White Bluffs spokesman. [volume] (White Bluffs, Wash.) 1907-1938, 1934-05-24
Will Rising Prices
Restore Prosperity?
BY G. d. Jacobs,
Assistant Professor Of Business Ad-
ministration, State College OF
WASHINGTON

Washington
Most discussions of business cond1-
lions during the past four years nave
eventually gotten around to the ques-
ton of prices. There has been a gen.
eral feeling that business could not
revive without a reversal IN price
movements and that anything that
would raise prices without further I'M
dermining confidence would be the
most important aid to recovery. Many
economists feel that the greatest I'M
petus business has received in recent
months has come from the upturn IN
prices.
Must we always have rise in prices
before business improves? A study of
past depressions indicates that up
swings in business almost never begin
while the general movement OF whole
sale prices is downward But revival
has usually begun while commodities
were still hesitant and at a low level.
After business begins to revive whole
sale prices begin to rise and the rise
becomes more rapid as the stage OF
prosperity is reached. Reaching
high point, the price movement has
usually reversed itself before business
recession began so that prices changes,
though ordinarily in the direction Of
the general business movement, have
led in the downward movement rath-
err than the upward movement. How
ever business has not been able to
make Roadway against steadily declin-
ing prices. The deadening effect OF
declining prices which encourage man
to buy tomorrow as contrasted With
the stimulating effect of rising prices
which bid him "Buy now and save"
is obvious.
However the mere average of whole
sale prices blurs the picture some
what. Historically, raw material prices
have generally reversed their move
ment before those of semi-manufac-
tured and finishd goods, while retail
prices have Jagged behind wholesale.
During a continuous downward price
movement some prices are so sticky
that decade may be required to bring
them in line with prices of farm pro-
ducts or other raw materials produced
on a competitive basis.
Something of the price distortion
that resulted from the rapid decline
during the first three years of the de-
preston may be shown by a few fig
ures. Of 1874 commodities for which
the Bureau of Labor Statistics lists
wholesale prices there were in June
1882, SO commodities whose prices were
less than one-third the average for
1926. At the same time there were "
commodities for which prices had de-
clined less than 10 per cent from the
1926 price Prices of 16 commodities
were quoted above the June, 1929, level
and % were quoted at exactly the same
price as in June, 1929. Between thai
time and February, 1888, some OF the
sticky prices broke away from the11
old levels and fell somewhat into line
, but the movement was slow and i
, was not until prices began to rise las
, March that much of the distortion wa!
, corrected though price relationship
are still far from ideal.
Therefore, anything that may restore
price levels and price relationships
thus encouraging buying, restoring pur
' chasing power to depressed lndustrle
and easing the burden of debt
worthy of consideration; but caution
e in fixing commodity prices is advisable
Measures which sustain prices for an
! commodity without remedying under
: lying conditions are unsound. Some
: one has likened them to shooting
! plane into the air without motor.
q won't stay up long. And we should re
member that revival from most pre-
vious depressions actually began with
g out the impetus of a general price rls
II thus indicating that other factors al
e important.
n Nevertheless, we hope to see the prlc
IS movement continue upward. Despl'
i devalued currencies the world Is SUI
5. thinking in terms of gold; therefor
i an upward movement of world price
/ in terms of gold is to be desired Whs
t, can be done to raise prices is dls
F cllssed in another article.