A LITTLE LATER, Governor Young of the Federal Reserve in his speech in Cincinnati, reviewed the expansion in speculative credit in such a way as to make it obvious that he expected deflation. The stock market, however, was not alarmed because he said that he favored raising rediscount rates only as a last resort. He further declared that “there is no occasion to become unduly excited because we must recognize the fact that the changed methods of financing business have developed very rapidly. Financing business through shares or bonds can be on a sound basis and, when it is sound, is entitled to credit, but it is not entitled to all the credit or an unreasonable proportion of the total.” Stock prices moved up sharply on the publication of these reassurances, although Mr. Young’s last idea probably was to stimulate further speculation.

Most of the best informed financial authorities hesitate to make any predictions as to what will happen in either the stock or the money markets but they are all agreed that they do not envy any one with a responsible position in the Federal Reserve System.

Source: Outlook and Independent, April 3 1929