Current Situation

The Christmas psychology has confused the business outlook. Retail prices for the largely superfluous objects which form the bulk of the holiday trade are rather high, with the suggestion of smashing bargains after New Year's. Gold pieces accumulate in the banks, ready to be drawn out, given as presents, redeposited and sent back to the Reserve vaults again.

In the basic industries, however, cheerful news is beginning to appear. Oil producers prophesy curtailment of production, and the prices of crude have been raised in some fields. Steel orders are reported in prospect. Agricultural surveys show that the farmer is far from insolvent, excepting in the wheat belt. Cotton planters who managed to grow much cotton are well off, although spinners' takings here show another tendency to decline in fear of a curtailment of consumption.

In the business situation throughout 1923 there has been one constantly reassuring factor--an abundance of credit. The gold ratios of Reserve Banks are high, and the danger has been that too much credit would be extended, rather than that a credit shortage would develop. If the banks ever let go the brakes, a larger inflation than even 1919-20 might occur. At the same time our overlarge gold supply helps in making the business outlook unpredictable according to old methods, because of this necessary yet artificial control of credit now being exercised. Just now the likelihood is for slightly lower money rates, with a consequent rise in bonds and other fixed-income securities.