Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-08-15
STABILIZED PRICE
LEVEL HELD VITAL
Sir Josiah Stamp Points Out
Effects of Falling Commod-
tiles on Business.
BY JOHN F. SINCLAIR.

ing the price level is the most practical
of all the business problems with which
the world contends today" said Sir
Josiah Stamp.
1T is not sufficiently realized that
slowly falling prices have deadening
influence on business itself. While fall
ing prices help the man working on a
regular wage, they reduce the number
at work because they restrict the area
of profitable business.
Understand, 1 am not talking about
a certain price level. Business can be
done at any price level just so long as
that level is kept stable, even. It's the
transition from one level to another that
does the mischief.
Toll Of Production.
"Now with greater purchasing power
of money all receivers of vast payments,
larger toll of the national production,
This is very important. For if the rate
of price decline of the last three years
Is continued over the next 10 Britain
will find no relief whatever in taxation,
even If both production and popllla-
ton increase substantially"
I wish 1t were possible to include all
of the examples and illustrations this
British banker used in explaining his
points.
But let Sir. Josiah continue:
"All the machinery for wage settle
ments on a large scale can be destroyed
by single years fall or rise in the
price level Think of that and stand
appalled, at the lethargy of the business
and labor world, which does not de-
mand a stable price level
Nov, what's to be done about it? In
my opinion it Is necessary to insure a
long period of stability. Public opinion
must get in the habit of asking about
every question involving contractual re-
lations and monetary values over long
periods of time, between nations or
large classes of people, with public or
international policy involved"
Told that the price level in the United
States had decreased about IL per cent
during the last year, Sir Josiah said:
How can business be built on such a
foundation? I agree with Prof. Irving
Fisher that the first Job is to clear away
the money illusion. When that is done,
stabilizing the price level will be next"
Public improvements.
What is your opinion of the practi-
cability of proposals to increase ex-
penditures for public works as a means
for relieving Unemployment" was the
next question asked.
Neither in Great Britain, in the
United States nor anywhere else will
salvation come by public expenditure of
money. Temporary unemployment can
be modified by it, but permanent I'M
employment cannot. You see, such a
plan does not increase the totality of
purchasing power. 1t merely transfers
the spending from private to public
sources, and this does not meet the
problem"
AS Ernst Wagemann points out in his
Economic Rhythm" If you carry on
this policy on large scale, you must
either increase taxes materially or Dor
row extensively: If it isn't carried out on
a large scale, 1t doesn't amount to any,
thing. Raising taxes in time of depres-
sion Is out of the question in countries
with representative and party govern
mentS. Borrowing either increases ten
sion In the money market or delays the
reawakening of private business enter
priSeS.
Cheap money is not everything"
Sir Josiah resumed. at will take II
months for it to percolate back from
the centers into industry, but what is
needed more than anything else is to
maintain the purchasing power at a
level which will not cause unemploy-
ment. AS I have already stated, the
falling price level unconsciously makes
drag on the margin of profit, but idle
workers always increase on dropping
price level, because the area of profit
able business tends more and more to
be restricted. That's what happened
in England during the creeping pa
ralysis that came over business in the
sos, when witnesses before the Royal
Commission on Trade Depression al
legged and urged every reason except
the true one.
Monetary Machinery.
II don't want to be technical. I hope
I'm not. But to get at this picture
what is involved In the changing price
level-we must look into the monetary
machinery itself and see the whole
stream OF production from which we
draw our living and watch the allot-
ment of goods to different people
changing silently, arbitrarily and with
out justice-between British, French
and American (for reparation and debt
paymentS), between past lenders and
present lenders, and risk takers in the
capital and interest of business and
government; between providers of work
by hand and brain and providers of
capital, in the division of the products
of industry
In word, public opinion must be
conscious and determined to have a
ships that is not made of jelly or elias
tic, such as the world of business sees
today.
I have just been reading a late re-
port of the Harvard economic system
and agree with a quotation which
find in that. 1t is this:
BY devices and arrangements now
well known and with reasonable CO.
operation among central banks the
nlNnc irarr fNf hn Iy0eN
comparatively though, of course, not
absolutely. stable, so that If the decline
CT gold production now in prospect after
1885 is followed by serious decline
of commodity prices. this result will be
due, not TO unacceptable economic law
but to causes wholly within the control
of human volition.'
But is it possible, Sir josiah to
maintain a fairly even price level with
the demand for gold increasing and the
new supply becoming relatively scarcer?"
He smiled.
World Gold Needs.
'I think that is answered in the
quotation I just gave you. The world
| needs approximately, according to the
best available figures, per cent in
crease each year to maintain the normal
| expansion of business say $50 to 300
million dollars of new gold annually
Now II new gold fields are not dis
covered and no new processes which
will give us this amount, obviously the
| gold we have will have to be so used
! as to do the same work without restric-
ton. 1t can be done. 1t will be done, If
intelligence is used by the central bank
officials Of the world and its leading
bankers. Certainly. If the problem is
understood. It's largely psychological,
but bankers have no great reputation
for being adept in psychological moves.
But the world conference for the
study of gold. of which George E. Rob-
erts, vice president of the National