COMMODITY PRICES

Hokitika Guardian, 29 April 1930, Page 5

COMMODITY PRICES

THE DOWNWARD TREND

BRITISH BANKING VIEW

The trend of world prices to a low level and the effect on British industry is discussed' in the Midland Bank Monthly Review. Alter surveying tile causes lor the recent increase in unemployment in Britain, it says: “if reasons are to be sought for this relapse it is by no means improbable that one of them is to'be discovered in commodity prices. The level of wholesale prices has continued to follow a downward .trend, almost precipitate in its steepness in recent in'oiuhs.” It was never contemplated when Britain was considering reverting to me gold standard that wiithin five years wholesale prices would fall very near to the 1913 level, but such has been the case. The Review claims that this trend of world prices has placed an excessive burden on Britain im view of the disparity/ widened with every step in the downward movement, between wholesale and retail prices, wage rates, and costs ol goods and services in unsheltered as opposed to sheltered industries, and declares that “the whole tendency ! ot declining prices, whether of commodities Britain produces, materials Britain buys, or foods that Britain eats, reacts on Britain’s trade. It is unreasonable to suppose that the present condition of industry is closely bound up with the trend of world prices? If the answer is in the affirmative — and the spread of depression over a ivide international field points in that direction—then there must also be an association between business conditions and the trend of bank deposits. Deposits have not only ceased to grow, but are actually lower than a year ago. In short, ive have a shrinkage in the volume of money, accompanied by a fall in the price level—which seems to be an unassailable definition of deflation.’’ This seems to endorse the vieAvs of Professor Gustav Qassel, Avho advocates maintaining the price level by the econmical use of gold, and to achieve this lie suggests a managed currency, Avhicli appears also to be the vieAV of Professor J. M. Keynes. The Re vieAV asks: “To Avhat extent it is possible for Great Britain to mitigate the consequences to herself of this universal movement.” The important point is the outlook for the future, and the Review states that the cost of money is less important within limits than its scarcity or ready availability in required quantities, and “on this account the prospects are not so good,” says the ltevioAV. “Sterling after its marked appreciation has relapsed, and since the beginning of February has been consistently below parity. This fact indicates that the old forces arc at Avork again and that credit expansion is likely once more to be postpon- ! ed to a later, problematical, and more 1 propitious time.” The conclusion ar- ! r ived at is that “in the continued pro- ■ press of enlightened and even more skilful credit policy lies the chief hope for the economic Avelf'are of the country iu the near future.”