Evening star., 1934-01-16
NEW MONEY STAND
| HELD NOT TOO FIRM
DR.. Mead Predicts Price Rise
Until 60.Cent Level Is
Reached.
BY DIR. EDWARD s. MEAD,
Professor Of Finance. University of Penn.
sylvania

Professor OF Finance. University Of Penn.
sylvania
(written for the Associated Press)
PHILADELPHIA, January 16. -
President Roosevelt has at last taken
a stand for sound money-not too firm
a stand.
He Is still obsessed with the de-
lusion of the commodity-rubber-
lar; he still believes that the price ratio
can be controlled by manipulating one
side of it; he still dreams of a BIZ
metallic standard Of value he still re-
fuses to commit himself to fixed con-
tent of the dollar, but-barring another
relapse-he has taken a stand
Instead of the 50-cent dollar Of Will
liam Jennings Bryan, we have the 60
cent dollar Of Franklin Delano Roose-
welt.
We may anticipate from this action
of the President certain probable con-
sequences:
l. A rise of prices until the 60-cent
dollar level is reached. This price ad
vance in commodities exported and
imported, will be reasonably certain.
The prices Of some imports-coffee, rub
Der and tin. for example-will probably
advance 1t is likely that some ex-
port prices, such as ra wcotton and lard,
will also rise. A speculative movement.
at least for time, may raise all COM
modify prices.
Increase in Profits Seen.
2. If this rise of prices takes place on
a broad scale, even If the volume OF
business does not Immediately increase,
profits will increase because costs nat
urally rise more slowly than prices. In
creased profits will increase dividends
or the prospects of dividends. and so
raise stock prices of those companies
which share in the benefits of price in
creases Public utility companies. rail-
roads and producers of articles and
services whose prices are fixed by law
or custom. will not benefit from rising
prices. Neither will corporations bene-
fit, whose products are exposed to COM
modify competition such as anthracite
coal, or, as in gasoline. where the limit
of consumers demand has apparently
been reached.
3. Bond prices will respond to the
rise in commodity prices according to
the business Of the issuing companies.
ing at low prices, should advance with
the rise in industrial profits Railway
and utility bonds will increase their
margin of safety in earnings only II
the volume Of business Of the issuing
companies increases, and If the increase
in profits is not absorbed by wage in
creases forced upon them. Municipal
bond prices will rise II higher COM
modify prices increase tax revenues
Farm mortgages will probably rise as
farm prices go up.
Fall Of Real Wages.
T. Real wages-the purchasing power
of money wages-will fall If retail prices
rise Minimum wages fixed by the codes
will assist the employer in holding
wages down to present levels. Wages
may follow prices upward. probably as
the result Of strikes. or the action Of
code authorities.
S. The volume Of business will be in
creased by higher prices II another wave
of speculative buying repeats the ex-
perience Of last Spring and early Sum-
mer.
s. Can the new price level be main
tanned? Yes, unless increased produc
tion at home and abroad increases sup
ply and again depresses market values
For example, increased cotton produc-
ton in India. Egypt and China may
force down cotton prices. The A. A. A.
may hold up farm prices, however, by
reducing supply, and the code authori-
ties. as in textiles. steel and oil. may
hold down production and so assist in
maintaining high prices.