Evening star., 1931-12-17
BANCROFT ADDRESS,
ST|RS BOND CLUB
Publisher Sees No Good
Reason Why U. S. Business
=: Should Not Improve.
BY EDWARD c. STONE.

ever maze before LIle WdSIulBLOll bOIlu
Club, Hugh Bancroft, publisher Of the
Wall Street Journal, Boston News Bu-
rezu. Barron's Weekly and other fl
nancial papers. told the members at the
December luncheon at the Carlton
Hotel today that If we call normal
business 100. We are at present down
to so, ard that, irrespective of the con-
dition of the rest of the world, there is
no good reason why We should nCt come
back to 90,
He added, however that no real
prosperity can be expected until world
conditions are much improved. The
immediate critical condition of world
economics, he said, results from a COM
plete credit collapse, "a major share of
this country"
Highlights in Mr.. Bancroft's address
follow:
New Price Levels Imperative.
Prices of everything must be brought
into more reasonable relationship with
the new price level of basic commod-
tties.
Prices to consumers can come down,
II business is to exist, only by reducing
costs
Taxation has bccome a major factor
in costs. If taxation is not to be re-
duced, its proportion Of the inevitable
cost reduction must be absorbed by
wage scales.
Government has enormous power to
harm the economic situation; 1t has
practically no power to help the eco
nomic situation.
The reason for this Is that govern
ment has nothing of its own, but only
L. %oL Y,n0N1n
All politicians and most people
credulously believe that Government
can help us out of our economic diff
cultieS
Government is inherently an eco
nomic liability and functions accord
ingly IN times of economic stress.
If the Federal Government is not to
add to the difficulties of economic re-
covery, it must balance its budget and
at the same time must not increase
Federal taxes.
Scores Huge Expenditures.
Hundreds Of millions of dollars are
being spent for purposes entirely be-
yond the scope of government. Other
hundreds of millions of dollars are
being spent for the purpose Of har-
Messing business, destroying business
and competing unfairly with business.
The Government is competing with its
citizens in 81 separate activities.
We cannot expect to attain real
prosperity until world conditions are
much improved The immediate crit
ical condition of world economics re-
suits from a credit collapse, major
share cf the responsibility for which
belongs to this country.
Tho postwar financial settlements
set up an arbitrary force which for the
10 years, l932-l931, directed in round
figures s5Oo,Ooo,ooo year of gold to-
equal proportions.
Nearly one-half of the monetary gold
of the world has been drained by this
arbitrary force from the localities where
1t should have remained If the busl-
ness of the world was to go on to be
lodged in the two centers where 1t is
mically useless.
Urges Reductions in Wages.
Mr.. Bancroft. in explaining his
statement that business in this coun-
try could be brought back to 80,
stated the secret of the matter hinged
on costs. He said people had been
using their hearts instead of their
heads in trying to meet conditions
and said he had no criticism for those
who tried in 1929 to maintain wages
and employment. He believes now that
wages must come down, explaining:
Several million of us are still insist
ing that the law of demand and supply
do not depend on the economic worth
of the work performed, but can be ar
does not apply to wages that wages
bitrarily established at figure which it
is considered socially desirable that
the wage Garner should receive.
People who employ others will not,
and cannot, employ others except at
price that yields the employer profit.
No employer can pay his workmen
more than the economic worth of their
bankruptcy and no jobs. The eco
nomic worth of such service is finally
determined by the customers, in the
price they are willing to pay for the
product"
Mr.. Bancroft made extended refer
ence to railroad wages and then turned
to Government expenditures. If the
Federal Government is not to add to
the difficulties of economic recovery
it must balance its budget and at the
same time not increase Federal taxes.
He expects the reverse of this, how
ever.
Touches on World Conditions
1.-THE business of the world, both
domestic and international, is con-
Quoted in the main not for cash but
with various credit substitutes for cash
such as bank notes bank deposits,
checks, bills Of exchange and so en-.
Such substitutes for cash function eff
fectively only so long as there is uni
versal confidence that they may be
turned into cash promptly and effec-
lively should cash be desired To es-
tablish and maintain such universal
confidence it is necessary that there
should be accumulated and maintained
in some suitable place in each coun-
try, usually in the vaults of central
bank a supply Of god adequ1te to
establish confidence that the c edit
substitutes tor money originating in
that country can be so conTerted if de-
sired
The total monetary stock of gold
In the world Is not much over l1,000,-
100000. Nearly one-half of the none
tary gold of the world has been drained
from the localities where it should have
remained If the business of the world
was to go on, to be lodged in the two
centers where it is economically useless.
The result is that the credit structure
through which the business of the
world has been carried on has broken
down, and all the countries except
rIaHce ana tlle OnlIeo states ana TWO
or three minor European countries
whose special circumstances have en-
abled them so far succ essfully to resist
the drain on th2iI geld. are either
actually or in effect CT the god basis.
This arbitrary force has b2cl tcmpo-
rar.ly suspended. For word conditiors
to recover, it is essential that this
arbitrary movement of gold should be
stopped forever.
The effort to collect reparations
from Germany has already cost the
allied nations far more than the total
bill of reparations. The effort of the
United States to collect the allied debts
has already cost the United States far
more than the total amount of those
debts