New Britain herald., 1928-05-05
ATTEMPTS TO STABILIZE
 PRICES

Every merchant and manuactur- CT in New Britain Is deeply con- cerned regarding price stabilization. They are as interested in this as they are in prosperity. The wish to flatten out the curve of the business cycle-to prevent slumps on the one hand and speculation, extravagances and booms. which usually precede and cause depressions--is almost universal.
 Ever since the slump of 1921 in- tcrest has been keen in some meth- cd to prevent them. There may be disagreement as to the underlying cause for slumps. but the idea is quite generally heid that money -d credit conditions are of prin.aty lm- portance.
 There was q steady decline from 1878 to 1S97; and d steady rise from 1897 to 1919. There are evils in both conditions.
 \ rise in prices encourages &C., emulation of stocks of goods for speculative purposes, misleads pro- ducers ill judging the demand, and stimulates the creat ton of excess productive capacity. Rising prices means falling money; and injury is done those whose incomes are not readily adjusted; holders of savings, bonds, bank deposits. life insurance and mortgages and find themselves suffering a loss as the buying pow CT of the dollar ehrinks, and they are victims of a situation over which they are not responsible in the slightest.
 Falling prices, on the other hand, check activity. Hand-to-mouth buy ing, such as we already have expcri- cnced, is encouraged, and producers are led 10 underestimate the strength of demand. Borrowers suf- fer as their incomes go down while their debts contracted during peri ods of higher price levels, remain fixed.
 The result in either instance ia the same. whether aa the result of Q sudden crash, as In 1921, or a long gradual decline like that of 1873 to lS97.
 ThS Strong stabilization bill. which is before the committee on banking and currency of the House of Representatives, may be destined to have powerful effect upon the country's prosperity if enacted. Its purpose is to place responsibility upon the Federal Reserve system for maintaining general price level" or a level deemed to repre- sent the purchasing power of the dollar. The bill is expressive of an ideal, and may not attain it's specific end in all cases.
 There are four ways in which the Federal Reserve Board can influ- encc the general price level, accord ing to the proponents of such sta bilization:
 1. Raising and lowering the re- discount rates.
 :. Increasing and decreasing the Federal Reserve banks investments in securities.
 2. Moral suasion over member banks.
 1. Publicity. designed to stimu- late or check optimism on the part of the business community. It is grand argument both ways however. Our doctors of economics don't agree whether price stabiliza- ton can be brought about in this ! manner. But they all agree about the magnitude of the social ques. tions involved. 4 good sign is thai the comparatively few who have taken cocniZance of this important bill are not considering fl along political lines, but arc battling with economics and statistics bereft oi political considerations. From this il Is clear the stabilization idea hal nothing in common with the tariff While the economy experts are dis cussing. analysing and weighing l their doctrines We wish them luck IE ,ondEnnrips