Writing on the Wall... Street
Charles Stahl
Consolidated Edison, a major public utility company in the State of New York, passed its dividend for the first time since 1885; New York's Franklin National Bank, with deposits of $5 billion, ran into trouble and in five working days had to borrow $850 million from the Federal Reserve System; the prime rate went up to 111/2 per cent; but so far no brokers have been seen jumping out of Wall Street's windows, and the Dow Jones Industrial Average is still around 800, no mean achievement in view of all the adverse economic developments.
However the Franklin National Bank — which could still go under — has nothing to be ashamed of for dropping close to $40 million in foreign exchange transactions; the professional gnomes of Union Bank of Switzerland and Swiss Credit Bank managed to drop $50 million each, and the largest bank in Germany lost $110 million on its 1973 forex transactions. Obviously the current float of currencies has not turned out to be a favour for a great many banks, and we suspect that many more banks will sink.
For the first time in this generation, lending money in the United States has become a losing proposition, because in order to make a 5 per cent profit, after allowing for a 2-digit inflation, interest rates of some 20 per cent have to be charged, and no one is paying that kind of a rate as yet for the privilege of using somebody else's money.
Harold Lever, the British Minister without a portfolio, was recently seen and heard on Wall Street plugging a plan to purchase oil from producing countries through a central agency; Mr Lever expects the western world banking system to collapse within 18 months if no changes in the current oil prices and recycling of proceeds are forthcoming soon. Mr Lever should know; his family is in the banking business in many countries, including the Middle East, Switzerland and Canada.
All of those dreary thoughts lead us to conclude that the stock market may not after all be such a bad place to park your money if it is not safe in the banks.
Charles Stahl is publisher of Green's Commodity Market Cornments and President of Economic News Agency.
Previous page
