PERIOD OF FRENZIED TRADING

Dominion, Volume 25, Issue 120, 15 February 1932, Page 9

PERIOD OF FRENZIED TRADING

Buyers Stampeded in Stock Exchange Boom __ SPECULATIVE, NOT A TRUE BUOYANCY U.S.A. Inflation 1 Feared; Dollar Exchange Value Falls WORLD REACTION TO CREDIT-EXPANSION MOVE / (By Telegraph.—Press Assn.—Copyright.) (Rec. February 14, 7.5 p.in.) New York, February 13. Scores of leading stocks showed net gains of from four to seven • dollars, and many did better, in two hours of frenzied trading on the Stock Exchange to-day as buyers stampeded to ride the rise loosened by the Government’s drive to make the Federal Reserve system more flexible. The markets’ gain of 7000 million dollars in values was accomplished by a marked buoyancy of commodity markets of all kinds, and reflections in London and Paris. / The upward movement was the result of the attention centred upon the credit-expansion measure which is being expedited through the Congress, its passage next week virtually being assured. Shorn of all disguises the movement from Thursday to to-day was purely speculative. It was not an investors’ rush to buy securities. It was a spectacle of bears being squeezed and retracting precipitately. Nevertheless the very air is full of talk of a possible speedy return to prosperity. America, after a long and disastrous deflation, is caught by the elusive hope of a boom coming again. < It is a remarkable phenomenon which cannot be overlooked by nations abroad vyho may wonder whether America is not playing with fire. s X

Despite the upward movement in other markets, the dollar in the foreign exchange market turned exceptionally weak because of European fears of currency inflation. The dollar lost up to 11 points. Belgian, French, Dutch, and Swiss currencies closed at levels making possible and profitable the withdrawal of gold from this market. Strictly speaking, the .credit-expan-sion scheme is not inflation. • Forty per cent., of the gold ratio will continue against all note issues. 1 ■ * “Dead” Gold to Be Used. The Federal Reserve Bank, by being permitted to. accept United States Government stocks and high-grade industrial and commercial securities for re-discount, which was impossible hitherto under the law, will be able to utilise at least a billion dollars of “dead” gold which is now being held in its vaults. How far the measure is a scheme to help the banks, which were caught with immense sums in badly-depreciat-ed stocks and bonds after the Wall Street crashes of 1929 and 1930, it is difficult to say. Crash Must Be Liquidated. There is some, feeling in banking circles that a healthy expansion is impossible until the 1929 crash actually has been liquidated.' The poor stocks and. bonds accepted as collateral holdings, with which the banks were caught are poor materials on which to launch currency expansion. European comment is pessimistic, namely, that

America is heading for a departure from the gold standard. This is not considered seriously here, but the question is asked: Is\the United States trying to lift itself by its bootstraps? »

In the United States Senate on Wednesday, President Hoover announced that • the Republican and Democratic leaders had agreed to a proposed measure in Congress whereby the character of the commercial paper rediscounted through the Federal Reserve system will be so liberalised as to permit of a possible increase of the currency by 2500 million dollars. This measure, the President said, “is expected to smooth the way out of the crisis.” Against the contention that the move will be tantamount to augmenting the note issue, it is declared that the gold ratio will remain adequately high, and the proposal in no way tends toward inflation. MARKET IN BRITAIN Marked Change for Better (Rec. February 14, 5.5 p.m.) Official Wireless. Rugby, February 12. There was a decided change of/ sentiment on the Stock Exchange this morning. Business was on a better scale, and the general trend was in an upward direction. This is attributed largely to the en-couraging-advices from Wall Street and the brighter prospect of an agreement on the reparations issue.