New-York tribune., 1918-11-18
Business Foresight
Will Prevent Crisis
When rices Fall
DR.. B. M. Anderson, Recalling
Experience After Civil War,
Counsels Optimism
By DR.. B. M. Anderson, Jr.

National Bank of Commerce, New York
A sharp drop in commodity prices
will follow the end of the war, but we
will have no crisis. Wages will also
drop, but fair play on the part of both
capital and labor will keep this from
resulting in industrial turmoil. How
ever, continuance of active business
will depend upon the policies which
governments, banking and business
pursue to further the rapid repair of
the wastes of war and the restoration
of normal conditions throughout the
world.
The belief that there will be drastic
drop in prices is based on obvious con-
ditions. With a vast volume of labor
rapidly being discharged from NUM-
tion factories the world over to resume
the production of normal supplies;
with steel, copper, coal, shipping and
other essentials released; with 50,000,-
900 soldiers returning to farms and
factories, there will be an immense in
Bile for civilian consumption. Prices
should fall, even before this actual
transformation is carried far, because
wholesale markets commonly forecast
impending changes.
No Crisis After Civil War
Under ordinary conditions this would
mean a business crisis with widespread
bankruptcy Yet, to take a historical
precedent local to America, the verit-
able collapse of prices in the North,
following the Civil War, produced no
such crisis.
In the six months from January to
July, 1865, the general average of
cent Such u slump coming unex
pectedly would seem to mean universal
bankruptcy. Most merchants, having
bought goods largely with borrowed
money and meeting. in effect, 80 per
cent depreciation when they undertook
to sell those goods, would be unable
to pay their debts. The credit system
would collapse.
comparative fewness of its bank
ruptcies. Dun's agency reported only
500 failures for that year, as against !
$500 in 1861. The liabilities in the /
1865 failures likewise were only one
tenth of those in 1861.
Greenback Depreciation
The rise in Civil War prices was
due chiefly 20 the depreciation of the /
Greenback dollar, which at it's lowest,
IN July of '64, was worth only 35 cents |
in gold. There was no world wide |
shortage Of goods except cotton. The
prices were rot gold prices, but paper
money prices. They represented, not
rise in the value of goods. but a fall
in the value of the paper dollar. Vice !
versa. the fall in prices in 1865 repre- |
sented a rise in the value of the paper
dollar as the victory of the North be- !
came assured and it became probable
that the government would redeem it's
paper money in gold at reasonably
early date. High prices to-day in the
United States, however, are high gold
prices, representing real scarcities of
supplies of almost all kinds.
But this difference does not upset
the parallel between 1865 and the end
of the present war. The business mans
contracts run in dollars, not in gold.
Nheap ana nuctuatlng legal tender
paper money is a great evil, but for
short run purposes it will pay debts.
rise in the value of the dollar re-
ducing prices of the goods the bust
ness man has to sell without reducing
the prices he has contracted to paw for
them or the loans at the bank he has
to meet, is at least as hard on him as
fall in prices through increased sup
| plies of goods.
Business men generally are antici
pating just this change. They are car
Tying ryylng light stocks Of goods, partly
scarcities have been so great that thev
cannot obtain heavy stocks. ONLY that
man should suffer who goes light
heartedly on, on the theory that pres
ent prices are to last forever.
Six Points in Postwar Conditions
There will be no crisis. but can there
be real industrial activity in the
United States? To answer this cues |
tion we must consider six principal |
points,
(a) The Physical Needs of Europe
To-day. A second great difference he /
tween the North at the end of the Civil
! War and most of the belligerent coun-
! tries to-day is to be found in the fact