Pullman Company was then
he said, "I'm dreadfully disturbed
furnishing only one car in three about the New York Central be¬
for requisitions which were com¬
cause .the cost of labor is
such
ing in to them.
at these terminals that the New
cars

only 26 bedroom

lines than there is in the railroads.

were

to

put

and

bedroom

some

to

shipping

Mr.

others

ice

for

do

public
didn't want through service; that
passengers, when they got to Chi¬
cago, preferred to get off and go

Mr. Y
and

could

is

Los

the
Pennsylvania,
the
Central, the Pere Mar¬
quette, Seaboard and Florida East
Coast—every one of those trains
has, within a few years, paid back

uo

there is greater

the stand and testified that

on

wouldn't pay;
is under oath

endangers
our
personal
safety is that the boards of these
interests

he

world

Central,

the new railroad
—Pullman Company—to see what

through-passenger service

which

railroads

been

the

'Frisco and

Morgan

of.

the board of the

on

and the first time we had a

Illinois

see

got

why this

reason

rate

to" Chicago to

in

that's true also

of traffic to Florida this

and the President of the Atchison

Directorships
Now,

care

winter because he'd just

million

sense.

those

vocal, and

are

they

dollars to get that board of direc¬
tors.
Nothing
else
makes
any

these

for

that

that he didn't know how
world they are going to

the

But

that

gloomy.

the insurance companies and their

to make that

agent of the Florida East
Coast came in to pay his respects
and say

train

between

one

House

the

cause

wanted to sit

Angeles, the Southern Pacific day
train, which nets, or grosses," $8
a mile, and costs $4 a mile. Every
new
train
that's
gone
on—and

and the. local pas¬

damage,

tion

lous

•

passenger
cars
month ago I went to

A

banker sib-

a

ting on .a board.of directors of a
company
and selling bonds to

first

system.

the

that

is

reason

same

have com¬

we

himself, and that is wny you have
competitive bidding. It was be¬

New

a

.

reasons.

reason

petitive bidding..
i am more, against

you

35%'," "Well," I said, "Mr. Com¬
appreciative of that!
missioner, we were down here
depression,,
what is going to happen in the Inadequate Passenger Equipment , last year to offer you new equip¬
Since the war, or since v-j uay, ment; and every place you. turn,
next depression?
You have only
you, more important to our na-.
wnere
mere
is
new
equipment,
tional defense than the Army and got to have such a principle ex¬ there have been 2,000, passenger
ercised through two depressions, cars ordered, of which 1,000 are those passenger trains not only
the Navy?
return
their
out-of-pocket, but
until you have wiped out the capi¬ Pullmans. In the last year there
Well, 1 can give you several
they return a big profit. The most
talistic
have
been
112
this

in

that

do

industry tnac is, as my friend,
Captain Holmes here will also tell

the

that's!

years.

the

junk lor the next five
years because Mr. Gurley

ten

three

give them

living wage,
there's a lot you can do aoout it.
But he said, "Let's just take the
passenger business. The trains on

to ride iri

tion

(Continued from page 12)

for

Thursday, November 27, 1947,

that's
trouble

Lamont

when
with

I

the

had

one
was

of

his

called

to

and
have

Guaranty

Trust

began

the

on

C

&

O

was

so

great from its operators and from
government of West Virginia

that it

was

compelled to take thd

hotel back, rather than see it pass

into

other

hands, and it

was

ref

acquired.
It is being refinished on a very
expensive basis, as anything is
that's done these days, and
we

hope

to

see

it

the

finest

resort

Company.

hotel in the world. But the returp

Now, I'm not for competitive
bidding. I'm against competitive
bidding, but there is something

it will show to the C & O will be

else

that

I'm

more

against,

and

mostly indirect, in that we will
something to offer there to
coal operators and others along

have

Volume

Number 4650

166

COMMERCIAL

THE

The State of Trade and

the Norfolk & Western can't offer.

So, it may look like an expen¬
operation in some respects,

sive

but I think, on
the fact that

WHOLESALE

DAILY

the line which the Virginian and

35

(2191)

CHRONICLE

FINANCIAL

&

INDEX

COMMODITY PRICE

SHOWS STEADY RISE

industry

balance, in view ox
every
railroad is
public institution,

rise in
compiled

price level continued its slow but steady

The wholesale

The daily wholesale commodity price index,

the past week.

(Continued from page 5)

only slightly
forced to clear their books of all promised tonnages which cannot
under the post-war peak of 293.56 registered on Oct. 23. The latest
be delivered before Jan. 1.
more
or less a
Some segments of the automotive industry are claiming that figure compares with 289.17 a week ago and with 240.15 on the corre¬
as
far as certain aspects of its
sponding date a year ago.
many of their parts-makers are not receiving enough steel with the
service are concerned, I think we
result that auto firms in some case are being forced to supply steel
Leading grain markets scored further advances last week
just have to look upon that as to their
parts-makers.
On the other hand, other steel consuming
although price movements were somewhat irregular and volume
part of the C & 0 service, just
by Dun & Bradstreet, Inc., closed at 293.10 on Nov. 18,

The

Let

tell you about

me

situation

a

Seaboard.

delphia where demand is still strong the average price of heavy
melting steel is up 50c a ton, while the important Chicago district
reflects no change. "The Iron Age" steel scrap price composite is off
67c a gross ton this week and now stands at $40.58 per gross ton.

today it has $60 million of cash,
value of its bonds

and the market

is probably less than the
its cash and equipment.

value of
So that
when you buy into that situation,
you're buying the railroad for

and

Missouri

Pacific,

others—Florida

and

East

1947.

96.3% of

This compares

week ago, 97% one month ago and 62.8% one year
ago. Current operations represent a decrease of 0.7 point or 0.7 %
from the preceding week.
The week's operating rate is equivalent to 1,685,000 tons of
97%

one

also

month

a

FREIGHT

RAILROAD

com¬

CONTINUE

LOADINGS

trading.
prices which followed the gov¬

forecast for this year's crop was well
maintained during the week with values holding within a com¬

SEASONAL

paratively

LATEST WEEK

DECLINE FOR

paratively
cheaper
now
than
Pennsylvania, Central and Nickel

reported

ernment's unexpectedly low

and 1,106,800 tons one year ago.

ago

were

The initial advance in cotton

last week and

steel ingots and castings compared to 1,697,400 tons

buying of flour, after a lapse of several weeks.
over a large part of the Winter wheat belt in the
latter part of the week and tended to hold advances in check.
Strength in corn reflected active commercial buying prompted by
cold weather in mid-Western producing areas which may increase
tion of government

Rains

ward in active

few

a

Coast,

of the industry will be

capacity

steel-making

to decline.

displayed marked strength aided to a large extent by
buying stimulated by continued CCC wheat purchases, and a resump¬
Wheat

feeding requirements and tend to restrict marketing. Oats advanced
aided by government buying, small receipts and reports of heavy
farm consumption. Domestic demand for flour continued at a low
level with buyers holding aloof pending developments from Wash¬
ington. Hog prices were steady although receipts continued heavy.
Cattle prices strengthened at the close and lard prices moved up¬

of steel companies having 94%

operating rate

capacity for the week beginning Nov. 24,
with

Island

Rock

and

the

week

the

of

railroads in the country, and most
of them are in the reorganized
Seaboard

Monday

The American Iron and Steel Institute announced on
of this

nothing.
j
Our analysis shows there are
three or four outstandingly cheap

field.

driven

has

much like
think, even

very

the Rock Island, and I

of trading in futures continued

prices down at Pittsburgh where the average price of
No 1 heavy melting this week has declined $2.50 a ton. At Phila¬

The Seaboard Air Line

It's

squawking about auto firms getting too much steel.
general boycotting of high scrap quotation by consumers

groups are

like its dining-car service.

narrow range.

sales in the 10
the week, from
313,500 the week preceding, and 120,600 in the like week a year ago.
In addition to the low crop estimate, the market was stimulated by
sonal^ decline in freight traffic and observance of Armistice Day. heavy rains and frosts in parts of the cotton belt, a strong demand
again, in one of these non-stock¬ They* also represented a decrease of 38,787 cars, or 4.2% below tne for cotton textiles, and the continued high rate of domestic cotton
holder managements, I would be
corresponding week in 1946, but an increase of 77,803 cars, or 9.7% consumption. According to the New York Cotton Exchange Service
very enthusiastic about, but there
above the same week in 1945.
Bureau consumption during October rose to approximately 825,000
is a voting trusteeship there, and
bales, as compared with 727,000 bales in September, and 931,000 bales
ELECTRIC OUTPUT AGAIN HITS NEW ALL-TIME HIGH
Loadings for the latest week Nov. 15, 1947, totaled 878,337 cars,
according to the Association of American Railroads. This was a
decrease of 31,823 cars below the preceding week due to the sea-

Plate, and other eastern railroads,
which even so are very cheap now.
The
Seaboard, if it weren't,

the stockholders have
I

talked

the

the

with

Seaboard

interest.

no

President

within

last

the

in October last year.

of

take

some of that $60,000,000 and
buy up those 4l/2 % income bonds
selling at 62; those income bonds of
are a

electrical

the electric
light and power industry for the week ended Nov. 22, 1947 was
5,180,496,000 kwh., a new all-time record figure, according to the
Edison Electric Institute. This compares with the previous high of
5,084,340,000 kwh., reached in the preceding week, and was 8.7%
The

six

months to try to persuade him to

the Seaboard

Inquiries were more numerous and volume of
spot markets increased sharply to 342,100 bales for

in

far better bond

the

of

excess

last

of

week

of

amount

energy

distributed

by

kwh., produced in the corresponding

4,764,718,000

"

year.

Demand

attendance

the

at

road

bonds,

the

on

York

New

bidding

prices

and

on super

to

United

States

week's

recdrd

in the railroad panic we had

motive

point

last

fall,

couldn't

I

ago

year

a

persuade that management to
in

and

think

buy

that

those bonds. Now, I
just injuring the

I

can

Another
which

understand

thing he
as

can't afford—he

was

road

you

or

9%

If

buy

equipment

on

fi-

for

it

appealed

to

ought

and

to

that's

voting

trusts,

companies,

and

companies to set

ing trusts,
juring

I think

you

system

our

enterprise, and

as

vot¬

up

were

of

much

in¬

I love

Wall Street, I love private enter¬

prise

Financial

j

losses
lor

of

a

than

more

sented

a

than

Co.,

647

members of the Los Angeles Stock

a

with

mild

1946

Of the 64 larger failures, 10 involved
including one enterprise failing

million

decline

Fifteen

dollars.

losses to

small

concerns

LAMAR,
Reel

is

The

Financial

COLO.

with

Street.

He

bakery products.
Winter clothing attracted very

from

the

previous week's total of 18.

liability class accounted for only

failures, it showed

a

fifth of

an

Lacy lingerie, hosiery and jewelry were

irons occurred in many areas

Retailing and manufacturing continued to have about an equal
of failures, claiming 33, and 30 respectively.
In wholesale
five. The mild decline in failures in the week just ended

manufacturers and among construction con¬

The second largest, occurred in

of the week's decline

North

Central

week

was

the Middle Atlantic States.

concentrated

in two areas,

the East

In all other districts, business failing

States.

was

Retail volume for the country in the week
a




Wednes¬

a

moderate rise in wholesale volume last

week with

moderately exceeding that of the corresponding week
a
year ago. Subustantial quantities of most types of merchandise
were purchased. Optimism was prevalent among buyers and the sup¬
ply of some items remained limited but adequate stocks of most
goods were available. Deliveries were generally prompt.
Department store sales on a country-wide basis, as taken from
the Federal Reserve Board's index for the week ended Nov. 15, 1947,
increased by
with

an

11%, from the like period of last year.

increased

This compared

the four weeks
sales increased by 10% and for the year to date

increase of 10%

ended Nov. 15, 1947,

in the

just ended either increased or held steady.

was

in the preceding week. For

by 8%.

Christmas shopping here in New
to stimulate retail trade to

a

York the past week served

greater degree and resulted in de-

week of 1946.
reached its peak
and statements to the effect of a possible return to price control
failed to serve as a deterrent to buying, it was reported.

parement store sales rising 5 to 10% above the like
FOOD PRICE INDEX REGISTERS FURTHER ADVANCE

The

&

Dun

Bradstreet

wholesale

food

price

index

In wholesale

showed

a

According

bringing the Nov. 18 figure to $6.95, from $6.89 on Nov. 11. This
gain of approximately 1.0% in the week, and is only

chief

a

function

of

with $6.49 last year, an increase of 7.1%.

the

index

prices at the wholesale level.

is

to

show the

The

general trend of food

garment centers buying activity

to

the

Federal

store sales in New York

an

Garrett-Bromfield & Co.

on

retailer buying

rent index compares

West

ended

were

week ago, was estimated to be from 11 to

increased 10%

111

equipment,

15% above that
of a year ago. Regional estimates exceeded those of a year ago
by the following percentages: New England 9 to 13, East 10 to 44,
South and Middle West 8 to 12, Northwest 11 to 15, Southwest
day,

2.4% under the all-time high of $7.12 recorded on Sept. 16. The cur¬

previously

hunting

quested.
Sporting goods, particularly
readily purchased in some locales.

There

trade, only six failures were reported, in construction and commercial

All

luggage especially popular. Lamps, small tables and small heaters
in large demand. A spurt in the buying of branded electric
with hardware and paints steadily re¬

were

Eugene
a

in

15 to 20 and Pacific Coast 6 to 10.

number

ago,

T.
securities

favorable attention last week.

women's coats and suits increased and interest

both men's and women's shoes also sold well.

represents

.business from offices at

Olive

with the demand for coffee steady and at a high level.
was
reported in the volume of confectionery and"

increase

Chronicle)

—

engaging in

sugar

went out

creditors of less than $5,000; this repre¬

further moderate rise last week following the sharp uptrend a week

to

and

Some

$5,000.

He was formerly with
First California Company.

E. T. Reel Opens

be

and

exceedingly sharp upswing from
when only three small enterprises failed with losses under

the week's

Exchange.

(Special

large demand. The supply of fresh vegetables and fruits con¬
to be plentiful and purchases of poultry and fish proved to
substantial. Housewives increased their purchases of canned goods

The buying of

$100,000 each,

'

Maxwell, Marshall &
South
Spring
Street,

current survey of trade.

tinued

the total

two-week increase, commercial and industrial fail¬
in the week ending Nov. 20, reports Dun &

While this small

Chronicle)

nected with

buying the past week. Retail

moderately above that of the preceding week and re¬
excess of that of the corresponding week a year ago,

little

a

more

business

failures.

LOS
ANGELES,
CALIF.
—
Martin S. Stout has become con'

the
in

Geographically, the Pacific States continued to have the most

Maxwell, Marshall

rose

mained well in

very

cerns.

Martin S. Stout With
The

96,454

figures show 4,472,548 units produced in the year to

occurred entirely among

to

year

both large and small
failing with liabilities of $5,000 or more dipped
week to 64 this week, about three times the 21 reported

service only

more.

(Soecial

comparable week last

In the

in this size group a year ago.

private
as

volume

Holiday gift buying was considerable and consumers purchased fairly
liberally with insistence on quality continuing to be stressed.
A slight increase in the purchasing of food occurred the past
week. Dairy products, frozen foods and utility cuts of meat were in

Business

from 66 last

when

gentlemen, allowed those in¬

surance

declined

failures.

of

why I think when the

insurance
you

have

j

fel-1

lows, and that's why I don't think
we

passenger

ing week of any year since 1942.
The week's slight downturn appeared in

when
It just

those

promotions and generally favorable

in large demand and
The volume of men's
jackets, suits and sweaters too, was substantial with a marked in¬
Bradstreet, Inc. Concerns failing numbered 79, against 84 one week crease in the buying of overcoats. Purchases of men's heavy under¬
ago, but over three times as many as the 24 in the comparable week wear and
gloves held up well.
of 1946. They also exceeded the total registered for the correspond¬
Consumers sought Christmas gifts of all types with toys, cameras
Following

ures

41/2 %

that,

finance it at 2%?

The combination of seasonal

weather helped to encourage consumer

BUSINESS FAILURES TURN SLIGHTLY LOWER

(

why

so

your

didn't appeal to me, as an analyst,
But

82,029

present pace of more than 22,000 daily continues for the

the

ABOVE

furs continued to improve.

income bonds, and take cash and

you can

were

remaining 26 working days in the year, stated "Ward's"
should easily pass 5,000,000.

&"o

can

equipment for 2%,

7%, 8%

week

Canada.

cash for his equipment. Well, now,

pay

last

paying 100%

you gentlemen know,
nance

for

date, of which 3,127,311 cars and 1,112,524 trucks were built in
United States, and 147,990 cars and 84,723 trucks were made
i

the C

as

total

completed.

doing—

was

rich

a

it.

the

were

voting trustees have the money in
some
bank, or what. I just don't
I can't'

according to "Ward's Auto¬

produced, while in the corresponding 1941 week 80,820

Cumulative

in grade.

TRADE MODERATELY

according to Dun & Bradstreet, Inc. in its

in

were

know. I don't know whether those

know.

units,

110,663

24,269 trucks made in this country and 3,885 cars and

and

1,054 built in Canada.

is that—well, I just don't

see

of

output

units

stockholders, and the only reason

postwar high

Reports."

cars

was

a new

Canadian

and

Included

go

attained

turning out 111,228 cars and trucks in the
plants.
This surpassed the previous

production b,y

in

security, they constitute a
mortgage, virtually, of the
Seaboard. Yet the management,

wools 58s and above

AND WHOLESALE

WEEK AND YEAR AGO

The automotive industry last week

first

even

RETAIL

POSTWAR HIGH

Stock Exchange selling in the 90's
and 100's, both as to earnings and
as

ESTABLISHES NEW

PRODUCTION

auction

wool

volume of sales were disappointing. In foreign
primary markets prices remained firm. Buying in Montevideo was
said to have slowed down as a result of recent increases in asking
but

than any—than most—bonds, rail¬
AUTOMOTIVE

Boston market remained ac¬
offerings. There was good
sale held in Boston on Nov. 13,

for domestic wools in the

tive but volume was small due to restricted

above the same

increase of 5% in the

Nov. 15,

10%.

Reserve

Board's index department

City for the weekly period to Nov. 15,

1947,

period last year. This compared with

preceding week. For the four weeks

1947, sales increased 18% and for the year to

ended

date rose by

36

(2192)

THE

COMMERCIAL

CHRONICLE

FINANCIAL

&

Can We

The Progress
(Continued from page 15)
me

arbiter.

as

that

there

and

is

But

I

line

a

do

tion,

believe

of

approach
method of procedure anal¬

a

to

ogous

those

we

use

of Economic Reconversion

debt

to

to

power

and

cause

get

this

burdensome

becomes

now

like

the

on

whereas

boom

a

out

the

make

of

balloon¬

prices

soar

that threatens

hand.

However,

materials
that

from wage increases
stimulated by advanc¬

or

were

there is not, in our present situa¬

ing living costs.

tion,

the

have

an

had from methods followed
since V-J Day.

This approach is in full accord
/with the American tradition of
free enterprise and the business
tradition

of

manage¬

of science and

use

engineering techniques.
It
in¬
volves a change in the form of the
question asked
economic

the basis of

as

an

decision.

The question
What will give my
company or my union or my agri¬
cultural unit the
biggest gain. in
to

ceases

"some

is

be:

question

becomes:

of action by

course

by

my

man

or

debt

It

is

and

up

to

organization puts

the question thus there is the

un¬

spoken premise: Only by promot¬
ing the largest and best sustained
national prosperity can I have the
best market in which to sell

lines"

our

and reorganize our economic forc¬
es

so

to continue to

as

Many of

us

accept

personal

sacrifices

to

are

will

have
if

to
we

accomplish that end.

Turning from'the
tic

for¬

move

ward.

monetary

demand

to

the

ac¬

companying
situation
of
short
supply, we must recognize that
this tightness was in part relative

ated

of

Act

1946

ation

of

course

vorable

certain

iting factors that
in

from

came

unfa¬

conditions, the for¬

crop

from

mer

industrial

lim¬

had not fully

we

advance.

It

is

which

this

liver

to

American

that it has proved

say

by the end of 1947

the

fabulous

that

had

we

to

de¬

quantities
rather

of

debo¬

ments

embodied
Act

in

states

•

a

the

This places ini¬

responsibility upon organized
industry, labor, and agriculture

themselves to make those internal
adjustments of price, wage,

profit,

investment, and

spending

which

consumer

will

provide a
■naximum number of "useful em¬

ployment opportunities, including
self-employment; for those able;
willing, and seeking to work" and
the
capital equipment whereby

their
that

labor

is

made

efficient

so

high employment level

a

sults

in

But

"maximum

the

act

clear intention of
lic enterprise to

re¬

expresses

longer

a

or

employing pub¬

all the

promote the ob¬

force

and

our

of

use

plant

our

and

that

the

has

been

for cats

the

and

automobiles

had

were

need.

a

two years also

natural

doctrine

all

people

anyone

labor

In these last

have taken the

we

of the

measure

This, too, is traditional
American
doctrine, although our
of

have

clamoring for,
and all the refrigerators
and other
household equipment for which

resources.

practice

it

steel needed

locomotives,

unwilling to make ade¬

quate productive

would

run

desirable—to supply immediately

jectives of maximum production
when or to the extent that
private
business
enterprise
finds
itself
unable

inadequacy of

our

scrap

iron supply after the attri¬

tions

of

year

after

not

the

yet been sufficiently perfected to
Iiave
prevented
recurrent
and

highly

sometimes

war

period to

meet

demands

year

of

economy.

lengthy periods when

This

both human and
capital resources
ran
to waste in
large quantities.

From the

office
local

the

school

grant colleges,
der

we

"mixed

a

passage

district

to

the

conditions is

shortages

tude

un¬

I

to

ideology but

been

pragmatists

land

to

of

get

things

done

rich opportunity

age of expanding

in

and

a

an

opportunity, and

to preserve the freedom of action
of the citizen as well as the busi¬
ness

enterpriser in the
things — large

getting

of

process

should

cause

In

all

ap¬

this,

for

of

encouragement
dismay.
It has re¬

that

stimulate

demand.

and

This

guide

our

long-run efforts toward supplying
it. The fact that there is still so

Inflation Problem
The

particular purpose we are
trying to accomplish now. is to
from

the demand.

of

see

direction

things—

done.

much of

a

backlog after

two yeahs

of

high production gives ourv injhigh J^AVMUVUW
productive
fdm
tempo rvf war +« piicIfiinnJ high dustrialists confidence iri their
of
to sustained
T",;v',/vc 111
production in peacetime. In doing planning for the future, and this
So,-we are faced by two difficul- confidence is being reflected right
ties which test our ingenuity and
both in their words and
and
move
^

r»r»

the

wot-

,

our

power

group
4?rfli4-

-

of

self-control

discipline—easy
rfA/-t/4n

TA

and

year, two years,

•

*

-

gigantic public debt because
keeping out of debt would have

4i

-

deprived

of the necessary in
get maximum produc-

us

centive to




-

-

We

can

stars that bad weather did not hit

right in the midst of the
We can hope too that

us

effort.
if

have

we

bad

weather

in

war

fact

have

we

is

that

to

a

and

temporary

shortage of food will
permanent and to some ex¬

tent cumulative

dustrial

effect

situation

High

economy.
costs

the

other

the

leverage
point for wage
increases, and
these increases, as we well know,
have a very persistent effect on
productive

costs

and

the

whole

price structure.
Decries Laissez

Faire

disastrous

will

limits
the

to

require the

eration

in

to

that

be
are

economy?

utmost

mod¬

those

places
where
either goods or services are
in
short supply and monetary de¬
mand is strong. It will require ac¬
ceptance of the fact that consum¬
cannot have

ers

as

much food and

high quality food for the same
price or the same percentage of

as

their

incomes

in

of

years

poor

that they do in years of
bumper crops. The use by any
group of its economic power to
keep its standard of living posi¬
tion unimpaired in time of physi¬
cal
shortage simply means that
they secure their own exemption
from deprivation which must be
crops

borne by someone.

No amount of

(Continued

that
the

previous high rates did. It is
quite likely that the same result
would

old

demand."

are

"law

of

supply

be

It could

counted

adjustments under which;

and
on

will

we

continue to work ■ and to buy' in
the market and to save and to in¬
vest

all

lated

in

to

needs.

amounts

properly re¬
complementary

their

But the level

stabilizes
duction

and

the

which

at which

levels

we

of

have

be

produced

today.

it

pro¬

during

adjustments.
the

Employment Act of
1946, the country is now being put

positive

we

are

program

wise,

prevent
the
disastrous
swings of boom and depression.
We are meeting this test, not un¬
der the
expected conditions of
supporting the economy against a
demobilization

I

ployment

and

crisis

of

recession

in

Everybody' is - pressedto
meet his obligations, apprehensive
to what

some

some

may

happen,

assurance

promise

of

allowing

a

venience to

our

uncontrolled into

run

sweeping disaster.
Fate has cast the

United States

role in world af¬
fairs at one of the crucial mo¬
ments of history.
If we are to
serve the world well in this time
for the leading

need, the first requirement is
we keep ourselves economi¬
cally strong.
This means keep¬
ing production high, credit sound,
price
and
income
adjustment
of

that

operative needs of

geared to the

held tenaciously

the economy, not

arbitrary demands of any

the

to

individual

or

group.

eager for

* from

outside,
security. They

find it easy to accept and comply
with support measures.
But sta¬

13)

exemptions is great, for

in

crease

all tax payers are

affected.

—

With

under

as

kind,

such

a

tax

and I regard as
put through in a

you

be

can

or

democracy all able-bodied

citizens

be called upon to fight to
support and maintain our govern¬
ment in time of war.
Should not
may

all citizens with incomes, at

least

above

question.

level, pay direct taxes to support
and maintain our government in

Certainly

choose such

would
best

time

for

none of us
year as the
consideration

a

calm

subsistence

minimum

a

times of peace?

of individual income tax.rates and

The fact is that exemptions have
exemptions or of technical amend¬ been
severely reduced and rates
ments.
Nevertheless, 1 there
is
severely raised during the war
clearly a strong will in Congress
years
since
1939.
Previously;
to do the job in 1948.
Since rev¬
during the 'thirties, exemptions
enue revision is badly needed, you
were not much changed, but rates
and I ought to do what we can as
were
steadily raised.
Hence, in
sitizens to bring it about.
beginning an approach to a more
norhial peacetime tax system, it
The 1948 Revenue Bills
would seem just and wise to raise
It is likely that there will be
exemptions a little and to reduce
two
revenue
bills in 1948; one
rates

dealing primarily with rates and
exemptions, one primarily with
amendments

to

the

tax

structure

injustices and restric¬
the proper functioning

remove

tions upon

Probably, tax
reduction will largely be limited
to the individual income tax, plus
perhaps some of the excises. The
corporation will only benefit from
our

economy.

adjustments to the tax struc¬
Such

ture.

is justified
corporations have had a
major tax reduction since the war.
a

program

because

the

repeal

of

the

excess

profits

tax; and individuals have not. The
tax

unem¬

but

tion.

as.

resentatives

private

our

public rep¬
impose, we shall be
small present incon¬
or

Presidential election year is a nice

the
meas¬

to

of any

gram

of

of taking

that

measures

increase

for the Federal Govern¬
Whether or not a tax pro¬

posals

deal with all the component local

ures

control

organizations

We

the incentive of more pay to

ment.

to

to its first test of whether

any

$5,000, we cannot afford to
exemptions
much,
at
If you have followed me thus least if the income tax is to con¬
far, you can join with me in fill¬ tinue to be the mainstay of the
ing in the details of my tax pro¬ Federal revenue system.
In a

that process and afterward depend
in significant degree on how we

Under

and

with

scrupulously

comply

government costs what
will have the revenue to pay off
they are now and are going to be
enough of the debt to demonstrate for some time to come, we cannot
that we regard the debt as a real afford
to
reduce
income taxes
obligation
which
we
mean
to much.
Moreover, since the great
discharge; and also to give all bulk of the income stream flows
sorts and conditions of working to
taxpayers
with net incomes
men

Policy

ready to urge
leave the whole matter to

we

bad

program

conservation

food

from page

the

take home after taxes.

