New-York tribune., 1922-11-19

". sast accommodate ourselves to
!. ,h.aner dollar. dollar OF smaller
|.,reraI baying power--in other words.
,,rs< Of prices at an average level
|s.siSsgsbly higher than that which
f.ss;jsd during the ten-year period
I+rtdiatssy preceding the World War.
nese admoni.lons have been dinned
Ia the ears Of the average business
81 until By q process OF repetition
n suggestion they have been ac-
Esei by his subconsciousness, but
y. wky they are sound is question
5at still bothers his objective mind.
Il viii try TO put into plain English
kss ef the reasons why these econo-
&ys who happen, in the long run, to
= rssrlY always right, predict high
Fl rerage level Of commodity prices
Ie.slso TO suggest the bearing of this
3ssG price level on the general bust
~ prospect and the securities
Id, for Forecast
s h basic reasons for the higher
! "a serecsst are: First, tho increased
2sE OF gold, bringing with 1t com
fmsrste increase in our total circu-
8tsu media and thus cheapening its
I'm; ard, second, the prospect that
n sill retain this gold for consid.
ansls period to come. A secondary
Iysssn Is an increasing volume of busi-
IA activity, with the normal accom-
[ainent Of rising prices from exist
ag levels.
kow, while net ali economists sub
5sibs to the quantity theory of money
a.ast ia, that, all other things being
3rstsagsd, doubling of the supply OF
s,,,sy will eventually double prices
all agree that increases in
s gold supply tend to increase the
$asrsl level Of prices. Economic his
n will amply corrohorate this view.
ioiows that if any country becomes
Emsessed Of disproportionate amount
asha worlds supply of gold the pur-
tasng power of the gold in that par
q %xalsr country will be decreased. If,
addision to this abnormal acquisi-
n ssa Of gold, there exits a funda-
q s.nsal barrier to its export--if other
. entries are heavily in debt to the
8 santry possessing the gold by reason
4 uniasorahle trade balances and
sStra large borrowings of money and
interest secsaals--and if, upon this
barrier, there be imposed a super-bar-
rier ia the shape of q high protective
tariff thaa We have nearly all the ele-
issats VI high prices.
Ihis condition exists in the United
States to-day. Since 1912 the amount
dgld money has doubled; the amount
VI money, including gold, silver,
asss and nickel coins and paper
nMsy, has doubled; the amount of de-
nhIs subject to check has doubled.
lstse deposits constitute, in effect, the
Alcr psrt Of our circulating media,
y the great bulk of our business is
Es through exchange of credits
assr than through exchange of cash.
The large chart shows the annual
sr.entage increases in gold money,
sad money plus total deposits and
ssnnodity prices, as is revealed In
" accompanying two-column chart.
According to all indicia, business
islpolidation, spl following the imitation of
Z .s!V, kas bean virtually completed and
Ns swing Of the business pendulum
ss y started in the opposite direction.
Notwithstanding, however, the severe
Me prolonged liquidation that ex-
saded throughout the year 1921 and
se greater part of 1922, the average
four standard indices of commodity
isln s',ceS Is az pei. cent higher than the
si9 level. With liquidation complete,
is reasonable to assume that the
,fessure OF goods fo- sale has exerted
.s 5uil influence on prices and that
no low price levels Of 1922 represent
point below the level that will be
I normal under the new set
: conditions arising from the war,
- ~. Wnicn have been already outlined.
w IDEA can best be conveyed by a