The Brookings register. [volume] (Brookings, Brookings County, S.D.) 1903-1971, 1919-07-17

"
expect prices to drop. The funda,
rental practical question, therefore.
confronting business men is whether
the general level Of prices is going
to fall. In my opinion 1t is not going
to fall much If at all. We are on
permanent higher price level. and the
sooner the business men of the coun,
try take this view, the sooner they
will save themselves and the nation.
THE general level Of prices is de-
pendent upon the volume and rapidity
of the turnover of the circulating me-
dunn in relation to the business to
be transacted thereby II the num-
Der of dollars circulated by cash and
by check is doubled while the num-
Der of goods and services exchanged
thereby remains constant, prices will
about double.
"Over billion dollars in gold has
come into this country from abroad
since 1914, and a 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 the
bank reserves. On June so, 1918. the
portion of the gold reserve of the
Federal Reserve Banking System
which supported national bank depos-
more than three times as large as the
gold reserves under the old national
banking system on June so, 1914
$1,786 ,000, 600 compared to $592 ,000.-
900. During the same period credit
instruments (demand deposits and
notes. increased about two-fold-from
$500 900 600 to $11,700,000 900. This
increase of credit instruments is typ
ical of the banking situation for the
country as a whole, and largely ex-
plains the present high level of prices
Many people, referring to this in
fation in the circulating medium, and
assuming that it is temporary, are
waiting for this imitation to subside.
When we speak of imitation We
mean more circulating medium than
is needed to transact the business of
the country on given price level
But what price level? Some people
mean the price level Of 1914. Our
currency is certainly inflated in terms
of the prices of that period, just Us
the currency of 1914 was inflated with
respect to the prices of 1896, but our
currency is not inflated at the present
time relative TO the new level OF prices
in the world which the war has
brought about. At the present time
European goods are not Iow-priced'
(however little the money wages of
European labor will buy. Prices IN
Europe since the war began have
risen more than they have in the
United States.
THE, chief dependence of those who
predict lower prices is on reduction
of the superstructure of credit rest
ing upon our gold rather than on any
reduction in the volume of this gold
itself. But the main cause for the
present extension of bank credit is
the Liberty Loan, and since then the
Victory Loan.
"The banks must lend credit and
create deposits to meet the expendi-
lures not only of our own government
as well. During the war, the fiota-
tion OF stocks and bonds OF coinrler-
cial concerns has been greatly dimin-
ished. During the period upon which
we are now entering the issue of such
securities will increase greatly
"Business men should face the
facts. To talk reverently of 1914
prices is to speak a dead language
today. The buyers of the country
since the armistice, have made an un-
exampled attack upon prices through
their waiting attitude, and yet the
price recessions have been insignifi-
cant. The reason is that we are on
a new high price level, which will be
found a stubborn reality. Business
men are going to find out that the
clever man Is not the man who waits,