Many people

partici¬

do not

we

Prospects for Tax Cuts' and
Inequities in Tax'Laws

in¬

whole

and

meat

becomes

the

on

and

within

confined

It

potential

If

pate vigorously in the voluntary

1948,

and relative
have

our

writing up of incomes will undo
the effect of flood, drought, frost
and disease.

even

meet

the

exercise the re¬
individual and
that will permit

we

upon

group
actions
the inflationary
not

Restraints?

reduction b:ll will, of course,

have

across

more

ther board.

The reduction

in dollars for the

tax

judgment, the whole sur¬
should

schedule

rate

vised if

dream

that

a

boy can work his way to
and that he should be

do

so

re¬

country

the top,

encouraged

The present scale is so

so.

steeply
are

be

still believe in the old

we

American

to

w'

——1

—-»•»

*

vv

-

little.

a

In my

graduated and the rates
high that added work and

accomplishment
warded.

The

are

surtax

not much re¬
rates on the

higher incomes produce little rev¬
but they do discourage risktaking and endeavors to advance
in the business world. In general
enue,

there

is much to be said

for the

proposition that, in normal times,
a

man

more

should not be asked
than

share

his:

to do

income

equally with the government. A
thorough revision of surtax .-rates
perhaps cannot be done in T1948,
but surely a start can. be made, by
some percentage reduction of'Sur¬
tax

i

rates.

Another

plan

to

r >

increase''the

big income taxf
thus much greater than

equity of the individual income
tax
is
ta permit husbands and /
the-I wives in the rton-community prop-*
small; tax payer, but only because
erty states as well as in the Cofri-*
the
former' Started
off with
a
munity property states to cdmpute
much heavier tax burden than the
their; respective -taxes by fifst di? 1
latter. - 7
•
- viding their/total income evenly
An
payer was

the

reduction

in

dollars

for

,

bilizing measures in; a boom are
alternative method of in¬
something quite different/ They
between themselves. Surel^there
come tax reduction would
be an
is no sufficient reason for taxing
suggest restraints at a time when
their actions.
increase in exemptions.
j everyone is
The efr a man
confident, ready to
earning $50,000 in Califor¬
But these! limitations on TJT10 take a
mcbC;
III III Let LIU I lb
Oil
the
chance, impatient of any¬ feet of such a procedure would be nia ' 6r Texas $6,194' less , than a
short-run expansibility of a
sup- thing which, seems:to chill a pros¬ first to eliminate millions of
taxf man with- the same/income, in
~1"
Illinois. With; tax rates so high,
ply of consumer- goods, aggravated pect of profit. But it is just when payers from the tax
rolls, and
as it was by numerous work
stop- confidence outruns prudence that
feus from direct tax responsibility injustices:ofr this sort are intoler¬
pages,'has tended to
restraints should be introduced
oyillV/
able, arid there is every reason to
keep; sprne
inflationary pressure on in the in- from outside, since they cannot be to the government.
Second, the believe that they will be remedied
dustrial market and to make it developed from within.
revenue cost of even a slight in¬
next year. Since the dollar bene-

money aiiu
and
iityixvj

tight, goods. ; It is rather .ironic
thatwe uou to win the war with
had vir.WAU tllC well WJLU1
mjiuv, WW

tem¬

a

whether
one
or an even longer
thank our lucky

Can

us:

straints

Exercise

the question is squarely

so

political repercussions
rather than
than the revision of the Code; and
the midst of a mounting strain of
vealed to us the tremendous size
I enter with great misgivings into
labor shortage, scarcity of goods,
of the market to be
this field of political prophecy.
supplied, year and a
price-wage spiral.
It is
in and year
out, under conditions almost self-evident
H.R. 1 and H.R. 3950, both ve¬
that any at¬
of sustained high
employment. It tempt to introduce stabilization toed by the President last spring,
has provided the
were attempts
opportunity for
to reduce the tax
policy and action meets its most
consumers to demonstrate and for
favorable response if launched in burden on individuals by a more
producers to measure the size
or less flat percentage cut in rates
anfi a deflationary or depression situa¬

We have

as

to be of

sure

character,

capable
the supply

on

peared only because of the magni¬

instead

trying

limiting fact

a

prosperous

the

not been rabid

have

and

land

from

have lived

system."

active

side was, as I
said, only relative.
The total amount of
goods has
been gigantic, and

inauguration of the post

and

have

but

war

its part was not able—nor in the

production."

also

adjust¬
to adapt themselves.

during the preceding to adjust
everything in due time
depression was somewhat longer if we
would just keep our hands
than we had
imagined, or at least off. It would, I
suspect, do so by
hoped, that it might be. The rail¬
giving us a boom that, feeding
roads had done a
phenomenal job on itself, went on till it burst.
of
stretching their equipment to Then cumulative
liquidation and
meet
the heavy drains of war
protective restriction of produc¬
transportation. When, with little tion would
bring the pendulum
time to reequip,
they were asked full stfing to a
depression prob¬
to carry the
gigantic peacetime ably worse than the
'30s.. To me
product of 60 million employed
this seems
too
crude
a
proce¬
workers, it was only natural that dure for a
people of scientific
the strain upon this hard-worn
training and business talent.
We
equipment should have become are
feeling our way toward a
manifest.
The steel industry on
workable set of price and income

compet¬

business

economic

our

porary

that the

period of making
up the deficiencies in producers'
and
other
civilian goods
which
had piled up not
merely during

The "dec¬

clear and unequivocal
intention to
"foster and promote free

itive enterprise."
tial

of

size

The unfavorable turn of weather

food

discredit

no

industry to

goods

policy"
of

the

surmount

tom is

2

determined

and

problem of economic readjust¬

our

nairly assumed would be available
by now. What this means at bot¬

Section

.

wheat, and, very likely, other
crops in 1948 which has really cre¬

diate

part absolute, in part an
to expand fast enough
part an arbitrary curtail¬
ment of supplies. The latter situ¬
in

ployment Act of 1946.

<

for

inability

This is an economic
philosophy
which I find embodied in the Em¬

laration

of

and

unable

Employment

of

course,

crop

other parts of the world will have
better conditions.
But the imme¬

realized

whether goods or labor
technical and managerial talent.
of

of

corn

and in

product,

Philosophy

It is,

reduced

this year and the dubious prospect

period.

factor of elas¬

my

-or

much

economic

subsequently to "rectify

What

tivity and the putting of this pro¬
ductivity on a sustained basis?
a

monetized

circumstances.

short of the point of disaster and

will

When

money

intelligence and our ment for the coming year and
integrity to "contain" that the inevitable consequences of
inflationary pressure somewhere the most awkard situations to

company,

or
my
argricultural
contribute most to the
enlargement of national produc¬

unit

large

a

our

union,

my

supply of
inescapably forces

us into
inflation of certain size. There
an
inflation potential created

other

relatively short-run period?

The

fixed

moral

analytical

ment and full

a

to

up

peculiarly susceptible to cost in¬
creases
coming either from ad¬
vancing costs of agricultural raw

technological or physical side of
this problem of
production which
promises better results than we

which

And

Thursday, November 27, 1947

.

■,;i,

Volume

THE

Number 4650

166

COMMERCIAL

&

FINANCIAL

CHRONICLE

(2193)

37
11

fit

1 mainly to persons

1 in

excess

flow
earning incomes

change

the

of

would

of $5,000, the

adoption

nate the double

tax

distributed

income
and to

as

the tax

ease

corporate

on

them

as

major

smooth

func¬

dividends,

matters.

small

tioning of. the revenue laws, in¬
deed their utility and efficiency
in raising billions of dollars fairly,
depends upon the justness and de¬
cent operation of just such sec¬

.

on

would not regard

cor¬

the

Yet

porations.

We hope that another

accompanied

by a reduction in
increase in exemptions
that will be beneficial primarily

result

our

rates

will

be

with

the

to

in the courts.

tions

Many difficult problems, both
of policy and of draftsmanship,

such

plan will doubtless be

a

or an

with

persons

under

incomes

I $5,000.
Improving the Revenue Act
duction

first

revenue

ond

which

bill,

may

act of 1948.

bill, in which

are

we

the

be
The

sec¬

more

of

revise

the

ample,

distributed

this

•

tributions

on

proposed by

individual and professional organizations. They have been widely
discussed

U

been

and

ments

There

corporate divi¬

shall

be

adopted?
un¬

profits
tax—let - the
deduct dividend dis¬

corporation

smoothly.
A vast number of amendments of
have

laws.

,

tration to function

sort

project to

variation of the old

a

able business and the tax adminis¬
more

on

Which

dends.

litigation

possible ways, for ex¬
alleviate or eliminate

to

act, to eliminate injustices, to
;

any

revenue

interest, may be the bill to im¬
prove the structure of the revenue
en-

by

the double tax
One is

controversies

Treasury and

several

are

recommendations

reduce

to

presented

are

So much for the income tax re*

News About Banks and Bankers

tem could break down because of

of
'

well

as

as

interest pay¬

itself pay a tax only
as it retains.
An¬

and

such income

other is the British scheme—treat
the
as

tax

paid

payment

a

these.

as

Our

revenue

sys¬

indefinite
been

future.

tax

going on for
of
testimony

posals and drafting the actual rev¬
enue bill is a staggering one.
The
Committee
done

and

valiant

the

work

staff
to

have

accom¬

plish it.

and

practical

than

either

of

the

other two plans.
Much

the

of

trouble

in

recent

sions that

seem

unreasonable and,

the

the

of

Fourth District, will succeed
George D. Crabbs, Cincinnati, O.,

investment

the

Clinton

of

close

Trust

business

industrialist and civic leader who
has been a director of the Federal

prior
Dec.

on

of

Reserve
Jan.

New

enue

will

laws

actually

❖

Amending Section 102

on

nessmen.

wrong,

If

the premise that the
we

are

member of the board of directors

Of

Special Tax

the

Federal

Cleveland

Reserve

honest busi¬
shown to

be

the country will be in for

ft
«

Board of Governors of the Federal

■•m

of the Mellon

National Bank and

Reserve System

Trust

Pittsburgh

Co.

of

the end of December it
in

the

of

Nov.

of

around

of

Melbank

to the effect that

Mr.

Cor¬

Millsop recently was elected
Mayor of the City of - Weirton,, ;
ty. Va. Chairman Brainard stated ^
that the directors accepted with

poration
The

at

and

group, has two offices.
main building will become

the.Oakland office and the branch
in

the Gulf
building, the Gulf
building office, of the Mellon Na¬
tional. Richard K. Mellon, Chair¬
man of the Mellon
National, and
James M. Boyard, President of the
Forbes
National, said J. Nevjn
Garber and Paul C. Harper, Vice-

regret the resignation of Mr. Millsop, who has Ibeen "a meiriber since
April 12, -1940. Mr. Brainard or¬
dered a special election to fill the?
unexpired term, ending Dec. 31*
1948, of Mr. Millsop, who is a
class B director.

have worked

it—men like Cordell Hull and

will be managers of the Oakland
and Gulf building branches, re¬

spectively. The Forbes National
was organized in
December, 1927,
with Mr. Mellon

as

the first Presi¬

William
Cashier
the

T.

Federal

Detroit branch

Chicago,

Trust

,

resources

600,000."
I The same
that

paper

"William

dent

of

the

E.

as
[ a, Second
Vice-Presi¬

dent the pres¬

further stated

Howard,

Braddock

urer

the gain
corporate property,
make" it,-difficult for business to whether preceded or followed, by
a liquidation, should be subjected
function r at its best/ Our recomto
only one capital gains tax,
men^tions«relative, to deprecia¬
tion,' Section 102, and pension and thereby eliminating .entirely the
stock purchase plans are, examples materiality of the issues of fact
which the courts have been trying
of our attempt to carry out this
not very happily to resolve.
We
purpose. - Second, we wanted to
eliminate serious inequities and have great hopes for both changes.

per share on the 625,000. common
shares outstanding, compared with

The amendments I have out¬
injustices. The tax load will con¬
tinue heavy for a long time to lined, plus the fifty others we
have recommended to the trust
come. Therefore we must use our
best: endeavors to distribute it provisions, the pension provisions,
fairly. So we have made recom- the estate and gift tax sections
mendations to improve the taxa¬ and so on, do not involve much
The
tion of family income, to elimi¬ revenue.
ordinary laymarf

change,




ther
on

a

recommended, that
sale

of

$2,277,605, or $3.01 per share for
the 1946 fiscal year.

of the

ent

Presi¬

Garvin, Bantel to Admit

Garvin,
Bantel
&
Co.,
120
Broadway, New York City, mem¬
bers of the New York -Stock

Ex¬

directors

Of the Federal Reserve Bank. The

directors,

larger

chosen
banks

member

Federal

rectors

since

change • s membership of HeriVy^S.
Allen).Jea v-»a; ' -:u« *i»
mov

Lurid,

a

o!'.

an¬

nounced.

Mr.

Cameron, who

,

has

been

As¬

sistant Cashier
of the Detroit

bank since

1941, was re¬
sponsible for
William

T.

Cameron

loans made to»
contrac¬

war

tors

trial
13b

under

Regulation V,

loans

.

of

made

the

indus¬
Section

under

Federal; Reserve

Act*
Regulation V/
from,1941 through 1944. In addi¬
tion, he was responsible for the
supervision of the Discount, Safe
keeping, Accounting, Credit, and
RFC Custody Departments of the
Detroit branch. A graduate of the
University of Illinois in Banking1
and Finance, Mr. Cameron started*
in
1929 with
the
Sibley State
Bank of Sibley, 111. In 1931 he was
appointed Receiver of the Melvir*
State
Bank
of
Melvin, 111. He
administration

started

with

of

the

Federal

Reserve

Bank of

Chicago in the Auditing1
Department in 1934, was trans¬
ferred
1936

Detroit

the

to

in

branch

supervisor of audits, and

as

made Assistant Cashier in 1941.
*

The

Federal

Bank announced

serve

that in
that

elected

as

Bank of

the

J.

Re¬

Nov. id

following

werCf

directors pf the Reserve

Minneapolis to serve for

three-year

Jan. 1,

on

election which closed

the

day

the

*

Minneapolis

term

beginning?

1948:
R.

McKnight,
President*
National
Bank,
Pierre,
S. D., to serye as Class A director

Pierre

board of directors of the Peoples

Barik

i

Di¬

by
in

First National Bank and Trust Co.,

*

the

of

Reserve

will admit Thomas J.
Thompson to partnership on Dec.
3, and Walter J. Mc Adams, Jr.,
to
partnership on Dec.1 4,; -tMri
McAdamso will acquire thrifts

•

—

10,

Board

the —re-elected by member banks in
the
Group 2 (those banks having com¬
District,
bined capital and surplus not ex¬
were elected for three-year terms
starting. Jan. 1, 1948. Mr. Rohr, ceeding $250,000 but in excess of
a
class A director, will succeed
$75,000);
Walter
H.
McLeoc?*
Frank F. Brooks, Chairman of the
President,
Missoula
Mercantile
new

Fourth

,

as

month

Nov..

National

Weslinghouse Electric

Corp., Pittsburgh, Pa.,

Com-»

Chicago,

pany,

of $700;000 and
in excess of $23,-

of

Nor them

The

joined

Whv

we

•,

of

Bank

Reserve,

surplus

Keystone Steel Common
Offered at $45% Sh.

Therefore;

.

Cameron, Assistant

of the

Study Group

need to,eliminate those provisions
of .the tax law. which tend, to

*

•

at any

with.

'■■A

'#

Presidents of the Fqirbes National

tptal

perfection of the revenue
is probably a never-ended

of

rectors of Federal Reserve bank**.

National, which is
the

ruling

a

holding political office
cannot, consistently with the spirit
and underlying principles of the
Federal Reserve Act, serve as di¬

19, which also said:

member

with

persons

stated

was

Pittsburgh "Post Gazette"

"The Forbes
a

Bank

$500,000

men

ii

tho

$

National

dent. The bank now has capital of

wise

irt';-,".

■

cordance

*

Forbes

another decade of tax evasion, in¬

laws

Nov.

on

his

vestigations.
witch-hunting
loophole closing.

task. Many

of

Bank

announced

was

17 by Board Chairman George C.
Brainard. Mr, Millsop submitted

Jersey.

rate, are very, hard to live
George May and Arthur Ballan- Bank, which this month became
should a foreclosing
tin and A. W. Gregg and Ran¬ the Braddock branch of the Mel¬
mortgagee be:taxable upon interest
dolph Paul, to name ony a few— lon National, has been named
Last June, Chairman Knutson, he didn't
receive, merely because and yet, so much remains to be Assistant Vice-President of the
Congressman
Dough ton,
senior he bid the amount of principal
done.
Our Committee
earnestly latter institution." Plans of the
Democratic
member,
and
the and interest for the property? He
hopes that our report will appeal Mellon National to operate the
Committee asked a group of ten made the bid of interest because
to such men as yourselves, that Braddock National as a
branch
men
to help out.
That group, it cost him nothing; and in all
were referred
to in our Oct. 30
you will find its recommendations
called the Special Tax Study Com- probability he
really had a loss,
sound, and that you will work for issue, page 1757.
f mittee, has just made its report not a realization of income, on the its
adoption. The Code will not be
to the Committee on Ways and whole deal.
Why should the es¬ perfect, even if all our ideas are
Ceremonies were held recently
Means.
I shall not go all over sential elements of a recapitali¬
embodied in it. But if you agree in the
lobby of The Bank of Vir¬
the
detailed
recommendations zation
or
a
reorganization
be with us that it will be
greatly im¬ ginia at Richmond, Va., incident
with you here this evening, for shrouded with so much judicial
proved thereby, and will make tp the
unveiling, of a portrait of
I: hope you will read them for mystery when it is plain that Con¬
your
end orsem en t
known,
we Thomas C. Boushall, President of
yourselves.
Let me emphasize gress intended to and did embody
ought to be able to make a long the bank. The occasion climaxed
rather our general purposes.
in the law the complete catalog
step forward in 1948.
the bank's 25th anniversary pro¬
First, the Committee decided to of specific technical reouirements
gram, and the portrait was pre¬
make no recommendations on such for a reorganization? When a sale
sented to the bank by the board
major policy questions as indi¬ of property is in fact made by
of directors as a token of esteem
vidual
income
tax
rates
and corporate stockholders personally
for the leadership of their Presi¬
exemptions.
The Committee on after a liquidation, why should
dent,
Mr.
Boushall,
who
has
Ways and Means and the Congress the sale be taxed as having been
guided its destinies through a
made in substance by the corpora¬
Paul
H.
Davis
& Co., Union
are charged with the duty of de¬
quarter of a century. Gaius W.
termining national policy on these tion? How can anyone know what Securities Corp. and associates on
piggs made the presentation on
matters.
The
relevant
data
is "substance" is when we know that Nov. 25 publicly offered 41,270
behalf of the board of directors.
shares of common stock, no par
readily available, and the Com¬ it is not fact?
Miss Frances Boushall, daughter
mittee and Congress are. better
Our Committee has tried tp cor¬ value, at $45%
per share.
The of the
President, unveiled the
informed than we are on the con¬ rect each of these difficulties. The shares offered are already out¬
portrait.
W. W. McEachern, Ex¬
siderations pro and con.
last two presented serious prob¬ standing and are being sold on be¬
ecutive
Vice-President, received
lems for the draftsmen. We have half of the National Lock Co., a
Our
Committee
thought
we
it for the bank.
In making the
could perform more useful service recommended that Congress state subsidiary of Keystone. The Key¬
presentation, Mr. Diggs paid high
expressly
that
the
conditions, stone Company is engaged princi¬ tribute to Mr. Boushall's adminis¬
by reviewing and reporting upon
and
requirements pally in the manufacture and. sale tration.
major structural amendments. We qualifications
of steel wire and wire products.
❖
$
s':
have made recommendations on set forth in Section 112 are all
Two subsidiaries (National Lock
about 50. major topics, many of that are to be applied, unless the
George C. Brainard, Chairman
them with
several subdivisions. Commissioner shall prove, by a Co., 68.43% owned and Mid-States of the Board of Directors of the
Our basic purposes were largely clear preponderance of the evi¬ Steel: & Wire Co., 77.41.% owned)
Federal Reserve Bank of Cleve¬
are also engaged in the manufac¬
two-fold. The Treasury and to a dence, that the>,pxirxcipal purpose
land, announced on Nov. 20 the
of thepla n .of a^o^ganization was ture and sale of steel wire hard¬
degree the whole world is greatly
election of John T. Rohr, Presi¬
tax avoidance. We realize that the. ware and other products. For the
dependent upon the active funcdent of The Toledo Trust Co. of
proviso perpetuates; uncertainty, fiscal year June 30, 1947. Key¬
fc tioning oftVur economy. We need
Toledo, Ohio, and Lawrence H.
consolidated net
but could we reasonably give the stone reported
to produce more than -we have
Lund, Vice-President and Treas¬
Commissioner less? We have fur¬ earnings of $6,087,002, or $9.74
ever done before.
The Work of the

:<«

resignation, which has been
accepted, effective Dec. 31, in ac¬

*

suc¬

The

its work

«

Pittsburgh, Pa., will become part

be

cessful.

bulk of taxpayers are

continuously since

resignation of Thomas EL
Millsop, President of the Weirton
Steel Co., Weirton, W. Va., as a

sale

the

Bank

1, 1924.

The

a

for sound basic reform of the rev¬

The

is really due to court deci¬

years

securities
to

of

citizens' advisory com¬ is
subject to the approval of the
mittee to help out.
I know you Commissioner
of
Banking
and
join me in hoping that the effort
Insurance of
utility of

by the corporation
on behalf of the
withheld
at
the

months. to the individual and that applic¬
I Volumes
and
of able to the corporation. Some day
A briefs have been submitted.
The we may reach that Utopia. In the
Committee does not lack for data, meantime, the credit is reasonably
but the job of sorting out pro¬ fair; and it is more intelligible
have

value

Consummation

-

the

market

15, 1947. Officers of Clinton Trust
recognized
overcomplexity
and are
confident that the price to be
inequity; and it is approaching
paid to common stockholders will
unpleasantly close to that situa¬ be not
less than $14 per share and,
tion today.
The Committee on in the
absence of fluctuations in
Ways and Means deserves a very the
market value of investment
good mark for recognizing the
securities
held
by the Clinton
need of a thoroughgoing revision
Trust Company, is likely to be
of
the Code, and the possible
more.

perfected;
One word more.
Some of our
and a larger measure of agree¬ stockholder,
source.
Thus the amount of the recommendations go a long way
ment upon them has been reached
toward sustaining the taxpayer's
by the proponents, the staff of the dividend which the shareholder
Joint Committee, and the Treas¬ must return is the amount he re¬ accounting practices and business
ury. The great problem is to con¬ ceived plus his portion of the in¬ decisions, unless the Commissioner
sider, sift out, draft and enact come tax paid by the corporation. proves him wrong. Thus, the bur¬
den of
showing that surplus is
these so-called technical amend¬
The
simpler plan which our
ments. There are dozens and even Committee
recommended
harks improperly accumulated for Sec¬
hundreds of them. Many of them back to that embodied in the rev¬ tion 102 purposes is put on the
present
debatable
questions of enue laws from 1913 to 1936: let Commissioner, as well as the bur¬
den of showing that the taxpayer's
policy. Many of them are hard the stockholder take credit at the
method and rate of depreciation
to formulate.
initial rate of normal tax and sur¬
are
erroneous.
Both provisions
The Committee on Ways and tax for the tax the corporation
reverse the former presumptions.
Means and its staff consequently has paid.
At present this would
These provisions will only work
confronted
a
very
formidable mean a 19% credit for a 38% tax.
well if taxpayers in general make
task. It decided to accept it and The ultimate goal of this plan
honest, defensible business deci¬
perform it, not to lay it over for would be equivalency between
sions. Our Committee has based
applicable
Hearings the starting rate of
thereby

(Continued from page 18)
completed, and fluctuations in the

Pittsburgh, who declined renomination.

Mr.

director

senting

of

Brooks
the

class

has

Federal

Nov.

B

commerce

been

a

Reserve

16, 1937. Mr.
director repre¬
and industry in

Company,
serve

by

as

member

(those

Missoula,

Mont.,

to

Class B director—elected

banks

banks

in

having

Group

3

combined

capital and surplus of $75,000 and
less).

5

38

TffE

(2194)

rily concerned with. So let's
get down to it!
*

Tomorrow's

;!j

Markets

Whyte

column

was

when the market started up.
When I sat down to write,

Says—

the

(see! here they are
around 180.
When
into print they
were close to 184.
My belief
averages

again)

By WALTER WHYTE=

55

week's

Last

barely out of the typewriter

Walter

FINANCIAL

&

COMMERCIAL

Strict technical interpretation

were
it got

Thursday, November 27, 1947

CHRONICLE

Program of Tighter Credit Controls
(Continued from page 2)
sharply restricted by the Eoard's
margin requirements.
In

the

face

large and

these

of

expanding demands, production is
practically at present capacity and
further growth will necessarily be
slow. The physical volume of out¬
put of manufactured goods and
in

minerals

averaged

has

1947

186% of the 1935-39 average. Cur¬
rent

borrowing outside of the banking
system, there would be no in¬
the

in

crease

retrospect,

we

could

have

have

taxed

In
that we
probably should
see

can

and

borrowed
investors

and

more

non-bank

from

more

supply.

money

and less from the banking system.
We

are

today

suffering the consequences
of an excessively swollen
supply which neither the

money
bankers

individually

govern¬

nor

deal with the demand side of the

equation, while

do everything

we

possible to maintain and increase
production. We should have .the
largest possible budgetary surplus
while the inflation danger exists.
And this means taking from the
public in taxes money that other¬
wise would continue in the spend¬

It

ing stream.
ernment

ferment of all

rigid

means

It

economy.

gov¬

de¬

means

expenditures, Fed¬

output is about one-fifth be¬
selling across 184 is that somewhere around
ment
authorities
have adequate
eral, State, or local, to the great¬
low the wartime level, largely be¬
and buying around 180. Long 184-186 the amount of stock cause of the reduction in weekly means at present of controlling.
est extent consistent with public
In order to enable the banks to obligations at home and abroad.
term indications point to sud* offered is too much for the working hours. Agricultural out¬
government
securities Using the budgetary surplus to
den move with little warning. market to handle at this time. put in physical terms has contin¬ purchase
ued for the past three years at essential to the financing of the pay off bank-held public debt as
From a trading viewpoint it
In recent weeks it has be¬
record
levels of about a third war, the Federal Reserve System it becomes due will reduce the
would be practical to get out above the maximum of any pre¬ maintained
money
supply by an equivalent,
easy money conditions
come increasingly more popu¬
of at least half positions at the war year.
This volume reflects and made Federal Reserve credit amount. This is a reversal of the
lar to throw sling-shots at the
general
favorable weather
and and reserves readily available to process by which the money sup¬
upper figure, and buy them
Dow Theory.
further growth can hardly be ex¬ the banks. The vast money sup¬ ply was expanded.
I haven't the
In an infla¬
back when they drifted down
faintest idea of coming to its
pected. Construction of all kinds, ply
thus created
was
held
in tionary boom such as we are ex¬
to around the 180 level.
At including residential building, ex¬ check b,y an elaborate harness of periencing the government should
defense for the simple reason
the same time it must be re¬ ceeds
any
previous
peacetime controls consisting, among other pay off as much of its debt as
that any defense from me
Expansion in building is things, of allocations .of scarce possible.
membered that the 178 level year.
would be. presumptuous.
now being
Public debt cannot be reduced
I'm
retarded by shortages materials,
construction
permits,
is to be considered a critical
of essential labor and materials.
certain
price and wage ceilings, ration • during deflation. Budgetary def¬
that, in any case,
Railroad transportation is limited
ing, and the excess profits tax. icits, not surpluses, aie an inevit¬
there are people much better point.
by the shortages of railroad cars When the harness of controls was able consequence of serious defla¬
equipped than I to speak for
and
other
equipment.
Employ¬ prematurely removed and no ef¬ tion.
Tax
reduction
would
be

for

calls

those

For

it.

