INFLATION AND COLLAPSE.

Taranaki Daily News, 25 May 1921, Page 4

INFLATION AND COLLAPSE.

The National City Bank of New York, in a recent issue of its review, has this to say on the present economic conditions of that country, which, it will be seen, differ only in scale with those now obtadnifag in New Zealand:—Every .period of rising pr. continued over a period of years begets carelessness about incurring debts. The more deeply people go into debt at such a time the more money they make—while, the movement continues. A new crop of rich men is created, of individuals who disregard all the sound rules of doing business. Margins are reduced to next to nothing, credit is strained to the limit, because as month after month passes this policy is found to pay. Why should a speculator in stocks carry 100 shares on an ample margin when he can carry 200 shares and double his profit, and that reasoning applies generally? Salesmen, superintendents and foremen who have saved up a little money on salaries start into business for themselves, and make money rapidly, turning their profits over and over and using them as the basis of more borrowing. Everybody is pyramiding, and the situation becomes highly artificial. It is evident now that the apparent scarcity of goods about a year ago, when manufacturers were sealing orders, was largely artificial, caused by a scramble among dealers. The Whole business situation at such a time becomes infested with marginal traders who have an influence in putting prices up, but lack resources to withstand falling prices. Their holdings are thrown on the market at a time when the market is ill-prepared to receive them. Men have been buying farms valued at 50,000 dollars, by payring 1000 dollars or 2000 dollars down and entering into contract to pay the balance, expecting to sell out at a profit before the contract matured. For several years the game was booming, but common sense warns tfiht that sort of performance must come to an end. It has about one “run” for each generation, and when it comes to an end a fierce demand always rises for a change in the banking or monetary system which 'is held to have been responsible for the trouble. All the people who .have gotten into debt are sure that if credit had been on tap without limit, the boom would have kept on forever.