Current Situation

In the stockmarket, prices of shares have resumed their long upward rise. The public is interested in stocks and is as usual optimistic.

Thus far, however, the excesses of speculation seen during War and post-War years seem to have been avoided. Improving industrial conditions and the prospect of economic tax revision, along with easy money, are thus far the prime motives of the continuing "bull market." But the test of its soundness should soon be seen in increased earnings.

In the absence of conclusive industrial news, the statements of the Federal Reserve Banks have been closely scrutinized to see what was going on in the money market. Recent statements show a distinct change in Reserve policy. Holdings by Reserve Banks of Government paper are allowed to run out, while their Treasury Bills are similarly declining. On the other hand, member banks are discounting trade bills and paper; and in this way the official rediscount rate is again becoming "effective." This move may or may not presage higher interest rates generally, but it puts the Reserve in a stronger position to check undue speculation if such a step becomes necessary. Thus far the demand for credit comes from metropolitan rather than rural sections.