Current Situation

Whether justly or not, business psychology is deeply bound up with the stock market. A rise in shares inspires confidence among producers and distributors, while a fall spreads distrust of business expansion.

When the Reserve system poured cold water on the stock market, the result was quickly observable in the diminished cheerfulness in general business. Perhaps it was the realization of this which induced Mr. Mellon to issue a quite "bullish" interview, with especially favorable comment upon the extent to which shares have recently risen. At any rate, just as the stock market itself has apparently recovered from the psychological jolt thus administered to it, so have industry and commerce. Retailers, who for a while dreaded a slump until after the Christmas season, are now apparently in a more optimistic frame of mind.

There is nothing wrong seemingly with most lines of business or with the credit structure which sustains them. The advance in Reserve rates (TIME, Dec. 7) has so far exerted no appreciable effect on merchant or manufacturer, except to worry and puzzle him temporarily by the unexpected manner in which they were inaugurated.