Evening star., 1920-06-13
lin THE WAY Of A
| HASTY DEFLAT|ON
Conditions of Credit That De-
mand Slow Work in Han
dIing-Cut Luxuries.


appears to have gotten under way in
some quarters may tighten the bur
den upon the banks. and it may be
that the worst of the credit strain
has now been seen.
| But prediction proves difficult be-
cause of the large number of factors
| that enter.
/ The autumn always brings addi
| tional demands for credit to move the
crops. The banks will doubtless con-
tinue for a time to be called upon tc
finance our export excess. Any in
| discriminate calling of loans or re-
| fusal to renew loans is out of the
question; "defation" at the cost OF
essential production is not desirable
| That part of present bank loans
1 due to transportation tie-ups cannot
be reduced without damage unless
and until the railroad congestion is
relieved, and though some relief may
shortly appear. permanent better
ment can come only from more labor
and more equipment-the last not q
very near probability.
That part of bank loans due to pur-
chase of liberty bonds cannot be re-
duced without injury to individuals
until people take more seriously the
need of saving and paying for the
| bonds which they are still allowing
/
part due to certificates of indebted
ness cannot be reduced until the gov
| ernmentS revenues exceed expendi-
| lures enough to give a surplus to re-
! deem the certificates-again not very
near probability.
| the financing of European export
| trade by bank credits cannot be re-
duced without bringing halt to our
excess exports until people here re-
alize the necessity and the advan-
tage of funding these credits in long
term investment securities-or until
| trade so reverses itself that our i'm
ports begin to exceed our exports
again q very distant possibility.
1t would greatly relieve the pres
ent situation if the government could
arrange for the gradual retirement of
the certificates of Indebtedness and
of the currency and credit at present
outsta nding against them: and if this
were effected. not by levying still
greater taxes in order to pay off this
hoating debt, but by government
economy that would leave a surplus
from present taxes to enable such
debt to be paid off. Such a step would
also greatly relieve the present credit
strain.
Economy Necessary.
Any failure or inability of the gov
SIHHenl 10 DTiHB dpout contraction
Of expenditure does not. however, re-
lieve the private citizen of his re-
sponsibiiity for the correction of pres
ent unbalanced conditions. Collec-
lively we have spent a great deal of
energy and print paper in denouncing
the profiteering of producers. but a
large part of that profiteering would
have been impossible without the ex-
travagance OF consumers. Extrava-
gance encourages the increased pro-
duction of the less essential goods
The increased production of the less
terials away from the production of
the more essential goods, and hence
creates scarcity of necessarles and
an increase in their price.
Cut Out Luxuries.
The prosperity Of the luxury trades
was never greater than at the present
day. Based on the amount paid in on
the so-calied luxury tax, the collector
Of Internal revenue for the New York
district estimates that s1O5, 5,0Oo. 900 a
month is being spent In this city alone
on goods rated as "luxuries" by the
tax and that nearly $S.00O.O00 of this
amount represents expenditures on
theaters and moving pictures alone.
as srown ana yeap bY Year
Average production in the United
States in the three calendar years
1912, 1913 and 1914. was 9S3,700,0O0
pounds: in 1919 it was 1889. 500, 900.
According to figures compiled by the
Automobile Chamber of Commerce.
the number Of pleasure cars produced
In 1914 was 543.679; production in 1919
was 1,686.787; the estimated produc-
tion for the current year is 2.225,-
900. Reports of the bureau of labor
statistics show that employment in
the automobile industry from March.
1919, to March, 1920. Increased 37.9
per cent. a greater proportion than in
any other Industry except the Woolen
and clothing trades.
Shortage of Labor.
A study of the reaction of this upon
other industry and upon agriculture
shows that hired farm labor is II per
cent less than a year ago and only Y
per cent Of what it was before the
war This farm labor shortage is
part Of the explanation for the
shrinkage of the present indicated
winter wheat crop to barely two
thirds Of last years crop. There mas
been a failure to increase. and often
an actual falling off. in the produc-
tion of most of the more essential
goods, Of which wheat is an example.
In the three years ended June 30,
1912, 1918 and 1914, the per capita
production of wheat in this country
was ~ bushels, OF which bushels
per capita were exported, leaving
bushels per capita for consumption.
The present crop is expected to total
less than bushels per capita. and II
exports maintain the same ratio as
in the year ended June 80, 1919, the
last for which complete figures are
available, at least bushels per
capita will be sent abroad, leaving US
with less than s bushels per capita.
The examples should sufftce to show
that it is individual purchasing power
and not social need that often deter,
mines what goods shall be produced
and in what amounts. The desire OF
rich Americans for expensive foreign
limousines will lead to the production
Of these limousines in Europe to sat
isfy that American demand, while the
need of food for starving women and
children in many European cities will
not succeed in Increasing the produc-
tion of food in either America or
Europe, because these starving -peo-
pies. in the absence of charity, have
not the purchasing power to bid up
the price of food sufficiently to en-
courage it's prodl Ion and allow
farmers, in turn, to compete for labor
against less essential employments.