Arizona republican., 1920-12-11
Financial Review
Unusual Economic Conditions
By ERIC KOBBE Of Blyth, Witter 6 Go.

stands apart from any similar episode | in the history of the country. It has | been distinctive in it's unexpectedness; 1 in the extent of it's decline in a short l period; in the wide scope of the move | ment: in the suddenness with which 1 a belief in the scarcity of essential products gave way to the knowledge | of over supply; the clearness in which the causes of the movement stand out; and the remarkable fortitude and op- timism with which conditions have been met by business in general.
 These different aspects seem worthy of some discussion and explanation As to the uneXpectedness of the de- cline. Had this begun a few months after the armistice in November 1918 and had continued in a slow decline to the point where prices now are. it would have been accepted as an in evitable result of the return of peace; that the same had been predicted two or three years before the war ended as a result of blockades. Arrangement of industries due to war time require ments, and war expenditures; that merchants and manufacturers in gen eral had prepared for it. and that it | followed natural and expected eco l homie laws. But nothing of the kind occurred, and the present years fall was not predicted anywhere in the form which it assumed. Merchants. manufacturers, and retailers were taken completely by surprise, and as consequence of the shrinkage in value of stocks of merchandise which were being carried on credit, many failures have occurred and will continue to oc- cur, and many others will be facing | insolvency. In fact, the general opin- ion of economists, which probably would be reflected in the general opinion, was that prices would at least
 hold their own and probably would even advance during 1920.
 The extent of the decline is probably
 not yet fully realized. In seven months between March and November
 average wholesale prices declined 24% per cent, and went even lower in No
 vember and the end 1t not yet. This is the most rapid decline in the his
 tory of the country, and it speaks vol
 umes for our present financial system
 that a panic was not only avoided, but
 was never considered seriously as a
 possibility except by the alarmist.
 The scope of the decline has also been remarkable. It has been world , wide and statistics from France. Eng land, Italy and Japan, all show sub , stantial declines in commodity prices , l It would be hard to conceive of two countries in a more contrasting con dition than the United States and Ger
 many yet the price of shoes in Ger , many has fallen 50 per cent, of clotf IA per cent and of iron so per cent The South American countries were
 forced to cancel many buying orders ' in this country as unsold goods haC accumulated to an alarming extent these countries were hard hit by 6t per cent fall in the price of coffee anC
 Cuba was brought to the edge of fl
 nancial ruin through the 50 per cen
 fall in the price of sugar after tn ~ financial institutions of the island ha,
 made loans to the producers on a higl price basis.
 The belief in the scarcity of good
 might have come from many causes
 but in the present case it seems t s have been due to speculation. Specu
 lators. before their credit was curbe' 0 by the action of the Federal Reserv = Board, had stored up vast quantitie of goods holding the same off tn l market for higher and higher prices With the stopping of this kind c = credit these goods were forced on sale Q and the great wave of liquidation be gan and it soon became evident tha e the scarcity of goods was a nnytl = and that in fact an oversupply exist e ed. Leather, copper, cotton, sugar an Q WO0A 01PPAAODs dl4 CtAAiG lO AAN MAA f spectacuar suddenness, and the fall i q prices of these commodities can hardl d be called an illogical result.
 n The most visible causes for the de = cline are the consumers strike and tn = curtailment Of credit. The publi = turned over a new leaf and refused t
 buy. Old shoes were patched, ol } clothes were made to do, luxuries an
 pleasures were curtailed. and a nickt
 lnnknA a fxuira hafnra o spent The extent to which this cur " tailment of buying was carried was nc s appreciated and its phenomenal an V immediate effect was startling. Backe v by the Federal Reserve Boards actio - In curtatling credits prices were force . down to their present level. An out standing feature of this fall is the fal
 that it came without the worlds in = Hated paper currencies being deflate VI to any extent-a circumstance whic = many economists said was impossibl II It is quite evident that the great ia u in prices has occurred, not on accouT
 of any reduction in the currencies, bl l. in spite of an expansion in them. Tn T. does not show by any means that cuI y rency imitation does not affect prices T. in fact it has such a direct effect ths
 the overcoming of the same in Il ], present case is all the more remark f, able. and it does prove that the move E ment of prices up or down are n,
 solely the result of the expansion l contraction of the money supplied.
 It appears that the optimism wit
 which the future is being approache
 by business in general is due to tw
 main causes. One is the change n the present administration and u 1f other is the faith in our present finar
 cial system Although 1t is very di
 fieult to trace any immediate ar
 direct results of the election, 1t ht
 beyond question restored confidence Is the country in general, and althoue {: this confidence may not be due to 5; positive belief in the new admin. D, tration it is the result of the reli s. from the burden of the old. The d
 rection fthe financial destinies
 the country by the Federal Reser7
 Board although not entirely free fro
 mistakes has been such as to warra1 IT, a firm belief in it's ability to meet ar C. overcome any financial obstacI
 which may make their appearance