Evening star., 1936-06-19

lating a demand lSsss& -
for goods and David Lawrence
services is to send
prices upward For whenever there Is
a scarcity there is tendency 10 re-
gard the demand as warranting
price increase.
Then there is the possibility that
shortage of products to meet the de-
mand In any given line will result IN
a feverish desire to produce more
goods and stock up. Where busi-
nesses misconstrue any temporary de-
mand as a permanent pickup. there
is the danger of piling up inventories
and then running face to face with
Fall slump.
Like Another Christmas.
Fortunately, most of the retail busl-
nesses of the country are accustomed
to spurts in spending and buy care
fully. nevertheless. They know, for
instance, how to prepare for Christ
mas season. AS some retail experts
see It, the bonus spending is Ike
second Christmas for the year 1885,
and they will be guided accordingly
What is difficult to measure, on the
other hand, is the velocity OF the
transactions that will be set in motion
by the bonus spending. Estimates
based on the way the $1,000 100000
bonus loan was spent in 1881 lead 10
the belief now that much OF the
money will be spent for what are
known as consumer goods-household
necessities and clothing. Much OF it,
too, will go for household furnishings
and remodeling of homes-refrigera-
tors. gas and oil furnaces, an extra
bath tub or a new bath room, a new
radio, or the purchase of an auto.
The immeasurable items, however, are
those which>will go to pay off debt,
TO pay off an insurance loan or to
help toward the taking out Of a new
policy, or for investment in real estate.
Then there will be immediate lux
uries, such as travel and vacation
snusements, which will absorb the
bonus in many instances.
Decline May Follow.
From an economic standpoint any
such sum as 100000 100000 is bound
to create an abnormal demand and,
unless carefully watched, may produce
an abnormal decline when the bonus
money has been spent.
The money that goes to pay of
debt will find itself in the banks. ulti-
mately swelling existing reserves and
making money for investment even
more plentiful than it has been. Uncle
Sam will get a good bit of the bonus
money back through taxation of the
enterprises that make substantial prof
It's this year on account of the bonus
trade.
The important factor is what will
happen when the bonus market tapers
off. In those industries where in
creased demand for products causes
new employees to be taken on there
may be, in the Autumn, curtailment.
The immediate effects of $4,000, ,000,-
600 expenditure undoubtedly are stim-
ulating to trade but, from a political
angle this year, it is big question
how long the benefits will last. Will
they extend beyond the election or
will the reaction downward begin in
October or just before the presidential
election. This is the query that is
puzzling the political folks hereabouts.
Resembles Imitation.
In a sense, the spending of the
$4,000 000, 900 is like dose of infla-
ton. The glow Of health and prosper
ity is deceptive and the temptation is
to renew the dose at the earliest mo-
ment. Probably the best thing that
could happen to the country would
be for the veterans to take their time
about spending their money so that
the stimulus would be spread over q
longer period of time, indeed so that
the spending would not outrun the
pace of recovery itself. But the de-
sire for things which the veterans
and their families have been looking
forward to acquiring for many months
probably will govern in the majority
Of the cases.
The Democrats are rather glad the
bonus came at this time, for they
think its benefits will be felt by busi-
ness and in increased employment and
that the psychological factor will help
their cause III the election. From
the opposite standpoint, the sudden
increase in the public debt figures
to an all-time high in the history of
the United States gives the Repub-
licans a powerful argument in favor
OF cutting expenses. which is their
chief campaign issue.
Economists WatchfuI.
Apart from the politics of it. how
ever, the economists will be observ-
ing minutely what happens to an eco
nomic system when $4,000 900, 900 is
suddenly granted by gift of the Gov
eminent to million or more citizens.
Two billion dollars is hard to visualize,
but it is more than all wages and SAL
aries paid by the railroads in 1895.
It is more than all the wages paid
on relief work projects in 1885.
1t is more than all Federal payrolls
In 1885, even including the military
and naval services.
It is approximately equal to the
sons engaged in the wholesale trade
in the United States. It is equal to
about one-fifth of all the wages re-
ceived in manufacturing in q single
year.
And finally, if $4,000 900 900 in silver
dollars we're placed side by side at
the Equator, the dollars would go
twice around the world. That's why
the phenomenon of two-billion-dol-
lar expenditure in such short time
Is something unprecedented in Amer
ican history.
Copyright. Ie36J