The Bridgeport evening farmer., 1910-02-03
BG FINANCIAL
 PANIC COMING
 SAYS YALE MAN
Prof. Fisher Sees Industrial Upheaval Accompanying Crisis Predicted By
 Present Conditions
Due to Gold Increase Neither Trusts Nor Labor Unions Are Causing High Prices, Which Will Rise Still More.

"We are headed exactly toward
 financial and industrial panic.''
 Such was the prophecy uttered by
 Prof. Irving Fisher to his class of several hundred Yaie students of po- litical economy in a lecture yester- day.
 Prices are rising with amazing ra- pidity, and the chief cause is the in
 crease in gold,'' he continued, in eX- planation. within the past few years
 the discovery of gold in Africa, Alas
 ka, Australia, and parts Of the United
 States has fairly glutted the markets.
 "We had a small panic in 1907 and there was quick recovery because of 0 timely influx of still more gold.
 Present conditions are a prediction that another crisis is due in a few
 years. One cannot tell just when it will come.
 of gold there is an increase in the i amount of deposits in banks, and a general boom in trades. Interest rates in such cases usually rise slight ly, but not enough to check lnjud1- cious borrowing and investment. How ever, at the present stage, interest rates are not very high, and investors have apparently not begun to take any great advantage of this fact. But a swift rise in prices is an almost cer- tain forfender of serious break" Commenting upon the causes of the
 present situation in the Review of
 Reviews for February. Prof Fisher has written in part:
 ''We must give up our blind faith in the stability of gold. While exper- fence has given us all a keen sense of the dangers of paper imitation, thls very fact has led to OVer-confidence in
 gold. We stoutly cling to the deluslon that nothing else is as solid as gold. while under our very eyes the cyanide method of extracting gold from low
 grade ores as well as the new discov- ies of gold and their continued ex- ploitation produce a depreciation we are unwilling to recognize. The sta tistics for the last few years have shown a remarkable increase in the output of gold and one which resem- bles the increase after the gold dis coveres in the forties. Prices rise now as they rose then, and for the same reasons.
 "There is one possible explanation 1 for the general rise in prices-name- l ly, an expansion of the volume of cir culating money and deposits. It may l be shown that the volume of deposits depends upon the volume of money:
 There must be always a money basis 1 for credit, and the larger the basls l the larger the credit structure possl- ble. While it is true that the credlt i structure may temporarily expand be- yond it's normal ratio to the money basis on which it rests, yet even this | abnormal expansion of deposits is al- ways inauguarted by an expansion of
 money. It is probable that deposits 1 it general are now expanding more /! rapidly than their monetary basis. But
 the source of this deposit imitation IS 1 money imitation and the source of the
 monetary imitation is gold.
 1 Labor unions and trusts, If they actually restrain trade in the aggre- gate, will tend to increase the price level. This effect, however, is of quite
 a different kind from direct raising | of particular prices. From no point of view can the conclusion be Justl-
 fled that the main cause of the present rise in cost of living is due to labor
 unions. This rise in cost is, world
 wide being felt in Europe and even In
 India. where American labor unions and labor leaders cannot, by the ut- l most stretch of imagination, be SUD-
 posed to dominate the situation. Similar reasoning would seem to l disprove that the general rise of prices
 is due, in any large measure, to trusts
 Whatever effect they have had 'in re- | straint of trade has not been suffi- cient to decrease the general volume
 of trade. The general rise of prices
 applicable alike to cost of living and
 other prices is not due in any great
 measure to trusts nor labor unions nor 1 any other cause. except the growing 1 abundance of gOld.''