TAKING STOCK

The activities of the New York stock market in the past week have doubtless lent force to the opinions of the more austere. European critics who have so often blamed this country for the lack of the continental finesse in the pursuit of this world's goods

The bull market on which the country has ridden in "Republican prosperity" the past eight years is a commonplace. The break of the past week has been a debacle. Whether the prosperity is to continue, or is to turn into a period of relative depression is hardly to be foretold, but the greatest stock crisis in history can hardly be designated as a technical readjustment. Whether the decline in what admittedly was an inflated market was touched off by the hammering of bear fools that finally tapped a layer of stop loss orders, whether the some what uncertain business conditions that appeared in September particularly in the direction of automobiles, "specialties" and rubber brought the shift in public opinion, whether the recent discussion of the Massachusetts, Public Utilities' Commission unsettled the upward movement, or whether the Bank of England's raising its rate a month ago exerted the final pressure that broke the market is in a sense an academic question.

The facts remain that some thousands of people have lost some billions of dollars, and some others have made, or stand to make nearly as much. It is almost inconceivable that business conditions will not be affected in some way by this great decrease in the public's purchasing power--in spite of reassuring messages by President Hoover and it would seem a reasonable guess that luxury lines and those trades which have padded their sales with the somewhat artificial methods of installment buying will feel such ill-effects as are developed.

But the current crisis differs so widely in such important respects from those that have gone before that any prognostication is more than usually hazardous. In the first place, this is the first crisis in what may be termed normal conditions that the Federal Reserve System has experienced-not that anyone doubts its ability to extend any or all accomodation that may be needed. Its reserve ratio the past year or more has been between 70 or 75 per cent some 30 per cent above the legal minimum. Indeed, this unprecedented gold revenue may be said to have indirectly been behind the bull market, since the public knew there were far greater supplies of credit available in the country than they would ever need, and that the high discount rates which the Federal Reserve has maintained in effort to check speculation have largely been a "false front". Related to this situation is the relatively low level which call money has kept during the current crisis--a development most unusual in an uneasy market. Connected with these two characteristics is the recent development of "extra-banking" sources of funds, the "loans for others" that have bulked so largely in the call-market.

The consideration of these factors seems to give a certain weight to the theory that the discount rate of the central bank of a country is not the ultimate determinant in a country's credit position, particularly when public opinion refuses to take cognizance of the message of the rate, and when--as has been the case in the late years in the United States--the credit policy is controlled by other factors than the gold reserve. In view of these facts it does not seem too much to say that stereotyped financial theory and business practice are rapidly being put through a laboratory experiment in this country in which several factors are unknown variables.