THE DOWNWARD TENDENCY OF PRICES.

Hokitika Guardian, 2 October 1920, Page 4

THE DOWNWARD TENDENCY OF PRICES.

AMERICAN AUGUST REVIEW. The general situation is favorable to lower prices. A good crop of food stuffs has been raised, and as it is likely that Europe will require less than during the past year, it is probable that the prices of these will be somewhat lower than they have been, although a return to normal conditions is out of the question until Russia resumes exportations on the old scale. One of the chief factors in high prices is conceded to be the inadequacy of transport facilities. Grain would be lower in the central markets, coal would be cheaper and manufacturing costs generally would be lower if the congestion on the American railroads was cleared up. But this is only a temporary difficulty, and will be gradually overcome.

A general recovery from the effects of the war is going on. The replacement of shipping is well on the way to accomplishment; ocean freight charges are declining and shipbuilding operations are diminishing, releasing workmen to other employments and reducng rthe demand on the steel mills. will take years to bring up the railroads and other public utilities add do the house-building ..needed, but gradually the stress will be lessened, as equipment is increased, importations increase and our exportations dtcline. The great business which is in sight for the steel works and the electrcal companies is in enlarging the productive capacity of the industries. GRADUAL READJUSTMENT. In short, conditions seem to favor a gradual readjustment of prices toward a lower basis. This is what everybody should desire, because it means keeping the industries in balance, with continuous employment for wage-earners, a continuous turn-over in trade, a gradual reduction of inventories and indebtedness and a safe re-establishment upon the foundation of normal solid values.

The wise policy for the time is one of ready adaptation and co-operation all round. Changes are impending and it is no time for any group to take an arbitrary position and say that it will have things its own way. The problem is to lower the whole level upon which the exchanges of industry ■ are being made without disrupting the organisation and interrupting production. If, as seems probable, the farmers must accept a gradual reduction in the prices of their products, as Europe becomes more self-sufficient, some impairment of their purchasing power will result, and they will buy less of the products of other industries unless these are correspondingly cheaper. It will be useless for the producers in other industries to insist that they shall have/the same money income if the great agricultural population has less. There is a natural equilibrium and reciprocity among the industries which is bound to be maintained because it is fixed in the very constitution of things. If the readjustments are not made reasonably and harmoniously they will be made any way by the force of economic law.

CONDITIONS IN THE NORTH OF EUROPE.

Reports from abroad indicate a slackening of the demand for goods and a tendency to deflation. The labor situation is giving much perplexity, owing to low production and high costs. In Denmark, where a shipping strike was broken by volunteers from the farmers, merchants and all lines of business, the industrial situation is now quiet and it is thought there will be no more trouble for some time. All the big strikes in Denmark have been lost. Money is very tight in the three Scandinavian countries. The Norges Bank (Central Bank of Norway) raised its discount to 7 per cent on June 25, the central hawks of Sweden and Denmark having raised their rates to that figure some time earlier. The central bank of Finland has its rate at 8 per cent.

All the Scandinavian countries are looking for trade with Russia, and the Soviet government has made advance deposits of gold in all three countries.