Evening star., 1920-05-29

Zt
third meeting of the Economic
Club of New York. Thursday. 1T the
Hotel Astor. New York city. Francis
H. Sisson, vice president of the
lGuaranty Trust Company of New
| York. said. in part:
"A wave of price-cutting is sweeping
over the country 1t is the 2ost in
teresting economic phenomenon of the
day-an event long heralded and
waited for by the public And yet.
| curiously enough. the public is only
| tardily awakening to a realization of
the fact that it is not only the bene-
ficiary but also the creator of the
movement. Merchants generally frank
| ly explain that they are reducing the
prices of certain commodities because
the public in refusing to buy at high
prices. In brief, the movement rs
| largely psychological rather than
| economic IN character.
| And it will be well to bear that dis
tinction in mind in endeavoring to
| analyze and foresee the trend of COM
modify prices. The reductions in prices
| that are being made today are not due
| to overproduction: for there is. in
fact, underproduction in many essen
| tial lines which is likely to continue
| for some time. Consequently. 1t would
seem advisable to avoid hasty con-
clusien that the present movement
| forecasts a universal and drastic
drop in commodity prices.
Not to Force Price Recession.
Our problem is not to force price
| recession as rapidly and as pre-
cipitately as possible. but rather to
bring about a gradual readjustment
with view to stabilization. There is
quite as much danger from too ac-
l celerated and extreme price reduc-
tion as there is from too high prices
! and all their attendant evils. Above
all, we should remember that a per-
| manent lower price level can be OBJ
taired only as the resultant of many
forces. some of which seemingly are
| unrelated. but all. nevertheless, work
ling. directly or indirectly. toward a
common objective. namely, general
economic readjustment.
Effects Of Declining Prices.
The present recession in prices is
concentrating the attention of both
lproducers and consumers upon the
probable effects upon themselves OF
such a decline. The nature of the
effects which may be felt will de-
pend upon the distribution of the de-
clines throughout the whole range OF
commodities as well as upon the ex-
tent and the rapidity with which the
declines are brought about.
| Our price level has attained its un-
iprecedented height as consequence
of worldwide scarcity of goods and
of extraordinary extravaganza on the
part of the American buying puohc.
| production under conditions OF
general shortage moves up unevenly
| and overtakes the demand. now In
this line, now in that. 1t is natural
that high-priced goods. luxuries in
| particular. should soonest show a aden-
mite downward turn of prices. This
is what we are apparently witnessing
! at present. Furs and silk. for exam
| nle. have recently declined to consid-
erably lower levels. The slump in raw
| silk prices in New York, chiefly IN
consequence OF the pig crop IN .apa. asa
nese prices, was preceded by some
months Of gradual weakening. Clotn.
i ing and shoes are other examples OF
goods for which there is a weakening
| demand at prevailing prices. an ex-
preston of the growing lmpatlence
| with high living costs. The eXtraor-
| dinary demands of foreign markets.
like those at home. are overtaken
[ pfecemeal in accordance with the
varying fortunes of foreign producers
| in the resumption of normal activity.
| which means that the export prices
| will be variously affected.
Uneven Pressure ON Price Scales.
"The Tightening OF the purse strings
in the matter Of credit and the ac-
! companying discrimination in some
| measure between essential and nom
essential lines of production IN the
! granting of loans. moreover. IL also
making for uneven pressure on the
price scales.
a prospective readjustment of prices.
there should not be a number OF not
merely sustained individual prices
but Of actually higher prices.
"rhe effects Of a broad downward
swing in commodity prices upon pro-
ducers vary not merely with the dis,
tribution of the changes-their spread
over the general list of commodities
but with their rapidity as well. the
more rapidly lower prices are rnari- reaSn-
enced by manufacturers and others
in turning their commitme ents with a
maximum of gain or a minimum OF
loss. A price recession or gwen
extent. which would result In sweep
ually reached over a longer perlou.
be successfully withstood. There are
those who do not believe it is pos
sible to bring about real ana neces-
sary readjustment in prices wftnou.
passing through a period Of marked
husiness depression. attended by
heavy record of failures.
Problems Of Producers.
"The chief problem Of producers un-
der conditions of a declining market
for their goods is, of course. the diff
Iculty OF conhning costs of produc-
ton within the limits OF the sale
value Of their products: Generaliy
speaking, cost Of production moves IN
harmony with the value OF the goods
produced Wages. however. whicn
are unprecedentedly hign now anu
often the largest single item IN tns
cost Of production. usually respond
less promptly to variations in COM
modify prices. In other words. wages
nearly always lag behind commodity
prices in their movement either up or
down. Accordingly. 1t IL to be expect
ed that wages will not fall as rapidly
:.rhe distribution OF the losses. in
consequence Of falling prices and con-
fraction Of profits. all along the line
10 the result Of numerous influences
It 10 an axiom in economies that the
price Of q commodity already pro
duced - not directly determined by !
its cost Of production. including the
expenses incurred In distributing the
Commodity. The goods may or may |
not find a market at q price to cover |
this cost of production. II they do |
not flnd q market the less may fall |
anywhere among the s9istributers or |
producers, the Incidence of the toss /
depending in part upon the methods
and practices in vogue in the process |
Of producing the goods and placing |
them with the consumer.
There is such . diversity Of prac-
tices in assuming the liability Of re-
ingrYess and ability Of individuals to