So far

I'm concerned the

as

more

problem of stock market theo¬
ries was always an academic rally
I have yet to come across

Dow

their

or

misinter¬

own

of

pretation

certain

signs,

to the

theory. It is ob¬
vious, therefore that any the¬
never

which has

ory

many

expressed

Cavanaugh Director

my own little niche I
long followed the ticker
tape. When that was replaced
by the translux it just meant
that I had less ink on my fin¬

&

has

been

elected

announced. G.
L. Ohrstrom &

completely divorced
I have of

course

That

referred

was

to

averages.

because many more

are familiar with them
than with any new nomecla-

people
ture I

it's

can

more

think up.

*

*

}

4w

this

7

theories has little to do with
the
and

present market which I,
I believe you, are prima-

Pacific Coast

H. T. Cavanaugh

which special¬

in

izes

huge,
labor-saving,
trucks

for

off-the-highway
mining, oil and

the

lumber industries.

that

Humors

resigned

Emil

New York 5, N. Y.

*

7-4150

Teletype NY 1-928

has

resign

as

until the end of 1948.1

saying this, I

Presi¬

as

after that time.

express

the senti¬

—

Oakland

—

Barbara'
Sacramento

Fresno




from

new

by the
creates
to
the
To the

war

program

did

by

investors,

non-bank

the banks and thus
supplies of money.
purchas¬

ing government securities, sup¬
plied the commercial banks with
reserves needed as a basis for the
increased
a

money

supply.

result, the country's money

measured by privately
demand deposits and cur¬
as

circulation,

in

increased

236 times, rising from
$40 billion in June of
1940 to $106 billion at the end of
June 1946.
In the same period,
than

than

deposits nearly
addition, the general
public, outside of bahks, insur¬
ance companies,
and government
agencies, accumulated or increased
holdings of government securities,
to $100 billion, or nearly seven
time

or

savings

doubled.

times

as

These

the

have

that

was

or

at

appar¬

in

rise

sharp

ent,

been

prices

inevitable.

a

In

much as in June of 1940.

government securities in
of the public are the

hands

Board

Bank

new

office

As

result,

a

the

was

economy

caught in a dangerous wage-priceprofit-credit spiral, acutely
in¬
tensified
by
short
farm
crops
abroad,

reduced

and

and

corn

cotton crops

at home. Critical con¬
abroad, in part resulting

ditions

from

our

upon

us

be

met

impose
which inns;

prices,

rising

obligations

add to

though they

even

inflationary difficulties.

our

It

would

be

blindly

and

fool¬

ishly optimistic to believe that
the spiral of inflation can continue
through
further
general
wage,
price and
profit increases and
further overall expansion of credit
without ultimate serious deflation.
The

the necessary read¬
justment is delayed, the longer it
longer

will take to reach
tion

of

stable condi¬

a

employment and produc¬

The most serious maladjust¬

tion.

ments

evidenced

are

of

numbers

creasing

whose incomes

do

in¬

the

by

people

our

not keep

pace

of living.
They are being priced out of the
market
for
housing and
many
other things, and in countless in¬
stances their
savings and credit
have already been exhausted. The
higher prices rise and credit ex¬
pands, the greater the subsequent
liquidation and downward pres¬
sure on prices is bound to be.
As
with

the

the

rising

November

tional

cost

letter

Na¬

the

of

of New York
"Rapidly accu¬
mulating debt is both a cause and
a consequence of the inflationary
City

correctly

the

State

sale

and

bonds

Building, Greenville.

distribution

and

of

other

savings
government
of

for in a wage-price
business constantly needs

pressures,

spiral,

and

more

to

money

more

keep

going and this leads to the incur¬
of

rence

more

and

business

spending

by

and

more

the

debt by

and

more

more

individual.

To

spiralling —
which is to the ultimate benefit
of no one and to the injury of
check

kind

this

The

is

problem

what

of

simple."

all—is not

of

can

be

we all face now
done at this late

danger.

(Special

to

The Financial

Chronicle)

MUNCIE,
tin

is

with

IND.—Ben
K.

Wysor Building.

J.

M.

Brown

&

Mar¬
Co.,

If it

were

possible to finance a
entirely by taxation

great war
there would, of course, be no Jhcrease in the public debt.
Or if it

possible to do the financing
by a combination of taxation and

were

would,

In

the

absence

of

compre¬

a

of

in

taxes

this

at

forth

call

fact,

production, then it would be
justified.
Today
we
still have
more

scarcities of

terials.

Adding

labor

and

existing

to

ma¬

buy¬

ing power either by tax reduction
aggregate expansion of credit

or

the effect of

only have

can

ding

If conditions

labor and materials.
were

reversed

labor

and

and

bid¬

the prices paid for both

up

and

had

we

idle

surplus of materials

a

productive facilities coupled
a shortage of capital and in¬

with

sufficient purchasing power, then
reduction
in
taxes,
particularly
would stimulate

which

that

buying

Outline
If

I

we

are

the

causes

now

rather

of

a

program

with which

faced, I would list
steps to deal with

following

the

effects

Program

a

outline

situation

the

meet

to

of

to

were

mass

would be in order

power,

than

the '

with

inflationary

pressures.

listed in what I consider

They

are

their

order

of

importance.

(1) Increased productivity both
at home and abroad.
the

tion.

Production is

solution

ultimate

for

Nothing could be
increased

than

fective

infla¬

more

ef¬

produc¬

longer hours
In short, if '
all who are engaged in producing
goods and essential services were
of labor and

tivity

of work by everyone.

to work more,

and

save more,

and

spend less, the unbalanced rela¬
tionship
between
demand
and
supply would most effectively be
corrected and prices would come
down.

Suspension

(2)

for

mands

wage

those

cially

of future de¬
increases, espe¬

organized

of

increases

the

where

labor

have

been

greatest, is necessary if the present unbalanced relationship is to
corrected

be

taxes

they

without

Business

flation.
are

more

were

in

profits

than

and

year,

should hold

double

in

therefore
prices down

»

de¬

severe

after
what

any prewar year

double profits

almost

any

and
war

business
should

or

>

them.

reduce

(3) A fiscal policy to produce
largest possible surplus to be

the

used to pay
ment

debt

off bank-held governand

thus

reduce

1

the

supply.
This means the1
possible economy in qll
government expenditures." It
means
more
adequate financial
money

greatest

support of the tax collection ma¬
chinery
of
the
government
to •
prevent tax evasion.

general

decrease

It means no
in tax rates at
the

*

agricultural
price support program unless price
ceilings are also reimposed.' .

*

It should also

elimination

Reliance Now on
Fiscal Policy

With K. J. Brown & Co.

reduction

a

time

this time.

Main

securities.
f

If

Bank

states,

of Governors

in

appropriate after deflation sets in,
not during an inflationary period.

acute

Spiral

Wage-Price-Profit-Credit

our

'

San FranciscoSanta

its

apparent,

was

to

effective

of

equivalent of money because they stage, if necessary, to curb fur¬
are readily convertible into casht
ther
inflationary
developments.
community generally."
It should
be strongly empha¬ As a practical matter, we cannot
now
put back the elaborate har¬
sized that the banking system was
Greenville Representative the instrument, and not the insti¬ ness, of wartime controls, and it
seems that we are left only with
GREENVILLE, N. C. — W. gator, of this swollen money sup¬
Erskine Duff, Vice-President of ply.
The bankers .performed a the choice of certain curbs or re¬
straints
selectively
applied
at
the First Securities Corporation of vital service in the financing of
some of the more critical
points
the war and particularly in the
Durham, N. C., is in

Private Wires to Principal Offices

Monterey

Con¬

The Federal Reserve by

less

are

runs

to

Government

the

finance

more

entirely without
foundation, according to a state¬
ment by Robert P. Boylan, Chair¬
man
of the Board of Governors,
who added, "He has a contract

Exchange

firm's

(Associate)
San Francisco Stock Exchange
Chicago Board oj Trade

14 Wall Street

that

rency

Schram

intends to

or

the
in¬
the

important to bear in
borrowing from the

is

that

it

should

it

devised

was

flood

the

charge of the

New York Stock Exchange

New York Curb Exchange

COrtlandt

ap¬

Board stated in
Report

Annual

it

held

Quitting

President of the New York Stock

and of

Members

this

banks.

Reserve

1945

As

ments of the

,

of
was

government securities to
banking system,
cluding those purchased by

supply,

In

Schwabacher & Co.

56%,

about

or

commercial

created

Company,

dent many years

Orders Executed on

billion,

44% came

raised by borrowing. And of
total
which
was
borrowed,

It relied upon

hope that he will remain

Pacific Coast Exchanges

£222

or

remainder

taxation, it was obliged to borrow,
and to the extent that it did not

Truck

Dart

which

Securities

taxes.

borrow

Schram Not
about

billion,
The

crom

not

}
■

*

argument

period, June 30, 1940
through June 30, 1946, the Gov¬
ernment raised about $398 billion,
the six-year

extent

As NYSE President
All

and

During

prosecution of global war.

but only $176

substitute

back

demand,

in¬

for

preparation

in

banking system, whether
Government or by others,
an
equivalent addition
country's money supply.

Besides

convenient.

the

financing and
Federal
deficits

enormous

curred

hold

present infla¬

war

mind

J.

of Kan¬
City, it is

pany,

I

averages.

is

tion

of the

source

gress,

Com¬

Truck

a

of stocks

from

of Inflation

War Financing Cause

The

fective

least

As the Reserve

rector of Dart

knowingly

I

f'elds
unem¬

ployment.

its

di¬

a

theory. Looking C o. recently
back at it, I probably did. But acquired for
investment all
this theory, if it was that, was of the
com¬
based (and still is) on action mon stock of

followed

high levels with

very

with

Federal

Co.,

strom

sas

of the day.

at

shortages in many
a
minimum of

acute

and

ing

partner of

a

Ohr-

L.

G.

have

Cavanaugh,

T.

H.

In

is

ment

proximately $90 billion, or 23%
of total needs, was raised by sell¬

inter¬

#

gers at the end
don't know if

Whyte

in tnx.
article do not necessarily at anj
time coincide with those of tfa
Chronicle. They are presented a>
'hose of the author only. 1
views

[The

their followers.
*

Thursday.
—Walter

preters must trip up some of
*

I doubt if it will start

More next

anybody
else's—always attribute mis¬

takes to

daily becoming more
likely. When it does

are

more

that
with the customary orthodox
fact
signals.
theory—

exponents of a

whether

and

come

any
theory or system
works in the long run. In

the

to

I'd like

point out that the chances
than a minor trading

to

of

one.

inclined

not

trade them that close,

'i'

*

*

of

mean

the

(4) Continuation and expansion
of the Treasury's Savings. Bond
•

hensive

scheme

continue, to

of

controls

we

main
which is
by far the most effective way to

must

reliance

on

put

our

fiscal policy,,

campaign, with adequate finan¬
support by Congress. - Funds ;

cial

Volume

166

* Number 4650

raised hkve

so

It

two-fold effect.

a

these funds

removes

the

from

spending stream and makes them
ayailable to pay off bank-held
debt, thus reducing the money
supply.
(5) Legislation giving the Fed¬
eral Reserve System such author¬

ity as may be necessary to restrict
further overall expansion of bank
credit.

The need for this author¬

ity would be'less if Congress
thorizes

restoration

instalment
if stricter

eral

credit

of

au¬

consumer

restrictions and

appraisals and less lib¬
terms were applied

credit

under

Veterans

tne

Administra¬

tion, the FHA, and the Home Loan
Bank programs
i Other

•

of housing finance.
have ' been 'pro¬

actions

posed which, however, deal with
the
effects
rather
than
with

Allocations,

causes.

construction

permits, price and wage ceilings,
commodity margin requirements,
installment credit regulation, ex¬
port and rent controls, and similar
devices are all in the category of
rather than

curbs

Where

cures.

be applied as a practical
they can be
useful, but they do not go to the
sources of the problem.

they

can

matter and enforced,

*

I should like to summarize what

the

Reserve

Federal

Board

lieves might be done in the

be¬

mone¬

tary and credit field.
In its 1945
and 1946 annual reports to Con¬

the Federal Reserve Board
the situation in which

gress

those with responsibility for mon¬

of the war.

consequence

as

a

As the

Board stated in the 1945 report:
•

"In

with other nations

common

whose energies were devoted pri¬

marily to winning the victory, the
United States had no choice, under
the r exigencies of a global war,
except to use monetary powers in
furtherance

essential

of

war

fi¬

as an anti-infla¬
There has been a
widespread assumption that, with
the coming of peace, such statu¬
tory powers as the Reserve Sys¬

nancing and not

tionary

weapon.

tem possesses

should be exerted in

the traditional way against the
heavy inflationary forces at pres¬
ent confronting the country.
The

believes

Board

that

such

an

as¬

sumption
does
not
take
suf¬
ficiently into account either the
inherent limitations of the Sys¬
tem's

existing statutory powers
under present-day conditions, or
the inevitable

repercussions

on

the

the
government's financing operations
in
particular of an exercise of
such existing powers to the degree
necessary to be an effective antiinflationary influence."
generally

economy

and

on

Needed

Of

late

Federal

the

the

Federal

Reserve

aank investors.

tem

Banks

buy
from hon-

securities

government

The Reserve Sys¬

restrain banks from bor¬

can

is

important, therefore, that

very

the

understand

Congress

those

powers

Board

does not

used

be

to

what

and why
believe they

are

with

deal

the

the
can

credit

problem, and why we suggested in
the
1945 and 1946 reports, and
suggest now, that Congress con
sider providing
other authority
that may be necessary to cope
with the situation.
We did not

deal

with

arising

reserves

from

jour

existing

we

as

powers

insuf

ficient.
The Reserve System

has always
influence the
supply and Cost of bank credit
Through open market operations
that is, buying and selling of gov
ernment
securities, the System
either gives reserves to the banks
or

absorbs

reserves.

Reserves

port

become

ketable

confused

so

and

government bonds would

Wholesale liquidation of

a

fears

isting
uch

powers, we would welcome

expression from the Con¬

an

In that case, there would
need to consider any al¬

gress.

be

as

no

foundation

credit is built.

raindrop in a
strong language.
say
with certainty

is

that it is too exaggerated.

In any case, I think it is
clear that
withdrawing

fairly
support

under

rise

'on

government

securities

present

offset

to meet the situation.

increases

in

bank

reserves

from

First, let

consider what the

us

effect would be of raising the disount rate

by itself.

Actually, the

effect would be negligible, except
for
possible psychological reac¬

gold acquisitions.
Sales of
system holdings of government
securities

for this

purpose

have

compete

with

to

would

private

credit demands. Private borrowers

might outbid Us for these reserves.
long as the Sys¬ There would be no certain
level of
tem stands ready to buy govern¬
security prices or interest rates at

tion, because
ment

as

securities in

ket, banks

the open mar¬

obtain

can

at

reserves

will

which

could dispose of enough
securities
to
offset

we

government

by selling such securities out
gold imports.
of their portfolios.
Suppose, then,
On the other hand, we have to
.hat the System refused to buy the
recognize what would happen if
securities—and that is the heart we
follow the present course of
of the matter
what would the
policy in order to maintain the
consequences be?
Bear in mind public's confidence in
government
that
the
total
interest-bearing credit and avoid any
unnecessary
debt of the government is $256 increase in the
interest cost to the
—

Dill ion.
:t

more

than five times What

before the

was

The pub¬

war.

lic debt at the beginning of 1940
was
about one-fifth of the total

public
it

the

is

nearly

entire

about

government

securities.

is

about

50%

of

$70

billion
This

their

two-thirds

indebtedness

of

of
the

these

securities

sum

total

the

and

of

de¬

half of
Federal

Reserve

System, in providing an
About one-third of the ultimate market, should buy them,

country.
total

the

of

debt

rently hold

whereas at the present posits. If they should sell

country,
time

private

and

government for carrying the pub¬
lic debt. Commercial banks cur¬

is

short- the banks would acquire an
equiv¬
term marketable debt and would alent volume of
new reserves.
On
need

to

rate

securities;

the

debt

government

be refunded

cost

the

would

banks

this

government, and
the
taxpayers, of

to

carrying the public debt.
the

raise

the

to

therefore

into higher

nation's

bill

tax

Already

for

interest

is

approximately $5 billion,
or nearly one-seventh of the total
Federal budget.
Just

how

high

would

ness

have
and

terest

to

rise

deter

to

individuals
do

rates

interest

from

busi¬
bor¬

Higher in¬
deter

not

the

lender.

basis

of

these

could

reserves,

expand

the

credit

by

about six times, or more than $200
billion. While it is unlikely that
the

banks

would

dispose

of

so

large a proportion of their hold¬
ings, it nevertheless is a measure
of the potential bank credit ex¬
pansion
banks

that

are

can

occur

if

the

left with complete free¬

dom to convert their government

security holdings into

reserves

at

will.

borrowers.

The additional costs to the gov¬
in carrying the public

ernment

mate,

would

difficult

to

esti¬

but they would amount to

billions
time.

be

a

year

over

a

period of

If that

sequence,

were the only con¬
it might be argued thai;

the extra cost to the governmen;
would be justified because infla¬

tionary borrowings would

banks

gain

equal

an

amount

of

Over the next year, the
gold inflow is estimated at from
$2 to $3 billion. Multiplied by six,
this would permit an expansion of

reserves.

bank

credit

of

from

$12

to

$18

billions.




However, this is only

of

the matter.

In

the

one aspec
process

o

The result of these support
opera¬
tions is to increase bank reserves
and thus to support further infla¬

tion.
Under

rate

present

on

and

long-term

government
tained.

marketable

securities

be

The

Reserve

that

power

has

have

we

There

potential
bank

are

two other

sources

reserves.

of

York

26%

and

of

matter

and

to

go

the

Chicago from

their

deposits. This is

in

not

heart

demand

relatively minor

a

does

net

of

any

the

effect

on

expansion,
growth, has
than

for

well

as

been

the

rest

nesses

face

increasing needs

for

working capital under prevailing
inflationary conditions. To some
extent, these needs will be met by
sales of short-term government
securities, which the Reserve Sys¬
tem may have to buy.
The

bank'

second

possible

source

of

credit

Und

complex problem.
We are
convinced that the remedy of let¬
ting interest rates on government
debt go up on the

theory that this

would

bring an end to inflationary
borrowing is dubious at best, as
has

been
demonstrated
in past
monetary history, notably in the
20's when high rates were unsuc¬

cessful
in the
or

in

restraining speculation
markets, real estate,
clear in

made

was

as

be

can

justified

have, therefore, been

pelled to seek
native
to

than

com¬

better alter¬

some

higher interest rates

restrain

further

bank

credit

expansion. We believe that

one

is

available which will not make the

government and the taxpayer bear
the

added

hardship

cost

of

the

restraint,

the bartks, that will,
in fact, have a compensating as¬
pect in that the restraint imposed
would increase interest rates on
private borrowings without addi¬
on

tional cost to the government.

the

"Special Reserve"

proposed in the 1945 Annual Re¬
port. We recommend for consider¬

ation,

the best alternative

as

we

have been able to devise, that all
commercial banks be required as
a
temporary measure to hold some
percentage of their demand and
time deposits, in addition to pres¬
ent reserves, in a special reserve

in

the

form

either of

government
cash

short-term

securities

cash,

or

items, interbank balances,

balances

with

Federal

or

Reserve

Banks.
Such

requirement

a

far less

for

onerous

would

be

the

banking
system than any other effective
method that has been suggested
in the long period in which this
problem has been discussed by

bankers, by economists, and pub¬
lic
officials. Manifestly, such a

requirement would have to be im¬
gradually^ if at all, as an

posed

offset, for
quisitions,

example,

to gold ac¬
and the purchase of
government securities from nonbank

investors, and also to limit
ready availability of re¬

the too

stock

otherwise.
As

far

as

We

deposit

as

relatively less
of the country.

We have given a great deal of
Study to this admittedly difficult

serves, now enabling banks to ob¬
tain reserves at will, on which

An¬

a multiple expansion of credit can
Report for 1946, we are not be built at a ratio of fully six
opposed in principle to higher in-? dollars of
lending for every dollar

nual

terest rates if

the

and

served

some

public

by such

desirable ends

interest

policy.

a

in recent months

be

can

In fact,

have cooper¬

we

of

10%

made

some

rise from wartime levels of inter¬
est rates on short-term
govern¬
ment securities. This
adjustment
was

made to reduce the wide dif¬

ferential

prevailing

between

short-term and long-term interest
rates.
Such a large differential

having the effect of encour¬
aging banks to sell short-term
securities, which the Federal Re¬
serve

bought,

and

securities

thereby

to

in

buy

the

encouraging

long-

process,

multiple

credit expansion. The differential
in rates was also exerting a
downward

pressure

strong
yields of

on

that this decline

aware

We

was

were

artifi¬

cially induced by investment poli¬
cies of the banking system known
as

monetization of the public debt,
resulted in bank credit ex¬

and

pansion.

We

also

recognize

the

importance

of checking the de¬
long-term interest rates
to protect educational, charitable,
and pension funds, as well as in¬
in

cline

surance
institutions,
savings
banks, and individuals depending
upon interest for income.

rise

strong
funds,
strain
and

action
in

permitting

a

short-term

interest

mod¬

coincided, however,
with
demands
for
long-term
which
put
considerable
on

the market for corporate

municipal

securities.

As

time deposits. It should be
applicable to all commercial

on

It would not be effective
if applied only to member banks
of the Federal Reserve
System,
and would
be an unjustifiable

discrimination.
We recognize that this proposal
is

no

panacea, but it would be

as

vestments.

thus

some¬

competitive,

with

what

more

long-term
fore.

They

are

governments

have

than

in¬

be¬

We have to face this fact of

an

important,
available
restraint,
now lacking, to be
applied equally
to

all commercial banks so that
the individual banker would be in
the
same
competitive situation
he

is

in

today.

Over

four months there is

the

next

likely to be

little need for the suggested spe¬
cial reserve because of the large
amount of

Treasury surplus funds,
taken from the market through
taxes, which will be available to

retire bank-held public debt. This
would

temporarily exert pressure
against bank credit expansion.
The

proposed

requirement has

special
a

reserve

number of im¬

portant
advantages
Over
other
methods of dealing with the prob¬
lem of

restricting the banks'

ex¬

pansion of credit:

<^) The plan would have about
the

effect in

same

expansion

as

mary reserve

an

limiting credit

increase in pri¬

requirements which

was

proposed as the third alter¬
native in the 1945 Annual Report.
It would enable the banks to re¬

tain the

same

a

consequence,
these issues
been made more attractive

propose

banks.

was

term

would

maximum of 25% on demand and

ting

Treasury in permit¬
moderate, corrective

We

reserves.

that the special reserves require¬
ment
be
limited by
law to a

ated with the

rates

term government securities. Busi¬

an

banking conditions only

in two cities in which the

increased

tors; mainly business corporations,
hold about $13 billion of short-

way

problem.

Any action taken would have

erate

inves¬

been

requirements of the banks

to

important

Non-bank

one

by some for not using.
That is the power to raise the re¬

20

about

under present circumstances.

I refer to the second alternative

criticized

New

on short-term
gov¬
ernment securities to rise has gone

A

Federal

in

interest rates

main¬

Raising Reserve Requirements
other

adds- to bank

These developments in¬
dicate that a policy of permitting

that will impose very little, if any,

prospective
conditions, it is not only desirable
Dut essential, in the opinion of the
Treasury and of the Reserve Sys¬
tem, that the established 21/2%

The

1

cease.

to protect

so as

^overhfiieht bonds

have

long-term issues.

on

long-term interest rates.
This bank credit expansion po¬
tential is apart from other sources

Rising interest rates ate
like rising prices.
At some point of bank reserves. Gold is now
they may deter the borrower or flowing into our banking system
buyer.
They do not deter the in large quantities from foreign
seller or lender.
I doubt if any¬ holdings. As a result, deposits are
body knows how high interest increased and on the asset side
rates, especially shoft-term rates,
would have to rise to discourage

sales

of the prices of marketable

serve

Support of Government Securities

circumstances,
would not increase the power of
ull consideration should be given
the Federal Reserve
System to
to any proposal that would help

are

on
which ban
If banks have no

Such

to be met by Federal Reserve
sup¬

as one

ternative powers.
On the other
from the
government
securities
band, if Congress agrees that our
market and letting interest rates
existing powers are not appropri¬
ate

If in¬

did

reserves is the $59 billion of
marketable, medium and longterm government securities held
leaving government securities to
reserves
they cannot lend.
Bu
by non-bank investors. With
they can obtain reserves when the free play of variable forces widening opportunities for the

the

government securities.

increase.

appear
do some bankers and
storm. -That
insurance
company
executives,
bat we should more fully use ex¬ Nobody can

feels,

debt

had broad powers to

term

"ikely

Use of Discount Rate
the non-marketable E, F and G
Why, then, doesn't the System bonds. He declared that it would
simply make the discount rate be the most dramatically infla¬
prohibitive and at the same time tionary move that could be made
refuse to buy any more govern¬ at this time, the repercussions of
ment securities?
Let me say that which would be, as he put it, so
if the Congress disagrees with us Catastrophic as to make present
nd

attrac¬

continues, this shifting will

all; government bonds, including

feel tha+

are

increasingly

yields,
there
is
a
small
amount of shifting by investors of
heir holdings of marketable
longflation

not

39

reserves.

at

tive

entirely at the
priercy of uncontrolled factors in
the market, if, indeed, conditions

lead* to

gold acquisitions.

Certainly the rates
would have to
be
substantially
above the present relatively' low
then and we do not now seek levels.
Bank customers, particu¬
power, but we feel that we would larly business, with seemingly in¬
be remiss, as an agency of Con
satiable
markets awaiting their
gress, if we failed to report the products,
are
hardly to be de¬
situation as we see it and to pro
terred by one or two points of in¬
pose alternative means of dealing crease in bank interest rates.
with it inasmuch

of

vestment

the 2i/2 % rate

rowing from banks?

to re¬
expansion.
It

placement of funds in private in¬

government bonds

Reserve

powers

credit

would be

by raising the discount chaotic as to demoralize complete¬
sufficiently high to make the ly any refunding operations.
I recently saw a prediction
sorrowing unprofitable.
by a
It could
refuse to buy government securi¬ very keen bond market analyst
that failure of the Reserve System
ties and shut off that source of
reserves.
It has no powers to to support the 2Vz% rate of mar¬

existing

statutory

rities.1 It

(2195)

rowing

rates

bank

CHRONICLE

rate

System has been increasingly crit¬
icized for not adequately using its
strain

FINANCIAL

they borrow from the Federal Re¬ in the market, the Treasury would
Banks or sell -government be confronted with a continuing
securities to the Reserve Banks. jpuzzle in all of its constantly re¬
And the banking system automat¬ current refunding operations.
It
ically receives reserves through Could hot tell from day to day at
gold acquisitions, and also when what price it could sell its secu¬

cost

New Federal Reserve Powers

&

serve

described

etary policy find themselves

COMMERCIAL

THE

volume

assets that they now
an

increase

in

of earning

hold, whereas

basic

reserve

re¬

quirements would make it neces¬
sary for them to reduce earning
assets, with adverse effects upon
the earnings position of banks.

the market place and be prepared
to offset any shifts in investor

(2) The ratio of potential credit
expansion on a given increase in

holdings from government bonds

reserves

to

extent

other

securities.

able aspect of the

The

undesir¬

situation, from
inflationary
credit conditions, is that support
the

standpoint

of

was

would be narrowed to the
the
Special reserve

that

required.

