Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-11-25
BUSINESS IS NEAR
END OF Retreat
Economic Authority Points to
Many Factors Which As
sure Early Upturn.

In the current issue OF Barron's
Financial Weekly an article by w. M.
Persons, formerly of Harvard Univer-
sity and past president Of the Arneri.
can Statistical Association, gives q con-
vincing array of evidence that business
has reached "the end Of the retreat"
The writer points out that ''in pre-
viouS major depressionS a level of 20
per cent TO IS per cent under estimated
normal for the time was the bedrock
below which the depression did not CO."
AS the present depression has fallen
more than IS per cent below normal, IL
Is vitality important to know whether
that level lis merely statistical accident
OF the major depressions of the past IS
years" Or, on the contrary, does this
level possess some economic signif-
canoe as q final resistance point?"
Where Depression Hats.
Prof Persons answers that It is not q
statistical accident, but a real resistance
point entrenched In the American
standard Of living, The immediate
effect of decline in salaries and wages
is a reduction in the purchases of goods
and consequent lowering Of the scale
Of living. Further curtailment would
mean lower standard of living But
here the real rub comes" American
consumers will work harder and reduce
their savings to get the things TO which
they have been accustomed. "A time
comes when consumers will draw upon
their savings, II necessary and sell their
securities to secure funds for current
expenditures rather than preserve their
savings against a possible future need
for the necessities Of life"
When consumers reach this stage in q
business depression, "a situation de-
velops which stops the downward trend
Of business and stabilizes it on the level
then reached" Business, however, never
remains stabilized at this resistance
point. Presently. the volume of pro-
duction and trade turns upward ''
and the revival of manufacturing acc
tivity means increased payrolls and In
creased consumer purchasing power"
Any past depression and recovery will
illustrate the steps in the revival Of &C.
tivity, though the important factors
may not be the same in different
periods Of recovery. In 1020-22, for
example, the most important role in re-
covery was played by the building and
automotive industries. They will prob-
ably play a lesser part in the recovery
now due. It appears to the writer that
IAN increased demand for commodities
will be more evenly distributed among
many industries than in 1921" though
the construction and automobile indus
tries will share In the general revival.
Many Favorable Factors.
The encouragement that this article
gives Is all the greater because 1t does
not depend on O mechanical application
of the historic resistance point of IS
per cent below normal, nor does 1t md
in the standard Of living the sole fac
tor Of recovery. A careful survey of
conditions shows that the stage Is
fully set for a business recovery. for
there Is evident today a combination
of ''unSatisfied wants felt by a people
(a) with industrial ability, (b) with a
desire to work, (c) with purchasing
power or with ability to acquire pur-
chasing power by borrowing from banks
at fair rates and wants felt (a) at q
time when stocks of goods have been
depleted. (b) when prices are lower and
(c) the rate of production is below the
rate of consumption.
Other important factors are operat-
ing to assure an early upturn. Among
them are "(a) low interest rates, OBJ
initiative of business in discovering
sound projects for development, (cl the
ability OF business men TO convince
bankers that these projects should be
financed, I'D the willingness Of bank
ers to extend credit and (e) the CO.
operation Of the Federal Reserve
Banks"
To complete the picture, Prof. Per-
sons shows that favorable signs are al
ready present. In recent weeks the
decline in prices of important interna-
tional commodities has been much
slower and evidences of sterilization
have begun to appear, news has come
Of the possibility of granting credits by
the Bank of France to the Bank OF
England, the textile industries have ex-
banded operations and In season Of
the year, November, when manufac..
turing activity and railroad traflc nor
mally contract sharply resistance to
decline is appearing"