New-York tribune., 1918-08-01
WALL STREET OFFICE,
Mills Building, is Broad St.

prices or real estate booms." We
do not see how the bank arrives at
any such conclusion, nor how the
statement issued yesterday can be
squared with one made by the same
institution three months ago, in
which it said that whenever the cur
rency and credit of a country are
inflated commo dities rise and labor
demands and usually receives higher
wages" To the extent that the
banks prevent credit initiation they
will also prevent price imitation.
An authority, asked if the thrift
campaign had succeeded to the ex-
tent Of bringing about general re-
duction of the consumption of goods
by the civilian population, answered
in the negative. All that has been
accomplished thus far, he said, was
that the tendency toward increased
consumption had been definitely
checked. Some Of che people are
saving as they never did before, but
this is balanced by an orgy of spend
ing by workers receiving fantastic
wages. And it is plain that if we
are going to carry out our war pro-
gramme civilian consumption must
be reduced, and that drastically, for
it is beyond the power Of the nation
to put through programme calling
for the expenditure Of $24,O00,000,-
000-not far from half the national
income-while utilizing labor and
materials in the normal way. In this
connection the National City Bank,
in its current review Of economic
conditions, has some interesting
things to say.
"The distribution Of $3.50, 900, 900
Of Treasury certificates bi-weekly to
the banks" the review states, "raises
numerous appeals Ito the banks) for
assistance, based upon the plea that
rediscounting is imperative in order
that they may take care of local
business. Usually they explain that
they are turning down everything
but the current requirements Of
trade, which they assume must be
met. This, however, is the very crux
of the whole situation. The country
is trying to do a greater volume of
current business than it has the fa-
cilities for doing. Each individual
is trying to maintain and increase
his own labor supply and his own
stock of materials or goods, and as
prices rise he asks, in good faith, for
more credit with which to do so.
He doesn't realize that his own ef-
forts are contributing to the rise,
but with thousands Of employers
struggling against each other to ac-
complish the same end the net re-
suit is a higher level Of costs
and a steady expansion Of credit,
while they all continue to wonder
how high prices will go! There is
literally no limit so long as they can
all continue to borrow. The amount
Of credit required to handle the
business of the country is said to
depend upon the level of prices, but
this order has been reversed, so that
prices and costs are responding to
the amount Of credit which can be
had to finance the competitive strug-
gle over labor and materials.
"The whole situation resolves
back to the question: How much
more of actual services and goods
will the government get in this fiscal
year for $4,000, 100000 than it got
last year for $12,700,000,000? Evi-
IDENTIFY it will get more only to the
extent that the productive capacity
of the country is increased and as
private economies release productive
capacity to the government. Pro-
duction Is not increased by a mere
increase of credits, or by a process
son of wage earners marching from
one factory to another in response
to the latest bid for their services.
The value of the s24,000,000,000
which j. Is planned to expend will
depend upon the willingness Of pri-
vate consumers to cut down their
own demands on the country's man
power. When this Is done the de-
mands for credit to handle current
trade will fall off, and the plain
truth Is that it must fall off If the
governments programme is to be
carried out"
All Of which is true. But the un-
fortunate fact is that, as previously
stated, private consumers have not
cut down their demands, nor are
they likely to do so voluntarily, ex-
cept go gradually as to be of little
effect this year. That is the prin-
cipal reason why heavy taxes on
consumption must be enforced.