At

the

maximum

requirement proposed, it would be

(Continued

on page

40)

THE' COMMERCIAL

(2196)

40

If it, in fact, called
production, it would
be desirable.
If it only permits
one borrower to
bid against an¬
dangerous.

or

(Continued from page 39)
one-half to one.

two and

Reconversion

(3) It would bring about an in¬
crease in interest rates on private
debt and would increase earnings
the

of

^

this

from

banks

from

culture,

source

in

ties

It would

low.

moreover,

purpose,

divorce

would

(4) The main effect of the plan
would be to reduce the availabil¬

would be less willling to
government
securities
in
order to expand credit because
the amount of such liquid assets

purposes,

unfortunate, I

might

greatly reduced by the

possibility,

blame

for

pound.

government expenditures.
It is
not likely that prices of goods and
services supplied by governments
would be increased sufficiently to
offset the increased

securities they have

government

loans and in¬

held and will continue to

uninformed, it

an

to

a

change

They object
temporary limitation on

operating

ex¬

Third, any change in the inter¬
national value of the pound ster¬
ling would be bound to have farreaching repercussions in the en¬
tire sterling area. The currencies
oi the member countries have re¬
mained stable in relation to the

prices and
their

permit
to

made

being taken

would be introduced as a
result of imposing the require¬
ships

free

currencies

own

ment.

(8) The banks would be left by
with sufficient latitude to
meet essential needs of the econ¬
,

the plan

the

and

credit,

for

omy

public

would be assured of a high degree

of

the

for

safety

and

liquidity

banking system.

amcng

ties.

Devaluation

number of other
European countries at the end of

adversely the sterling-area mem¬

in

which would in turn cre¬
more and more deposits.
The

that this

argue

proposed requirement is unneces¬
sary because the banks themselves
have a vital interest in the con¬
servative extension of credit, aid
will

prevent excessive

pansion
banking

credit ex¬

a matter of ordinary
prudence.
The banks,

as

however, confront a situation in
which they can readily meet un¬
limited
private credit demands
in

and

which

such

demands

are

vigorously sustained by inflation
while at the same time, these de¬
mands are contributing to infla¬
tion.

They

are

The

effect.

both

banks

a

not

and

cause

are

in

a

position to refuse legitimate, sound
credit demands of individual cus¬

current loans, taken
separately and in the light of the
customer's satisfactory credit risk,
tomers, and

do appear to represent

credit needs.

ing these
the banks

legitimate

But in accommodat¬

credit demands freelv,
system are expand¬

as a

ing bank deposits and adding
the money supply.
Increase in
From

the

to

Bank Credits

beginning

of

1946

through October of this year, the
banking system as a whole has in¬
creased its loans and investments
—other than Treasury obligations

—by

an

estimated

This has added

a

$12

billion.

like amount to

some

very

'

Miles A. Sharkey With
Staff of Lester 6 Co,

Germany and

a

Often

we

agree.

with Lester &

sure

the

the

the

Council's

opinion

of

a

views

great

who are entirely
in the belief that the loans

bankers,

many

sincere

Street,
of

members
the

Los

An¬

Stock

geles

Exchange. Mr,

of

Los

more

&

that

&

Miles

A.

panied by a corresponding decline
prices of manufactured goods.

in

devaluation of the
sterling would stimulate
exports of British commodities to
In that case, a

pound

Reserve

Board

the

condi¬
on
the

The budget is

quantities o'
be imported/
A

would not increase

rapidly is not due to the fact
British commodities cannot

and all responsible for pub¬
policy must necessarily ap¬

Francis

gress,

lic

proach the whole problem from a
different
tion

we

standpoint.
The ques¬
must ask is whether any

L.

Brokaw,

with Shelby Cullom
was

found dead

on

demands

associated

Davis & Co.,

the farm where

he had been born in
was

Somerville,
listed

as

"v/msnD 11 MWi.' I ■

TWWfiuc

a

setting
tween
a

for

higher

wages,

prices

wages.

Within

the advantages, if any, that
be

gained from
pound

a

would

might

devaluation of
be

lost.

It is,

income

result of the de¬

of raw materials

prices

If the pound ster¬

remain unchanged
under those conditions, it would
become more difficult for agri¬
ling

to

were

cultural

raw-materials

and

pro¬

ducing countries to buy in Great
Britain. Since the British economy

large extent on ex¬
obviously would not
Britain.

depends to

a

this

ports,

be to the interest of Great

Devaluation would be feas¬

(2)
ible

future, when the
is replaced by a
market, British industry

if,

the

in

sellers'

market

buyers'

should find it difficult to compete
with the

more

efficient industries

Under those

of the United States.
circumstances

devaluation

a

of

the pound,

if not accompanied by
an increase in wages and prices in
Great Britain would render Brit¬
ish commodities

competitive

more

in the world's markets.

the

Finally,

(3)

of

the

future

move¬

will
large extent upon the'
movement of commodity prices in
the United States. If prices in this
country remain high and even
ment

depend to

sterling

pound

a

continue

to go higher, then the
sterling may be under¬
and certainly no further

pound
valued

devaluation will be needed.
the

other

hand,

If, on
in the

prices

Urited States should decrease

terially, then

ma¬

change in the in¬
ternational
value
of
the pound
might be made for competitive
a

reasons.

In

the

considering the outlook
Canadian

concludes

dollar

that

nounced drastic
tect

the

for

bulletin

the

recently

measures

an¬

to pro¬

and

improve the balance-ofpayments position of Canada with
the United
tion

States

are

an

indica¬

that Canada does not intend

to devalue her

currency in terms
of the United States dollar.

Paul J. Herdd

thus

in 'motion the spiral be¬

as a

and foodstuffs.

followed by

relatively short time, therefore,

the

X
"

the cost of living

in

Con¬

in

cline

Sharkey

F. L. Rrokaw Dead

The

reduced

was

national

whose

countries

are

risk.

pound

the

of

might be expected only
the following conditions:

(1) A decrease in prices of food
raw
materials not
accom¬

Depreciation of the pound would
extending are safe, de¬
Meyer,
and
therefore not lead to an increase
serving risks necessary to sustain
was
an
officer
of
O'Melvenyin exports which, in the existing
full production.
That conviction,
Wagenseller & Durst.
sellers'
market
are
limited bv
honestly held, is unhappily char¬
production
rather
than
by the
acteristic of boom psychology. In
"rice
structure.
Second,
since
1920. or in the latter part of that
Jos. F. Trounstine Dies
Great Britain must import in large
decade, bankers would have made
the same replies that they give
Joseph F, Trounstine, formerly quantities from outside the ster¬
today
if
asked
whether
they a member of the New York Stock ling
area
manv
indispensable
commodities,
notably
raw
ma¬
thought the loans they were mak¬
Exchange, died at his home at age
terials and foodstuffs, devaluation
ing should not be made. A short
of 54.
He retired from business of the
time later thev were trying des¬
pound would result in an
perately to
liquidate some of several years ago because of ill increase in prices of these com¬
modities expressed in
these loans. The individual banker health.
terms of
the pound sterling.
is judging by standards applying
This would
to
the individual borrower and
automatically lead to an increase

they

inter-i

an

as

and

types and

pound

devaluation

under

id the creation of new

to

London

a

sterling

compete in the world markets but
rather to the shortage of com¬
modities
available
for
export

was

Stern,

Frank

the

the

of

Co., Inc. Prior
with

a

Finally,
of
the

Conditions of Devaluation

exports from Gre^t Britain since
the
failure
to
develop exports

office

thereto he

Britain,

bal¬

sterling

large

London.

in

A

decline in the international value

An¬

Blyth

balanced

commodities

department of
the

Great

whole, are sound.

over

Sharkey was
formerly in
the trading

supply.




in

Fiscal

affect

would

national financial center.

of

future.

holding

prestige of

deposits through Treasury bor¬
rowing has come to an end. Foreign-exchange restrictions are
likely to remain in force for an
indefinite period, giving the gov¬
ernment almost complete control

Co., 621 South

In this case they

geles

am

Chronicle)

the member coun¬

fur¬
ther
devaluation
pound
would deal a serious blow to the

conditions in
the conclu¬
sion that no change in the sterling
rate is likely to take place in the
analysis

An

tions

regulation.
I

Financial

CALIF.—Miles
A. Sharkey has become associate

Spring

reflect

The

LOS ANGELES,

remedy we
advocate. They contend that banks
are not indulging
in inflationary
expansion of credit; that, there¬
fore, the problem should be at¬
tacked on other fronts, and that
no
legislation is required on the
banking front.
They differ with
us
also in unanimously opposing
reinstatement of instalment credit
oppose

to

This, together further expansion in the aggre¬ N. J. f The death
with gold acquisitions, is largely gate amount of credit is desirable suicide.
the money

bers
ances

Great Britain leads to

immediate
(Special

composed of 12 bankers, one from
each
Federal
Reserve
district.

unitedly

bankers

Many

of

and

another

one

the

ments

not relish

opposition

The

into

pound sterling, thus fa¬
cilitating trade and capital move¬
into

ilar in character to that witnessed

rowers,

prominent bankers to any new
power for the Federal Reserve is
expressed in a statement which
they have asked me to submit for
the record.
It is a statement of
the
Federal
Advisory
Council,

has

bloc

useful function

relation¬

interbank

established

The ster¬
performed a very
in permitting the
conversion of the various

ling

levels, they would soon be con¬
a sharp inflation sim¬

further use of these funds as
basis for loans to private bor¬

and

Instinctively

bankers do

the mem¬

on

bers of the sterling area.

naturally, ate
World
War
I and in Hungary,
restrictions government has an obligation and I Romania, and Greece at the enc
by the Reserve authorities, would
a
on their activities any more than
duty to step in at this time of | of World War II.
have a very restraining influence.
national
labor likes wage controls, or agri¬
danger to
say
to the I
A further severe inflation would
(5) The plan would not rely on
culture likes price ceilings.
We banks, "We are not proposing to'
have
adverse
political
effects
higher interest rates to restrain
realize that the special reserve deprive you of benefits you have
throughout the countries affected.
private borrowing, but to the ex¬
proposal which we consider the already derived and will continue i
It would virtually wipe out the
tent higher interest rates restrain
to derive from the vast increase
best alternative, after considering
such
borrowing,
the
proposal
middle class.
Holders of bonds
all of the circumstances, will be in bank deposits resulting from,
would make use of the interest
and
mortgages,
beneficiaries ol
very
strongly resisted by those your purchases of government se- j
rate mechanism. Hence, the cost
pensions, annuities, and life in¬
bankers who fear that it points curities, but we do say that you
of
surance would be ruined and this
restraining credit would be
accusingly at them, or that it is should be willing to accept a rea¬
borne by private borrowers who
in turn could cause great sociai
sonable limitation on using a warmore regimentation, more bureau¬
are incurring additional debt, and
and
political upheavals.
Hence
cratic reaching for power, or an created situation to multiply pri¬
hot by the government which is
while theoretically
at least, ar
loans
in
peacetime when
encroachment on State rights, or vate
reducing its debt.
argument could be made for let
an
opening wedge to force non- they serve to intensify inflation¬
ting economic forces take theii
(6) The plan would restore use member banks into the Reserve ary pressures."
own course, in reality such a-pol¬
of the customary instruments of
To sum up, the proposed spe¬
System.
All these things have
icy would not only not achieve
Heserve influence on bank credit
been said to us privately or pub¬ cial reserve requirement is only
the expected results but also could
expansion, namely, discount rates
licly—and we can only say that if a part, though a necessary part, lead to serious
political conse¬
and open market operations. Sup¬
a
better alternative can be de¬ of any effective anti-inflationary
quences.
It is therefore highly
port of these instruments by the vised, we would welcome it.
program. As'I have indicated, ac¬
improbable that anv of the counspecial reserve requirement would
tion on other fronts, by far the
The Board recommends that the
tr'es confronted with the problem
enable
the Federal Reserve to
administration of the special re¬ most important of which is fiscal
of stabilizing exchange rates would
make it more difficult and costly
policy, is necessary to the success adoot the
serve plan be placed in the Fed¬
policy of permitting the
for banks to borrow Federal Re¬
eral
And the need
Open
Market
Committee of that program.
exchanges to find their own level.
serve funds.
whose members, in addition to the for action on the monetary and
In analyzing the outlook for the
(7) No alterations in the bank¬ Reserve Board, are five Presidents credit front would be reduced to
ing structure, in the authority of of the Federal Reserve Banks. the extent that needed action is pound sterling the bulletin states:
the
supervisors,
in
customary This should help to remove some taken on other fronts.
No Change in Sterling Rate
methods of bank operations, or in
of the misgivings of bankers.
Likely
without action

even,

effects

its

account

ex¬

find

rates

A readjustment iin the
therefore, could not be
without first taking
into

pound.
pound,

fronted with

the
a

to

were

hold for

indefinite period.

even

This is not the case.

money.

the

penditures. Since, in a period of
drastic inflation, revenues do not
keep pace with expenditures the
deficits of tie governments would
government securities; that this be larger than ever before, thu.c
created new deposits in the banks; further
stimulating the forces of
and that they have had also the inflation.
If the governments of
benefit of interest received on the France
or
Italy,
for
example,

that the banking
been or is now to
the
oversupply
of

has

therefore, not to the interest of
the British economy to decrease
international
value of the

largest

matically result in an increase in

think, that

banking leaders oppose protective
against inflationary
forces arising in the credit field.

appear

system

the

among

are

employers, operating the railroads
end public utilities as well as the
recently
nationalized industries,
an increase in wages would auto¬

measures

likes restraints. I am

us

wares, which are
vestments.
To the

they held as secondary reserves
a

is

It

(Continued from page 19)
counties

Leaders

of Banking

Attitude

sympathetic with the bankers who
resent seemingly to be singled out
for
a
special restraint on their

sell

Such

and

justified.

None of

They

requirement.

industry

Stability
Without Exchange Stabilization

for scarce

buyer

thus adds to upward
pressures on prices, it is danger¬
ous.
It is our best judgment that
overall expansion of the money
supply at this time is inflation¬
ary and dangerous.

momentum.

ity of bank crediL This would be
accomplished by putting restraint
on the lenders, that is, the banks.

be

agri¬

Sees No International

there¬
High levels of They seem to forget that in order
peacetime activity have long since to assist in war financing, the
been attained, however; yet, bank
government provided the banking
credit expansion is continuing and
system with additional reserves
in recent months has gained rapid which enabled the banks to buy
was

*

could

required ag¬

facilitate the earliest

for private

government securities.

as

economy

ana

commerce,

order to

sion

market for

private debt • from the

peace

fore

plan, in effect,
the market for

The

market.

would-be

goods

possible attainment of peacetime
activity on a much higher level
than prevailed before the war.
Some of this bank credit expan¬

accomplish
without
increasing the interest cost on the
public debt or permitting unstable
prices in the government securi¬
this

to

war

the

of

gressive bank financing of

where rates on loans are compara¬

tively

more

responsible for an increase in pri¬
vately held deposits of $14 billion.

to nearly

lowered from six to one

forth

other

Piogiam of Tighter Credit Controls

Thursday, November 27, 1947

FINANCIAL CHRONICLE

&

-

Paul

J.

fices at 141

City,

Broadway, New York

to engage in the

business.

In

officer of

John

Inc.

Opens

Herold has ooened of¬

the

securities

past he

C.

Adams

was

&

an

Co.,

Volnme>166/'-Niimber;;4650

THE

;

COMMERCIAL

&

FINANCIAL

CHRONICLE

(2197)

.

41;

;

The following statistical tabulations
covet'.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) :
Latest

AMERICAN IRON AND
Indicated

steel

STEEL INSTITUTE:

operations

Previous

Week

'percent of capacity)

Nov. 30

96.3

(net tons)

Year

Ago

Ago

97.0

Equivalent to—
Steel ingots and castings produced

Month

Week

Latest

AMERICAN
of

Nov. 30

1,685,200

1,697,400

1,697,400

1,106,800

Crude

output—daily average (bbls. of 42 gallons each)
to stills—daily average (bbls.)

Nov. 15

5,257,100

5,239,550

5,268,400

Nov. 15

5,223,000

5,189,000
16,270,000

5,167,000

4,706,000

16,0,6,000

16,298,000

14,888,000

output

(bbls.)

Nov. 15

Kerosine

output

(bbls.)

Nov. 15

2,107,000

2,089,000

2,176,000

output (bbls.)
Nov. 15
Residual fuel oil output (bbls.)
Nov. 15
Stocks at refineries, at bulk
terminals, in transit and in pipe lines—
Finished and unfinished gasoline (bbls.) at
Nov. 15
Kerosine (bbls.) at
Nov. 15
Gas oil and distillate fuel oil (bbls.) at___
Nov. 15

§,159,000

6,256,000

6,217,000

8,556,000

*8,650,000

8,542,000

83,041,000

82,007,000

80,912,000

4,792,300

oil

and

Residual

distillate

fuel

oil

fuel oil

(bbls.)

production

at__r

63,283,000
57,827,000

Nov. 15

22,593,000

output

22,516,000

21,854,000

63,358,000

61,312,000

69,424,000

57,172,000

57,776,000

60,186,000

Month of
Number

freight loaded (number of cars)
freight ree'd from connections (number

878,337

910,160

954,249

917,124

15

714,848

730,961

745,287

723,500

.\ov.

S.

ENGINEERING

CONSTRUCTION,

RECORD:
Total U.

ENGINEERING

NEWS

S. construction

State

and

URBAN

Nov. 20

$100,930,000

$159,327,000

$141,719,000

Nov. 20

54.084,000

73,741,000

84,959,000

33,867,000

Nov. 20

46,846,000

85,586,000

56,760,000

42,655,000

64,537,000

50,306,000

4,191,U00

;\ov.

21,049,000

6,454,000

OUTPUT

Bituminous

(U.

coal

S.

BUREAU

and

lignite

Pennsylvania

anthracite

Beehive

(tons)

coke

OF

(tons)

*12,810,000

12,645,000

non-residential

1.185,000

1,223,000

1,193,000

130,100

STORE

SYSTEM—1935-39

SALES

INDEX—FEDERAL

166,618,000
90,000,000

92,188,000

6,000,000

74.000,000

*141,200

133,100

etc

118,200

All

4,000,000

PRICE

INDEX

INCOME

FOR

FAMILIES

5,000,000

380

347

299

158.4

144.1

MODER¬

IN

of

LARGE

August

15:

items

All
.Nov. 15

342

foods

196.5
and

bakery

products

FAILURES

(COMMERCIAL

STREET,

;_„Nov. 22

AND

INDUSTRIAL)—DUN

&

5,180,496

4,963,816

4,764,718

Fats
79

84

81

•

24

135.4

220.2

136.6
180.1

183.8

and

and

178.3:

1P0.8

126.0

178.5

oils

and

Sugar

173.6

202.0

181.7

,

178.8

203.0

199.8

vegetables

Beverages
Nov. 20

171.2

155.0

212.3

Fruits

BRAD-

INC.

Products

Eggs

5,084,340

193.1

155.7
228.4

Cereals

Dairy

(in 000 kwh.)

69,000,000

2,000~000

160.3

ATE

EDISON ELECTRIC INSTITUTE:

output

64,000,000

24,000,000

Meats

Electric

69,000,000

2,000,000

-

alterations,

CONSUMERS

RESERVE

AVERAGE==100

194,962,000

2,000,000

CITIES—1935-39=100-As

DEPARTMENT

272,669,000

12,643.00C

1,097,000

Nov. 15

_

12,600,000

Nov. 15

(tons)

residential

350,754,000

28,000,000

.'

529,577,000

80,000,000

etc

construction

92,199,000

533,537,000

construction

168,799,000
94,000,000

153,626,000

alterations,

building

Additions,

Nov. 15

263,847,000

82,000,000

etc

272,997,000

177,842,000

299,564,000

New

MINES):

S.

Aug:
$561,195,000 $535,647,000 $424,653,000

building

New

COAL

U.

of

non-residential

Additions,

274

2,162,139

301,2^2,000

alterations,

Federal—all

16,827,000

THE

residential

New

27,108,000

20

New

43,935,000

Nov. 20

municipal

Federal

OF

LABOR—Month

non-residential

Non-Federal—all

$77,802,000

AREAS

OF

*274

*2,506,464

VALUA¬

construction

Additions,

Private construction
Public construction

274

2;675,324

PERMIT

residential

Now

«

*

10,796,000

—

reporting
transported (ton?)

DEPT.

building

New

CIVIL

ASSOCIATIONS

carriers

motor

IN

—U.
All

161,449,000

3,223,000

296,000

export

(bbls.)

CONSTRUCTION

TION

Nov. 15
of cars)

178,951,000

9,671,000*
150,000

September:

of

BUILDING

4,218,000

10^7172,000

and

(bbls.)

TRUCKING

4,624,000

'

88.108,000
AMERICAN

8

3,824,003

domestic

—

7,294,000

11,204,000

(bbls. )

Indicated consumption

50,000

8,242,003

1,684,000

„

159,731, 000
149,910,000

159,237,000
10,969,000
50,000

lo0,365,000

oil

imports (bbls.)
Refined products imports

ASSOCIATION OF AMERICAN RAILROADS:
Revenue

gal¬

171,619,000 *170,256,000

Volume of freight

Revenue

42

output' (bbls.)—
(bbls.)
;

Increase—all stocks
21,473,000

of

(Lbis. >

gasoline

Benzol

7,692,000

Ago

172,913,000

Natural

Crude

(bbls.

output

5,622,000

.

Year

Month

Month

—

each)

Domestic crude oil

Gasoline
Gas

domestic

lons

runs

INSTITUTE

August:

Total

AMERICAN PETROLEUM INSTITUTE:
Crude oil

PETROLEUM

Previous

Month

62.8

97.0

182.0

180.3

IRON AGE

COMPOSITE

Finished

steel

(per lb.)

tin

(E.

(New

Lead

(New

Lead

(St.

Zinc

$36.96

3.18925c
•

3.18925c

&

M. J.

108.7

123.8

119.5

113.7

$36.96

328 IT

$41.83

$19.r,

Other

St.

21.200c

21.200c

21.425c

21.300c

17.425c

Refined

80.000c

80.000c

80.000c

70.000c

Nov. 19

at

21.200c
21.500c

Deliveries

15.000c

15.000c

15.000c

11.800c

Nov.

at

17.275c

19

14.800c

14.800c

14.800c

10.500c

10.500c

10.500c

Crude

10.500c

Refined
of

Bonds

Nov. 25

*101.89

1102.02

*103.14

+ 103.5f

Nov. 25

112.19

112.56

113.89

116.41

117.00

117.60

118.80

Baa

_;

115.04

115.63

117.00

112.37

112.75

113.70

116.02

Nov. 25

Group

105.00

105.00

106.39

107.09

107.62

108.70

112.00

Nov. 25

113.89

114.27

115.24

115.63

116.02

117.60

Oats

Barley

2.80

2.71

2.60

2,90

2.87

2.80

2.70

3.04

3.02

2.97

2.85

3.45

3.45

3.37

3.18

Nov. 25

I_
Group

2.83'

Nov. 25

Utilities

2.96

Nov. 25

'3 Railroad Group.

3.03

Nov. 25

.

*2.29

3.05

Nov. 25

:

t2.36

Nov. 25

3,33

3.30

3.24

3.06

2.77

+2.27

Nov. 25

2.94

2.89

2.87

2.85

2.77

of

INDEX——

stocks

JfATIONAli FERTILIZER
•»,

>

V >v

ASSOCIATION—WHOLESALE

455.7

448.3

452.4

at

of

end

IN

U.

S.

period

U.

—

as

S.
of

Nov.

1:

grain

beans

,

Building
Fertilizer

materials

220.6

Sugarcane

261.2

259.0

270.7

231.4

si.lup

All

313.3

315.3

286.1

300.3

308.3

207.9

Hops

245.1

245.2

261.3

236.1

Apples,

198.2

198.2

195.0

157.0

Peaches

175.4

173.0

163.1

Pears

218.6

217.6

204.4

Grapes

159.5

159.5

132.4

Ciurries

232.7

205.7

Apricots

157.1

157.1

154.5

145,9

136.4

135.5

122.4

*139.4

136.9
127.1

116.6

Nov. 22

215.9

214.3

Nov. 15

154,639

222.903

217.2

191.3

received

Production

1

Nov. 15

activity

Unfilled orders

at

182,686

Nov. 15

1__

i

(tons)

(12 States)

101

Nov. 15

Pecans

86,64%
34,447

3,043

3,180

183

183

230

196-

196

'330

756

743

837

104,271

100,206

76,706

(ton)

(5 States)

(bbl.)

—

(12 States;

1

(lbs.)

PURCHASES—INSTI-

'

1TUTE OF LIFE-INSURANCE—Month
Octiber:

436,319'

v

162,060

138,100

185,873

185,868

170,411

102

....

150.7

$1,104,368,000

365,805,000

101

101-

467,636

445,358

325,896,000

200,793,000

186,066,000

198,701,000

$1,356,703,000

$1,616,330,000

$1,796,548,000

146.2

149.4

$606,499,441

$569,697,227

—

3—

Total

580,331

148.8

Group

YORK

As

..Nov. 21

$1,290,105,000

Industrial

NEW

0UV PAINT;AND DRUG REPORTER PRICE
*. 'INDEX—1936-36
AVERAGE=100

83,857
35,048

(ton)

(3 States)

Ordinary

(tons)

(tons)

Percentage of

83,857

LIFE INSURANCE

of

NATIONAL PAPERBOARD ASSOCIATION:
Orders

4*

53,17t
1 TV 410

125.6

128.3

32

47,244
112.910

3,029

Cranberries

128.3

5,997
10,563

35,350

235.3

136.7

12,248

32

(bu.)

66,807

24.450

112.503

ibu.)

475,96#
-

2,312,080

12,074,
5,743

19,365

12,384

crop

3,920196,725

2,036,430

378,099

5,459

.

-7,183
15,797

180,985

59,208

(ton)

159.4

139.4

-

-

2,102,260

2,153:356

(bu.)

235.4

Nov. 22

combined—

(ton>__

34,33#

r

6,542

11,423
seed

31,817

■

16,314

6,542
177,379

2,190,746

&

4
•

47,244

com'l

177.9

33.271

16,828

(lb.)

221.1

Nov. 22

1

——

groups

324.8

i

"

100,860
11,530

1

6,503

(gal.)

304.5

32,898
'j

'6,503

Sugar beets (ton)
firoomcorn
(ton)

Nov. 22

p

Fertilizers

Farm;■ machinery-

it,A3 *271

58,316

294.5

106,737

13,179.

379,886

238.6

Nov. 22

I

85,096

32;898
ij

18.683

101,804

13,179

3—_—

:

238.6

Nov. 22

materials

Chemicals, and.;drugs*.i.^-_^_—

71,520

2,125,205

(ib.)

Nov. 22

—

76,738

85,950

(bu.)

260.7

Nov. 22

,

Metals

■

for

.229.5

Nov. 22

Miscellaneous commodities
Textiles

22,963

__c—

(ib.)

Nov. 22

Fuels

7,105

39,980

101,804

„__

Nov. 22

—

8,182

(bu.)

(ton)_

Nov. 22

—

263,350

25,405

7,406
39,980
76,982

Nov. 22

Livestock

284,497

25,405

Nov. 22

Grains

>

245,986
1,509,867

284,497

233-6

.

268,096
1,231,561

(bu.)

282.2

..

35,836

268,096

1,231,561

Sorgo sirup (gal.)
Sugarcane for sugar

.

873,893
281,822

43,017

(bu.)

Potatoes
(bu.)
Sweetpotatoes (bu.)

.

1,155,715

311,113

43,017

Nov. 22

products
Cptton

3.287,927

1,406,761
1,095,648

311,113

-Nov..22

Farm

2,458,674

(bu.)

for

all

Tobacco

Fats, and oils,

4

91,161

(bu.)

Peanuts

375.1

COMMOD-

J_.__L___^

,i._,

80,113

(tons

DEPT.

(bu )

Hay,

INDEX DY GROUP—1935-39^KM):

Foods

136.481

1,406,761

Hay, wild (ton)_.
:
Hay, alfalfa (ton)
Hay,-plover and. timothy (ton),
Hay,
lespedeza
(ton)
Beans, dry edible
(100 ib. bag)
Peas, dry field (100 ib. bag)

-

...

95,582

1,095,648

spring

Sorghums

2.67

Nov. 25

7»,y47

112,202

(bu.)

Soybeans
COMMODITY

92,088

2,009 lbs.)

,

MOODY'S

*33,675

(bu.)

Rice

2.77

Nov. 25

Industrials Group

2.96

76.075

108,163

(bu.)

Flaxseed

*2.37

lbs.»

(bu.)

Other

119.61

Nov. 25

Average corporate

Public

72,807

—

2,000 lbs.)

