Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-01-26
|PR|CE CONFIDENCE
HELD VITAL NEED
Chicago Bank Outlines Best
Methods of Speeding Up
Business Recovery.
Special Dispatch to The Star.


CHICAGO, January 26.-The decline
in business in the United States during
the last year and half has been sub
stantally greater than in the outside
commercial world, and thus the as
sumption that business revival here
must wait until worldwide conditions
improve is wholly unwarranted. This
opinion Is set forth by the Foreman
State National Bank of Chicago.
Declines and def1ations have not
been as steep throughout the world as
in this country, and American business
should be apprised Of that fact" the
Business Observer says. Commerce
and industry in this country are still, Of
course, at levels above the average for
the outside world, but, compared with
our and their achievements in the re-
cent past, the present depression has
brought American industry to relatively
lower levels than in most other coun-
tries.
production of steel, for instance, in
1880 was reduced 81 per cent in the
United States from 1929 levels. In the
world outside the United States it was
reduced only IA per cent. The total
volume of international trade during
1880 was reduced approximately per
cent from the previous year. American
foreign trade was down Is per cent.
Since June, 1929, stock exchange values
have fallen slightly further in the
United States than they have In Ger
many and more than so per cent fur
ther than in either England or France.
Production volume declined 70 per
cent in the United States from the
third quarter of 1929 to the third quar-
ter Of 1880. In Great Britain it was
down 10 per cent; in Canada is per
cent.
What Comparison Means.
1.-THE surface significance of all this
Is that, while American industry at
tanned greater heights of imitation in
1929, it now has experienced COM
pensatingly intense deflation. The prac-
tical Implication is that American in
dustry is now as unlikely to remain be-
low its normal relationship to other
commercial nations as 1t was Impossible
for it to remain so abnormally high In
relation to them in 1929.
According to rough estimate we are
now in a position to retrieve from 20
to 80 per cent of the loss In volume
and momentum of American business
before we are back to our usual parity
with outside commercial nations. We
have, moreover, significantly favor
able factor to aid in bringing that about.
Commodity prices have declined further
in those countries where we buy most
of our imports than in those which take
most OF our exports.
Comparatively speaking, then, we
buy for less and sell for more than in
1929 And while the gradual readjust-
ment of world prices will ultimately
affords us a handicap advantage in re-
covery."
Favorable Development.
All six Of the important interest rates
rates on commercial paper, bankers
acceptances, time money, call loans, the
yield on seasoned bonds, the yield on
new bond offerings of the current
month-registered f1rmneSS from Novem-
Der to December and four of them
actually advanced. This relative firm
ness, the more significant because it
has not happened before in a year,
should be interpreted as favorable de-
velopment because all of these rates,
with the exception of bond yields, are
now at extraordinarily low levels. But,
the Foreman-State publication adds:
From the above facts it would seem
entirely logical to conclude that demand
and supply had finally worked short
term money rates into stable position.
But, curiously enough, the arbitrary
factors in the money market were ex-
erted on the down side in December
We refer to the fact that rediscount
rates were reduced at several of the
Federal Reserve Banks, with the New
York rate down to 2 per cent-the low
est point in Federal Reserve history"
The deflation in commodity price
averages since June 1929, is now close
to rs per cent, The Business Observer
notes. It adds:
Price Confidence Needed.
This deflation has the appearance
of being adequate-adequate to remove
the artificiality from price levels.
There remain, however, many specific
commodities which have not as yet
been debated in line with the trend
of the times, as well as some which
apparently have gone down beyond the
point where supply and demand will
eventually stabilize them. These pro-
nounced contrasts in commodity defla-
ton constitute the most effective re-
sistance to business recovery at the
present time.
1T is remarked widely these days
that business needs only confidence in
order to go ahead. 1t needs confidence
in prices. There IS, of course, only one
possible way by which confidence in
prices can be re-established, and that
is by completing the deflation of prices.
That will be a gradual process, but it
need not be indefinitely prolonged. 1t
will require writing of losses. But
taking inevitable losses now will, in
the majority of cases, prove far less
costly than postponing the process.
Business intelligence should be concen-
trated on the job of completing COM
modify deflation. 1t is the one prom
iseful opportunity for speeding re-