The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1933-05-23

measures yet put
into effect, ever
since March 4, it Lippmann
has been evident
to many persons that some inf1a-
ton was necessary and inevitable.
Since the middle of April. when
the gold embargo was proclaimed,
it has been evident to every one that
some initiation would be practiced.
AS a result, the markets have antici-
pated by speculation the effects of
an initiation which would reduce the
value of the dollar in gold by some
thing between 10 and 20 per cent.
SO there has been a marked rise
in the general price level, and this
rise has brought about a distinct
economic improvement.
DUT when We examine this rise
ID in prices we find that the pro-
phecies have rot been indicated.
which said that the disparity Of
prices would not be corrected. The
evidence seems to show that the
inhationary process has not merely
raised the general average Of prices,
but that it mas tended powerfully
to correct the disparity of prices.
In other words, those commodi-
ties which were most debated have
tended to make the bee gains,
whereas those prices which had
fallen little or not at all have
tended to rise very little.
The Journal of Commerce pub
lished a Weekly-index of wholesale
prices, and on Monday it offered
its readers very significant analy-
sis of what has happened. The low
point in the average was reached
on Feb. 4, when the index stood
at 52.5. BY April /, it had risen
TO 53.6, a gain of IL points.
Then came the gold embargo and
the decision to adopt a controlled
initiation. BY May Is the average
had risen to 5Q.5, gain of points
from the bottom.
But when the movement of sepa-
rate groups Of commodities is ana
lyzed. as the Journal of Commerce
has done, a most significant result
appears: "Of the five groups of
commodities which showed the least
defation from the 1929 price
level on March 4, 1888, two groups
pulp and paper and fuels &C
tually have declined during the last
two months, while none of the
other three groupS-chemicals, iron
and steel, and building materials
has shown rise of more than 3
points.
ON the other hand, each of the
Ofve price groups which had
suffered especially severe dehation
through the long period of depres-
sion (paint materials, non-ferrous
metals, foods, textiles and grain) has
shown advances ranging from about
8 to % points since early March. >
These are very reaSSuring Symp-
toms, for they mark a restoration
Of the equilibrium rather than a
mere raising Of all prices. If the
most Debated will be the most re-
f1ated. with fixed charges remaining
stationary, wholesale prices rising
more than the cost of living, the
policy will be an indubitable sue
cess.
Within the last week, it must be
noted, however, that the advancing
movement of prices has been ar
rested and has even become sta
tionary. This may with reasonable
confidence be ascribed to two re-
ports which have come out of
Washington.
One was that the federal reserve
system still was heSitating about
proceeding with the open market
operation to expand credit; the
other was that negotiations were
under way to stabilize the dollar in
relation to gold.
The effect of these two reports
has been to make the dollar strong
er, equivalent to making American
prices weaker.
NOW there is a good deal to be
4 Y said for a tentative stabiliza-
ton Of the dollar at, say, 20 per cent
depreciation. if that will facilitate
the negotiations at London.
But there is nothing to be said
for sterilization which would pro-
mote rise in the dollar to its old
parity. That would shake prices
down and renew the def1ationary
spiral
1t follows that there ought to be
TO further delay about making it
clear, through large purchases of
government securities. that the adj
miniStration's monetary policy is
seriously and resolutely to be car
ried out. 1t would, I believe be a
great mistake to consider any stabi-
lization, however tentative, unless
this is done.
Every one who desires to avoid
the perilS of the cruder inflationary
measures. the resort to greenbackS
the full RECOMMENDATION of silver, or
the arbitrary devaluation of the
dollar should see the Importance OF
proceeding promptly with the more
conservative and reliable methods OF
relation.
Thus far speculative anticipation
has done great good, but that good
will come to an end and be lost if
the administration and the banking
system encourage a bear speculation
based on the theory that they are
not willing to act. and that the talk
OF controlled imitation" was more
| gesture.
Copyright. 1887
Baby Cross