(tons

spring

Rye

Aaa

129.8

Oct.;

(bit.)

Buckwheat

Bonds

of

lbs.)

Durum

117.60

Nov. 25

A

AGRICULTURE—Estimate

All

MOODY'S BOND YIELD DAILY AVERAGES:
Govt.

133.5

91.8

2,447,422

of

copper

Winter

109.79

Nov. 25

Group

Industrials Group

S.

160.0

(000's omitted)

119.06

Nov. 25

S

month

Corn, all (bu.)
Wheat, all (bu.)

121.04

Nov. 25

A

in U.

PRODUCTION

OF

Aa

U.

135.0

184.3

customers—

A.

2,000

CROP

corporate

Utilities

91.7
146.6

74,507

(tons
to

S.

For

—

of .2,000

(tons

U.

In

11.650c

Nov. 19

,

Nov. 25

Public

92.0

134.2

ice
,

production

Nov. 19

^

Louis)

Copper

Nov. 19

Aaa

Railroad

and

154.8

133.8

fuels

INSTITUTE

Nov. 19

!

at

at

Louis)

Govt.

and

Gas

140.3

QUOTATIONS):

MOODY'S BOND PRICES DAILY AVERAGES:

U. S.

and ice
electricity

Housefurnishings

i

Average

:

electricity

COPPER

York)

York)

(East

110.0

2.70711'

S37.06
$41.50

$41.25

copper—

refinery at
reiinery at

Export

3.18925c

18

Nov. 13

Domestic

Straits

161.3

111.2

sweeps

Miscellaneous

METAL PRICES

Electrolytic

Nov

184.7

Fuel,

Nov. 18

Pig iron (per gross ton)
Scrap steel (per gross ton)

179.7

185.9

Rent

PRICES:

179.8

Clothing

of

STOCK

October

Members

$1,250,627,000
347,220,000

EXCHANGE—

31:

firms

carrying

margin

accounts—

WHOLESALE PRICES—U.

S.

DEPT.

LABOR—19>6=100:

All .commodities
Farm

—4

:

and

Textile

leather

186.9

186.1

190.9

167.3

Nov. 15

178.0

176.3

178.5

164.1

199.6

198.7

190.4

159.2

L

Nov. 15

142.9

142.9

141.2

129.5

Nov. 15

118.7

118.4

115.7

94.8

products

Nov. 15
;

2

151.3

151.3

151.1

116.3

—Nov. 15

:

products

Raw

185.3

185.2

184.0

140.4

;

Nov. 15

All
All

133.4

132.7

117.6

118.1

117.9

116.5

104.6

124.7

122.3

Credit
Cash

Market
Stock

of

commodities other than

tFigures

farm products
farm product's

are




for

taxable

of

listed
listed

index,

$582,962,60*3

77,703,728

74.598,933

383,207,689

395,582,858

497,902,645

615,504,997
68,883,690,210

629.680,553

719,772,119

67.521.963,215

66,114,306,579

138,336,333,665

banks

free

of

140,498,941,444

140*245,279,97?

78,693,671
"

U. S.

in

credit

bal.

shares
bonds

.

77.5 '/<■

78.7 %

12-31-24=100

79 3'Sn

Member borrowings on U. S. Govt, issues

$110,338,763

$138,969,392

$159,965^099

Member borrowings on other collateral

221,106,139

*238,602,893

210,593,662

REAL

ESTATE

AREAS

OF

FINANCING
S.

U.

BOARD—Month

Insurance

175.8
155.4

155.2

152.4

125.9

151.7

151.0

Mutual

151.1

13Q.4

152.3

151.6

—

IN

HOME

NON-FARM
BANK

LOAN

of September:

129.0

139.3

$322,339,000 $315,305,000
0,277,000
76,042,000
°"7'7 nnn

companies

Individuals

150.8

116.2

Ncv. 15

previous

in

value

Nov. 15

and foods.

and

value

Nov. 15

securities;

customers

to

customers'

price

Nov. 15

'

other than

hand

on

Total

Market

extended

Nov. 15
articles

products

debit

net

Savings and Loan Associations

I

commodities

figure.

129.1

133.5

Nov. 15

materials

♦Revised

131.3

Nov. 15

commodities

Semi-manufactured

Manufactured

^

135.8

.Nov. 15

—

Special groups—

—

157.9

iHousefurnisliings goods
Miscellaneous

r

157.9

Nov. 15

products

Building, materials
Chemicals and allied
;

158.5

—i-i.iL.

Fuel;and lighting materials
Metal and metal products

customers'

of

balances

Nov. 15

£

products

Hides

;
t

Foods
,

Total

figures given

141.5

were

for

175.2

141.3

non-taxable

176.0

securities.

152.6

Bank

and

Trust

Savings

banks

Miscellaneous lending institutions
Total

—.

255,349,000

Companies

55,097.000

.

250,612,000
51,378,000

171,938,000

165,781,000

140,983,000

.—

135,093,000

$1,022,648,000 $388,446,000

THE

(2198)

42

COMMERCIAL

materials and labor.
;

I shall devote my time principally
to a discussion of that particular

item.

shall

I

touch

but

briefly

the remaining three as they
primarily the concern of other
government departments and are
being discussed by representatives
of those departments as they ap¬

upon
are

Item
sumer

one,

credit

discussed
ficials.

am

of those controls.

credit

control

individual

the

at

extension

which

forms
are

of

con¬

tributing to inflationary pressures.
The most important single form
extension

credit

at

the

present time is in consumer credit.
Total consumer credit outstand¬
i

ing at
reached

the

end

of

September

all-time peak of $11,-

an

At the end of 1945, it
only $6,600,000,000.
Prior to
December, 1946, total
consumer loans outstanding at any
one
time had never reached the
400,000,000.
amounted

to

$10,000,000,000 level,

p This increased
credit

in

the

inflationary

Holdings of Federal debt by com-

mercial

nevertheless

have

Banks

Reserve

Federal

and

con¬

and fell by

use of consumer
present period of

pressures

add to those pressures.

nonbank investors
correspondingly.
by

concentration

held by banks

types
of
those which

are

credit

such

flecting the approximate balance
of the budget during this period.

duction during

effective

most

strike

of

1946, the debt has re¬
mained substantially constant, re¬
the end of

The

Credit Control

Consumer

The

period

this

"restoration of con-lover $6 billion in the first 10
controls," will be months of the year, with holdings

by Federal Reserve of¬
in favor of the res¬

I

toration

during

debt

place in the holdings of gov ¬
ernment securities by commercial
and Federal Reserve Banks. Since

took

tinued to be reduced

and testify.

pear

the

in

(Continued from page 2)

only
As we all
can

1946

increasing

of
on

debt

re¬

securities

and the transfer of

$6 bilion of debt thus far in
1947 from bank to nonbank hands

over

in large part, the con¬
of the public debt poli¬
cies of the Treasury and of the
restrictive credit policies of the
Federal Reserve
System. These

have been,
sequence

that

measure

be taken in the

can

the

Commercial
In the field of

Credits

Bank

commercial bank

Depart¬
ment, through the Comptroller of

loan credits, the Treasury
the

Currency, has been very ac¬
tive in studying trends and tak¬

ing steps to induce a restraint in
inflationary bank loans.
A few weeks ago, we had the
District Chief National Bank Ex¬
aminers in for a conference, at
which time the credit situation
was discussed at some length.
The
Chief Examiners were instructed
to have their examiners, during
the
course
of
examination
of

counsel with and caution
bankers against speculative lend¬
ing policies.
More
recently, the Board of
banks,

Governors of the Federal Reserve

the Comptroller of the
Currency, the Federal Deposit In¬
surance Corporation and the Exec¬
policies have contributed substan¬
utive Committee of the National
tially to the fight against infla¬
Association
of
Supervisors
of
tion, and will be continued as long
State
Banks
have
collectively
as they are appropriate. I should
taken steps to urge the curtail¬
like to note in this conection that
ment of all loans either to indi¬
a
sizable reduction in the public
viduals or businesses for specula¬
debt will be possible during the
tion in real estate, commodities,
early months of 1948 — during
or securities.
In a joint statement
which months will occur most of
issued this morning by these agen¬
the excess of government receipts
cies all bankers are urged to con¬
ever
government
expenditures
fine
the
current
extension
of
predicted for the entire fiscal year.
bank credit to the greatest extent
bank

minimize

To

credit

ex¬

pansion, restrictive measures have
been applied to the money market
the war period gave rise to a tre¬ by the Federal Reserve System
mendous
deferred
demand
for and the Treasury. This has been
reflected by
a
rise in interest
such goods. As we all know, de¬

know, the curtailment of the pro¬
duction of consumer goods during

System,

possible under existing conditions
to financing that will help pro¬
duction
rather
than
increasing
demand.

consumer

Item

Anderson of
the
Department
of Agriculture
rates and
a
better balance be¬
spite the fact that industrial pro¬
will present testimony on legisla¬
tween short and long-term rates.
duction during 1947 has reached
tion that should be provided to
The average rate on
the
90 day prevent excessive speculation on
highest level ever attained
Treasury bills has increased from the commodity exchanges.
during peacetime, we have not
yet been able to produce enough % of 1% in early July to nearly
Intensification of Savings
goods to satisfy this deferred de¬ 1% a the present time; while the
Bond Drive
mand. There still exist many im¬ rate on one-year
Treasury cer¬
portant shortages of goods. But
production
near
capacity
levels, purchasing power made
available by consumer loans can

with

be used

only to bid up prices of

consumers' goods, not to purcnase

goods.
It is imperative,
therefore, that efforts be made
to restrain the demand for scarce
more

goods until supply approaches de¬
mand.

Money
market interest rates
form a small part of the total cost

credit, and changes in
almost powerless
to limit its extension. It is neces¬

of

consumer

such

rates

are

to
cover
specifically
by
regulation such matters as mini¬
mum
down
payments and the
maximum
periods
over
which
sary

tificates of indebtedness has risen
from

%

of

1%

to

iy8%

in

the

During this time the
yield on the longest-term Treas¬
ury
bonds—those issued in the
Victory Loan — has risen from a

same

period.

little

over

The

2.30%

entire

management

since
of an
First,
there was the paying off of bankheld government debt out of ex¬
cess
cash balances; second, there
has been a payment on bank-held

the
Treasury
February, 1946 have been
anti-inflationary character.
policies

of

debt out of funds derived from (a)

surplus, (b) trust funds,
and (c) the sale of savings and
investment bonds to the public;

budget

Item 4 makes recommendations

of savings

activity

of

bond sales as an anti-

inflationary action.
said

President

the

message

to about 2.43%.

debt

3, Secretary

for the intensification

As

now thafc the, war is over
people do not understand
importance of the savings
bond program today,
The savings bond program ab¬
sorbs excessive purchasing power
in the hands of individuals. This

But.

in

his

of Nov. 17:

"Another

effective

weapon

cuts down

spending pressures. For
reason,
emphasis is being
placed—and will continue to be
placed—on
the payroll
savings

to

encourage

additional

savings, the Government should
intensify its vigorous efforts to
sell savings bonds."
Since

the

measure,

ment

the

has

the

as

an

is

It

the

Mullen, Exec-

the

is

which

Vice

utive

f!

-

of

President

National'

the

Broadcasting
Co., painted a
glowing pic,*4

smaF

fu¬

ture of the

ture of the in¬

more

dustry.

go on a spending spree
that is the most important to gel
invested in savings. The investor

Mullen

want most is the individual—

v"N B C

money

likely to

we

"On
1

March

1944,"

Mr.

stated,:
an¬

the worker with good income an
the farmer whose income is at £

nounced

high level.

nation-wide

i

view

even,

if

we

have

balanced

a

budget, for they widen the owner¬
ship of the debt and provide a
At
time the sale of these
debt

sounder
same

ings

the

structure.

makes

bonds

an

sav¬

important

contribution to the control of in¬

flationary pressures.
It withdraws funds in the hands
of the individual

from the spend¬

thus providing funds
the Treasury
to
retire bank held debt.
This in
turn results in a reduction of the
ing

stream

which

enables

money

supply in the economy.

In

order

increase the sale oi

to

Savings

States

United

have
selling job to do.
however,
The

we

Treasury

an

Bonds

intensive

Department

is

ready to move right away on ar
enlarged savings bond sales ac¬
tivity.
But this increased sale?
funds

require

will

activity

over

those

additiona]

earmarked

foi

this purpose
in the budget foi
fiscal 1948. We are therefore ask¬

ing the Congress to give approva
to the use of additional funds for
the

savings bond program over
and above those approved in the
budget.
The

staff

greatly
reduced
Washington and in the
can
be expanded immedi¬
present

i

in

additional personnel
promotion,
the
number of purchasers on payroll
savings plans can b.e greatly in¬
creased and the sales of savings

and

With

funds

Frank E.

for

materially multiplied.

which

work

forecast would span tne

then

we

continenr.
that

date
we

cause

probably by 1950. Today
looks pretty good be¬
anticipate that by two
now
we
from
New

oictures

have

will

from

years

a

television net-

Mullen

fiscal point of

a

its

for

plans

Bond sales of this character an

important from

economy

Treasury
Depart¬
enormously

curtailed

are

New

13, Frank E. '

Nov.

on

aihDunts V invested' regularly
by
millions and millions of people.

bonds
war,

obtain

to

funds

ately.

order

inflation.

City

in

Hotel

Roosevelt

the

at

York

workers and on bone
programs for individuals, and es¬
pecially farmers. The importan

field

against

a television semi¬
of the Radio Executives Club

Speaking at
nar

for

plan

dollar

fighting

By 1950

this

against inflation is increased sav¬
ings by the public.
Every dollar
that is saved instead of spent is a
In

Television Sets

many

field.

fiscal

.

2,000,000

Forecasts

Administration Anti-Inflation Pio gram
completely under the jurisdiction
of the Treasury Department, and

Thursday, November 27,.1947

FINANCIAL CHRONICLE,..

&

to

York

Hollywood, and possibly from
Hollywood to New York. Before
the end of 1948 we expect our
network

bring television

to

pro¬

population in excess ,
of 22 million people.
Within an¬
other year or 18 months another
20 million people living east of
the Mississippi will have network
television programs available to
them.
The network serving the
eastern seaboard cities only will,.
to

grams

a

by the end of 1949, according to
our best estimate, have at least a
million and a half television re¬
On

ceivers.

should
in

least

entire

the

drawn

on

2

above

area

line

a

from Wash-,

map

your

1949, there
million sets

31,

Dec.

at

be

ington, D. -C., to St. Louis."
Continuing. Mr. Mullen stated:
"When

in

fluences

sight

of the most

one

to

service

totals have been
will have be¬

these

television

realized
come

the

sound

to

the

provide

will

home

in¬
Adding

potent

nation.

and

an

a
ad¬

vertising medium of great poten¬
tialities. Television will truly be¬
come

one

munication
life.
will

You
have

of

the

forces

here
an

in

greatest

com¬

American
this audience
in

opportunity to ex¬

perience this television impact on
national life when you see the
of the Republican and
Democratic Conventions in Phila¬

our

Incidentally, I think that you
would be interested to know thai
total

sales

of

savings

bonds

are

telecasts

of the savings
delphia next summer.
the money mar¬ bonds division, and has resorted continuing to exceed redemptions
"A net work television service
and the volume outstanding has
ket with slightly higher interest
primarily to those programs for
has
been
launched after many
rates. Through the payment and which the voluntary cooperation reached a new high—nearly $52
goods m order to restrain this
billion.
In E bonds alone there delays and it is my belief that in
calling of maturing bonds and re¬ of
individuals
and
businesses
a
very
few years we will have
type of inflationary credit.
$30,894,000,000
outstanding:
funding them into short term is¬ could be recruited. While this pro¬ are
television coverage of the ma¬
In reference to the matter listed
this volume is today within onesues, it has been possible to cre¬
cedure has been eminently suc¬
jority of American homes.
under item two, "some restraint ate an interest pressure on the
quarter of 1% of the peak volume
cessful and
has
produced most
"Ladies and gentlemen, I won¬
of
E bonds
outstanding at the
should be placed on inflationary
money market without an increase satisfactory results in maintaining
close of the Victory Loan nearly der if all of you who have come
bank credit," this is a matter un¬ in the net cost of the market debt
bond sales in excess of bond re¬
here to attend this session of a
two years ago. We have been able
der the jurisdiction of the Board
to the government.
demptions, it still has its limita¬
television
in other words, to increase the
of Governors of the Federal Re¬
seminar, realize that
In making our decisions with tions.
serve
savings bond total and to sustain yon are witnessing and partici¬
System which has respon¬
respect to public debt manage¬
Up to now the day-to-day ef¬ the volume of E bonds outstand¬ pating in one of the greatest in¬
sibility for overall bank credit
ment, we must constantly weigh forts of the Treasury savings bond
control.
However, the Treasury
ing
throughout this period of dustrial expansions that this na¬
the restrictive effect of any pro¬ sales
organization has been to postwar readjustment.
tion has known.
Department, due to its respon¬
posed debt management action maintain the popularity of the
This has been a tremendous ac¬
"After World War I we saw the
sibility on debt management, has
against its cost in added interest payroll savings plan among Amer¬
been actively studying this field
radio industry brought into being
burden on the taxpayer.
An in¬ ican workers and to sell to the complishment. There were those
for some time. Some of the Treas¬
you
remember,
who
predicted and expanded into a business,
crease of Vz of 1% in the average
American people the idea of in¬
that the termination of the war which today
ury activities in this connection
accounts for more
cost of carrying the public debt,
vesting regularly for their own would be followed by wholesale than- a billion and a half dollars
cover
debt management, interest
for
example,
would
mean
an
good.
This program has formed cashing of savings bonds and the to the American economy. Tele¬
rate adjustments, and study and
added burden of $1^4
billion a an important part in the Treas¬
recommendations regarding bank
liquidation of much of the effect vision should prove to be at least
year on the taxpayer.
ury's fiscal policy.
credit trends.
of the wartime savings bond sales four
times
as
great.
In other
At
the present
time, as you
During the war it was obvious effort. The truth is that this just words, within a short span of time
Management of Public Debt
know, the interest cost on our to people why we needed the sav¬ didn't happen.
The redemption we can expect the television in¬
debt
amounts
to more ings
I must point out here, that the public
bond
program.
Everyone record of United States savings dustry to give employment to am
than $5 billion per annum.
This could see that the Government bonds is a cause for considerable additional 250.000 men and
Treasury must continually meas¬
is a large figure and may increase needed dollars — over and above
ure
the
effects
of bank
credit
gratification for all of us. It is women.
It will of itself in tele¬
in the future if a larger propor¬
controls against the problems of
taxes—to buy munitions and pay a tribute to the people who sold
casting and manufacturing be a
tion of our
debt is carried
in
debt management. The manage¬
wages
and subsistence for our the bonds during the war and to
longer-term securities requiring armed forces.
ment of the public debt since the
Each of us had the people who purchased them. $6 billion business, but more irriclose of the war has presented a higher coupon rates of interest. It someone—son, daughter, brother, I am confident that with the ad¬ porlant still, by its very nature,
is, therefore, imperative that dur¬ sister, loved one—in service and ditional effort that will be pro¬
continuing problem.
it will provide impetus to
our
ing these times of great prosper¬ therefore had a direct interest. vided by additional funds, good
The
public debt reached
its
whole industrial machine for it
ity we should continue to collect And, in addition, everyone could results can be obtained.
peak of $280 billion on Feb. 28,
has the capacity as an advertising,
adequate revenues over and above understand that savings bonds
1946.
During the following
10 a balanced
budget to provide for
medium for stimulating, in a fash¬
helped to absorb inflationary dol¬
months, it was reduced over $20
Ernst Nash Opens
a systematic reduction of the debt
lars which were accumulating at
ion
never
before
realized, the
billion, reflecting the reduction in total.
A reduction in the debt a
Ernst Nash is engaging in a secu¬
rapid rate because incomes were
the cash balance in the Treasury
merchandising and hence the man¬
rities business from offices at 420
through a substantial budget sur¬ growing while goods and services
from a wartime to a peacetime
ufacturing of nroducts.'?
1
Riverside Drive, New York City.
level. Almost all of the reduction plus is the most anti-inflationary available for purchase were not

payments may be spread on in¬
stallment purchases of consumers'




third,

pressure on

organization

Volume l66
\\

4656

Nuinbei1

The

THE

problems, when his

said:
"To expand

mes¬

sage

we

heed a

basic

output,

citizens,

Mr.-

in

ca¬

and

a

be?

I

scrap.

Can

leave

We

.

.

rifeed

This

The

worked

in

It

.war.

tax- incentive

scrap

to

same

millions

system

set up

was

govern¬

war

ment scrap-piles.

production.

The Act allowed

management to

claim income tax

be

can

dilly-dallying

no

and

There literally are scores, if not
hundreds of actions, that can be
taken—not on some far-off proforthwith.

Now

piit-it-off, confused boys who
smash

bush

right

the

to

heart

of

a

problem.
.Here

about

few lines of attack:

a

factories

still

end

no

in

even

sight to

shortages.

and

whole

country needs to see
Fontana plant expanded at
earliest possible moment to

permanently.
Fontana

for

and

to

there—the

making

bodies

Only

ex¬

produce

kind

refrigerators,

automobile
products.

plan to

a

and

used

to

build

sheet

a

stoves,

scores

of

rolling

mill

at

Los

Angeles.
The only way

con¬

to support real

competition.

Immediate

action is called for
the shortage of steel for pipe¬
lines,
because
great
projected
pipelines are held up by lack of
on

This,

in

turn,

causes

short¬

ages of natural gas needed to

keep

industries running and growing.
The shortage of irrin and steel
scrap,

as

you

newspapers,

know

from

your

is

our

tremely

effective,

forgotten,

we must

hydro-electric

develop

more

White

desperately needed

scrap.

Reports to the magazine "Steel"
assert that the War Assets Admin¬
istration could pour into industrial

four

million

in a few months.
before yesterday, Mr.

scrap

the

Assets

tons

of

Only day

Administrator—Jess
me

when




they

Lar¬

de¬

The

kicked-

Instead of spending all the time

reminded of Jesus' parable
of" t~e talems.
Defnocracy is a

rev¬

culated
those

sacred talent.

"To him that hath,
given.
To him that
hath not, everi that which he hath
shall be taken away."

cal¬

to
use

us

our

own

strength

Communist

destroy
selves.

knows

that

be

the

player

of

shall

chess

expert
make

it

like
of

am

to
oyr-

The

the

idea

bridge is more important than
the bridge. It may be easy to de¬
stroy the bridge and very difficult
to rebuild the bridge if you lose
a

the

idea.

Therefore,

Communists, let

the

reason

Capital. Goods

try to destroy
the idea of democracy. Since ideas
tend to be perpetuated by intel¬
lectuals,
colleges,
schools,
the

Industries

and

Tax

Reform—Machinery and A1-.
lied Products Institute, 120 South
La Salle Street, Chicago 3, 111.—
paper—250 per copy (lower rate
for quantity orders)

us

press, and the like, Communism
has made a point of successful in¬

Crowell-Collier Automobile

electric power. Skeptics said the
Pacific Northwest "would
"have

dosing up the patient, won't
Congress and the Administration

power to burn" after

do something—yes tomorrow and
all week—to tackle the task after

No. 11—Market 'for new
the cars; price problem; dealer-cus¬
other hand, have too often forgot¬ tomer relations; new car financ¬

task

ten the

the

war.

on

But

instead, the available hydro-elec¬
tric power—not only of the North¬
west
but
of
all
California—is
being

overtaxed.

We

must

kilowatts

more

country, in order to produce
goods in every field.

than

"So

the

Now

The

more

take

the

food

said:

New

situation:

"We

need

put

off

—just

ing
at

as

the

This
of

distant

"""

nation

dividing

mind to

forever

the

scarcities

•

H'W1"'"-

Anglo-Swedish

one

"Times"

dated

we

another

ex¬

Nov.

25,

a

new

industry

Sweden under which, until end of

1949,

countries will settle their balances

.

.

.

Splitting

in

with

up

the

central

banks

of

both

their

respective currencies up
8,000.000, and above that sum

stricken peoples around the world

to £

—and

we

though

we

balances will be settled in gold.
According to the "Times," the
pact, in effect "provides a cushion

ourselves

The

must

do

right

now

advocates

economy

this,

even

don't have enough fof
.

of

.

.

a

scarcity

would

keep us on the
ragged edge of shortages endless¬
ly. We simply must make more
stop

talking

production.

Let's

about

get

more

inore

pro¬

duction.

Administration and Con¬
gress will have to reject the "let's
wait, and see" boys and the "it
shouldn't be done" crowd.

industry

act—and

least

and

can

existing

plants
full production.

her

ad¬

a

commitment

under

the

American loari to convert current

sterling balances into dollars.

to

The

Financial

Chronicle)

LOS
ANGELES,
GALIF.
Harry E. Griffith has become

sociated

With

John B.

—

as¬

Dunbar

&

Co;, 634 South Spring Street. He
formerly with Livingstone &

Was

Co. and Searl-Merrick Co.

With M. E. Herndon Co.

into

is

to

(Special

get

immediate

„

to

Tiif.

Financial

ASHEVILLE,

there's

Herndon

has

productivity rising. Arid that Will
be tremendously
important, bd-

We

he

are

imparted

in

N.

C.

become

—

the

ground

but

some

in
or

G.

A.

associated

strong
tbe
of

defense

within, through
and development

cultivation
natural

and

The

Financial

C.

—

Charlbs J. Tucker is With Merrill

is producing
efficiently. Lynch, Pierce, Fenner & Beane,
being hit below the belt R. J; Reynolds
Building.

data

—

Inc.,

York 17, N.

Y.—paper

Major Problems of United States
Foreign Policy
1947 — A
Study
Guide—The Brookings Institution,

Washington 6, D. C.—paper—$1.50.
Small

Businessman

and

His

Bank,

The—Explanation of basic
banking policies and the require¬
ments that govern the granting of
business loans—U. S. Department
Commerce—U.

S.

Governriient

Printing Office, Washington
D. C.—paper—100

25,

Successful Investing Formulas—
Lucile Tomlinson—Barron's Book

Department, 30 Kilby Street, Bos¬
1, Mass.—cloth—$3.00

ton

hemisphere

mittee—Association

resources,

who,

like

termites,

bore away under cover.

Let's

stop

There

kidding

be

can

no

ourselves.

peace

of

American

Railroads, Transportation Build¬
ing, Washington 7, D. C.—paper

between

Trends

in

Output and Employ-

democracy and dictatorship. merit—George J. Stigler—National
Sooner, or later the one or the Bureau of Economic Research,
other

will

of

course

annihilated.

be

the

world

been different had

The

might have

when

Inc., 1819 Broadway, New
23, N. Y.—cloth—$1.00.

acted when

we

Japan walked into Manchuria

or

York

Will Dollars Save the World?—

Henry Hazlitt

—

Foundation

for

Mussolini

raped Ethiopia. Economic Education, Inc.,
Irvingmarkedly dif¬ ton-on-Hudson, New
York—paper
ferent if we do not soon awaken
—750—lower
rate
on
quantity
to history's object lessons.
orders.
The

world

will

be

Your

Democracy Must Recapture Its
is

fired

with

a

combustible and destruc¬
tive fanaticism.
Has democracy,
the other hand, become too
passive and too contended? There
on

seems

to be

win souls.

no

Newspaper—Blueprint for
Press—by Nine Nieman
Fellows, Leon Svirsky, Editor —
The Macmillan Company, 60 Fifth
Avenue, New York, N. Y.—cloth
—$2.75
a

highly

longer the urge to

Where, today, in this

Better

With Livingston Williams
(Special

to

The

Financial

Chronicle)

CLEVELAND, OHIO — Edward
great country of ours is there real
L. Knight has been added to the
enthusiasm for democracy? It just staff of
Livingston, Williams &
dries riot sriem to exist.
democratic

Co., Inc., Hanna Building.
^

sweat

and

blood,

was

us

by

also

once

fired with passion and enthusiasm.

