The citizen-Republican. (Scotland, Bon Homme County, S.D.) 1???-19??, 1920-10-07
DOLLARS VALUE
INCREASING WITH
DEF[ATION SET IN
Very Noticeable Among the
Wholesalers, While Retailers
Will Feel It Likewise When
Current Stocks are Sold.
BY WALTER b. BROWN.
Editor the New York Commercial.

New York, Oct. 4.-The topic up-
permost in the minds OF everyone at
this time is the deflation movement
now underway and which seems to
be steadily gathering impetus. Con-
trary to expectations deflation is TAX
ing place much more rapidly than
initiation occurred. To be sure there
has been quite q period Of prepara-
ton in the months since the federal
reserve board instituted its policy Of
credit contraction by increasing the
discount rates. While there had been
reductions here and there, some
rather spectacular. as in the case OF
sugar and In the stock market, the
movement did not really gee under
way until Henry Ford made hls sen
sational cut in motor cars. It Is quite
true that the 20 per cent. cut in mer-
chandise made by John Wannamaker
in the spring was equally sensational.
but it vas simply a beginning that
else, for even his reduced prices still
showed him a good profit.
Deflation Well Under Way.
Deflation now. however, may be
said to be well under way. and the
value Of the dollar is increasing very
noticeably In the wholesale business
at least. although the retail markets
have felt it only to a limited degree.
This will come later, when current
goods are disposed Of, or when COM
petition has forced liquidation. The
deflation process must Of necessity
cause a disturbance where it strikes
individually, but no important move
mnnf auaY pnf 11r1or rr,n -1kt,~,,
causing hardship somewhere. The
general opinion seems to be that
when REIMBURSEMENT has been accom-
plished it will be highly beneficial
to all concerned. and the markets
generally will be upon a more stable
basis.
Just at present the price cutting
movement is being used as a bear
ish argument In the stock market.
although ultimately it will become q
bullish movement, in fact, to some
extent 1t is already being so used.
This is particularly so in the case
Of the traction stocks and other utili-
ties, whose incomes have remained
fixed throughout the war period
through the refusal of the munici-
palities, usually for political reasons,
NANo" liz A5S hoHSA1C puOllS ~ Oc
changed, SO that operating cost has
oyertaken income, or nearly so. If
the cost Of materials is reduced and
living costs also go down it will I'LL
timately result in a reduction OF
wages, SO that the relationship be-
tween operating costs and income
will approach the normal. Hence
there has been considerable buying
of these stocks. the prevailing prices
Of which have reflected the difficult
situation in which utility orpora-
tic"a ihc.-o found themselves.
Argument in Stock Market.
In still another direction the defla-
ton movement will act as a con-
structive argument in the stock mar
ket. 1t will mean the release of
funds that had been tied up in credits
which must seek other employment
either through speculative operations
in the market or increasing the in
vestment account. In this latter par
ticular there is already great activity
ana the pond market has shown
greater movement than at any tir. e
since the armistice was declared. So
far as bonds are concerned there can
never be such another opportunity
for profitable investment as there is
now, unless there should be another
war, but deflation Of capital cost will
go on just as the cost Of everything
else comes down, for money is a
commodity just as much as wheat
or cotton.
There has been considerable dis
cussion as to whether the deflation
movement should be undertaken on
a gradual scale or whether it should
be forced through all at once. The
probability is that it will determine
this for itself. and as matters now
appear, it is likely to take place
quickly rather than slowly. AS to
effects while the process is under
way it depends a great deal upon
the attitude Of the public mind.
Taken as a whole the situation as
it is becoming more fully understood
is creating optimism in place Of the
pessimism that ruled but a short
time ago.
R M is OPPOSED TO