Evening star. [volume] (Washington, D.C.) 1854-1972, 1933-03-08
COMMODITY PRICES
HAVE SHOWN GAINS
Advance Started Before
Banking Crisis and Has
Been Steady.
RY CHARLES F. SPEARE.

Special DlSpatCn W 1iie otai.
NEW YORK, March 8.-The move
ment of commodities this week suggests
that the country is entering a period
of imitation. The question is whether
it Is a true and orthodox trend or only
temporary and in response to certain
emotional refleXeS In situation not yet
clearly defined.
One fact that should be taken into
consideration before stamping the COM
modify rise as the beginning Of pro-
gressive advance Is that this started be-
fore the banking crisis reached CHI
max. There had been evidences OF pro-
nounced strength in certain speculative
staples a week before the banks were
closed and an embargo placed on gold.
The common belief was that such COM
modities as wheat and cotton had
reached the level Of complete def1ation
and that on the basis of prices so much
lower than productive costs they were
in the group of profitable investments.
Stocks In Demand.
The movement in silver was mainly
predicated on the possibility that the
white metal might assume broader
function in the monetary system OF the
country. There was much surprise over
the action of stocks on Friday in the
face of banking conditions throughout
the country, recognized as extremely
dangerous and not ordinarily helpful
to security markets. Yet stocks were
strong that day, while bonds were ex-
tremely weak.
Here again the impulse to purchase
equities was to some extent the same
as that in mmodities-namely, their
debated condition, which had been real
lied for weeks and had only been ig-
nored because Of the steady fall IN the
price of bonds. There was also an ex-
PLANTATION of this anomalous situation
growing out of the belief that the New
York Stock Exchange might be COM
PEELED to close, leaving those who were
short of stocks in an embarrassing posi-
ton.
The issuance of clearing house GER
tiflcates or other forms of scrip might
be held as a basis for imitation, on the
score that it increases the supply OF
circulating medium. However, such
emergency substitutes for currency can
not be said to have the same inf1a-
tionary effects as those propelled into
the money markets of the country for
the direct purpose Of accomplishing in
flation. Clearing house certificates or
scrip cannot be forced on the public,
which will use only enough OF them to
accomplish its routine business func-
lions. 1t is quite different matter
than setting the printing presses OF the
Government to work and feeding out
fiat" money on larger scale.
On the other hand, there is the fact
to be considered that an embargo has
been placed on gold and that, tech
nically, the United States is tempo
rarily "off gold" The general belief in
DIV Sc hof o1thnllOh tho
national bank holiday" may be lifted
on Friday, the period of gold embargo
will be extended at least for another
week and possibly longer This would,
of itself, lead to certain amount OF
imitation.
The experience of Great Britain, after
abandoning the gold standard in Sep
tember, 1881, was that Of an immediate,
though not very substantial, rise in
commodities, but subsequently the fail
ure of this movement to expand. This
would be the hope of those who have
swung around to a mild form OF in
f1ation in order to lift the price level
of commodities to a point where it
would permit producers to obtain
enough for their products to enlarge
their purchasing power and pay por-
ton of their debts. The management
control of imitation has been quite sue
cessful in England The expectation
in some quarters is that it could be du-
plicated here On the contrary, those
who have feared imitation and have
resisted 1t In every way possible believe
that once the movement started Ii
this country, where the demand for it
in the West is SO strong, it would soon
run beyond control and lead to serious
consequences that would permanently
affect the credit of the United States.
Recent Averages.
The duration of the gold embargo act
will depend on the degree to which de-
posts are returned to the banks after
the proposed relief legislation is en-
acted. If this restores the confidence
of bank depoSitors it should be only a
short time before deposits expand suf-
ficiently to remove all danger of a
threat to the gold standard, lifting the
reserve ratios of the Federal Reserve
banks to a figure considered safe for
them to operate on their former basis.
So, while the commodity rise may at
the moment appear to be symptom OF
imitation and undoubtedly expresses the
conviction in many minds that the coun-
try is moving toward a higher price
level, it is also to be remembered that
the recent commodity average was
about the lowest in modern economic
history, and that this had begun to
create a strong respect for speculative
commodities and speculative securities
some time prior to the national bank
ing holiday"