BOOM PSYCHOLOGY

Evening Post, Volume CVIII, Issue 138, 7 December 1929, Page 12

BOOM PSYCHOLOGY

UNITEir STATES TEADE

PRESIDENTIAL ASSURANCES

"Evening Post," 7th December,

The dramatic collapse of speculation on the American Stock Exchanges and the enormous losses involved have no doubt conveyed an idea to the world at large that industry and commerce in the United States are in. for* a lean time. Mr. Hoover, as the Press cables have intimated, is desirous of removing such impressions, where, they exist, and to show, as he put it, that "the fundamental business of this country, i.e., the production and distribution of commodities, is on a sound and prosperous basis." Mr. Hoover's right-hand man in all matters relating to the internal and export trade of the United States is Dr. Julius Klein, Assistant Secretary o£ Commerce. Dr. Klein is in the best position in the United States to; furnish, the President with facts for fcis speeches and messages on the fundamental business of-, the country. From advices received by the American Trade Commissioner in -New Zealand (Mr. Julian Poster), the debacle on the New York Stock Exchange, and other great exchanges in the United States can and will have but little, if any, effect upon the prosperity of the-; country^ Dr. Klein points out that a decline in security prices has no great bearing on the buying power o£ the community on which buying power rests the-'.activity of production, the earnings of corporations and other business enterprises,' 'and ' employment of labour. He estimates that the speculation would involve less than. 4 per cent, of all the families in the entire nation, or less than 1 per cent, of the total population. i REACTION BOUND TO COME. "Stock prices have gone down suddenly because over the past two or three years," Dr. Klein holds, "we have been under the' influence, as regards stock prices, of a boom psychology. Many persons have bought stocks with, little knowledge of their present or probable future dividend-paying capacity. Many, moreover,-have borrowed money in order ttf make these stock purchases. A reaction was bound to occur." But there has been no change in the situation of the overwhelming majority of American families. "The growth of the income of the nation and the advance in the well-being of its. business men, its wage-earners, and its farmers during recent years^ has not been due to boom psychology nor. to temporary and fleeting causes. It hasibeen.a definite upward trend, not a wave, whose subsidence would leave us in a deep trough. The fundamental cause . of-the-expansion-.of (business and the improvement, in standards of living has been the 'growing efficiency, of production." i'rices have been steady with any trend at all in a downward direction. Per capita production has increased by from 50 to 75 per cent, since 1900 and by from 25 t6 35. per cent, since 1919—and the latter year was one of high, activity. _ * \Dr Klein draws special attention to the- nature of the United States export trader which has become a \-ery important factor i'u American business.. Exports of manufactured goods especially have increased steadily and rapidly in recent years, and approximately 10 per cent, of the total output of the factories are exported There is no reason to anticipate any decline in this big factor in demand and on the contrary, the upward movement of recent-years is likely to continue. He'also states that one. of the major indications or general prosperity is the amount of new' life insurance taken out; and sales of life insurance during September last were 15 per cent, higher than tor September, 1928. To-day (he states) we have the truly prodigious total of over 100 billions of insurance. Some small fragment of this doubtless was bought with the proceeds of speculation, but by far the greater part of it stands as a mighty symbol of the inherent economic soundness as welV as the far-sighted frugality of °'aiSr I£age<31£age<3 "rates stand;' normal purcnaimg power.has not; been appreciably impaired; and the industrial and commercial structure of the nation is sound "notwithstanding regrettable speculative uncertainties."