Current Situation

Interest during the past week was shifted from the security and commodity to the money market, through the rise in the N. Y. Reserve Bank rediscount rate (see below) from 3 to 3 1/2%.

The change, although unexpected, nevertheless failed to elicit selling except to a minor extent in the bond market. It was generally taken to indicate the end of the period of very easy money which has prevailed in Manhattan since last summer; and also the long way that financial and industrial recovery has traveled since that time. Evidently the familiar "business cycle" has not become nonoperative through the plethora of funds. Evidence accumulates that large amounts of credit will be taken up by agricultural efforts this spring to plant large crops at high prevailing prices, and by considerable commercial expansion. Also, the outward flow of U. S. gold continues. The Reserve has simply recognized the existing situation and, in a conservative way, endeavored to prepare for the rather obvious trend of subsequent future events.

Thus far this winter, despite activity in the steel industry, no tendency toward a "boom" is manifest. Business is generally good, but business men have no intention of killing golden-egged geese, as they did in 1920.