Evening star., 1935-11-24
BY MARK SULLIVAN,

dTLlClc WOulQ reveal 1al1
u y number Of predictions that
did not come true. But turn here
to one that has been borne out by the
amiable conformity Of events. I cite
it now because it Is a convenient text
for saying something about the future.
This prediction that encountered
faVoring fortune was easy to make.
It was printed In December Of last
year. as part Of forward looking sur
vey Of what was then the New Year.
alluded to the views Of an orthodox
economist who disapproves the New
Deal, Prof. Neil Carothers Of Lehigh
University, and I said:
Recovery after depression Is as in
evitable as Spring after Winter. Re-
covery at such time grows infallibIy
out OF the materials within itself 1t
cannot be permanently suppressed.
Its vitality, its will to live is so pow
erful that it will break down even the
barriers set up by the mistakes of
Government. 1t is so resourceful that
1t will leap over, or crawl under, or
run around, or seep through all the
handicaps, bunkers, barriers, barri-
cades and hazards that may be put
IN its way by the folly of politicians,
politicians who. in the present case in
America, combine the vices of poll
ticians with the ineptitudes of aca-
demic theorists
The recovery is now under way and
1t has a powerful bearing on Presi-
dent RooSevelt's fortunes looking TO
the campaign next year. 1t helps him,
helps him in quarter where he has
not been popular. Business men who
a few months ago almost ragged
against the New Deal now say, well,
after all" Few business men can
keep themselves free from the psyche
logical effect of rising figures, Of
plus" signs following the price quota
tions of securities and goods.
Setbacks Natural.
1t Is possible for this recovery TO
go on In a way that would sustain
and increase prestige for the admins
tration until election day But a year
is long time for a business rise to
continue without interruption. The
present recovery may be destined for
increasing heights for much more than
a year. Yet every business rise, if
wholesome, is attended by occasional
setbacks. Also. at least one part of
the present recovery, the rise in prices
Of some securities has been going at
a pace rather too rapid to be sus-
tanned. The present rise began about
the time the Supreme Court held
N. r. A. unconstitutional, which was
last May. and has had no material
interruption. From May, 1885, until
election day in November, 1896, is IT
months. If the pace, the rate of rise
during the past six months, should
continue for IL months more, the
heights reached might be unwhole-
some.
For those who look beneath the
surface, it is desirable to call atten-
ton to some characteristics of this
recovery, characteristics which might
not have accompanied 1t had it not
been distorted somewhat by the New
Deal. The situation contains a
dilemma for Mr.. Roosevelt.
The enormous Government borrow
ing and spending, by process too in
tricate to go into here. have caused
the banks to contain immense quanti-
ties of bank money" so called. Ac-
tual and potential, the quantity is far
beyond anything the country has ever
known before. If a large proportion
of this bank money flows into the pur-
chase Of goodS-into land and other
communicative may see within the
year before election a spectacular rise
in prices. That. if it goes too far.
would result in marked increase in
the cost of living. And high cost of
living would be a serious detriment to
Mr.. Roosevelt in the election.
Can Check Rise.
The other horn of the dilemma con-
tains possibility Of another kind of
disadvantage to Mr. Roosevelt. A pre-
ventive Of too great rise in prices, or
at least a moderating check on it, is
within the power of the administra-
tion. AS incidents of the banking laws
and by other means, the Government
has the power to raise interest rates.
This, if done, would tend to check any
rush of bank money into commodities,
and therefore check a too great rise
in prices. But If the administration
makes use of this check. If it increases
@xA- 1F iv,<n frxrr vrrf1l fAl-
low, both somewhat embarrassing to
the administration. First, the Gov
ernment would be obliged to pay
higher rates of interest for its future
borrowings. Second, the price quota
tions of Government bonds already IN
existence in banks and elsewhere
would tend to drop. This drop in the
price of quotation of Government
bonds would diminish the quantity of
so-called bank money and thereby tend
to check recovery. 1t would not only
halt the rise in prices, but cause
prices to drop somewhat.
OF those acknowledgement rise in
prices leading to increase in the cost
of living. or a drop in prices leading
to slowing up of business-eitheI
would be unpalatable to an admins
tration in the midst of a campaign tc
keep in Office But one or the other
seems inevitable.
Gadgets Multiply.
Possibly the administration may seek
to escape both alternatives. We may
see an effort to check the rise in prices
by some new gadget of Government
Secretary of Agriculture Wallace was
reported by q newspaper the other day
as fearing a boom in land prices, and
as suggesting preventive in the form
of an amendment to the income tsH
laws, which would confiscate the whole
profit of any person who bought a farm
between 1880 and 1896, and sells ii
between 1896 and 1910. That might
check the increase in land prices-but
1t would give rise to new set OF
troubles. When any government sets
out upon such minuteness Of control
of business as the present administra-
ton has attempted, 1t finds itself pres