Evening star., 1923-04-08
ALARM IS SEEN
|. IN RISING PRICES
Manufacturers Fear Demand
sf0r Goods May Be Checked
g by Advances.
GOLD RESERVE FACTOR
Supply and Demand Held More
Vital to Sugar Situation Than
Tariff Inquiry.
BY GEORGE IT. HUGHES.

BY GEORGE II. HUGHES.
NEW YORK, April I'm one re-
spect the present financial situation is
without parallel. That respect is in
the amount of gold accumulated in
the United States, the total of which
imported from abroad since 1920 is
estimated at billion dollars.
Attention was called to this situa-
tion by the Federal Reserve Board
this week in a statement explaining
why the credit expansion necessi-
tated by the business revival has
made no impression on the resources S
of the federal reserve banks.< The
board pointed out that during the
past year there had been a S2.000,00O
expansion in member bank loans, but
that this demand had been met by the
member banks without recourse to
the federal reserve banks because of
these unprecedented gold imports.
The result is. in the language of the
board. at present "the volume Of re-
serve bank. credit is not an adequate
indicator of credit trend
How long it will be before member
bankers will find it necessary to bor-
row from the reserve bank the board
does not attempt TO predict nor does
1t attempt to say when there will be
II reversal of the international gold
movement.
Would Set Aside Gold.
That the present situation is alb
normal and probably undesira BILE
every one agrees. Secretary Hoover's
committee on unemployment, in it's
report just made public. suggests that
part of this enormous gold surplus
ne set aside as special reserve
against probable future gold exports
But gold exports must await revival
in Europe, both commercial and finan-
clal. and while progress is being
made along both lines there is as vet
no sign of any turn in the yellow tide.
ID me gold ,.; is here and must he
to raise prices. or at least maintain
them at the present level 1t also OBJ
scures the whole price situation and
renders it more difficult than ever TO
recognize approach of dangerous
Initiation
1t is plain. then. that whether prices
are too high cannot be determined by
reference to the reserve ratio of the
federal reserve system. 1t seems
equally evident that except for the
rlomentary Physiological effect the
raising of the rediscount rate would
not of itself check raising prices.
Best Index on Prices.
IF, then, we are forced to abandon
the fluctuations in the reserve ratio
as danger signal. what shall We
substitute? How can it be known
when prices have gone too high
Probably the best answer is. that
prices are too high when they check
the movement of goods from pro-
Queer TO consumer. And on that basis
there is as Yet no sign that reaction
IS imminent, for despite all the recent
advances in commodities there is as
yet no let up in conSumptive demand.
rake the case of sugar. There has
oeen an outcry against the advance
in sugar prices, and the government
has undertaken an investigation The
President wants to find out if the
tariff is responsible. and If not why
prices have gone up. Cndoubtedly.
this a very praiseWorthy investiga- !
ton, but the only effective restraint
on sugar prices is either an increa Sc
in sugar production or a drop in
sugar consumption. Until one or the
ate 1t is nonsense to point to rising
sugar prices as evidence of a danger
Gus imitation
Automobile Makers PuzzIed.
The automobile manufacturers rec
ognize just where the limit to the
price of their product will be found.
Costs in the automobile industry.
both for material and labor, are
steadily rising, but the leaders hest
tate at the logical solution if their
profits are to be preserved, namely an
advance in the retail price for the
finished product.
How much the ultimate consumer
will stand for is the question they
would like for one to answer before
they put him to the test
1t is by study of the outcome in
Just such trade problems as these
that the most light will be thrown
upon the future of commodity prices.
Automobiles are a peculiarly good
barometer. Few people realize the
leading part which the motor car in
mobile is at once a luxury and a
necessity, and the output is on a con-
stantly increasing scale. During
March more than 100000 cars and
trucks were turned out, new record.
What better test could be asked than
The possibility of marketing a prod
uct like this in increasing quantity
at advancing prices?
Better Securities Demand.
Turning to the investment market
the week has been notable for the
revival Of interest in high-grade Sc
rurlties. For long time, under the
menace of higher costs for money
and advancing commodity prices,
bond quotations have been slowly de-
dining. Apparently the point has
now been reached where many of the
unfavorable factors have been dis
counted.
At any rate there has been a good
inquiry for sound securities both
from institutions and private inves-
tors 1t must not be forgotten that
savings and profits are continually
accumulating and eventually look for
investment
The mount of savings seeking EN-.
ployment in this country last year i.
estimated at sS.000.000,00 The aues.
tion for the future is what relation
the volume of capital seeking invest.
ment will bear to the demand
Most Popular Investments.
1t is true that outside of govern
ment obligations the fashion in in.
Nestments favors public utilities. i
Will be very interesting to see whether
this favor will be extended to include
the railroads which announced tn.
for 1923. -
In the official statement given ou,
TO the American Railway Association
expenditures for equipment and ia
cilities amounting to S1,100,000, 90,
are announced as in contemplation
A good deal of this sum will doubt
less1y be raised by means Of equip
ment trust certificates on which tn,
1t Will be instructive to obsery,
the reaction of the investor, as wei
as the politician to the statement tha
the railroads propose to go aheat
with their program of expansion, re
lying on the fairness of the American
people to insure just treatment t.
funds invested in railroad enterprise
Copyright. 1929