Today, too often
taken

fore,
ous

for

now

way

of life

It,

there¬

rekindle

enthusiasm.

every

that

This

business¬
spirit

hf

hnards

and

especially

plies to members of school
mi ttpps

—

Hunter, Prugh, Ball Adds
(Special

to

The

Financial

Chronicle)

DAYTON, OHIO — Hunter,
Prugh, Ball & Davidson Winters
Bank Building, have added Harry
C. Conway to their staff.

must become the obvi¬

challenge to
to

our

granted.

—a—ijwfci

life,

of

way

purchased and hallowed for

Chronicle)

N.

service

Publishing Com¬
250 Park Ave., New

Transportation in America —
Final report of the Railroad Com¬

man

WINSTON-SALEM,

and

(b)
building a subtly strong offensive
of party members in the western

is

With Merrill Lynch Firm
to

pany,

of

Communism most certainly has
dual goals of (a) building up a

repair

Crowell-Collier

and can *;be
of the other

groups
are
now
going wild
their race for votes, money

Our

tative for R. S. Dickson & Co.

(Special

ing;

class¬

a

of
one
part or another.
Then
you'll find the record of workers'

when

be

circulation.

Chronicle)

with M. E. Herndon Co., 117 East
steady flow of
materials, assembly lines won't Third Stredt, Charlotte, N. C. He
constantly be interrupted for larik was formerly Asheville represen¬

When

and

press,

They have

great measure in¬

a

Communism

Griffith With Dunbar Co.
(Spfecial

on

Youth

government

do

to

on

na¬

gold liability."
The agreement, it is stated, was
made necessary when Britain was
compelled last summer to aban¬

fast.

we

an

Both

tions presumably will endeavor to
balance their transaction^ to avoid

don

The

The

balance of trade.

contracting

basic materials.
Let's

fof either side in event of
verse

their plans.

Survey

Let Us Not Kid Ourselves

that, and not getting enough
increase production and stabi¬
prices

businessmen,

school, church,

in

trusted;

and

this

ranks.

sometimes failed to realize, as the
Russians have realized, that the
idea of their very freedom of en¬

feet

bilateral monetary agreement was
signed between Great Britain and

talk

these

rooms, on the screen, and through
radio. The newspapers have their

to

have—splitting with

radio

trusted

'

According to a special despatch
frpm London to the New York

production.

can't

up

.

into

American

ceed £8 million.

found the way dur¬
war—that can be taken
food

lWW

balances against

future.

several measures

raise

a

.

Provides for gold settlements if

we

to

once

the
are

had

.

Paei

that action is to be

into

Again, there

once.

filtration

terprise is in

a

comprehensive farm program."
I
trust the word "comprehensive"
mean

at

work."

Situation

President

solved

built the wall

we

for the people

—

Food

be

can

Let's really act in the spirit of
that Bibic quotation that says:

pro¬

across

Steelman : cause a worker's
job and his wage
newly-appointed
War dollar are only safe and
valuable

son—thrilled

neglected,

issue is

shut

can

d'rect

thinking about

production?

Let's not soft-pedal that the real
to expand plants.

One-sixth

power.

is

now

forgotten

Conclusion

I

con¬

moves are

Roger Babson

on

They
studied

people,

more

around, but fundamental problem
is
to
increase
production—and
without further delay.

aluminum plant at Spokane
down now—for lack
of

our

more,

useless, surplus ships to be made
available for the production of

and

we

flict. and

better

But who

shortage
hurts
nearly every type of industry. Be¬
fore we can increase
output of

and

House action, and is forcing more

production

the production line,
at home, and in the church.

olutions. Their

a

tnose

ad¬

have

flourishing
mean

to

mit.

re¬

such

things for you to buy
—and cheaper.
Mr:
LaGuardia
always
was
standing up for the "forgotten

aluminum

Steelman
ex¬

more

This would

economy.

critical

highly
critical,
thereby forcing high prices.
To
correct it requires the Maritime
Commission, War Assets Adminis¬
A Peacetime Pearl Harbor
tration, Army and Navy to sell to
When we were hit at Pearl
industry all the metal junk and
surpluses
possible, in order to Harbor, the people knew We had
produce the scrap that's so essen¬ to do a terrific job in
expanding
and producing.
tial'today to make more steel.
We Went all-out
to do that job.
,'
I can report from conferences
NoW We face a
With John Steelman, assistant to Pearl Harbor of
peace-time. Once
the President, that Mr.
is
taking determined

ever

The

lize

to prevent

centration of economic power is
to stimulate competition. The
gov¬
ernment has the power and duty

steel.

and

are

wiser than
want

ventures that will

new

an

the

four

days after
we announced the plan to
expand
Fontaria, the United States Steel
Corporation said it was planning

of

one

ahead into

aluminum is completely over-sold.

doesn't

Well. I announced

in

man."

the
pro-

permanently

Aluminum capacity now is five
to six times pre-war levels.
Yet

this

dtice sheet steel and other
prod¬
ucts needed riot
only now—but

pand

a

shortages today.

duce

As you know, there is a Kaiser
Fontaria steel plant in California.
Not only the West Coast, but the

sheet steel

——-

leaders

as
to encourage the small
businessman and risk-taker to go

iron, which is

is

needed steel in order to
help save
people of other lands from ruin.

bring

build

by
lack
of
enough steel production. This steel
famine can get much worse before
it gets
better, because we must
divide
sohle
of
our
critically

There is

between democracy and dictatorship,

whoiri? This is the rnost important
problem facing both employers
and their workers
today—far more important than prices or wages.
Tne Russian^-————

way

of

hamstrung

to

fact, tax laws should be

formed

speedy settlement and to
Think of the
immediate possibilities of using

are

bbing

In

government

possible

start up production.

aluminum,

are

Steel—Our

The

all

Aluminum Output Insufficient

beat
failed
to

and

do

I'm

stife I'm talking the language of
"The Little Flower," because he
heVfer could tolerate the
evasive,
the

tragic.

should

hundreds rif thousands of tons of
coal to make coke—to make
pig

facilities

ducking this fundamental issue.

around

no peace

The revival bf thri Third International fchriuld
rouse every think¬
ing American to action. Action of What kind? And against what and

necessary.

for

gram-^-but

One

be

can

Mr. Babson sounds alarm regarding revival of Third
International,
and calls upon businessmen to take action and
recapture American
youth's enthusiasm for oiir democratic Why of life.

A

their

That's

manufacturing
production, there
•

By ROGER W. BABSON

Holding there

it

way

then.

encourage companies to expand
plants and equipment for

make

taxpayers from

the

for

potential

Will

the

.

crease

excuse

43

.

When the way to lick
shortages
arid ever-rising
prices is to in¬

.

dofi .facilities?
did

locate in their different

can

in

smack

say

prodiic-

should help hr

all

trie

should

How cah the government stimu¬
late industry to increase

assure

uncover

ae-

of customers.

and

(2199)

pocketbook—by shortages.

that Mr. Larson will
stone unturned, and in¬

no

I

—or

long-standing labor-man¬ exemption for depreciation of new
*tidti right now
Action tomor¬
agement deadlock is depriving the plant TaciLties at the accelerated
row by "Admiriistratibh chiefs iii
tdiiritry pf upwards of three mil¬ rate' 6t roughly. 2t) to 25% a yeah,
Washington v Action by indus- lion tens a
year of high quality instead of the peace-tihie rate of
trialists. to obtain and operate idle
This brought about a
metallurgical coal.
Three West only 4%.
existing facilities, and immediate
Virginia mines closed July 1st gigantic expangioti.
measures to expand their plants
in a dispute with 2,200 miners
This! same stimulation is needed
\ v.
Action tomorrow rind
every
During almost five months of now, in order to entourage and
day to gear up this country to full
shut-clowri, industry has lost Hun¬ safeguard industries making tlie
production and to supplying wants
dreds of thousands of tons of coal. expansions that are so
.

,

government

areas.

/'long-range
program." Yet how long away cart

"long-rangfe"

vigorously they intend

wage an ail-out drive to release

they

President

need

we

to

dustrialists how

program to

shortages

pacity and equipment."

Certainly?

clared how

steel-users

industrial

long-range

overcome

FINANCIAL CHRONICLE

&

Forgotten Production77

(Continued from page 10)
nerve center of today's
pressing
economic

COMMERCIAL

of

ap¬

corn-

directors.

With Equitable Securities
(Special

to

The

Financial

Chronicle)

NASHVILLE, TENN. —Gus G.
Halliburton
is
with
Equitable
Securities Corporation, 322 Union
Street.

44

THE COMMERCIAL

(2200)

FINANCIAL

&

CHRONICLE

Thursday • November 27,• 1947

in
INDICATES ADDITIONS SINCE PREVIOUS ISSUE

•

American

Bankers

Insurance

of

Co.

Callaway Mills, LaGrange, Ga.
-/.-j .
Aug. 28 filed 123,306 shares (no par) common;
Under¬
writing—No underwriting.
Offering — Shares will be
offered only to those stockholders who exchanged their
holdings of common for preferred in 1945.
Price—$35 a
share.
Proceeds—For corporate purposes.

Florida,

Miami.
3 (letter of notification) 2,500 shares of class A
(par $10) common, 5,000 shares ($10 par) class B com¬
mon, and 11,250 shares 8%
($10 par) cumulative pre¬
ferred. Price—$240 per unit, consisting of 2 shares of class
A, 4 shares of class B and 9 shares of preferred.
No
underwriting.
For capitalization of company to enter
into stook fire insurance business.
*

Nov.

Americana

(12/2-3)

Inc.

Furniture,

Central Caoperative WHoresaJe, Superior, Wis.
Oct. 13 filed $750,000 of preferred stock.
No underwrit¬
ing.
Offering—A portion of the stock will be offered
for conversion of outstanding notes, on a dollar for dollar
basis, and the balance will be offered to members and
patrons eligible to become members.
Price—From $25
to $25.75 from January to December, depending on the
quarter in which the stock is sold.v Proceeds—For con¬
4

Oct. 23 filed 100,000 shares of 6% cumulative convertible

preferred (par $5) and 100,000 shares (100 par) common
an additional 285,000 shares common issuable upon

and

conversion of preferred and exercise of 35,000 common
stock warrants to be sold to underwriters.
Underwriters

struction of warehouse,
property additions.

—Gearhart &

Co., Inc., New York; Herbert W. Schaefer
£o., Baltimore, Md., and Comstock & Co., Chicago.
Offering—To be offered publicly in units of one share
<o£ preferred and one share of common. Price—$5.10 per
unit.
Proceeds—To finance completion of its factory
and for working capital.

Central

offered

for

basis

on

Rights

share

each

expire Dec.

scribed

shares

Price

18.

be

to

for

by

shares

two

amendment.

publicly offered

held.

Unsub¬

tenth share of

Proceeds—To be used for capital funds.

Price
®

American & Overseas

Nov.

18

subordinate

writing—None.

ating

debentures.

Price—Par.

•

Under¬

Working capital and day-to-day

by

new common

amendment.

Co.

(12/8)

and
Bids expected about Dec. 8.

Central Power &

Nov.

oper¬

for each common share held.

Proceeds—For construction

repayment of bank loans.

Development Corp., N. Y.
(letter of notification) $125,000 5-year 5% con¬

vertible

Power

$4,000,000 first and general mortgage bonds,
shares ($10 par) common.
be determined by competitive bid¬
ding.
Probable bidders: Blyth & Co., Inc. and Kidder,
Peabody & Co. (jointly); Halsey, Stuart & Co. Inc.
(bonds only); Harriman Ripley & Co.; The First Boston
Corp. and Coffin & Burr (jointly); Shields & Co. Offer¬
ing—The bonds will be offered publicly while the com¬
mon will be offered to 6% preferred and common stock¬
holders for subscription on the basis of one-half share
of new common for each preferred share held and one-

underwriters.

by

Maine

Underwriting—To

Corp.

new

one

21

filed

Light Co. (12/8)
$6,000,000 first mortgage bonds, series B,

1977; and 40,000 shares ($100 par) cumulative pre¬
Underwriting to be determined by competitive
bidding.
Probable bidders include Halsey, Stuart & Co.
Inc. (bonds only); The First Boston Corp., Blyth & Co.

expenses.

ferred.

& Pump

Corp., New York

Get. 31 filed 100,000 shares ($1 par) common. Underwrit¬

Ripley & Co. and Smith, Barney & Co.
(jointly); Lehman Brothers and Glore, Forgan & Co.
(jointly).
Price—By competitive bidding.
Proceeds—
For property additions and expenses.
Business—Public
utility. Bids—Bids for purchase of securities tentatively

ing to be filed by amendment.
Price by amendment.
pay off indebtedness incurred in the ac¬
quisition of the capital stock of A. D. Cook, Inc., Lawrenceburg, Ind.

Appalachian Electric Power Co.

(12/2)

set for Dec. 8.

Oct. 29 filed $28,000,000 first mortgage bonds, due 1977,
and 75,000 shares of cumulative preferred.
Underwriting
will

Probable bidders:

be

offered

at

Century Steel Corp., Hollydale, Calif.
Nov. 10 filed 4,000 shares ($100 par) common. No under¬
writing.
Price—$100 a share.
Proceeds—To purchase
rolling mill, equipment and for working capital. Busi¬
ness—To produce steel in Los Angelas County.

bidding.
Corp.; Halsey, Stuart

competitive

The First Boston

<& Co. Inc.; Harriman Ripley & Co., Inc.; Glore, Forgan
& Co; Sale of preferred will be negotiated.
Probable
underwriters: The First Boston Corp. and.Union Savings

'■'

Ji-.

I..

Cleveland

150,000 shares of cumulative preferred
stock (par $20). No bids submitted Nov. 12 for
preferred
stock.

Proceeds—To reimburse treasury for capital
penditures. Statement became effective Oct. 31.
•

Be these? a

Nov.

19

(Ohio)

Electric

Illuminating Co.

filed

1,000,000

shades

Underwriter—Tellier & Co.

'

capital stock.

par)

($1

Price—400 per share.

ceeds—To develop mining properties

ity of Ontario.

Pro¬
in Flint Lake local¬

>

.

.

Pa.

(letter of notification) 50,000 shares of 6%! pre¬
ferred, ($5 par).
Price—$5.75 a share.
UnderwriterMcLaughlin, MacAfee & Co., Pittsburgh, to acquire and,
equip a bottling plant.
East Utah

Mining Co., Salt Lake City

Oct. 27 filed

1,075,000 shares (100 par) common. Underwriter—F. Eberstadt & Co., New York.
Offering—Of-j
fered to common stockholders Of record Nov. 20 on basis!
of

share

shares held.
Rights
Price—300 per share.
Three stockholders have agreed to exercise rights to sub¬
scribe for 368,533 shares for investment.
Unsubscribed
shares to underwriters, who will offer %rds of unsubscribed shares to Newmont Mining Corp. and Olin Indus¬
tries Inc. at 300 per share.
Proceeds—To develop mining
properties in Wasatch County, Utah.
one

new

expire

3

for

(MST)

p.m.

each

Dec.

Steam

justment for outstanding $4.50 preferred.
Unexchanged
shares of new preferred will be sold publicly.
Price by
amendment.
Proceeds—To retire unexchanged shares
of old preferred.
Offering indefinitely postponed.

ex¬

Co.,. Inc.,

Sterlizing

Cleveland

Electric

Illuminating Co.

(12/9)

12 filed $20,000,000 35-year first mortgage bonds.
Underwriters—To be determined by competitive bidding.

Nov.

—

19

Bigelow, St. Paul, Minn.

filed

1,038,207 shares of common stock (after
split-up of 10-for-l). Underwriter—Otis & Co., Cleve¬
land.
Proceeds—874,562 shares of stock are being sold
by Charles A. Ward and other stockholders who will

receive the proceeds, and 163,645 shares are to be issued
in exchange for

outstanding shares of Quality Park Box
Co., Inc.; Consolidated Printing Ink Co., and John Beissel
Co.
Price—$9.50 per share.
Callahan
Nov.

13

Zinc-Lead

(letter

common,

of

Co.,

New York

notification)

3,500

shares

($1

par)

being sold by H. B. Van Sinderen, of Washing¬

ton, Conn., and 3.700 shares of common being sold by
Harrison White, Inc., of New York.
To be sold at mar¬
ket.
No underwriting.

,

writer—Reich & Co., New
etc.
•

Elliott

Nov.

20

York.

.

Co., Jeannette,

filed

60,000

Purchase of inventory^

]

.

!

(12/11)

Pa.

($50 par) 5% convertible
Underwriter—F. Eberstadt

shares

j

cumulative preference stock.
& Co., Inc., New York.
Price by amendment.
Proceeds
—For construction and expansion program.
Business—
Manufacture

of

turbines

steam

and

electric

j

generators,

and motors.

Empire Projector Corp., New York
(letter of notification) 80,000 shares ($1 par)
behalf of the company, and 15,000 shares ($1

Aug. 21

on

behalf of officers and stockholders. The

80,000 shares will be sold at $3
& Co., New York,
•

Fidelity

a

has withdrawn

Inc., Lancaster,

Co.,

Electric

|

share. L. D. Sherman
as underwriter.

Pa.

19

(letter of notification) 30,000 shares of class B
common.
Price
$1 a share., No under writing.. 1 The
shares

are

being sold by B. E. Crispin and F. E; Crispin*

Blyth & Co.; Halsey, Stuart &
Inc.; Glore, Forgan & Co. and W. C. Langley & Co.
(jointly); Dillon, Read & Co. Inc.; The First Boston
Corp.—Proceeds—For construction program.
Bids for

*

both directors of the company.

Firemen's
Nov.

filed

12

Insurance

Co.,

■

,

-

.

>-

N. J.

Newark,

($5 par) common. Under¬
writer—Blyth & Co., Inc., New York. Offering—Shares
initially will be offered to stockholders on basis of two
be offered
To be

120,462 shares

Nov.

Unsubscribed shares Will

publicly.
Price by amendment.
Proceeds—
to company's capital and surplus.

added

Fischer

Probable bidders include:

17

Baking Co.,

Newark,

N. J.

(letter of notification)

$299,000 5% cumulative
non-voting preferred. Price—$100 per share. No under¬
writers.
To refinance a part of corporate obligations

purchase of bonds tentatively set for Dec. 9.

and

Consumers

Oct.

16

•

Continental

Nov.

;

?!Neiv York




Car-Na-Var

Corp.,

Brazil,

Ind.

Cooperative Broadcasting Association,
Washington, D. C.
1
v

Nov.

21

(letter of notification) 492 shares ($100 par)
10,906 shares ($10 par) preferred.
To be
par.. No
underwriting.
To erect and equip
radio station and for working capital.
and

at

Power

&

Light Co.

(12/9)

bidders:

Halsey, Stuart & Co. Inc.; The First
and Blyth & Co., Inc. (jointly); Morgan
Stanley & Co.; Lehman Brothers.
Proceeds would be

Boston Corp.,

Pittsburgh,
s

.

used in connection with the company's
gram

construction pro¬
which involves an outlay of over $30,000,000 of
generating,
transmission and
distribution

additional

Products

Co.,

Detroit, Mich.

filed

21

100,000 shares ($1 par) common.
Under¬
writers
Campbell, McCarty & Co., and Keane & Co.,
both Detroit.
Price—$7 a share.
Proceeds—The shares
—

are

being sold by 14 stockholders who will receive pro¬

ceeds.

„t.v,

Gabriel

Co.,

<

-4,

Cleveland

(letter of notification) 10,000 shares. ($L'%af)
common, on behalf of Wm. H. Miller, a director 6f/th6
company, to be sold at market.
Underwriter^Styls,;
ton & Co., Chicago.
Indefinitely r
postponed;*v' v
i
7*
Ti
Oct.

facilities.

(letter of notification) 35,000 shares ($1 par)
common.
To be offered at approximately $3 per unit.
No underwriting.
For additional working capital.

Probable

CORPORATION
v

common

19

Delaware

Chicago and other cities

non-cumulative

Nov. 7 filed $10,000,000 1st mtge. coll. trust bonds, due
1977.
Underwriters—To be sold at competitive bidding.

FIRST BOSTON
-

4%

sition of additional office and plant

sold

Boston

$1,000,000

($25 par); $4,000,000 of 3y2% certificates of in¬
debtedness cumulative; and
$1,000,000 of N/2% loan
certificates cumulative. No underwriting.
Offering—To
the public. Common may be bought only by patrons and
members. Price—At face amount. Proceeds—For acqui¬

common

The

filed

Oct.

stock

improve employee and employer relations.
Fraser

Cooperative Assoc., Kansas City,

Missouri

•

Corporate and Public Financing

.

j

Y.

N.

Co.

Brown &

ij

Sept. 22 (letter of notification) 65,000 shares of common
stock (par 100).
Price—65 cents per share.
Under«f

shares for each 31 shares held.

Country Club, Inc., Bethesda, Md.

(letter of notification)

$150,000 2% debenture
bonds.
Price
$300 per bond to charter members of
club.
No underwriting.
To purchase club house and
equipment.

Nov.

j

I

1

Electric

j

two

18.

—

,

—

filed

16

22

par) common

"

Sept. 26 filed 254,989 shares (no par) preferred, series of
1947.
Underwriter
Dillon, Read & Co., New York.
Offering—To be offered share for share plus a cash ad¬

■

Associated Telephone Co., Ltd*
Get.

leases and driU test:well;

Dogpaw Gold Mines Ltd., Toronto
Oct.

Nov.

(EST) Dec. 2, at 30 Church Street, New York.
■'

Wichita* Kansas

3

(letter of notification) 25,000 shares ($1 par)
common, being offered by D. L. Wallace, President of
the company. To be sold at market through DempseyTegeler and Co.., Los Angeles.

Proceeds—For retirement of debt and

i*;

Cessna Aircraft Co.,

Nov.

partial financing of new construction.
Bids*—Bids for
purchase of bonds will be received up to 11:30 a.m.
•.?

gas

common on
-<■

Corp. (jointly). Offering—New preferred will be offered
outstanding 4!/2% cumula¬
tive preferred on the basis of one new share for each

:

purchase -oil and

r

to holders of record Nov. 24 of

four shares held.

Harriman

and

Proceeds—To

bonds

stock.
Price—7% cents a share.
Underwriter — H. J.
Newton and, A„ R. Kamp. &?Co., both, of:: Denver.* Tp

due

American Steel

—The

.

Doughboy Bottling Co., Pittsburgh,

series P, due 1977, and 160,000

Offering—To be
subscription by stockholders of record Dec. 5

of

Denver-Rangely Oil Interests, Inc., Denver,
Colorado
.v;„. ,v
' ;
(letter of notification) 500,000 shares (100 par)

Oct. 27

of inventories, and

Nov .10 filed

American Insurance Co., Newark, N. J. (12/19)
Nov. 14 filed 662.504 shares of capital stock (par $2.50).
First Boston

Bids for purchase of

Oct. 24

&

Underwriter—The

expansion

facilities up to the end of? 1949*
bonds tentatively set for Dec. 9.

24

.

*> '

>

„•

.

•

'

l

v

*

t

COMMERCIAL - &

THE

Volume 166'» Number 4650

FINANCIAL

•

in the Securities Act of 1933."

CHRONICLE

Offering—The shares

be

are

to be issued upon exercise

aof warrants issued on June
28, 1946. -JPrice—Warrant holders are entitled, to* pur¬
chase 21,000 shares of common at $12,875 a share on and

NEW ISSUE CALENDAR

after June

November 28,

Northwestern

1947

Public Service

to June

Common

Co

28,/l947

27, 1949.

poses.

'

.

Seaboard Air Line RR.,

1947

1,

2, 1947

Americana

F,urniture, Inc
Pfd. and Com.
Appalachian Electric Power Co., 11:30 a.m.
Bonds
(EST)
Mack Trucks, Inc.
.Common
December 4,

Electric

Delaware Power &

Common

Oct.

General
*'

the basis of

.Preferred

Common

Horn

stock

Price and

name

finance purchase of

by amendment.

Common

Preferred

machinery and other plant equip- :

Capital Stock

rations, arid the Luce Corp. and Stickley1 Bros; Institu¬
tional Furniture Co.j both Michigan corporations.

19,194 7

'

Maryland

Md.

Baltimore,

Record Corp.,

20

(letter of notification) 500 shares 6% cumula¬
tive preferred.
To be sold through officers of the com¬
pany.
Price—$100 a share. For business promotion and

of four furniture companies to be merged with the. regis¬
trant. The merging, companies are Toccoa Manufacturing
Co. and Stickley Brothers, Inc., both Illinois corpo¬

1947

Northern Indiana Public Service Co

American Insurance Co,

•

Nov.

Price—$9/25 a share. Proceeds-^The shares are being
sold-by four stockholders and represent part of the stock
the sellers will receive in exchange for /their/holdings

r

December 17,

Atlanta, Ga. ;
debentures, due 194D-

serial

ment.

16, 1947

Northern Natural Gas Co.—.

December

discharge estate taxes.

of.

195L7; 12,000 shares ($25 par) 5%% cumulative converti¬
ble preferred and 85,000 shares ($1. par) common/
Un-derwrite!r--~Kirchofer & Arnold,tnc.,Raleigh, N. C. Price
«--The debemtarea'kt:li)^507, while the preferred shareu
will be offered at par and the* common shares at $4
each; - Proceeds—Torretire^ bank indebtedness and* to

Illinois-Rockford Corp., Chicago
July 24 filed 120,000 shares ($1 par) common. Under¬
writers—-Braitsford & Go., and Straus & Blosser, Chicago.

Preferred
December

which to

underwriter

Business—Manufacture

13 filed

May 20 filed $500^000 5%

of the estate of John Fritsche (deceased) to obtain funds

with

working capital.
fabrics.

Manhattan Coil Corp.,

Price at par.

Co., New York
21 (letter of notification) 1,700 shares of common
(no par). The stock is to be sold for the account

Nov.

to

Trucks, Inc., New York (12/2)
150,000 shares (no par) common.
Under¬
writers—Hayden, Stone & Co., Adamex Securities Corp.,
both of New York.
Price by amendment.
Proceeds—
To repay bank loans and for working capital.

Hardart

1947

Co.
.

&

filed

Mack

Nov.

Proceeds—To repay bank loans and finance construction.
•

& Sons, Inc., New York
20,000 shares ($1 par) common. Under¬
writing—None.
Offering—Shares are being offered to
certain officers and employees under an "employees
stock option plan." Price—$21 a share. Proceeds—To be

26

cotton and rayon

Electric Light Co.

share for each two held.

Nut

Lcwenstein

added

22, when subscription warrants expire.
subscription to common stockholders on

one

•

Nov.

Rochester,

25,000 shares ($20 par) common.
Under¬
Unsubscribed shares will be sold at

Offering—For

1947

11,

Inc.,

None/

—

Bonds

of

Elliott

(Hawaii)

Bonds

Instrument Corp.-—

Co.,

auction after Dec.

Pittsburgh Steel Co. _—
-Bonds
Reading Tube Co.„
—Stocks
Sunray Oil Co. —
——J———-Debs. and Pfd.
December

Manufacturing

27 filed

writing

-Bonds

Light Co..

December 10,

,

HHo

1947

Georgia Power Co., 11 a.m. (EST)
Southern California Edison Co.__

Proceeds—For rehabilitation

common.
Under¬
Sons, Inc., New -York/ PriceBy amendment.
Proceeds—The shares are being sold
by 36 stockholders who will receive proceeds.
Offering
postponed indefinitely.

A*

Illuminating Co

shares

1V4

develop mining

Corp. of America
notification) 24,000 shares of 5% cumu¬
stock (par $12.50). Under¬
writer—Ray T. Haas, Chicago. Price—$12.50 per share.
General corporate purposes.

writer—E. H. Rollins &

Springfield Fire & Marine Insurance Co.-Cap. Stk.

Cleveland

Lock

Sept. 19 filed 200,000 shares ($1 par)

MainT Power Co.——Bonds and Common
Light Co.—
Bonds and Pfd.

December 9,'

share for each

one

Proceeds—To

lative convertible preferred

^New York

Common

—

of

share.

share.

a

Oct. 6 (letter of

•

Central Power &

Johnson Bronze Co.

a

cents

properties.

program.

