CREDIT AND PRICES.

Taranaki Daily News, 24 August 1920, Page 8

CREDIT AND PRICES.

STEADY FALL IN AMERICA. CONDITION OF COTTON CHOP. The National Bank of Commerce in New York, reporting on 18th June, foreshadows a steady fall in the prices. The bank insists that "recent declines in the prices of a few commodities are not to be regarded as isolated instances, but are part of a gradual and general move, ment that lias been under way for a considerable time."

"It has generally been considered that prices would ultimately seek a lower ievel than that maintained during the war and immediately thereafter. Such decline has always followed the overstimulation of commerce and industry produced by war. Under these circumstances, a downward price movement, if gradual and orderly, is to be welcomed both as an evidence of the return of more orderly conditions and ns a. factor in accomplishing that return. Such a movement in the prices of basic commodities is now clearly evident. Sharp recent declines in a few commodities, however, are likely to cause the business public to lose sight of thf fact that in a number of other commodities a gradual decline has been under way for a considerable time. The prices of copper and zinc have been at low levels ever since the armistice, "Even at this time it is well to emphasise once more that the abnormal pries level has been the result, first, of actual physical shortage of goods in relation to demand, and second, of expansion in the volume of credit and the various forms of money. It is thus clear, that a declii.e in prices can only be brought about by a falling off of demand, an increase in the physical volume of production, a decrease in the volume of credit and money, or by these and various other causes working together. The Armistice automatically destroyed the specialised demand which the war had created, and removed the artificial support which had sustained the buying power of Europe during the conflict. While the stimulated domestic demand in the United States and elsewhere at first appeared to offset this, this influence could not possibly be permanent. In many lines consumption is not immediate, so that the rate of purchase after every abnormal period inevitably declines to a normal level or below it. It is primarily this tendency which has been reflected in the refusal. of buyers to accept additional price increases, on, in- | deed, to buy in undiminished volume at the levels which had prevailed for months. INCREASED OUTPUT.

"It was not to be expected that the industrial community could maintain the high tension under which it had worked during the war years, and. it is very doubtful as to whether the maintenance of this tension would have been desirnble. Despite numerous and widespread complaints as to the unsatisfactory condition of production in the United States, the fact remains that since the recovery from the temporary hesitation following the Armistice, this country has if,creased production in certain directions While it is true that in many lines production in lfllS), and thus far into 1920. has been against great odds, and- in many cases disappointing, it is nevertheless true that production has been gradually filling up the gap between demand and supply not only in the United States but in every country in the world except those yet in a state of internal disorder. » "In the face of these conditions, discernible to all far-seeing business men, the unwisdom of further credit expansion became apparent some months ago. .Effort.s to prevent such expansion have resulted in a considerable • strain on credit, and this has been much accentuated bv retarded transportation and consequent tying up of a large volume of credit. At the same time, the fact, must, not be lost sight of that the credit position of the United States is essentially sound, and that there will be credit for enterprises ' prepared to. cooperate intelligently in the work of bringing manufacturing, commercial, and financial operations to a stable and conservative basis.

INCREASED UNEMPLOYMENT. A factor not to be overlooked at the presrtit time is the increasing unemployment. In some districts large numbers of men are out of work as a result of disorganised transportation. This_ effect has been especially noteworthy in the coal regions and in the great centres of automobile manufacture. Refusal of the public to aoeept increased prices, or even to maintain a volume of purchase equal to that of recent months at the level of prices then prevailing, has reacted sharply 011 some sections of the textile industry and on the garment trades. Considerable unemployment in these industries has resulted. If this is of brief duration, it need have no serious effects, but prolonged and widespread unemployment rapidly destroys buying power and produces social unrest, so that a far-seeing policy will indicate its avoidance if this is at all possible. "The agricultural districts continue to suffer from labour shortage, but it is now believed that reasonably adequate help for the harvests will be secured. The agricultural outlook is 011 the whole quite favourable for the grain crons. However, a larger part of the wheat crop is now in its most critical stage, and considerable variation from the present estimates is not unlikely The estimate of condition of cotton as <>"2.4 tier cent, of normal, the lowest on leeord, is not of so much concern to the South, which is each year less dependent on cotton. a<! it is to the cotton textile industry of the world."