The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1935-04-22
INITIATION HELD
PHANTOM FEAR,
YEARS DISTANT
MoOdy'S Declares Economic
Conditions Point Toward
Slow Price Rise.
BIZ Times Special

BIZ Times Special
NEW YORK, April ga rise in
the prices of farm commodities &C
counts for all Of the lis per cent
increase in wholesale prices that has
taken place since January, 1894
Moodys Investors Service pointed
out today in scouting the idea that
initiation was around the corner.
In fact, commodities other than
those originating on the farm &C
tually declined O.5 per cent during
the period, the service declared. Nc
nearby ruinOus price rise is in pros
/ pect, Moody's asserts, and imitation
fears on the part of investors are
/ decidedly premature"
The rise in farm products and
foods was due to drought and AAA
policies" the service asserted. Had
the increased supply of money been
the sole factor, all prices would have
gone up.
Budget Deficit Factor
big price inflations," the analysis
points out, have occurred almost
exclusively during wars or periods
Immediately thereafter. Wars bring
huge governmnt deficits, rapid crea-
ton of bank deposits; at the same
time the government becomes an in
satiable buyer of war goods, which
are almost Immediately consumed;
the productive capacity of the coun-
try is turned to making war ma
terialS and peace-time sources Of
supply abroad are badly restricted
Under these conditions commodity
price mutations enSue fairly easily.
The present resembles war con-
ditions only in respect to piling up
Of huge governmental deficit each
year, the translation of this deficit
into money through bank deposits
the abandonment of the gold stand
ard and depreciation of the currency
in terms of foreign exchange.
But the analogy breaks down and
supply factors are considered. Far
from having a shortage, We actually
have plentiful supply of raw ma
terialS, a productive capacity for
both agricultural and manufacturer
goods far in excess of current con-
sumption, an unheard of amount OF
unemployed and a condition which
holds back the expenditure of saw
ingS for capital goods. The effect
of these factors is to depresS rather
than stimulate prices.
Not Out of Question.
THE foregoing does not mean, OF
course, that a dangerous rise in
commodity prices is wholly out OF
the question, but it is plain that
there are many obstacles. The clear
est road to ruinOuS price imitation
lies in an indefinite continuation of
the present situation, in which We
are getting nowhere.
Without recovery and re-employ-
ment and with business being
harassed and hamstrung with regu-
lations, we could arrive at a grow
ing dlStrlbutlon OF money and ar
actual scarcity of goods and an in
ability to produce goods rapidly
This would amount to economic
diSintegration.
There is nothing to prove OF
to diSprove to the investors salts
faction that this sort of thing will
happen. The best that one may say
is that if it does happen it is likely
to be only after a considerable lapse
of time-say several years. This is
not to say that investment should
not proceed along more norma
channels, but only that purchases
should be made when one is salts
fled on other than initiation grounds
that the investment is safe"