Hickok

1947■■

December 8,
Central

on

Price—$5

1947

Phillips Petroleum Co.———-—-

basis

the

holders
owned.

as¬

Legend Gold Mines, Ltd., Toronto, Canada
27 filed 300,000 shares ($1 par) common treasury
Underwriting — To be supplied by amendment.

Hawaiian-Philippine Co., Manila, P. I.
Sept. 24 filed 500,000 shares 7% cumulative preferred,
par 10 Philippines pesos per share (currency basis one
neco equivalent to 50 cents).
Underwriting—No under¬
writing. Offering—For subscription by common stock¬

Noon (EST)___Eq. Tr. Clfs.

December

have been

meet

stock.

Price—50
December

a

June

pur¬

■'i'

•

used before definite dates for

signed to the association by the Maryland Racing Com'fniSsion.
Registration statement effective Nov. 20.

to June 27, 1948, or $14 per share

up

Proceeds—For general corporate

(2201)

f

expansion.
•

;

Maule

*

:

/ /

*

Industries, Inc., Miami Beach, Fla.

Nov;' 18

(letter of notification) 33,334 shares of capital
being offered on" behalf of the company and 66,668
capital stock on behalf of selling stockholders.
Price
$1.50 a share.. Underwriter — Atwill and Co,,
Miami Beach, Fla.
The company will use its proceeds
to pay off loans.

stock'

.

shares of
—

Gatesvilie

•

(Tex.)

Indianapolis Power & Light Co.
9 filed 40,000 shares ($100 par) cumulative pre¬
ferred. ' Underwriters—Names by competitive bidding.
Probable bidders: Lehman Brothers; Blyth & Co., Inc.;
W. C. Langle.v & Co. and White, Weld & Co. (jointly);

Industrial Foundation, Inc.

Oct.

I Nov. 17 (letter of notification) L. K. Thomson, Jr., filing
L for Gatesvilie Industrial Foundation, Inc., preorganization

subscriptions for 500 shares ($50 par) stock. Price—

$50 a share. The shares will be sold through L. K. Thornson, Jr.
To erect or repair buildings for industrial en¬

;

Otis

Co.

&

Proceeds—For

Interstate

terprises.
General

Finance,

Inc., Concordia, Kansas

Department Stores,

Underwriter—Lehman

off mortgage

ing of

new

May

150,000 shares of common (par $1). UnderI writer—Burr & Co., Inc., New York.
Proceeds—Stock

who will receive pro¬

Georgia Power Co., Atlanta (12/9)
Nov. 7 filed $10,000,000 30-year first mortgage bonds.
Underwriting to be determined by competitive bidding.
Bids—It is expected that the time for presentation and

11 a.m.

be

Halsey,

&

share

Co.

to

No

tion

•

Iris

For

Brothers, Goldman, Sachs & Co. and
on Sept. 25 rejected the bid

•

(letter

common

and general operating

Nov. 20

Nov.

share.

Debentures

will

To erect

be

sold

new

13

filed :272,852„,shares... (no

par)

common..

No

.

seven

held///The Company *also plans to sell privately

Z by

amendment.

Price

*

Nov.

Guyana Mines, Ltd., Toronto, Canada

in

North
•

Nov.

10

•sp¬




•

I.

Service, Inc., New Orleans,

..

filed

300,000

common.

To finance plant

7

American

Oil

Co.,

ment

of

Baltimore,

(letter of notification)
cents

a

Underwriter—HenryFor payment and develop¬

Public

Service

Co.

(12/17)

Oct. 29 filed 272,694 shares
common.

erence

JL

share for each

Castle^ Pa. (12/8-12)

common

stock.

($20 par) cumulative pref¬
Underwriters—Central Republic Co. Inc.,

Chicago; The First Boston Corp., and Blyth & Co. Inc.,
New York.
Offering—For subscription by common
stockholders .of. record. Dec..2 on basis of one preferred

r.:.

••

com¬

share.

Baltimore, Md.
mining lease.
Indiana

Md.

25,000 shares of

Boston

„

shares

No underwriting.

White & Co.,

Underwriter—George 1!. Breed,
working capital. Issue will

•••'

•

Lamston
19

(M.

Dec.

"stock

(par 500).
Proceeds — Stock

16.

eight

shares held.

common

Rights expire

Unsubscribed shares will be offered publicly.

"

Price—$21

a

share.

Proceeds—To

improve

its

public:

utility system.

Business

Northern Natural Gas Co.

(12/16)

shares of common stock (par $10);
Underwriters—To be sold through competitive bidding.

Nov. 14 filed 710,500

H.), Inc., New York

(letter of notification)

stock (par $1).

Matawan, N* J.

Oct. 30 filed 21,000 shares ($3.50 par) common. Under¬
writing — The registration said, that "the initial public
Offering is being made by Van Winkle Todd, of Mata¬
wan, N. J., and Harry P. Barrand, of Stamford, Conn., as
underwriters by sale on the over-the-counter market of
100 shares each at the market price at the time of sale.
Iii the event that any of the holders of the warrants ex¬
change any such warrants for other than investment and
offer the shares received for public sale, such offerer
may be deemed an underwriter, as that term is defined

R.

'

•

Nov.

^Hanson-Van Winkle-Munning

share.

Price—90

mon.

denomina¬

Underwriter—Lee Higginson Corp.
being sold for account of certain stockholders.
,—Manufacturer of .bearings and bushings.

equipment and working capital. Business—Mining busi/

Inc.,

Johnson Bronze Co., New

Proceeds—For new construction.

Nov., 26-filed 303,587 shares ($1 par) common.* Under¬
writing—^None. Price—50 cents a share. Proceeds—For

:<

Providence,

improvements and additions.

For additional

be-placed privately.

.

-1

-

50,0&0' shares '($100 par) preferred $4.50 series.

Automatics,

To be sbld at hiarkfet.

New York.

a

Northern

Johnson

Offering—The shares Will be offered to
ftdoi^hblde^s on the ;basis of. one new share for each

Butt Co.,

(letter of notification) 9.707 shares of

club house.

Opt. 10 (letter of notification) .95,000 shares of

underwritinjg.

-

expenses.

of

tions of $500 and $100.

,

England

Price—$25

notification) 100 shares ($500 par)
$100,000 of debentures. Price—$500 per

and

Baton Rouge, La.

share.

a

New Orleans Public

'

Gulf States Utilities Co.,

Price—$1

par) com¬
mon.
Price—$100 a share. Underwriter—Barrett & Co.,
Providence, R. I.
For purchase of machinery and equip¬
ment and for working capital.

Jefferson Islands Club, St. Mary's County, Md.

common

Gerity, Jr., company President.

:j.

75,000 shares ($1 par)
No underwriting as' yet.

Co., Denver, Colo.

expenses

24

Exploration Co., Las Vegas

(letter of notification)

Oct. 22 (letter of notification) 1,000 shares (no

Adrian, Mich.
Nov.

20

New

The SEC

17 (letter of notification) 50,000 shares ($1 par)
capital stock.
Price—$1 a share. No underwriting. For

•

,

drilling oil and gas wells.

bid of $4.05 per

Nov.

Sept. 29 filed 40,049 shares ($1 par) common.
Under¬
writer—Ames, Emerich & Co., Inc. and Dempsey & Co.
Price based on market: $10~$10.50 j?er share.
Proceeds—
The shares are being sold for fthe account of James

13,125 shares of common.
For additions and replacements to iisr

Louisiana

Oil

drilling

Nevada

common.

the sale of the bonds.
•

(letter of notification)

underwriting.

Nov.

plan which would be fair and equitable to the per¬
effected thereby." The SEC's action also held up

sons

For working capital and

property.

The SEC in its decision declared the price
offered for the stock "would not effectuate a reorganiza¬

Inc.;

preferred and five
Underwriter—Clair

Middle States Telephone Co. of Illinois, Chicago

for the stock.

Freres & Co. and
Equitable Securities Corp. (jointly);
/ Shields & Co.; Drexel & Co.; The First Boston Corp.
Proceeds—For construction program.

Corp.,

Lehman

on

for $75 per unit.

common

& Co.,

Cincinnati, O.
general corporate purposes.

< Price
to
bank loans
the financ¬

York.

Co., Dubuque, Iowa

Stock awarded Sept. 24

rate.

Hall

S.

Nov. 7

Power

Wertheim & Co.

Morgan Stanley & Co.; Blyth & Co.; Smith, Barney & Co.
and Kidder, Peabody & Co. (jointly); Lehman Brothers;
Harriman Ripley & Co.; Goldman, Sachs & Co.; Lazard

Gerity-Michigan

shares of

filed

13

coupon

(EST), Dec. 9.

Stuart

New

notification) 28,000 shares (10 par) 5%

To be sold in units of seven shares of

$19,400,000 of first mortgage bonds, due
1977, and 2,132,223 shares ($3.50 par) capital stock.
Proceeds—For debt retirement, finance new construction
and for working capital.
Bonds awarded Sept. 24 to
Halsey, Stuart & Co. Inc. on bid of 101.90 for a 3%%

"/ Nov. 14 filed

opening of proposals will
Probable bidders include:

Brothers,

McKay Davis Inc., Toledo, O.

cumulative preferred and 20,000 shares (no par) common.

stores.

(12/10)

being sold by four stockholders
ceeds. Price by amendment.

purposes.

Inc.

be filed by amendment.
Proceeds—To repay
and for general corporate purposes including

Interstate

General Instrument Corp.

construction

Oct. 30 filed $5,000,000 15-year sinking fund debentures.

Nov, 5 (letter of notification) $100,000 of 5% debenture
notes.
To be sold at face amount.
Underwriter—Robert
J. Long & Co., Abilene, Kansas.
To pay
indebtedness and for working capital.

new

•

Nov. 17 (letter of

Price—$6

Colony Corp., New York.

per
s

600

share.

shares of

common

Underwriter—First

For account of Harold Stone.

Laurel / Md.) r Harness Racing Association, Inc.

{
Oct.

23

filed

debentures

underwriting.'
000

of

above

$490,000

and

49,000

10-year 6% cumulative income
shares (10 par) common.
No

Price—$1,001

debentures

and

100

per

Probable bidders:
Inc.

Light & Power Co. which will use proceeds to retire
109,255 shares of its own $6 preferred stock held by
others than North American Co.
Bids—Bids for pur¬
chase of stock tentatively set

unit,, consisting of $1,-

shares

of

common.

Of

the

$146,000 debentures and 14,600 common shares
will be held by agent Until lapse of escrow
agreement.
Proceeds—Proceeds will be put in escrow and will not

Blyth & Co., Inc.; Dillon, Read & Co.
being sold by North American

Proceeds—Shares

Northwestern
Oct.

28

filed

writer—A.

C.

82.000

for Dec. 16.

Public

Service

shares

($3 par)

Allyn & Co.

Co.

(11/28)

Under¬
Offering—Offered for subcommon.

continued on page 46)

\

46

THE

(2202)

•

(Continued from page 45)

scription by stockholders

COMMERCIAL

the basis of one share for
each five shares held at $9.75 per share.
Rights expire
Nov. 26.
Unsubscribed to public through underwriters.
Proceeds—To be added to general funds.
Qn

Silver

Nov.

20

Crown

Otis & Co., Cleveland.

Peter
Nov.

For additional working capital.

(12/4)t

Philjips Petroleum Co., New York

Oct. 31 filed

l,007,5f 7 shares (no par) comiQQU. Unfler*
writer—The First Boston Corp., New York.
Offerings—
Offered to common holders of record Nov. 19 in the
ratio of one new share for each five held at $49
per
share.

Rights expire 3

p.m. Dec. 3.
Unsubscribed shares
publicly. Proceeds—To repay bank loans
and for working capital.

will be offered

•

Pittsburgh Steel Co.

(12/10)

$6,500,000 of first mortgage bonds, due 1967.
Underwriters—Kuhn, Loeb & Co.; A. G. Becker & Co.,
Hemphill, Noyes & Co.

Proceeds

—

Business

To refund

Wallace,

Inc.,

Oct. 28

(letter of notification) 1.345,000 shares of com¬
Company is selling 1,000,000 of the total and the
balance is being sold by four stockholders.
Price—150
a share.
The company will offer the securities directly

Anderson,

both of Spokane, Wash., as underwriters.
The company
will use its proceeds for mining Operations.

Co.

Edison

California

filed 800,000

18

Harris, Hall & Co. (Inc.) (jointly); Blyth & Co., Inc.

Price—$20 par sha e.
Pro¬
general funds for current conr

to

_

Telephone

Co.,

-

The First Trust Co. of
Co.

(Inc.), Chicago.

Harris, Hqjf
expansion of plant facilities.

Lincoln, Neb., and

For

Nov.

20

(letter of

notification) 70,00Q shares (200 par)

Priqe—30 cents a share, ^ To foe sold through
officers of company." For equipment and working capi?
tal in connection with
mining
common.

property.

White Motor Co.,

Cleveland,.O.

Oct. 28 filed 275,000 shares ($1 par) stock.

for Dec. 9.

Natural

Gas

Co.,

Shreveport,

25,000 shares of

(letter of notification)

*

Western World Industries, Inc., Salt Lake City

;

for expenditures for property and

Southwest

Kansas

Inc.,

Nqy. 6 (letter of notification) 10,00.0 shares of 5% cumu¬
lative preferred.
Price—$28 a share.
Undenyriters—

construc¬
Bids—Bids for purchase of stock tentatively set

tion.

held.

five

added

City, Kansas

shares cumulative preferred stock

Proceeds—Repayment of current bank loans and reim¬
bursement

be

(12/9)

(par $25). Underwriters—to be determined by competi¬
tive bidding.
Probable bidders; The First Boston Corp.
and

each

.Western Light &

l

•

Nov.

Light Co.

struction program.

mon.

Southern

for

ceeds—To

Idaho

Gas

(nonpar)

common.
No under¬
writing.
Offering—The shares will be .offered for sub¬
scription to common stockholders on the basis of one

share

Mines,

La,

common

Underwriter

—Hornblower & Weeks, New York. Offering—Proposed
offering postponed indefinitely according to an an¬
nouncement Nov.

behalf of R. M. Craigmyle, President of the company.
To be sold at market.
Underwriter—Craigmyle, Pinney
& Co.,

New York.

17.

outstanding first mortgage bonds.
of tubular, wire and semi¬

finished steel products.

Wisconsin Central
Nov.

Price by amendment.

Manufacturer

—

For mine exploration and develop¬

(D. C.)

Nov. 7 filed 85 000 shares

on

Nov. 20 filed

Inc. and

share.

a

Washington

50,000 shares ($1 par)
Underwriter—Lewis F.

.

Oct. 20

*

Thursday, November 27, 1947

Mines, Inc., Silverton, Colo.

common.
Price—$J
Pease, Limon, Colo.

ment.

CHRONICLE

with the aid of L. E. Nicholls & Co. and- W. T.

Paul, Inc., Naugatuck, Conn.

6

(letter of notification) 11,955 shares (no par)
common, to be offered for subscription at $25 a share
to present stockholders.
No underwriting.
For expan¬
sion and working capital.
,

FINANCIAL

(letter of notification)

Silverore

Pathe Industries, Inc., Cleveland, Ohio
Oct. 31 (letter of notification) $300,000 of 5% convert¬
ible subordinated debentures, due 1957.
Underwriter—

&

18 filed

writer—Loewi & Co.

Southwestern Gjas & Elec. Co., Shreveport, La.
Nov.

filed

5

30-year first mortgage bonds,
Underwriting—To be determined at competi¬

series B.

$7,000,000

Airlines, Clintonville, Wis. x

125 000 shares

purchase aircraft,
Business—Air

($1 par)

Priqe—$4

a

notes and for

repay

Under*
Proceeds—To

common.

share.

working capital.

transportation.

tive
•

Public

Service

Co.

of New

bidding.
Probable bidders: Halsey, Stuart & Co.
Inc., Lehman Brothers and Lazard Freres & Co. (jointly);

Hampshire,

Manchester, N. H.

White, Weld & Co. and Kidder, Peabody & Co. (jointly);

Nov?

25 filed 139,739 shares ($10 par) common and $3,000,000 30-year series C first mortgage bonds.
Under¬
writers—To be determined by competitive bidding. Prob¬

Blyth & Co., Inc. and Stone & Webster Securities Corp.
(jointly); Glore, Forgan & Co. and W. C. Langley & Co.
(jointly); Harriman, Ripley & Co. Proceeds—To finance

able bidders: The First Boston

Corp. and Coffin & Burr,
(jointly); Equitable Securities Corp., Kidder, Peabody & Co. and Blyth & Co., Inc. (jointly); Salomon

construction

Bros.

Oct.

program.

Inc.

&

Hutzler, W. C. Langley & Co. and Glore, Forgan & Co. (jointly); Halsey, Stuart & Co. Inc. (bonds
only); Lazard Freres & Co. and White, Weld & Co.
(jointly).
Offering—Common stock first will be offered
for subscription to present shareholders at the rate of
share for each five shares held. Unsubscribed shares

one

and the bonds will be offered
termined by

Price to be de¬
Proceeds—To pay off

publicly.

competitive bidding.

Springfield Fire & Marine Insurance Co. (12/8)

body

Shirt Corp.,

200,000

Co.,

&

holders
of

3

of

Dec.

p.m.

licly.

par)

capital

for

stock.

shares held.

Unsubscribed

5.

stock¬

to

at $38 per share on the

IVz

Oil

Rights

basis

expire

shares will be sold

pub¬

common

$100 principal amount pf notes.
Underwriter—E.
J. Drake, New York. To pay indebtedness and for work¬

each

ing capital.
Steam

Rawdon Brothers

Nov.

17

Aircraft, Inc., Wichita, Kansas

notification) 5,000 shares (no
common.
Price—$20 a share.
No underwriting.
plant additions and working capital.
(letter

He?diiig
Oct.

filed

28

class A and
class

B

of

Tube Co.

(Pp.)

shares

200,000

par)

For

(*2/10)

(no

cumulative

500

par)

participating stock, 50,000 shares (100 pqr)
50.000 shares class B stock issuable

stock, and

redemption of the class A stock.

UnderwriterAetna Securities Corp., New York.
Offering—Class A
stock will be offered publicly at $6 and class B stock
will be spld to underwriters for investment at 100 per
upon

share.

Proceeds—To

tive Nov.
•

^

St.

bank loans.

pay

Exchange.

($5 par)

common.

To be offered

Price—At

on

New Yprk

Proceeds—Shares
wholly-owned subsid¬
iary of Western Electric Co. Business—Company plans
to discontinue production of newsprint at end of year
and convert plant to production of higher grades of
printing and publication paper.
•

A

common.

60,000 shares ($1 par)
Price—$5 a share.
Underwriters—
Harrison & Austin, Inc.; Ferrop R. Davis, Inc.; and Her¬
bert S. Wolff Securities Co., all of South Bend, Inc.
To
organize business and for working capital.

a

•

25

stock

(letter

19

of notification)

Nov.

5

(letter of

notification)

5,000 shares of common

Vars, hoard Chairman. To be
through A. G. Becker & Cp. as agents.

Nov.

12

common.

(letter of notification) 3,674 shares
Price—$10 a share.
Underwriter

Carey and Co., Cleveland.
Sunray Oil Corp.
Nov.

12

issue of

filed

(no par)
—
Gunn,

For operating expenses.

Stevens

&

Clark

Fund,

Inc.,

(12/10)

$40,000,000 20-year debentures and a new

cumulative convertible second preferred

Boston,

market prices.

Underwriter

Price based
Proceeds—For investment.
Business

—Investment business.
•

Seiberling

Nov. 21

Akron, Ohio

(ietter of notification)

4,500 shares of

stock,

$100). The interest rate of the deben¬
dividend rate of the secpnd preferred stock
by amendment.
Underwriters—Eastman,
heads a group of underwriters.
Purpose—
merger of Pacific Western Oil Corp. and

Sherer-Gillett Co..
conwpon.

par)

Lypiber £o„

•

&

Electric

outstanding

Consolidated

Co.

common

one

new

some

time in Janu¬

share for each 10 held.

Edison Co.

of New Yprk,

|nc.

postponed indefinitely its p oposal tq
refund present preferred stock.
The refunding was to
have

been financed by the issuance Feb. 2 of 1,75Q,000
preferred shares and $57,382,600 of convevtible de¬
bentures. Postponement was attributed to unsatisfactory

market

conditions, interference Of the hplidqy season
tightness of the tirne schedule required to conr
summate a transaction of .this size. The earliest possible
date for putting through the preferred refunding now

J,15? shares ($100 par)
par) 6% cumulative pre¬
Underwriter—^. A- Dona¬

(letter of notification)
and 1.848 shares ($100

ferred.

To

be

sold at

hue, Billings, Mont.

par.

the

and

is

May 1, 1948.
International

Harvester Co.

Nov.

22, in statements mailed to stockholders, company
discloses that new financing is planned In an
amount
"less than $100,000,000/' A special stockholders' meeting
will be called to approve the program.. .The specific
request
ods by

will

be

for authorization

of, qn issue of con¬
This will giye company three meth¬
which funds could be raised, in accordance With

For payment of liabilities and con¬

The methods

market conditions.

sale of authorized

are

unissued

but

common, sale of non-convertible deben¬
sale of convertible obligations. Probable un¬

and

tures

Glore,

Forgan

&

Co.;

Harris

Hall

&

a

10.0QQ shares ($1 par)
share. Underwriter—First pf

|Wjpprposes

Transcon Lines,

Nov.

Los

•

New

Public Service Co.

Orleans

SEC

on

Nov.

21

authorized

the

company,

a

(letter of notification) 10,0$),;.shgrpg ($10 par)
common.
Price—$10 a sharp.
To bp sqld thrqugli offi¬
cers of the company.
Proceeds—To purchase equipment-

ana

capital.

Mining Co., Wallace, Idaho
(letter of notification) 1,500,000 shares of (10c
stock. Price—20 cents a share. Underwriters-r-F.

Nov. 12 filed 2:11,861

stock in the ratio pf 261/2 shares fpr
held, at $25 a share. Parent, which pwris
716,736 common shares of New Orleans, intends to pur¬
chase its proportionate share of new common.
Proceeds
will be used to finance company's construction progiami.
(no par)

common

each 100 shares

Seaboard Air Line
will

be

received

R.

R.

(12/1)

to

noon

Dec. 1
(EST) pt
Owen, Farr, Gallagher & Walton, 1§
the sale of $7,500,000 equip¬
$500,000 annually Dec. 15,
1948-1962. Probable bidders: Halsey, Stuart & Co. Ipc,:
Salomon Bros. & Hutzler; Harris, Hall & Co. (Inc.).
of

up

Willkie,

Broad Street, New York, for
ment trust certificates, due

Dec.
new

16.

Price

by amendment.

UNITED STATES GOVERNMENT,

STATE, MUNICIPAL AND
CORPORATE SECURITIES

.

.

Tin?-

shares (np par)

derwriterTrrMprgan Sfanfey &
Shares will foe offered to stockholders
share for Aaefo six field of repord

on

basis of one

flights expire

Proceeds—To finance

INC.

construction.

13

Pennaiuna & Co., fT E. Scott and Morris George,
all of Wallace, Idaho, and John Erickson and Harold
Gribble, both of Mullan, Idaho. For mine development.
E. Scott.




•

United Engineering; & Fdyndry Cp-ry-

Pittsbur^b

Nqy. J21 (jetfef pf notification)
stocfr fpar $?), jprice~-$38 per share, To be offered for
sale to not over 200 employees of-the company.

sufo.-

sidiary of Electric Power & Light Co., to offer common
holders the right to purchase 199,642 additional shares

,

19

Cp.

(Inc.), and William Blair & Co.

office

Ravalli, Mont.

common

Marshall, Mich.

Silver Buckle
Oct.

under¬

Nov. 25 company

Bids

Uniop Bag $ Paper Corp., New Y^k

(letter of notification)

Miphtean
for working

Thornton

•
common

being offered by T. K. Seiberling and L. M. Seiberling as
executors of the estate of C. W. Seiberling, deceased. To
be offered at market price. No underwriting.

?4

filed

financing

27

Probable

12.

struction of mill.

Rubber Co.,

'

Oct.

be

Dillon & Co.

Oct.

Nov. 21 filed 60,0Q0 shares of capital stock.
—Scudder Fund Distributors, Inc., Boston.
on

will

of

for

requested SEC permission to sell
shares of common stock (par $8 50)

1948, at the rate of

The

Mission Corp. into Sunray.

Scudder,
Mass,

holders

derwriters:

Strong Manufacturing Co., Sebrlpg, Ohio

To

•

to

Gas

company

additional

204,000

one

Boston Corp.

vertible debentures.

behalf of Addison F.

equipment and working capital.

A1

Varp.

Sterling Engine Co., Buffalo, N- Y-

notification) 30,000 shares ($1 oar)
Price—$2 a share.
No underwriting.
May
be sold through brokers and salesmen later.
For mining

■.

Exchange by A. G. Becker

Stock being sold on behalf of Addison F.

tures and the

(letter of

common.

-SI

5,000 shares of capital
per share.

Price—Approximately $2 50

(par $1).

To be sold on New York Curb

Co.

20

ratio of

First

Cincinnati

Sterling Engine Co., Buffalo, If, Y.

Nov.

series of 1947 (par

Santiago-Alaska Mines, Inc.

•

Nov.

•

Under¬

market.

being sold by Weco Corp.,

Nov.

class

Regis Paper Co., New York

writing—Np underwriting.
are

(letter of notification)

on

300,000 shares

Inc., Mishawaka,' Ind.

Motive Power,

14

sold at market

Nov. 26 filed
Stock

Statement effec¬

19.

stockholders in

writer, The

new

Nov.

&

to

Proceeds for construction.

Price—$100
will be issued with

common.

nite.
•

Alleghany Ludlum Steel Corp.

$200,000 of Series A 5%

(no par)

Five shares of

®

Jap. 26 stockholders will vote on authorizing an issue
of ,200,000 shares of preferred stock.
If approved, com¬
pany plans to register 107,383 shares and offer rights

ary,

Qorp., New York

10,000 shares

note.

per

6

each

Offering—Offered

(letter of notification)

notes and

—

($10

Proceeds—To be added to company's capital funds.

Nov. 12

Oct. 3 filed 140.000 shares ($1 par) common.
Under¬
writer—Reynolds & Co., New York.
Price by amend¬
ment.
Proceeds
The shares are being sold by thref
stockholders who will receive proceeds. Offering indefi¬

Oct.

record

Stanwood

New York

shares

York.

New

share

one

loans and for construction purposes.
Publix

filed

29

Underwriters—The First Boston Corp., and Kidder, Pea-

Prospective Offerings

ATLANTA

p

BOSTON

PHU^DELpSIA

i

f

.

BUFFALO

PITTSBURGH

*

CHIC4QQ

ST. LOUIS

•

THE

Number 4650

Volume 166

tion

COMMERCIAL & FINANCIAL CHRONICLE

corporate borrowers to

of

"crowd" the market. That is to

complete their financing

seek to
in

operation

sweeping

one

stead

?

of

it

splitting

sidering tenders for $10,000,000
of its first mortgage collateral
trust bonds, due 1977.
More

reasonable-sized deals.
Under

competitive

part of corporate finance
to assume pre-emptive
rights in the market. That is to
disregard the other people who
might have business in hand.
officers

Power

the

Appalachian Electric

Co.'s

Cities Approaching Situation

to market after the turn of

comes

To

the

month, as now scheduled, the
capital market will be treated to
something in the way of an in¬

only

issue

is

small

$7,500,000

tance,

but

in

its

itself,
impor¬

possible guide to the;
future
of
financing
through
preferred stock is jiot to be;
as a

is

setting
fund

up

of

the

issue

in

of

operating
for

case

companies,

debentures

other

securities.

Its

feature

words

the

in

and

for

introduction
sale

of

as

in

the start

mark

the method of

ity capital by this
The

sinking

provide

for

of

a

is

fixed
of

•

to

the

of

have watched the
the

market

in

re¬

cent months and witnessed first
and then

another potential

issuer either postpone or aban¬
don
preferred
stock
capital

will

be

watching

this

venture closely.

get

off

the

the

senior

effort

an

equity

dead-center

market

which

on

it

be hung at the moment.

appears to

The

while

Market's

At,

noon,

Electric

first

nothing fundamentally
new issue market,
in the opinion of
underwriting in¬
terests who are in a position to
judge the situation closely. Rather
according to one of their number,
the
principal difficulty is with
potential issuers themselves.
The

major drawback, in this
expert's opinion, is the disposi-

Security Analist

counting

V/2

public

accounting and financial sta¬
tistical work desires position

junior

security

address

Commercial

Chronicle,

analyst.

