The Washington times., 1930-09-10
WHITNEY lay 5
CRASH BLAME
ON BUSINESS

Richard whitney, president Of
the New York stock Exchange, in
an address yesterday before the
Merchants Association Of New
York, declared too attribute busi-
ness depression to stock market
panics was to place the cart be-
fore the horse.
There has been many al
legged causes Of the trade re-
cession," Mr.. whitney declared.
"The discussion concerning the
production ana distribution Of
gold Is an -xampIe. But events
have sufficiently progressed so
that we should by now be able
to ,cOgnize that Over-prOduc-
tiOn was the basic cause Of the
depression"
Theoretical economists some
times tell us that there Is no
such thing as q general over
production of goods, since the
wants Of humanity are infinite.
However true this assertion may
be as q general proposition and
over long periods Of time, it is
certainly not applicable in spe-
cific instances.
Business Cycle Returns
Last summer the breaking
point was reached" Mr.. Whit
ney continued. "COnsumptiOn
could no longer keep pace with
the enormous volume Of pro-
ductiOn.
"Our old friend, the business
cycle, reports of whose death
had-like Mark Twain's-been
, very much exaggerated, ap-
peared again full of life and in
control Of the situation.
"One Of, the first, and un-
doubtedly the most dramatic
results of the unsettled equi-
librium between the production
and consumption Of goods, was
to stock market panics," he
continued.
"TO attribute business de
presSiOns to stock market panics
Is to place the cart before the
horse, for in reality stock paniCs
are an effect, rather than q
cause, of trade depreSsiOnS."
Hits Artificial Prices
Referring to the level and trend
of commodity prices from 1925
to 1929, Mr.. Whitney declared
these price averages were highly
and most difficult tc
interpret correctly because while
consumption during these years
continued to balance production
at the same time the constant
lowering of the cost of production
tended to increase output.
Great efforts were made. Whit.
ney said, to maintain prices by
various artificial expedients. He
said: e
at was the artificial price
structure, created by such meth
DDS and not clearly revealed in
the indices Of commodity prices,
which has been responsible for
the unexpected weakness Of
commodity prices during recent
months.
Business is thus today paying
the price of unSOund attempts
to maintain price levels in the
face of decreasing production
costs
Business Affects Market
That the course of industry and
commerce directly and profoundly
affects the stock market. Whit
ney declared is a matter of every
day knowledge.
"In the past" he said, "the
stock market has shown an al
most invariable tendency to re-
fleet ir advance the general
course Of trade, and there are
q number of instances where
stock prices have risen before
an improvement in business
and have fallen before the ad-
vent of a trade depression.
This well known barOmetfic'
function of the Stock Exchange
falsely leads people to think
that it has . casual influence
on trade.
"The stock market, however,
is still sensitive to business con-
ditiOnS in general, and this is
clearly shOwI- by the course Of
events in 1927 and 1929.
"On the other hand, many
were led last autumn to con-
slider the tremendous crash in
stock prices as out Of all pro-
portion to the visible cOndi-
tiOns in industry and trade, but
the worldwide extert and BE-
verify Of the subsequent busi-
ness depress have shown that
the intensity Of liquidation in
the stock market was justi-
fled"
Mr.. Whitney concluded with
the statement that the country
natural resources are great ant
that it is in a strong financia
condition.