stock at any figure on the market that the bids of speculators who had contracted to deliver it drove up the price temporarily from 271⁄2 to 130. These extremely interesting transactions did not necessarily indicate early amalgamation of all the railways into a few great systems. It might even be argued that their result was to obstruct that process, since many of these large-scale purchases by railway companies of shares in other railways were ostensibly designed, not formally to absorb the smaller roads into the system which had made the purchases, but to prevent their absorption into other systems. But it will also be observed that this very extensive investment of the money of powerful railways in the shares of weaker and non-dividend-paying lines meant at least that the purchasing companies saw value in these smaller companies and were confident of the railway future. Since, however, such confidence must have been based on belief in continuance of American business activity and industrial prosperity, the incident was strong confirmation of the hopeful view. THE experience of the United States since 1921, the year of desperately trying deflation, and especially since 1923, the year of seemingly brief and ineffective trade revival, has created strong temptation to argue for an economic situation so The Past and the Future radically changed (in America at any rate) that it is no longer possible to draw conclusions or make prediction from the experience of the longer past. The temptation, as several episodes in our older history have shown, is dangerous. When the business community has yielded to it and has shaped its subsequent policies in disregard of traditions of the past, misfortune has invariably followed. The story has always been made up of the illusions and enthusiasms of a 1901 with the bitter realities of a 1907 as the sequel. Nevertheless, it has grown increasingly difficult to dispute the contention that certain essential underlying economic facts to-day differ so radically from those which dominated the American position in pre-war days, that application of the old-time familiar principles requires at least careful study of the question, whether they are likely to operate in exactly the old-time way. This is easy to illustrate. The characteristic phenomena of the older exaggerated business "booms" which led to our older financial panics were fourfold. If, after 1923 or 1924, prices of every kind of goods had been rushing impetuously up, with careless speculation pervading commercial markets; if the abundant credit fund were drawn upon without restraint for any and every kind of recapitalization enterprise, good or bad; if the credit facilities of our banks had been limited by maintenance or increase of a comparatively narrow margin of gold reserves; if marking up of staple prices and lavish increase of importations had started such a drain of gold as threatened to undermine the existing credit structure; if, as a consequence, signs were growing increasingly visible that free American resources had approached exhaustion and that recourse was necessary to the credit fund of foreign nations then we should be repeating the experience that preceded 1907 and 1873. All of the principles that have been attached to those past occasions would then apply. (Financial Situation, continued on page 65) SAFEGUARDED by the Growth An important element in the Public utility companies which we repre- Companies we represent include Com- Write for current list of utility invest Get Structure into Your Investments Let an experienced Bond House help you C OULD your investment holdings pass into the inexperienced hands of a wife or dependent children and provide them with a reliable source of income? The answer will tell you whether you are building a solid investment structure, or merely accumulating securities. Bonds, of course, should be the backbone of every true It is not difficult to build a solid investment structure if you will enlist the help of a competent bond house--give it your confidence, acquaint it with your needs, make it your investment ally. This demands a responsible and resourceful class of service, which we enjoy rendering to investors. It is constructive for them and for us. They are protected against mistakes and a feeling of uncertainty. We build up a permanent clientele of customers who come to us for investment guidance as confidently as they seek advice of their physician or lawyer. The seasoned experience and broad facilities of Halsey, Stuart & Co. are of manifold benefit to every investor who will take advantage of them. How it is What is HALSEY, STUART & CO. (Financial Situation, continued from page 63) THE peculiarity of the present situation, which makes it less easy to apply them, is the absence of any of these typical phenomena. Prices of goods have not been rising; the government's Labor Bureau average of 400 commodities is 10 per cent Unusual Influences at Work To-day lower than it was at this time in 1925. Speculation has not pervaded trade. This epoch of prosperity is commonly described as a period of "hand-tomouth buying" for "visible requirements only." Credit is, to be sure, obtainable in immense amounts for legitimate undertakings and on the Stock Exchange; but there has been no such wholesale throwing of bank resources as in 1902, into promotion ventures of a purely speculative nature. The margin of gold reserve against our banking credit structure is not close; it is double the ratio required by the Banking Law of 1913 and is notoriously superabundant. We have not, even so, been subjected to continuous large-scale reduction of our gold reserve through export; on the contrary, notwithstanding belief of many bankers and economists that such "redistribution" would be the best thing that could happen and notwithstanding occasional decrease, the gold reserve accumulates. It was $3,933,000,000 at the end of 1922, $4,247,000,000 at the end of 1923, and $4,502,000,000 at the end of 1926, and our gold importations of last January-$62,000,000, coming from thirty separate countries-were not only the largest importation of any month since our bankers were calling home their foreign balances in 1921, but actually the largest January import in our history. Finally, in the matter of recourse to Europe's credit fund, the position is absolutely reversed as compared with pre-war finance. Financial Europe could not supplement our home credit resources if it would, and as a matter of fact our bankers and investors are financing Europe on the largest scale. THESE contrasts are sufficiently complete and Contrast with Pre-War "Booms" striking to show at least that the financial and industrial situation in the United States does not resemble that of pre-war "booms"; that in some essential particulars, indeed, its character is the reverse of theirs. Even with that fact granted, however, two other questions would be left to answer. One is, why we should have