Box

H

1113,

& Financial

25

Park

and

of

preferred

new

$57,382,600

debentures.

sale

of

The

1,-

shares

convertible

cited

company

STOCKTON,

has

decided

to

post¬

its proposed financing which

ing.

Place,

New York 8, N. Y.

Mr. "Piltz

with

Reject Permissive Incorporation

number

proposed

of

ballots

cast

constitutional

on

a

amend¬

for

2,500

the

truck

and

3,000

conventional

of

the

same

size,

pounds
delivery

the cir¬

cular states.

The previous record, 1,131,
31 when the

In

making public the results of

the balloting, Emil Schram, Presi¬
dent of the New York Stock Ex¬

THE

ALABAMA

GREAT

RAILROAD

New

York,

dividend

A

ferred

Stock

Railroad

of

N.

$3.00

of

The

Company

SOUTHERN

COMPANY

per share on
Alabama Great

Eighteen

experience.

years

Has accounts, both

listed

and

over-the-counter. Well known
to

New

Town

York"

Traders.

and

Oiit-of-

Salary

and

Commission. Box M1127, Com¬
mercial & Financial

Chronicle,

25 Park PI., New York 8, N. Y.




the

close

of

business

Secretary.

held
of

Preferred

by

check

20,
30,

of

as

POWER

Northern

(Wisconsin),

at

Stock

of

the

States

meeting

a

November 18, 1947, declared
and
one-quarter per cent

one

the

record

STATES

(WISCONSIN)

Directors

Company

on

dividend

a

on

Company,

payable

December 1, 1947, to stockholders of
of
the close of
business November

1947,

for

the

quarter

ending

November

1947.
N.

H.

BUCKSTAFF, Treasurer.

has

been

STOCK

above

DIVIDEND NO.

95

Company

cents

50

per

the

not

1947.

the

Company

be

closed.

1

-

L.

P.

Pre¬

declared

BONNYMAN,

Treasurer.

payabl

24,
1947,
to stockholders of recorc
close of
business December 4,
1947.
dividend of $3.00 per share on the Ordinar;
Stock has been declared payable December 24.
at

the

A

1947,

to

stockholders
business December

of

of

record

the

at

1947.

J.

MAHER, Secretary.

POWER

&

Rector

Street,

dividend

A

COMPANY

York,

N.

Stock

Y.

DIVIDENDS

of

($6)

the

on

$5

W.

JACK,

Secretary

ANACONDA

COPPER

25

and Treasurer.

New

York

4,

MINING

Y.,

DIVIDEND NO.
The

of

Board

Copper

Directors

26,

the

Anacondn

Mining

of

record

o'clock

3

C.

P.

M.

EARLE

J.

at
on

close

the

December

of

will not
dividend.

of

5,

be
J.

New

business

the

York, N. Y., November 20,

payment

Treasurer.

1947.

of 50

cents

dividend

a

divi¬

share and an addi¬

per

$1.25 per

oi

share on the

the

business November 28,

ot

close

Vv. ATI WOOD, Assistant

1947.

Treasurer.

at

Tennessee
TCNHtSStC

Racine, Wis., November 26, 1947.
of $1.75 per share upon the out¬
Preferred Stock of this Company has
been declared payable January 1,
1948, and r
year-end dividend on Common Stock
of
80c
per share has been declared payable January 1.
dividend

standing

B.

for

SIMPSON,

1947.

Company

holders
of
record
at
December
12,
1947.

closed
A.

MORAN, Secretary & Treasurer

I. Case

Dollar

One

Company's capita) stock, payable Decem¬
ber 15, 1947, to stockholders of record at

(Incorporated)
A

books

this

tional

158
of

120
of

The Board of Directors has declared

1947

Company has declared a divi¬
dend of One Dollar
($1.00)
per share
on
it
capital stock of the par value of $50 per share,
payable December 23, 1947, to holders of such
shares

fer

dend

November

NO.

DIVIDEND

TEXAS GULF SULPHUR COMPANY

CO.

BROADWAY

N.

QUARTERLY

($1.00)
per
share on the Common Stock of
this
Company
has
been declared payable
at
the Treasurer's Office, No. 165 Broadway, New
York 6, N. Y., on Monday, December 22, 1947,
to stockholders of record at three o'clock P. M.,
on Monday, December 1, 1947.
The stock trans¬

$1.50 per share on the Pre¬
and a dividend of $1.25 pe:
Preferred Stock of American
Power
&
Light
Company
were
declared
or
November
25,
1947,
for payment January
2,
1948,
to stockholders of record at the
close
of business December 8, 1947.

ferred

DIVIDEND
A

LIGHT

New

STOCK

SOUTHERN PACIFIC COMPANY

close

4,

PREFERRED

the

close

of

PETERS, Secretary.

CORPORATION

CORPORATION)

A dividend of IScf. per

share has been
18, 1947,

declared, payable December
to

stockholders of record

at

the close of

business December 3, 1947.
An extra dividend of 25^ per share
has been declared, payable January 9,

1948, to stockholders of record at the
close of business December 3, 1947.

For Greenfield, Lax
ager of the

NORTHERN

of

Southen

61

Allied Chemical & Dye
61

Man¬

Corporation

Broadway

J. B. McGEE
Treasurer.

New York 6, N. Y.
November 18, 1947.

Broadway, New York

trading department of

November 25, 1947
Allied Chemical & Dye Corporation
has declared quarterly dividend No. 107

is

the

that

have

members

B. C.

proposal to admit corpora¬
to
membership has been

has

stirred

the issue, as

bitter

opposing the

debate

on

shown in past issues

"Chronicle."

the

The

group

fearful
might
be made to the membership. They
that

measure

undesirable

was

additions

that the strict, unlimited
liability of the partnership form
gave greater and more effective
argued

control

ities.

membership

over

be

the

advantages

savings to firms, if they
mitted to incorporate.

Cents ($1.50)
per share on the Common Stock of the
Company, payable December 20, 1947,
to

common

close

of

activ¬
of

Christopher Co.

1947.

Company

KING, Secretary

KANSAS CITY, MO.—With the
acquisition by Lewis C. Herwig of
New

York

Stock

Share

Public

offering of 38,000 shares
capital stock of American Mo¬
tors/ Inc., at $3 per share was
made November 26 by Frank C.
of

Moore

&

Co.,

New

York.

Pro¬

acu
American Car and

Trade.

share

New York 8, N. Y.

has

been

declared

a

cents

of 20

30 Church Street

There

day declared
of 15

Company

Exchange

membership of the late Howard
P. Armstrong, B. C. Christoper &
Co., Board of Trade Building, will
become members of the Exchange.
The firm already holds member¬
ship in the Chicago Stock Ex¬
change and Chicago
Board of

The Board of Directors has this
Foundry

dividend

of

one

and

three-quarters per cent (1 }i%) on the
preferred stock of this Company outstanding,
payable December 15, 1947, to the holders
of record of said stock at the close of business

record

December 4, 1947.

the close of business

at

STEPHEN G. KENT, Secretary

be

New York Stock Exchange

mailed

by

Guaranty Trust

of

Charles J. Hardy, Chairman
Howard

The New York Stock Exchange
has announced the following firm

Company

New York.

C.

Wick, Secretary

November 20,1947

(UMMERC1AL SOLVENTS

Corporation

Transfer of the Exchange mem¬

DIVIDEND No. 52

bership of Milton F. Untermeyer
Richard' R.

to

Jackman

considered

by

the

December

11.

It

will

be

Exchange

on

is

A dividend of

half cents (37

understood

that Mr. Jackman will act
individual floor broker.

as

DIVIDEND No.

an

151

cular,

the

compapy

was

incor¬

in February of 1947 for
the purpose of developing, pro¬
porated

ducing,

distributing

and

selling

To Be

Transfer of the Exchange mem¬

bership

of

Francis

M.

Weld

to

David Weld will be considered by

the

Exchange

light weight automotive vehicles.

David

Its

ner

principal product is a one-half

White, Weld Partner

in

Weld

on

will

December

become

White, Weld & Co.

a

seventyfivc cents (75<f.) per share
has been declared on the capital stock
The Borden Company,
payable

of

December 20, 1947, to stockholders
of record at the close of business

(25c)

declared

part¬

both

E. L. NOETZEL

November 25, 1947

Treasurer

per

dividend

year-end

per

stock

payable

of

share
the

on

of

on

this

on

one-

share and

a

twenty-five
have

today

outstanding

Corporation,

December 22,1947,

to stockholders of record at the

of business

close

December 3, 1947.
A. R. BERGEN,

December 3, 1947.

11.

thirty-seven and

Vic)

cents

to

cir¬

per

Transfer books will not be closed. Checks will

been

offering

dividend

December 12, 1947.

common

the

an extra

(total 35 cents)

capital stock of this
Company, par $10., payable Jan¬
uary 2, 1948, to stockholders of

The final dividend for the
year 1947

to

quarterly dividend

the

on

of

working capital.

a

and

cents

ceeds from the sale will be added

According

Street, New York

November 26, 1947

Weekly Firm Changes

,

5,

to

tax

were per¬

December

VV. C.

Become NYSE Members

the

Irving Trust

stockholders of record at the

business

One Wall

The advocates argued there

would

of One Dollar and Fifty

made

decision."

Offered af $3 per
i

at

CHEROUNY,

has declared a dividend
share on the Common Stock
to stockholders of record at
the close of business December 1,
1947,
pay¬
able December
15, 1947.
Transfer books will

Trading Mgr.
now

Power

The

Y., November 25,

WM.

Alfred E. Oldaker is

OF

Board

changes:

.•

;

December

1948,
to
business

Oldaker

The

of

Greenfield, Lax & Co., Inc.. 40
Board of Governors had endorsed Exchange Place, New York City.
the proposition, stated: "As one Mr. Oldaker was formerly with
who endorsed the permissive in¬ J. F. Reilly & Co. and prior there¬
corporation proposal as a con¬ to was with Peter P. McDermott
structive step, my only comment & Co.

change, who along with Robert P.
Bo.ylan,
the
Chairman
of
the

American Motors Stock

Trader Available:

S.

A.

of

established Oct.

was

stockholders of record
December 1, 1947.

COMMON

DIVIDEND NOTICES

share

Boylan, Chairman of the Board of Governors.

high record

Y.

Louis, Rocky Mountain & Pacific Co:
Raton, New Mexico, November 13, 1947

000.

between

new

N.

Walston, Hoffman & Good¬

,

ment.

previously

was

J.

as member corporations, sub¬
to the mem-f
bership on Nov. 7 by the Board' ton capacity delivery truck to be
of Governors, without its approval marketed under the name of "Delor
disapproval, has been disap¬ car." Expected to sell at a price
proved by a majority of the 1180 between $850 and $950, f.o.b. Troy,
ballots cast, according to a state¬ New York, where the
company's
ment released
by the Exchange plant is located, the "Delcar" will
on Nov. 20.
The vote was 344 ap¬ weigh
approximately 1,600 pounds
proving;
835
disapproving; one compared with a net weight of
a

5,

St.

mitted for balloting

is

York

of

win.

rations, under prescribed restrictions,

in

Philip

—

Sandman, Bank of America Build¬

sinking fund debentures of
Department Stores has
temporarily and the
Bridge and Tunnel

CALIF.

proposed amendment to the New York

The vote

distribution

COMPANY

nership in the firm of Holmes &

formalities.

necessary

ultimately will involve $120,000,-

defective.

cash

OFFICE

D. Piltz has been admitted to
part¬

Stock Exchange
Constitution providing for the permissive incorporation of member
firms of the New York Stock Exchange and the admission of
corpo¬

or

New

21, 1947
twenty-five
cents
(25c) a share and a special cash distribution
of one dollar
and fifty cents
($1.50) a share
have today been declared by Kennecott
Copper
Corporation, payable on December 22, 1947 to

Admits Partner

D.

The

of
ac¬

as

involved the

750,000

pone

bonds

simultaneously Delaware

Schram and Robert P.

The

Young college graduate,

Please

pre*

By vote of 834 to 344, proposal to admit corporations to member¬
ship was disapproved, despite endorsement by President Emil

and

in

This

Triborough

under discussion for several years

experience

off,
time

some

ferred stock,

Authority

issue of $20,-

NYSE Members

tions

years'

called

until

Two

SITUATIONS WANTED

with,

which
2

been set back

Illumi¬

Broadway,

November

A

December 11.

on

AMERICAN

their

major,

of Weston W. Adams &
Co.,
Kilby Street, will acquire the
New York Stock Exchange mem¬
bership of Cornelius R. Love, Jr.

Meanwhile offering of $5,000,-_

an

KENNECOTT COPPER CORPORATION

Boston

Exchange and senior part-

Interstate

adjusted commission schedule was
approved by the membership.

Position

with the

Junior

Inc.,
Feb.

000 of

first

Power & Light Co. will.be con¬

There is

wrong

bonds.

Cleveland

blank

of other such features in

Y.

financing of its outstanding

the

open

new

an

It could lead to the introduction
to

day,

will

mortgage

means.

fund

retirement

Those who

plans,

Co.

nating Co. for

new

through the setting aside of
the equivalent of 2% of the issue
annually.

one

Power

$10,000,000 of

on

000,000

raising util¬

bonds

behavior

that

on

W.

120

the

55

a

senior

a

to the attrac¬
tiveness of the issue and could, of

era

a.m.

of

rer

debt

equity' should add
course,

11

mortgage

a

features cf this nature have been

designed
bonds, in

course,

complete

the space of an hour.

by

utility

afore¬

hour later, bids will be opened

at least in the

now,

of

the
prevailing market conditions, the holiday season and the
tightness
of
the
schedule
to

bids

given time.
Until

these,

Stock

MASS.—Weston

member

Consolidated Edison Co. of

was

N.

of

piling up of issues for bids
a fortnight hence.
Turning to the "futures' calen¬
dar" he picked out Dec. 9 as a
case in point, noting that bankers
are being asked
to bid for three
issues, involving $40,000,000 with¬

Georgia

namely th£
annual sinking

an

retire

Largest

Adams,

after next May 1, projected re¬

mentioned banker called attention

At

involved,

to

contemplated offerings.

pone

to the

found in its proportions. Rather
it revolves around a new featurO
which

point, the

back

in

novation.
The

his

make

cut

were

this week as several
companies decided to post¬

more

from

preferred stock

new

future

materially

the

on

When

immediate

BOSTON,

issues for the

new

DIVIDEND NOTICES

Be

to

47

Mew York Exch. Member

Postponements

Prospective

bidding he
a tendency

feels also that there is

Weston W. Adams

in¬

into

up

(2203)

\[

Secretary,
November

26, 1947.

iifcYwi*!*^

ifiUMIWptfiMfl MWrtbll,•■>'$)■ il+WJ ;•''),' >

J&1

•

v..!»'.

48

COMMERCIAL

THE

(2204)

CHRONICLE

FINANCIAL

&

Thursday; November 27,-1947
personal

BUZZ

$100 and "

exemptions

releasing

million

six

persons

from tax liability will get some

individual income tax relief en¬

on...

in v the face of Trumanleft-wing opposition, it may be

acted

worth

Behind-the-Scene Interpretations

What's

before

taking place

Truman's

toward

way

message

was

inflation control"
like
the
first
From

mat.- They

were

then

however,
anything
of a phony war or

on,

reminiscent
a

is

will

It

be

The lesson

this

on

far

so

aid

—

leg¬

as

The two contestants
at each other awhile
and spar. Then one of them sud¬
denly will try to pull the legs out
from under the other. That is just
about
what happened with the
President's
Congressional
mes-

thing

goes.

glare

may

"

sage.
#

Republicans thought they had
it

doped

all

have

what Truman

out

Truman was going to

would do.

anti-inflation

limited

a

something that would
show that his heart was for the
program,

This

voter.

hurt

wouldn't
country too much.

thing."

big

It

the

the

wouldn't hurt

it

coun¬

"He

Republicans are showing some
surprising
signs
of
ill-humor.
They feel that Mr. Truman "done
'em wrong" by surprising them
with the anti-inflation proposals.
They shouldn't cry so early in
as

bloody

a

missed.

publicans
Mr.

one

the

who

Re¬

same

his

drafts" of bills are
wishing in private that the

ready-made
now

President

he

submit

would

them

they could see just how
go toward restor¬

so

now,

far

would

he

likes left-wing

would

with

the

much dis¬
himself.

allow

pass

program,

pigeonhole.

or

•I*

Last

*!*

as

whole

Wolcott

of

the

Committee

got

House

had

in

along

Banking

brains

enough to
steer legislative matters for both

committees, even if
Banking Committee

the

Senate

was

uncon¬

scious thereof.
a

New

the

day's

his speech

in

Economic

Club

(published

York,

"Chronicle")

of

in

to¬

announced

killing of the Federal Re¬
proposal

small

business

serve

Board

to

credit

consumer

It

follow

to

Wolcott

guarantee

to

The

loans.

when they try to forget about
legislative budget. The ma¬
jority
will
respond
that
theii
problem of framing foreign aid
makes it impracticable to fix an
overall
as

national

Feb.

Canada's

loans,

strictions

said, "seems somewhat

this

the

policy

the

reason

of
to

power

the applicable act, the

serve

own'

aides,

the

but

Old

Grand

President

the

instead

So

Congressional

Nobody

lap.

the mental age of 12 be¬

above

that

lieves

Mr.

Truman

ex¬

the

of eight around

age

thinks

here

Mr.

believes

cerely

in such

the

But

gram.

Truman

sin¬

a

pro¬

extreme

ap¬

they have not yet firmed
they want to do about
thing. Senator Taft
about have hit it on the head

ruling

by

fourths
and

the

With

trap. r

without

or

retching, the Congressional

Truman

three-

program

But even

that is doubtful.

also

It

that

is

a

pretty

Republican

safe

bet

thinking

the talking.

of time to

plenty

out next year.

90

of

ing

is

and

revenue

out

go

cuts.

limb

House

gress

V

will

This is
to

typical of what is going
Nobody around here

happen.

is

going to guide his actions main¬
ly for the sake of sweet loveli¬
ness and the social good.
For the
moment,
Republicans are com¬
mitted to holding down the spe¬
cial
session
to
stopgap foreign
aid

anti-inflation.

and

treated

to

this

said he

Truman

for final action

session

These

They
when

would

not

re¬
Mr.

press

during the special

long-term foreign aid.

on

"

.1*.'.

limit

'

$

• 's5:

sj:

prospects;

.

are

.

,

...

always

subject to change and without"
notice.

*

If

the

GOP




sees

a

not

shift

so

One
nesses

the

of
in

the

the

Canada awaits is

which

will

to

on

A. M. Kidder & Co., One Wall
Street, New York City, members
of the New York Stock Exchange,
announce

that Albert

S.

Knies is

associated with the firm.

now

#nies

Mr.

formerly Vice Presi¬
Co., in charge of
their New York office, and prior
Was

dent of Lester &

thereto conducted his

own

invest¬

business.

Old

Reorganization
Rails

Domestic &

Foreign

Securities

place

the matter of rais¬

opposed to

under

raising the

He is the

New Issues

m.s.Wien&Co.
ESTABLISHED
Members
40

one

N.

Y.

1919

Security Deelers Ass'n

Exchange PI., N. Y. S

HA. 2-8780

Teletype N. Y. 1-1397

Trading Markets:
Ralston Steel Car
j;

Oregon Portland Cement
Riverside Cement A & B

Spokane Portland Cement

man

sees

will, if retained, eventually
the
American
enterprise
system. However, in a political

LERNER & CO.
Investment

Securities

sap

conference,

wrestling

In other words,

match if

the

raising

10 Post Office

Square, Boston 9, Mass.
Teletjpe Bs SI

Telephone Hubbard 1990

con¬
now

HAnover 2-0050

Teletype—NY 1-971

Empire Steel Corp,

Firm Trading Markets

greatest

A. M. Kidder & Co.

Dominion
problem of

ets

billion less.

❖

weak¬

present match

Republican high

is its Senate
tee.

#

went

strategy
sharply as to

envelop rationing and price
trols, under, circumstances
imaginable.
#

issue

and died there.

Republican

However,

v

fields.

re¬

clearly that confisca¬
tory taxes in the upper brack¬

budget $6 billion

Senate for $4.5

The

for the H. C. of L.

the

exemptions

exemptions.

resolved

the

a

the

who

less than the President's budget;

blame Con¬

of

members

be surprised if the ship heels to

can

What

bitterly

prospective

winter is

over.

favor

on

and turns to 180 degrees before

thinks in '48 he

estate
such

Albert Knies Joins

Ex¬

the
personal income tax. Knutson is

So the majority had to

on a

ma¬

So the President

into

program

ing

by

program

jority could not swallow his en¬
program.

infla¬

real

on

other

just put the

Committee

"re¬

in

tire

import

prospective

Knutson of the Ways and Means

budget

legislative

theoretically

Feb. 15.

this

a course

is set now, don't

degrees

lending in

Republican
leaders
may
over-rule
Chairman
Harold

quired" to set the overall spend¬

There

work

Even if

the

Congress

Bear this in mind in

of all

ing

&

'S

v

Under

program

will not jell, or at least harden,
for weeks.

VI

was

of

continuance

lending

out

8j:

like the Hyde Park Agreement
Watch for the Republican lead¬
did during the last war by the
ership to quietly drop the funny
U. S. paying for American com¬
"legislative budget" provision of
ponents of Canadian lend-lease.
the 1946 Congressional Reorgan¬
%
$
#
ization Act.
This provision was
adopted out of pure theory, even
Should Congress fail to kick in
though plausible. The theory was the money for heavy buying ol
that by Feb. 15 of each year, the Canadian
materials, all or part ol
Congress should register a "legis¬ the drastic restrictions on imports
lative
budget" complete with a from the U. S. may remain in¬
ceiling on appropriations. It was definitely.
Should Congress fail
this provision, new in 1947, which to solve
Canada's
U.
S.
dollar
helped put the Congressional ma¬ problem, some other things might
jority in such a silly position with happen.
*
.©
*
predictions of from $4.5 to $6 bil¬
lion of expenditure cuts.

on

anti-inflation

their

is

Mr. Truman be¬
instead has set

the

guessing the top fourth would

the trap lines.

he

the bottom

out

of

slip through Congress.

spite

that

the

particu¬

More

inflation

proach beat the Republicans to
lieves

yet

to

what

may

pected such a sweeping program
to
be
accepted,
and
nobody
above

strategy.

s-:

brought

the Dominion in U. S. funds just

as

not

answer

early

as

have

Administration

the

the development of a U. S. buy¬

a

larly,
this

plopped his "all the way toward
inflation control" baby 011 the

have

their

out

is¬

com¬

while purporting to oppose

ment

drastic

and

way

ments.

system at the next regular

session of Congress."

new

a

start

or

war.

Republicans
worked
Truman

declare

to

emergency

military

on

Party as well.

have

hearing the

balancing her U. S. dollar pay¬

loans

solely to restore controls under

national

could

money

port-Import bank credit of $300
mid

would

a

power

business

with

budget

this year.

15

Re¬

#

for

request

guarantee

guarantee

President

1946

the

For

is

That also

act.

the humorless side, for

the

procedure, for
one Congress (two years ago) can¬
not bind another (present) Con¬
gress to adopt its rules.
Demo¬
crats may be expected to remind
the Republicans of their remiss¬

million

on

Con¬

probable that if they can
get by with it, the Republicans
will just forget about the legis¬
lative budget this year. There is
nothing in the law to compel them

the President to contract credit.

pertinent

with

is

inconsistent

bit

With

sue.

favoring

using the emergency powers of
the

does,

it

as

co¬

ness

Note—Wolcott,

GOP

to re¬
controls,

sistency about the inflation

tionary

Republicans

a

establishment fails to

gress.

with banking matters by virtue of
the fact that Chairman Jesse P.

wanted

really

it

']*

session,

He said if

member of Congress.

And

work.

not

Adminis¬

operate,

to

serve

Truman

"legislative

new

did

the

saved

tration from having to show to
the Senate, at least, its incon¬

that by favoring more Title

the
the

fancy

budget"

committee

bottom."

ap¬

the Senate

money,

mittee

House

also

the

on

promptly

utive

before

was

by

can't work, so long as the Exec¬

anti-inflation

would like to see such
bills, now, when they
have the majority to stop them.
Then they would have additional
ammo
to use against the White

There

cost s,"
conservative,

current
more

the subject matter of the Presi¬

brain-trust

a

"necessary

dent's

Then they would have
old Harry right flat on his back.
They could blame him for the
high cost of living. Trouble was
that the Republicans talked. Not
to
many
people, not for many
newspapers, but they talked.
Mr.
Truman read it. He didn't go for

th^t one. He fooled, not only his

Title

under

ually will get the major part of

They

man.

head

the

It

bills.

this committee which event¬

Congress

to berate
"uptown,

used
for

Roosevelt

he

beer

a

Harry, but

on

of

Some

is

when they were

nose

fixing to land

little matter

a

and

wants

try too much and it wouldn't do

good.

loans

to add $1 billion of home real

proving this

probably will
not be given to the Federal Re¬

any

insure

to

Likewise,

why didn't he do it himself by

since

addi¬

an

What the committee did thus

are

this

store

Republicans were elated. They
would adopt the Truman program,

of

5jt

purely provisional
political
wrestling

prospects

It would an¬

the need for "doing some¬

swer

rf

long-run values.

aid, he
legislative

foreign

All

wouldn't

program

much.

amount to

it.

do

ing controls and how

3jt

release

rather than at

Congress by

long-term

cretion
-

pull the chair out
push¬

can

under

the match for such

prospects, taxes, foreign
everything — is that any¬

the

was

match.

islative

t

VI.

of the

one

•

at

from

seen

have

S'S

Truman

Per¬

a

sit

*r.

estate loans which could be made

in

preponderance of
weight. This time the contest¬
ants are more evenly matched.
Figurative gouged eyes or torn
ears are to be expected.
carried

guys

sis

$4 billion tax cut in the special
session, look for it. Or if Mr.

will

dirtier tactics, when

tion

where, by a little fast
footwork, it can slip through the

ing

fights

other

haps

proved

chance

gen¬

dirty match.

a

.

$1 billion of authority for
the'Federal Housing Administra¬

fight

Nothing is fixed.

the level.

on

the

in

tional

This

ended.

was

on a

between

match

boxing

tlemen

groggy.

-

eyes, ladies and gentle¬
sincere political wrestling
national scale in just about

and

compromise,

Consistency note—Before meet¬
ing at 10:30 one morning to start
hearings on inflation control the
Senate Banking
Committee ap¬

the <§>

"all

The Republicans hit the

throw.

JLjL Jl/U

the

opinion of leaders.

younvery

the most earnest, ardent,
match you have probably witnessed
a generation.
:
is

President

V/lIf
JL AJ U/'

>| H/V

from the Nation's Capital

N

men,

>

of

All Issues

v.

This committee consists in

'

large
part
of amateurs who
haven't played the legislativefinancial game long. The com¬

r.ABL MABKS S r.O- INC.

Chairirian
Tpby of New Hampshire, who is
probably
the. Senate's
most
noted prima donna. He seldom

Hill, Thompson & Co., Inc.

s

'

mittee is headed by

gets along with his committee

Susquehanna Mills

FOREIGN SECURITIES

command

Banking Commit¬

T

FOREIGN SECURITIES; /.;

SPECIALISTS

.

for Dealers

Markets ;aa4 Situations

50 Broad Street

New York 4, N. Y,

AFFILIATE; CARL MARKS & CO. Inc. CHICAGO

,

120 Broadway, New

York 8

TeL REctor 2-2020

.

-

^20sf'rX-

-

..

■

.

m-T

XL

I'

,

4;-A

V'i

V,

^

'

1
nUrt*. tswrM acsc-.tr

e

; - aar*

a..--.