Word: rediscount
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...interests were being forced to pay too much for money they borrow, that indus-try as a whole was suffering from diversion of funds to brokers and speculators. It therefore expressed the opinion that a member of the Federal Reserve Banking System is "not within its reasonable claims for rediscount facilities" when it borrows Federal Reserve money to be used in "making or maintaining speculative loans." Further, the board threatened to "restrain the use of Federal Reserve credit facilities in aid of the growth of speculative credit." Taken at face value, this statement would mean refusal of loans for speculative...
Coincident with the Reserve Board's statement came the announcement that the Bank of England had raised its rediscount rate from 4½% to 5½%. With the New York rate at 5% the effect of this change will be to decrease the flow of gold from England...
...combined bearish effect of the Federal Reserve statement and the English rediscount raise was immediately observable. Market quotations sprouted a universal crop of minus signs. In a day's trading General Electric was-off 12½ points, Westinghouse 10?, Case Threshing 10½, International Harvester 6?, U. S. Steel 6¼. An average of 100 representative stocks declined 3.26 points. The Exchange closed Saturday, allegedly as the result of an influenza epidemic whose peak had long since passed. Stocks reopened on Monday comparatively strong, however, showing a distinct recovery from their first disorderly retreat. Having had time for reflection, traders had apparently decided...
Discount Rate. As for rediscount rates, here again it is the province of the twelve Reserve banks (not of the board) to initiate rate changes?. Here the Reserve banks have a specific and unquestioned method of making it expensive to borrow money. But this method cannot be indiscriminately applied. In the first place, a high discount rate will attract money from foreign countries. More important, however, is the fact that the Reserve bank cannot make it harder for the speculator to borrow money without making it correspondingly harder for the businessman or the farmer to borrow money. A rise...
...ideal rediscount rate is a rate that is high enough to discourage speculative borrowing and low enough to encourage industrial borrowing. The determination of such a rate is obviously a delicate matter involving many considerations other than bulls and bears alone. The New York rediscount rate has, however, been raised three times in the last year (though without any withering effect on the market), t was not raised following the Reserve Board's proclamation of last week...