Evening star., 1932-12-25

We were now to see a prolonged new
this apparent new tide proved abortive,
when prices went this week below what
they had been in June, economists
are likely to make an inference. They
are likely to infer that the former tide.
the downward one, is not yet quite
ended.
From this arises a presumption that
price rise is not likely To be the imme
diate path out of our troubles. The
presumption is not necessarily con-
elusive. Price rise can still take place.
But it must take place soon, for the
paralysis. after three years of strain,
is just about intolera BILE. Human ma
ture can bear no more. If we don't
get price rise quickly, then we will get
the other solution quickly.
Price rise may yet take place. The
materials for price rise exist in
abundance. They exist in the form OF
great masses of unused credit in the
banks They exist in the form OF a
dearth of manufactured goods. They
exist in the potentialities of the inter-
national economics conference that Is
to take place in the Spring.
Legislation Feared.
Price rise can come about In the
course of nature, or it can be forced by
egislation-though the latter method
is always feared by business, chiefly
because of the temptation TO push 1t
too far. Some proposals for inflationary
legislation to bring about price rise
artiflcially are kicking about Congress.
Congress does not seem, at this mo-
ment, likely to adopt them. The new
Congress, quite different in personnel.
which will meet in special session soon
after March 4, may or may not feel
different ABOUT legislating an arbitrary
price rise, through fiat money or 9TH
erwise
1t is impossible to assert that price
rise will not be forced by legislation
1t is impossible to assert that price
rise will not come about naturally. In
short, price rise is still. and at all times,
possibility At doaa this m moment; aeen 9on- CON-
vincingly likely to take place soon
enough. Hence the other path out OF
our troubles, the path Of scaled-doWn
debt. seems just little more likely to
be the one that 1888 will see US take,
in part at least.
Will Debts Be Scaled Down?
That the typical farmer cannot pay
his mortgage. or the interest on IL,
with wheat and other crops at their
present prices. is absolute mathematlcal
certainty. The same is true OF owners
of mortgaged city buildings, mortgaged
suburban homes, practically every class
of debtor. Assuming prices OF goods 90
not rise. then the fact that debts must
be scaled down is absolute mathenat-
ical certainty. i,
The scaling down can take place IN
many ways. 1t can take place through
foreclosure. If typical farm bears
mortgage for $1,000, and other debts,
besides; and if the holder Of the mort
gage forecloses, then the other debts
are wiped out. In many cases-very
many, unhappily-the farm cannot be
sold for the amount of the mortgage.
scaling down of debt.
Much of this scaling down by fore
closure is going on all the time. Inc
sales under foreclosure have forced land
prices all over the country very low. In
North Carolina farms are selling at
prices lower than in 1866 after North
ern Gen. Sherman had marched through
and burned the buildings.
This method of scaling down debt. by
foreclosure, is in many ways cruel and
Instantaneous to the debtor, the
creditor and the community. In many
cases, particularly in the cases OF city
property, it is necessary and unavolo-
able. In many cases Of farms and
suburban homes, the undesirability OF
foreclosure has come to be recognized.
Consequently. to a degree that constl-
tutes a present phenomenon, there is a
tendency to handle debt. where full
payment is impossible, in a different
way.
A different way OF achieving the
scaling down Of debt, where the neces-
sity of it is plain, is by voluntary agree
ment between debtor and creditor.
Much Of this is going on, and 1t is in
creasing. Many large lenders of money
on farm mortgages are practicing this
Systematically. Each case is treated on
its merits If the debtor can pay, he
is expected to live up to his obligation.
Where it is plain the debtor. no matter
how great his good will. cannot pay,
there Is voluntary scaling down, to
where payment is possible. Sometimes
the principal is scaled down. as $1,000
mortgage to $4,000. Sometimes rate Of
interest is reduced, as from per cent
to 4.
International Example.
The disposition toward scaling down
Va WV W dSlCNLllCllG DCtNCNll
debtor and creditor is likely to be accele-
rated by an event now plainly ahead CT
us. 1t is clear that We shall son see
the two greatest nations in the world,
Great Britain as debtor and America as
creditor, scale down the debt between
them to the debtors capacity to pay,
just as any Kansas farmer and his
mortgage might. The international
example will stimulate the practice in
the field Of private debt.
There are, as the president Of the
New York Stock Exchange, Richard
Whitney, puts 1t, just three things that
can happen to a debit can be paid.
or written off Gin whole or in part). or
postponed. Postponsment. however. is
mcre alluring than finally curative.
Postponement really rest, upon the
assumption that the other way out Of
depression will arrive; postponement
upon the hope that price rise of go2ds
will reach point where the postponed
debt, which accumulated interest. can
be paid. This may be. But it io only
may be-
All that can be said is that there are
two paths out, and that the path Of
strong price rise seems, as 1882 ends, a
little less probable than the path Of
scaling down of debt In any event.
herein lies the principal influence that
will determine what 1888 Is to be.
o-