The Dominion. SATURDAY, MAY 29, 1920. A FALL IN PRICES

Dominion, Volume 13, Issue 209, 29 May 1920, Page 6

The Dominion. SATURDAY, MAY 29, 1920. A FALL IN PRICES

The cablegrams have had something to say in recent days about a pi-ice-cutting movement which has taken shape, and is occasioning comment both in the United States and in Great Britain. As information stands, any decline thus far recorded in the price of commodities in Great Britain is, on the whole, slight. In many American cities, on the other hand, tho movement seems to have assumed the aspect of a feverish rush to dispose of stocks of some classes of ■ goods before prices fall still lower. One of the possibilities raised is, of course,, that this tendency limy develop and become widespread, but anyone who has examined the position even cursorily will realise that the conditions disclosed offer little enough promise of an easy, considerable, and lasting, dccline in tho cost of living. It is no doubt true that in most countries the high prices legitimately occasioned by war waste and the falling-off in production which is stili far from being made good have been raised still higher by the operations of speculators and profiteers—operations greatly facilitated by the almost universal extravagance which the outpouring of paper money has dono so much to encourage—and such people will havo no sympathisers if they are brought .to disaster by a wave of public economy ana a decline in the effective demand'for commodities.,. The danger appears, howevor, that the unsettled conditions 9f trade which are now threatened in Britain America may do less to punish the profiteer than to dislocate the machinery of useful production. Wages and all other costs of production have been raised as well as prices, and any attempt to return to the pre-war level is, of course, impossible. No doubt it is_ true of many industries that any important decline in the prices now obtained for their output would simply make continued production impossible. Conceivably demand may so fall away that the output of this or that industry can no longer be sold at a remunerative price. The result, however, would not be a reduction in the cost of living, but unemployment and distress. In spite of all the complaints that .are made about the high cost of living, the people of this country are well placed to realise that a general ana considerable fall in prices .would be anything but an unmixed blessing. Apart from the fact that the whole population would suffer if any serious fall occurred in the price of. export produce, it is obvious that for practical purposes our national indebtedness would be automatically and heavily increu-sed if prices here or in oversea markets, or both'here, and abroad, fell to anything approaching the pre-war level. At the. same time the extent to which increased wages and other working costs account for high prices is at least as apparent here as elsewhero. The real problem to be solved here and in most parts of the world _ is that of restoring economic stability with prices- and wages permanently adjusted on a very rtaucli higher level than before the war. One of the first things necessary ia to check the inflation of currency which, as an Amcrioaa financial expert pointed out recently, has been proceeding even more rapidly since the armistice than during the war years. As this authority, states the position, the paper currency of tho thirty principal countries in the world at the beginning of the war aggregated a little over. I*loo millions .sterling. When the nrmisticc was declared in November, 1918,' it aggregated about 8000 millions, and. one year later it aggregated 10,200 millions. In other words, while the average increase in paper currency during the four years of actual warfare was 1650 millions, the in the year following the armistice, was 2200 millions. These, figures exclude the, enormous amount of paper money issued by the Russian Bolshevik Government. They suggestively indicate that the existing inflation of currency, though it was in largo part enforced by war conditions,'has been carried further than was either advisable or necessary. It has been said that the additional impetus given to currency inflation after the armistice is difficult to understand, but the explanation offers that.it reflects the widespread extravagance and waste which tho previous inflation of the currency, though it was in itself necessary, had done much to stimulate. There is no doubt, that in all countries the circulation of a vast amount of paper money j did a great deal to unsettle popular habits of thrift and industry. It created a false sense of values and by encouraging people to waste their means lightly in luxuries did a good deal to undermine sound conditions of industry and production. In New Zealand these conditions of wasteful spending and the results they entail are by no means unknown. In the United States they have been carried to extraordinary lengths,, and it follows naturally enough that in the English-speaking world the United States at present exhibits the most suggestive symptoms of an impending crisis in commerce and industry. _ A collapse of confidence and of prices will not in it-self produce the remedy that is needed in the United States ana elsewhere. The essential remedy, of course, is to increase useful production and set the severest-possible limits on extravagance and luxury. Any country in which this commonsense policy is adopted and methodically carried out will soon master the problem of the higu cost. oi living and attain economic stability. It is equally certain that even tli? most sensational_ fall in prices will not in itself bring about these desirable results, and that such a fall, though for the moment it would be unwelcome to speculators and profiteers, would he rather more likely to occasion industrial dislocation, unemployment, and distress than to producc any material improvement in the economic situation.