The Pensacola journal. (Pensacola, Fla.) 1898-1985, 1920-02-02
FALLING PRICES
AREPROPHESIED
READJUSTMENT CERTAIN, SAYS
EXTENDED DEPRESSION MAY
BE AVOIDED.

Prospects of falling prices are dis
cussed by the National Bank of Com
merce in New York in the February
number of Commerce Monthly, the
banks publication, just issued. The
bank. while not predicting a definite
time when price readjustment may be
expected, maintains that the process
need not mean disruption to business
If, when the tide turns says the
bank, 'readiustment is not too long
resisted and production is not too much
slowed down, and if the situation is
flexible and competitive. we may ex-
pect to meet the reaction without dis
aster. The country is not as well
braced now for reaction as it was at
the time of the armistice, but so
many of our major industries are in
an exceedingly strong position. and
our banks are as a whole in such ex-
ceIIent condition. that we should view
the prospect without undue appre-
tension.
THE question of price readjustment
in the United States is tied up with
our attitude toward Europe'*s econ
nomic recovery. If it is felt that we
are all involved to significant de-
gree in a common economic future.
our participation will doubtless be
active. AS a part of such a policy. new
loans to Europe to make possible a
continuance of our exports essential
to reconstruction would delay the pro-
cess of price reimbursement.
Withdrawal of the present extern
sions of credit to support exports TO
Europe would soon check the present
one-sided trade This
would necessitate our domestic mar
ket's absorbing three or four hundred
million dollars worth of goods each
month which our market has not had
to absorb during 1919. With goods
thrown back on the domestic market
in this volume a relaxation of the
strain in our commodity markets
would follow Two possibilities would
then be opened. On the one hand, we
might have a speedy readjustment of
prices and wages and a revival of bust
ness activity on a lower level. On the
other hand, if efforts We're made to
resist price reduction by artificial
means we would be exposed to the
dangers of a painful period of real
business depression.
when this readjustment comes. the |
business men of the country will have
for the policy toward
labor which will go far in making for
industrial peace in the years that fol-
low. In so far as the balance sheets
permit it, business men will find it
wise to let prices go down first with
out making too vigorous efforts to re-
duce wages. The natural course of
events will lead to substantial wage
in time. However, we can
not expect to see wages recede as
rapidly or as far as prices. because
the elimination of immigration in re-
cent years has left our labor supply
relatively short. Even without reduc-
ton in wages, labor costs per unit of
output will be reduced with the re-
storation of shop discipline and the ,
cessation of overtime work
The chief cause of high prices out
lined by the bank is the shortage OF |
supplies for the domestic market, due |
to the drain upon American produc- |
tivity by Europe's demands. The short |
tailment of output in many lines fol- |
lowing the ar1nistice. Other causes
are the creation of an abnormal |
amount of credit by government loans !
for destructive purposes and extrav-
agance by the public in a post-armis- !
ice relaxation from time economy.
Concerning the relation of the value