The Maikato Times With which Is Incorpopated The Waikato Argus THURSDAY, NOVEMBER 14, 1920. NEW YORK EXCHANGE.

Waikato Times, Volume 106, Issue 17268, 14 November 1929, Page 6

The Maikato Times With which Is Incorpopated The Waikato Argus THURSDAY, NOVEMBER 14, 1920. NEW YORK EXCHANGE.

It is very difficult to know what has afflicted the United States- The original slump could be understood. Prices for stocks and shares had been run up to fictitious prices and there was much nervousness amongst those capable of judging the position. The first check created a panic, and shares were slaughtered. Wealthy institutions stepped in and bought to check the slump. So far it is easy to follow what happened; the mystery is to account for the later proceedings, for after shares had recovered somewhat there was again a mad rush to sell, and since that another panic-stricken effort to quit shares. It can scarcely be supposed that wealthy institutions which bought to check the panic should sell again within a few days. Banks and trust companies live by credit and dread nothing so much as a general lack of confidence. It was this that caused them to become buyers, and for the same reason it is hard to believe they are selling already. The speculative element among the public must have been shaken out at the first slump. Who then are the sellers of the immense number of shares which, we are told, have been sold in the two later break?, in the market? If brokers have been buying for themselves and acting as bulls, they will eventually have to face the bankruptcy court, for the losses have been extraordinarily heavy. We are not told, however, of more than one or two brokers’ failures, although there may be more to come. If so the question Immediately arises what banks or financial institutions are interested? A broker’s business cannot be carried on upon his own capital when trade is brisk on the Exchange, and it may be that the explanation of the later slumps is that those who advanced money to brokers are throwing the shares which they had taken as security on to the market. Even so, it ip hard to account for their sacrificing the shares, many of which, and possibly most, were shares In perfectly sound companies. The explanation that offers itself Is that the financial institutions were themselves in danger and, if so, the trouble may spread much further. It Is evident that the people of the United States are seriously perturbed, for they do not know how far the trouble may spread. People who have not touched the Exchange may be seriously affected- The cable says that inventories which were considered two or three weeks back to be moderate and conservative may turn out to bo excessive in view of the reduction in trade that is likely to take place. By inventories the American means what we call stocks in trade, and if a check to business is to put the proprietor into a dangerous position, the conclusion is that he must have been trading beyond his capital to a dangerous extent. The American has always been inclined to do this- It is the defect of his virtues as a pushing business man- The particular thing that has lmpiessed the American is the decline and the wide fluctuations in the shares of the United States Steel Corporation. It is the more extraordinary because the corporation has been unusually busy for some time past, and has been operating up to 90 per cent, of its capacity. This information has been available to everybody, but has not been sufficient to prevent the shares being sacrificed. The indications would point to overtrading on the part of financial companies, and if this be so it may affect the trader in goods. It has been generally understood that trade in the United Stales has been particularly good during the past two or three years, and no doubt.on the whole that belief is justified, although there were considerable deductions to be made from the general prosperity. That a long spell of very good trade should end in a Stock Exchange slump which has caused immense losses may seem strange, but it is in accordance with American psychology. Slow and steady gains arc despised; the American is always inclined to play "double or mil to.” Ha takes nn o.™>al risks, and

sometimes makes great profits; sometimes of course he makes great losses, and causes suffering to many people beside himself. In spite of our State divisions, the world financially is very much one, and what affects one country is felt in all other countries- When the New York Exchange rushed the prices of shares to a fictitious height America stopped lending to foreign countries in need of capital for development. It paid better to finance brokers’ loans. Now the slump has come the price of Australian and New Zealand stocks has fallen. The Bank of England has dropped its rate, which will restore confidence in gilt-edged securities, and the New York slump is at least one of the causes which enabled the Bank to take this action. It is possible that there will be a general lack of confidence, though what shape it will take is hard to say. Our own Parliament has just authorised a loan of £7,000,000 with much less discussion than would have taken place over £7,000. We shall probably have to pay more for this money. Australia requires to raise large sums in the early future, and may be hampered, for it will be some little time before the effects of the boom and the slump pass away. A tendency to gamble is characteristic of the semi-civllised, and America has been defined as a country of sentimental savages.