The Current Situation

Hard on the heels of an unprecedented break in wheat came a severe reaction in the stockmarket. With money rates rising slowly, and an evident tendency on the part of Secretary Mellon (who, incidentally, is Chairman of the Federal Reserve Board) to look askance at the large sums of money loaned hy banks on stocks and bonds, such a fall in share prices is not fundamentally surprising. There has been the further factor of evident over production in many basic industries to give pause to undue optimism.

For the last two years, a peculiar annual cycle in business has been seen. Dealers have refused to stock up and have thrown the task of "holding the bag" back on the manufacturer. Now the manufacturing industry, broadly speaking, is overbuilt with productive facilities, as a result of War and post-War conditions. Consequently, when genuine demand begins to increase, It one manufacturer fails to advance his production rate swiftly, his competitor will do so and grab the business. Thus, as soon as buying begins, output is tremendously stimulated all around; and so out of proportion are most U. S. productive facilities to actual needs of consumption, that very quickly overproduction occurs. Prices then break, output is sharply restricted and a temporary period of depression in industry follows until surplus stocks can be worked off. Then everything marks time till demand again appears, when the whole process is repeated.