experienced in 1920, when our new position in world-finance had already been achieved, precisely the old-time phenomena of speculative trade, extravagant rise in commodity prices, of depletion of our gold through export until the Federal Reserve had reached the legal minimum ratio of gold holdings to liabilities, with the familiar violent and disastrous readjustment. The other, often raised last year, is whether our present immunity from such influences may not turn out to be a temporary matter, perhaps with an even more serious eventual reckoning ahead, when forces hitherto held in check begin again to operate. The first of these questions is more easily answered than the second. The situation of 1920 arose from circumstances distinctly created by the sudden ending of the war. Prices then rushed up because of a natural but erroneous idea that the world's supply of goods could not meet the demand existing after four years of production mostly restricted to war material. Speculation in trade was excited by (Financial Situation, continued on page 67) The Investor Before He Write for our free booklet "Banking By Mail." It will tell you how investors all over the country are making deposits in this strong Mutual Savings Bank. They KNOW their money is safe and quickly available if needed. So many people fail to accumulate any money because they want to be a "running" investor right away-if they haven't several hundred dollars to invest they take it out in wishing that they had. But you don't need large sums to invest in a deposit account with the Williamsburgh Savings Bank. You can approach the goal of financial independence steadily and surely through regular deposits. The big investor of tomorrow is the one who starts building up his cash reserve today. THE WILLIAMSBURGH SAVINGS BANK Flatbush and Atlantic Aves. Brooklyn, New York Assets more than $190,000,000.00. Dividends 42% since January, 1923 economic well-being and have aggressively developed them. It was in this area that the Middle West Utilities Company first applied the plan on which its organization was based, fifteen years ago. That plan had as its objective the provision of a complete electric service to the smaller communities, including power facilities to invite industrial development. Generating stations placed at advantageous points, sending their energy out over a network of transmission lines, interconnected with one another to safeguard re liability of power supply and permit economic production of power by flexible adjustment of capacity to demand: these have been the essential means by which this purpose has been accomplished. Grounded on the convenient coal supply of Illinois, In diana and Kentucky and the water power of Kentucky, Wisconsin and Michigan, the subsidiary operating companies of the Middle West Utilities Company in the central states have so far realized this objective that they have assisted in bringing about a definite trend of industry toward the smaller towns. And, serving the rural districts through which they pass from town to town, the same transmission lines carry productive efficiency to the farm and greater comfort to the rural home. MIDDLE WEST UTILITIES COMPANY SERVING 1841 COMMUNITIES IN 19 STATES (Financial Situation, continued from page 65) enormous "future buying," really a consequence of breakdown of transportation facilities disorganized by the war and by mistaken conceptions of the buying power left after war to foreign nations. American credit was strained, not only by requisitions of the speculative home trade but by the fact that our prodigiously large exports were made possible only through raising in this country the money with which the foreign importer paid for them. Finally, our $316,000,000 net loss of gold on export, in the twelve months from the middle of 1919 to the middle of 1920, did not primarily result from post-war causes, but from the fact that in 1917 and 1918 the United States had assumed through the exchange market a great part of its allies' obligations to other countries, had in those years placed an embargo on gold exports to foot the resultant bill, and had con To what extent it is safeguarded also by the wholly unprecedented accumulation of American capital, is possibly more debatable. On the face of things, this increase of national income and national wealth is an all but bewildering phenomenon of the day. A lately published estimate of the Bureau of Economic Research placed last year's income of the American people at nearly $90,000,000,000 as compared with $62,700,000,000 in 1921, and, if it be objected that 1921 was a "deflation year," the estimate also reckons an increase in annual income of $22,400,000,000 from the $67,200,000,000 of 1919. The income and profits tax returns have supported these extraordinary recent figures, in so far as actual collections have risen from $1,691,000,000 in 1923 to $1,974,000,000 in 1926, notwithstanding the successive drastic reductions in the tax rate. HE unprecedented increase of the period in say sequently been confronted with an unprecedented Tings deposits and life insurance written points in outpour of gold when, in June, 1919, the embargo was removed. UNDER the circumstances of to-day, none of these particular causes for the commotion of 1920 could arise; indeed, the movement of economic events has been in the opposite direction. Whether any or all of them might not arise under altered cir The cumstances hereafter is a matter of very long-range conjecture. We know that situations change with the lapse of time and that so does the attitude of finance and trade. But from any such reaction the United States is evidently safeguarded for the nearer future, alike by the business community's clear knowledge of the present position, by its prudent policies in trade and by the state of our international balance and of our gold reserve. The Bid for the Ford Property the same direction; it also indicates the wide diffu- Associated Gas and Electric System (1925 Report New York Public Service Com., page 17.) Experience has demonstrated that the grouping of properties under a common management improves service and strengthens the financial structure. In 1918 there were 6,542 separate electric generating plants in the United States; today there are only about 4,800, although the total output is more than double. Within the Associated System, the Harlem Valley group along the New York-Connecticut border is composed of what were formerly 12 separate local units serving all together 10,000 consumers. In Kentucky, Tennessee and Indiana 16 municipal plants serving about 10,000 customers were added to the Associated System. Group management provided by the Associated System makes possible many substantial improvements. In one locality 12 to 15 interruptions in service had been occurring per month; now there are practically none. Improved service is a source of satisfaction to the company and to the community served. |