New-York tribune., 1920-07-02
No Rapid Decline
OF Prices Likely,
Says Bank Review
Prolonged Depression Also
Unlikely, According to
Conditions as Seen by
the Nationa CITY

The National City Bank, in its July
circular, points out that the general
world situation is not favorable either
to a rapid decline of prices or to pro-
lorged industrial depression"
In amplifying its position, the bank
adds, There is too much work needing
to be done. The argument from
former reactions from high prices and
succeeding periods Of industrial de-
preston IS not good, for the reason
that such reactions in the past have
followed periods of construction and
enlargement of industrial capacity
which had run their course. Present
prices are not the result of a period
OF construction and investment. The
$4,000 100000 of new government in
cebtedness which is gluttng the banks
and investment markets represents in
only very small part new industrial
fncIlltlcs. On the contrary this in
debtedness represents capital which
should have gone into our railroads,
house building, and other construction
and development work.
The rising prices Of the last year
have indicated scarcity of goods and
services of all kinds A check upon
higher prices is wholesome and de-
sirabl but does not signify that the
country has run a full normal course
OF industrial expansion. On the con-
trary 1T is apparent the country has
scarcely begun to make good the deficit
IN capital improvements which would
hnnn ODD k,,+ fo -
has scarcely begun to make good the
shortage of houses, public improve
ments and railroad equipment The
exports of May reached a total sur
passed in not more than three or four
months of our history, and there is
reason to believe that the unsatisfed
needs of other countries correspond to
our own.
Until this loss of normal capital
accumulation and of necessary con-
struction has been made good, it seems
probable that while excessive price ad-
vances will be followed by reactions,
every material decline in construction
costs will bring out new demands for
labor and materials. with renewal of
general business activity. Of course
employment and trade are mutually
dependent.
I'VE have had that during the last
year, and the movement has been car
ried to the point where a reaction re-
suits from natural causes. Some lines
of industry have outrun others, the
situation is out of balance, the natural
reciprocity is lost, the industries are
not mutually supporting as they must
be for a state of permanent prosperity.
There must be a adjustment, and in
view of the strained condition of credit
it must be at a lower level of values.
There can be no relief for the credit
situation except at lower level of
values, where less credit will be re-
quired to handle the business Of the
country. Of course, just as much bust
ness can be done, just as many goods
made and distributed. at one level of
values as another. Nothing has been
gained by the great expansion of bank
credit and rise of prices which has
taken place during the last year The
situation is more difficult to deal with
now that it was then, and every in
crease in the volume of bank credit
make it still more difficult, because the
ground will have to be retraced."
Regarding railroad financing, the
bank says:
at is estimated that since the first
of The year twenty-four railroads have
placed total Of 1888. .9oS 900, which
included S163, 1875 600 serial notes and
equipments and S95,S73 900 bonds, most
of which mature in ten years. After
this month new railroad issues must
be approved by the Interstate Com
merce Commission, and it is antici-
pated that new issues will appear with
less frequency, as the major railroads
have undoubtedly taken care of their