The Washington herald., 1920-01-29
PRICE ADJUSTMENTS

Prospects of falling prices are
being considered by the National
Bank of Commerce in New York.
The bank. while not predicting a
definite time when price readjust-
ment may be expected. maintains
that the process need not mean dis
ruption to business.
IF, when the tide turns says
the bank. -'readjustment is not too
long resisted and production is not
too much slowed down. and il the
situation is flexible and competi-
live. we may expect to meet the
reaction without disaster. IN,
country is not as well braced now
Tor reaction as il was at the time
of the armistice. but so many of
our major industries ar" in an cN-
ceedingly strong position, and our
banks are as a who'll IN SHrh rN-
eellent condition. that We should
view the prospect without undue
apprehension.
& THE question OF price readjust-
nent in the United States is tied
up with our attitTdc toward Eu-
rope's economic recovery. If IL is
felt that we are all involved to
a significant degree in Il common
economic future, our participation
will doubtless be active. As "A part
Of such a policy, new loans to Eu-
rope to make possible a continu-
ance of our exports essential to
reconstruction would delay the
process of price readjustment.
Export Credits.
Withdrawal of the present ex-
tensions of credit TO support cx-
ports to Europe would soon check
the present abnormally one-sidcd
trade. This would n .eSsitgte a-r
domestic markets absorbing s3Db.-
100000 or $4Ju.uUU.HuJ worth .i
goods each month which our mar
ket has not had to absorb during
1919. with goods thrown back on
The domestic market in this volume
. relaxation of the strain in our
commodity markets would follow.
Two possibilities would then he
opened. ON the one hand. We
might have a speedy readjustment
Of prices and wages and revival
of business activity on lower
level On the other hand. il cf-
IOrts were made to resist price re-
duction by artificial means. we
would be exposed to the dangers
of painful period Of real bust
ness depression.
Labor Readjustmeni.
When this readjuStment comes
the business men OF the country
will have opportunity for a policy
toward labor which will 20 far in
making for Industrial peace in the
Years that follow. In so far as
balance sheets permit it. business
men will find il wise to let nrices
go down first without making too
vigorous efforts to reduce wages.
The natural course of events will
lead to substantial wage reductions
IN time However. We cannot eX-
pect to see wages recede as rapidly
or as far as prices. because the
elimination of immigration in re-
cent years has left our labor sup
ply relatively short. Even without
reduction in wages. labor costs per
unit of output will be reduced with
the restoration of shop discipline
and the cessation of overtime
work"
Relation of Gold to Pricrs.
Concerning the relation of the
value of gold to prices, the bank
has this to say:
The great change in prices in
the United States has been due. not
to a fall in the value OF gold. but
to rise in the values of goods. AT
the present time. forces are at
work tending to make the value of
gold rise rather than fall. High
prices and high wages are curtail-
Ing gold production. and with di-
minished production there has come
also an increased Industrial con-
sumption OF gold. At the present
time the arts and industries are
consuming more gold in the United
states than our gold mines are
prodncins- III no other factor
were AT work this wed|d mean in
the long run a fall in prices"