The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1921-09-11

ate. since merchants try to rectify
the position quite suddenly by
an almost total cessation of new
orders. .-.. -...
When once tho depression q
wen started. the same factors re-
verscd, which previously over-stimu.
lated merchants. now hold them
back too long.
The fear that prices may fall
further deters them from ordering,
goods the community will need
and the financial embarrasom
Of the merchant class due to their
Losses hinder this essential link
in the chain Of production and dis
tribution from functioning as Il
should.
Production fails below the rate
Of current consumption until the
wasteful process Of factories which
could. but Tor the failure Of organi.
ration. produce goods the world
win want has provided the redress
OF shortage. In this way the fuc-
tuations in the rate Of production
are far out OF proportion to any
fluctuations there may have been
in the rate of current consumption.
ECONOMIC MACHINE GREAT.
These causes. springing from the
psychology and miscalculations of
traders and from the faulty work.
ing Of the economic machine. have
been more powerful in disturbing
the course Of recent trade than the
material wastes OF war or niggardly
reasons.
The miscslculations Of merchants
which lead to the alienation of
boom and depression arc . very
expensive form Of error. But the
consequences can be moderated by
wise policy on the part of the
banking authorities Of the world.
When merchants are elated by a
rise Of prices and over-order, It is
desirable to damp down their I'll.
Judged enthusiasm. This 10 best
effected by . drastic increase in
the bank rate. A soon az q boom
appears to be In progress rates for
money should be raised ut once.
But when merchants sre de-
pressed BY falling prices and are
bringing trade TO . standstfU nv
ther failure to place new orders.
then they should receive all the
encouragement which cheap money
can give them. In the first phase
borrowers arc oyer.valuing goods
as against money: In the second
phase they are undertaking them.
end both errors should be corrected
by the bank rate 50 far rs may be.
In the past two years the bank.
ing authorities Of England and the
United States have been Influenced
by correct principles, but they
have acted too slowly and too late.
They were too slow in putting
money rates up. and now they
nave been too slow in putting
them down again. A great deal of
wreckage might have been avoided
IL the Federal Reserve Board and
the Bank Of England had raised
their rates six months earlier and
more sharply.
WAITING FOR BOOM TO END.
The authorities in England and
tho United States waited until
nearly the top OF the boom before
raising their rates to Z per cent,
and they are apparently waiting
until the bottom OF the boom Is
passed before lowering them to s
per cent. But II. rs they should,
they have the ambition to guide
instead Of following the current Of
events. they would do wen TO 20
At least as low rs 5 per cent at
once, with the firm intention. how.
ever, Of raising their rates again
"hen INDUSTRY Is on its legs.
To get rid of stocks of valuable
and useful objects. simply for the
sake Of getting rid Of them, does
no one any good. As stocks Of
commodities are a great part of
the worlds wealth. and an album
dance OF them the basis of pros
perity. It is ridiculous to get into
the state Of mind of thinking them
an evil in themselves. to be dissi-
pated like a disease. The evil ex-
lists when rising prices raise false
expectations, SO that producers
are operating on the basis of a
larger real reward for their ruSNs
than they will in fact obtain.
look forward, therefore, main
tanning . qualified optimism, not to
increased abundance or q rising
standard Of life, but nevertheless
to trade recovery, tolerable employ.
ment and . new equilibrium.
A renewal OF prosperity in Asia
and the. Southern Hemisphere will
work wonders, even among the fol.