Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-04-19
Economist Sees New Demand
for Goods at Reduced
Levels in Prices.
BUYING WILL SPEED UP
FACTORIES, HE ASSERTS
Abundant Capital at Cheap Rates
and Aid Of Federal Reserve
Held Vital Factors.
BY EDWARD c. STONE.


David Friday, Washington economist,
looks for rising bond market during
the remainder of the year, a slowly ex-
panding demand for goods and conSe-
quently more activity among manufac-
turing industries.
While prices have been moving down.
ward, costs of production have like
wise failed and labor costs have de-
ciined materially, and commercial
credit has also dropped. These facts,
in the economists opinion. make 1t pos
sible for big corporations to make prof
its even under present conditions.
In the latest Investment Bulletin Of
A. G. Becker 81 Co., DR.. Friday dis
cusseS Steps in the Business Revival"
presenting several new ideas and stress
ing some of the points he made in his
address before the District Bankers
Association several months ago.
Economists Biggest Problems.
Every serious business depression pre-
eents the economist and hnancier with
two problems. The first of these is to
explain how we got into it; and the
second Is to explain how we are going
to get out Of it. 1t is always puzzling
to see why a period characterized by
large production, employment for all,
good profits, and business optimism,
suddenly change into situation where
men who are willing to work cannot
get jobs, where profits are unsatisfac-
tory, and where peSSimiSm and gloom
fill the industrial community.
Now, after some 18 months Of decline
we find ourselves still near the bottom
of the trough. Industrial production is
around IS per cent below the peak
reached in the Summer of 1929, and
:. factory pay rolls are down by a like
amount. There is also a good deal Of
unemployment in the building trades.
in mines. and on railroads. People are
wondering how full prosperity can be
restored. In fact, many persons do not
see anything on the horizon that can
bring US real prosperity for a long time
TO come. Obviously, if labor is I'M
employed and Is not receiving wages
the laborer and his family cannot buy
goods And If people cannot buy goods
how can demand revive?
Entering Upon Revival.
When prices have fallen and people
have used up in some measure their
stocks OF clothing and other commodi-
ties, buying picks up. Thus comes the
first stage of business revival and we
are now entering upon that stage, DR.
Friday declares. Production will mount
gradually throughout the rest Of 1881.
He continues:
With the reduced retail prices and
with depleted inventories, production
win mount gradually throughout 1881
BY December Of this year the volume of
industrial output should be IS per cent
larger, at least, than 1t was in Deem
Der, 1890. Productive activity fell from
On average of 124 during the six months
from April to September, 1929, to 81
IN December. 1880. A rise Of one
fourth from that point would bring it
to lob at the close of this year. That
: would still be far from boom activity:
: in fact, 1t would be a full 10 per cent
below normal. But it would make
great difference in the general psyche
. logical state Of the community. The
mere fact that employment is picking
up once more will make people more
ready to buy goods, and will accelerate
the recovery when once it is started.
Satisfactory Profits.
TT will remove the doubts Of invest
eFs, too. as to the soundnesS of the
bonds Of corporations and as to the
, maintenance of dividends on their
stocks. The result of this will be rising
security prices in both the bond mar
/ ket and the stock market, Since every
one feels himself better of when Sc
euritieS are rising than when they are
falling. this situation will further slim
ulate consumer buying, especially in the
durable luxury goods.
Profits will be maintained at salts
factory levels even at these lower
prices An increase in production such
as has been here suggested will give us
an average industrial output for 1881
Just about equal TO that of last year
The difference will be that while we ex-
psrienced gradual reduction OF output
from los at the beginning Of the year
TO 50 at the close in 1880, we should
+ have a rise Of from 81 at the begin
ming Of this year to l03 at its close. II
this prediction is realized profits will be
better this year than they were last.
The index advanced from 81 in January
TO 85 in February, this being the first
upward movement since April Of last
year" the economist forecasts.
Easy Money Held Assured.
DR.. Friday discusses at length the
ample supply CT and necessity for cheap
money in restoring lively business up
swing Capital must be abundant at
cheap rates of interest TO wipe out I'M
employment, he asserts. Hesitation and
suspicion are passing and when they
pass more completely, we can have a
good bond market and thorough bust
ness revival. It would not be at all sur
rrising II the market for first rate
bonds would even pass the levels OF
1928. he asserts
The Federal Reserve situation, which
IS always a guide 10 tire future OF the
bond market, has seldom been easier
in all its history. With the return
flow Of boarded currency which will
come when confidence is restored, 1t
will remain easy throughout the Spring
and Summer, the economist concludes.
Financial District Comment.
Capital Traction stock closed the
week on the Washington Stock Ex-
change at 33l2, stronger than week
ago. The days sales in various issues
we're.
Potomac Electric Power IS 1853
$1,000 at 1882. n.
washington Gas zi2s-Sl 900 at 100.
Washington Gas IS "B"-l00 at
a04A.
Merger1thaler Linotype-l0 ct 500.
Capital Traction-l0 at 33is.
Mergenthaler Linotype-l0 at 80iz.
Plans are progressing favorably for
the annual re-conyention dinner Of
the District Bankers Association to be
held at the Columbia Country Club on
April 20. It is announced that F.. O..
Await, deputy controller OF currency.
and w, r. Folger. chief national bank
examiner. have already accepted invita-