Norwich bulletin., 1920-05-29
THE COUNTRY WIDE PRICE CUTTING MOVEMENT

of production in the granting of loans,
 moreover, is also making for uneven pressure o nthe price scales.
 Tt would be phenomenal if, in such i a prospective readjustment of prices,
 .fTle effects of q broad downward
 swin in commodity prices upon produc- CTS vary not merely with the distribu-
 ton of tn echanges-their spread over
 the general list of coiEmodities-bu
 with their rapidity as we'll. The more
 rapidly lower prices are reached the
 greater difficulty is experienced by the
 manufacturers and others in turning
 their commitments with q maximum of
 gain or a minimum of loss. A price re-
 cession of a given extent, which would
 result in sweeping losses if sudden,
 might, if gradually reached over long CT period, be successfully withstoo-L There are those who do not believe 1t IS possible to bring about a real and nee essary readjustment in prices without
 passing through a period of marked bus mess. Impressions, attended by heavy record of failure. It is argued that our banking machinery, while functioning smoothly in the process of expanding con | tracing credit. The fact. however, that as yet our federal reserve system has i not been tested by the necessities of a period of general and sustained contrac- 1 tion is not proof of it's inability to func-
 
 l there are reasons to believe that the 1 system will demonstrate its ability to /! lead in an orderly contraction, a read l justment not ushered in by general col
 lapse of credit. In other words, it is possible to apply the necessary restric- tions gradually rather than suddenly to | the credit structure, thereby accomplish ] ing an easy and gradual reduction in the
 price level.
 '"The chief problem of producers under | conditions of a declining market for their ! goods is. of course, the difficulty of con- fining costs of production within the linn it's of the sale value of sheir products. ] Generally speaking, cost of production moves in harmony with the values of i which are unprecedentedly high now and
 often the largest single item in the cost of production, usually respond less promptly to variations in commodity prices. In other words, wages nearly
 always lag behind commodity prices ir ]; their movement either up or down. Ac' , cording it is to be expected that wages , will not fall as rapidly as prices This may be expected to retard the decline } of prices through the Influence of wages , on the cost of production. While th' maintenance of high wages may thus in l crease the difficulties of producers in ; ] period of declining prices, on the othe
 l hand. the preservation or InS Duylni : power of the wage-earning classes woul' powerfully reinforce the demand for al , most all classes of manufactures and b f an additional factor making for gradua
 rather than sudden price recesSions. The crux of the whole price probler may be held to be the gradutl decreasin . of the supply of money cpd credf and 9 h the same time the increasing of the sur .I l ply of goods through properly balance = production. To the z: ion of thi e problem bankers. man [ tlurers, labor l. CTS. consumels-in brief, every elemer - of our body politic-must be actiyel r dedicated.
 n 1 "The popular idea of dehation is som Q i process, vaguely conceived, that will rt l. duce prices so that ones income may bu - twice as much as 1t does now. We ar : all willing and eager to have prices de a Hated. but. of course, we are decidedl 5, opposed to having our incomes debate' e That is not the way, however, that refia l. ton works. And those who are clamol e ing for rapid fall in prices should bea l, in mind that drastic defl" ion will mea S painful economic readju nt. of whic n widespread unemploymci.- md bushes e distress would be features-such as hay l. occurred in Japan. The average ma $ should remember that there is not muc l. advantage in being able 10 buy twic e as much for a dollar if he does not hay $ the dollar"