Hokitika Guardian & Evening Star FRIDAY, 25th. APRIL, 1919 THE ECONOMIC SITUATION.

Hokitika Guardian, 25 April 1919, Page 2

Hokitika Guardian & Evening Star FRIDAY, 25th. APRIL, 1919 THE ECONOMIC SITUATION.

Our valued contributor “X” has been supplying some thoughtful articles on the economic situation in relation to the position between capital and labour, and the means for adjusting or other wise bridging the differences between the two great elements. On the question of a general levelling of prices to relieve the abnormal situation created by the war, a writer in an English journal points out that a well-known theory of economics, the truth of which is now being demonstrated, says that ! the general level of prices depends on | the amount of money in circulation, and that prices in general vary with relation between the total amount of money in circulation and the total amount of goods or commodities available for exchange by means of that money. To put it quite simply, more money and less goods will cause prices to rise; less money and more goods will cause prices to fall. We are all fully aware that there is and has been during the war a steadily growing short age of many commodities, not in Great Britain only, but throughout the world. During ;the period of the war the amount of money in circulation in the United Kingdom has been increased by the issue of Treasury notes representing a far larger value than gold which was previously in circulation. The level of prices gradually rose as the issue of notes increased. During the first week in January, 1915, there were £38,000,. COO in notes outstanding. On the corresponding date in 1910 there wore £103,000,000; in January 1917, there were £143,000,000, a n d in January, 1918, £212,000,000. Simultaneously, a gradual decrease was taking place in the quantities of every-day commodities available for sale anil purchase. At first certain articles of luxury began to disappear, then articles of food other than those of first necessity became scarce, whilst some which we were accustomed to regard as almost essential to comfort were difficult to obtain. Finally, though the process of elimination had been so gradual that we scarcely realised it, none but the prime necessaries of existence were really stead ily obtainable and that only because of the rationing system, which most of us agree has been remarkably successful. Side by side with the narrowing of our choice of foodstuffs, materials for clothing, household supplies and domes, tic utensils had imperceptibly become rarer and in some cases almost unobtainable. Thus the quantity of commodities available in Britain for exchange by means of money shrunk, whilst the amount of money in circulation continuously increased. Meanwhile, it is generally admitted, actual poverty had practically disappeared. At one end of the social scale the luxury and extravagance of pre-war had ceased, whilst at the other end the least well-off were at all events better fed and clad than ever beforo. And yet, with the exception, perhaps, of a few of the wealthiest and those who were in the fortunate position of being self-suppliers none were able to obtain more than quite a res. tricted amount, though a sufficiency of the real necessaries of life. Thus, it is apparent, there was a general levelling down from above, and levelling-up from below until the standard of living as regards the real essentials of existence was approximately the same for all, and satisfactory to all in spite of the absence of so many articles formerly regarded as necessary to comfortable living. Yet, seeing that the total amount of commodities consumed was less tha)U in pre-war times, though more evenly distributed, the sense <■ well-being amongst a great majority of the population of the country must have been due largely to the mere handling of larger sums of money, in the shape of earnings than they had been accustomed to possess. The question which is now being asked nnd which will probably he reiterated for many months to come is—When will prices go down? On our original hypothesis, th e answer is—Not unt’l the amount of money in circulation is reduced and the production of commodities has been vastly increased. That the first condition will bo attended to in due course we may be sure. The British Committee on Currency after the War has recommended that a beginning should be made by a. very gradual withdrawal of currency notes as soon as possible. The second condition will be fulfilled as soon as the world in general begins to recover from the shortage of foodstuffs and raw materials. One good harvest will probably make a far larger difference in this way than many would imagine to be possible. In Great Britain prices will begin to move in the desired direction when demobilisation provides labor for production, and as soon as shipping is available to bring raw materials, always of course, prothat the unfortunate outbreak of labour troubles does not become general or of long duration. If no less diligence and enthusiasm is used by the malo workers of the country, both employers and employed, during the next two years, in the production of goods to replenish tlio vacant shelves and employ store cupboards as was devoted by women munition workers doing the war to providing tbo means of subduing tbo Hun, prosperity and comfort should speedily be restored throughout the land. Not only will the general level of prices fall, but it should he possible to maintain wages at | a much higher level in relation to prices j than that which prevailed before the I Wi ' r .