The Richmond palladium and sun-telegram. [volume] (Richmond, Ind.) 1907-1939, 1919-06-20
Are Present Prices Normal?

Are Present Frees Normal!
The New York World contributes the append
ed discussion of the question, which may be ac-
cepted as a distinct contribution to an under
standing of the problem:
Business men should face the facts. To talk
of 1854 prices is to speak dead language to-
daytssays Irving Fisher, professor of political
economy Yale University.
The reason is that we are on permanently
higher price level Business men must accept
this as fact and wait no longer for return to
pre-war prices.
The general level of prices is dependent upon
the volume and rapidity of turnover of the cir
culating medium in relation to the business to
be transacted thereby. IF the number of dollars
circulated by cash and by check doubles while
the number of goods and services exchanged
thereby remains constant, prices will about
double
Any increase in the countrys gold supply has
a multiplied effect The possible extent of that
effect is dependent upon the amount of gold avail
able, and the gold reserve requirements, deter
mining the volume of credit that can be put into
circulation based upon the gold.
Over billion dollars in gold has come into
this country from abroad since 1914, and large
amount has disappeared from domestic circula-
ton. The gold from both these sources has
found its way into the United States Treasury
and into bank reserves.
AS to the future movement of prices, gold
will not return to circulation. People will leave
their gold and silver in the banks and use paper
money.
We used to owe Europe interest on American
securities she held, now she must pay us money
for machinery and materials and interest
credit we have extended her.
Prices in Europe have risen more than they
have in the United States and are more likely
to fall there than here.
The Liberty bonds have led to an expansion
of credits.
The availability of the vast issues Of war
bonds as bases for future credit expansion, coup
led with the fact that our banking system has
still many unused reefs, sure to be taken out
later, when business wishes to spread more sail,
is the chief reason why prices will keep up per-
rnanently; that is, for many years.
Against any considerable reduction in bank
credit and hence in the general level of prices, we
shall find the whole business community in arms
Falling prices mean hard times for the Individual
and for the nation and every one resists the ten
dency.
At the end of the Civil war the treasury start
ed to reduce the quantity of greenbacks. start
had hardly been made, however, before the bust
ness depression of 1866 and 1867 caused congress
to forbid by law any further reduction. Should
the federal reserve banks attempt, by raising
their discount rate or otherwise, to reduce the
volume of bank credit outstanding, they will
meet with the same sort of opposition.
Moreover, the hostile attitude of labor toward
the lowering of wages will deter legislators and
bankers from any organized policy OF contraction.
= w. A. McDermid of the Mennen Co, president
of the Association of National Advertisers, says
that the public has yet to understand that bust
ness can never return to pre-war conditions or
pre-war prices.
We have got to recognize that price levels are
permanently raised by permanently increased
labor cost and by high taxation These two fac
I From OH